Banking income deduction and reassessment by mere change of opinion were both resolved in favour of the assessee.

Income from commission, brokerage, Government subsidy, admission fee, incidental charges, financial penalties and miscellaneous receipts was treated as attributable to the banking business of a co-operative society, because the material test under section 80P(2)(a)(i) is whether the income arises from activities normally forming part of banking operations or credit facilities; the deduction was therefore available. Reassessment under section 147(b) was also invalid, since reopening based only on the successor officer's view that the earlier allowance was mistaken amounted to a mere change of opinion and was unsupported by fresh information; the reassessment was struck down.

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Issues: (i) Whether income from commission, brokerage, Government subsidy, admission fee, incidental charges, financial penalties and miscellaneous income was attributable to the business of banking so as to qualify for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961. (ii) Whether the assessment for the assessment year 1974-75 was validly reopened under section 147(b) of the Income-tax Act, 1961.

Issue (i): Whether income from commission, brokerage, Government subsidy, admission fee, incidental charges, financial penalties and miscellaneous income was attributable to the business of banking so as to qualify for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961.

Analysis: For the purpose of section 80P, the material test is whether the income is attributable to an activity normally forming part of the business of banking or of providing credit facilities by a co-operative society. Income earned from commission and brokerage in dealing with bills of exchange, Government subsidy, admission fee from members, incidental charges and financial penalties was held to arise from activities connected with the assessee's banking operations and not to be excluded merely because reference was made to the definition of banking under the Banking Regulation Act, 1949.

Conclusion: The income was attributable to banking business and was deductible under section 80P(2)(a)(i) of the Income-tax Act, 1961, in favour of the assessee.

Issue (ii): Whether the assessment for the assessment year 1974-75 was validly reopened under section 147(b) of the Income-tax Act, 1961.

Analysis: Reopening on the basis that the predecessor-in-office had committed an error in allowing deductions, without any fresh information coming into possession of the Income-tax Officer, was not permissible. On the governing principle applied, a mere change of opinion could not justify reassessment under section 147(b).

Conclusion: The reopening of the assessment was not valid and the issue was decided in favour of the assessee.

Final Conclusion: Both questions were answered against the Department, and the assessee succeeded on the substantive tax exemption issue as well as on the validity of reassessment.

Ratio Decidendi: Income from activities normally incidental to the banking business of a co-operative society is attributable to that business for section 80P(2)(a)(i), and reassessment under section 147(b) cannot rest on a mere change of opinion in the absence of fresh information.

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