Reassessment after section 143(1)(a) and co-operative bank security interest exemption under section 80P(2)(a)(i) upheld.

Reassessment under section 148 was held not to amount to a mere change of opinion where the return had only been processed under section 143(1)(a) and no earlier opinion had been formed on the interest issue. On the exemption question, interest on securities held by a co-operative bank in compliance with section 24 of the Banking Regulation Act, 1949 was treated as attributable to banking business and eligible for exemption under section 80P(2)(a)(i). The additions were deleted, and the revenue's appeals failed on merits.

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Issues: (i) Whether reassessment under section 148 was invalid as a mere change of opinion after processing the returns under section 143(1)(a). (ii) Whether interest on securities held by a co-operative bank in compliance with section 24 of the Banking Regulation Act, 1949 was exempt under section 80P(2)(a)(i) of the Income-tax Act, 1961.

Issue (i): Whether reassessment under section 148 was invalid as a mere change of opinion after processing the returns under section 143(1)(a).

Analysis: The original returns had been processed under section 143(1)(a) without any prima facie adjustment on the taxability of the impugned interest. The Assessing Officer had not earlier formed any opinion on the issue. Reopening on consideration of the legal position already available at the time of the original processing did not amount to a change of opinion, since change of opinion presupposes an earlier formation of opinion. The reassessment was, therefore, within jurisdiction.

Conclusion: The reassessment was valid and the objection to jurisdiction failed.

Issue (ii): Whether interest on securities held by a co-operative bank in compliance with section 24 of the Banking Regulation Act, 1949 was exempt under section 80P(2)(a)(i) of the Income-tax Act, 1961.

Analysis: The securities were held as part of the statutory banking requirements under section 24 of the Banking Regulation Act, 1949, and the revenue did not controvert the factual position that the investments were within the prescribed limits and formed part of the banking activity. On these facts, the interest income was attributable to the business of banking and fell within the exemption available to co-operative societies engaged in banking business. The earlier view treating such income as taxable was held inapplicable on the facts of the case.

Conclusion: The interest income was exempt under section 80P(2)(a)(i) and the additions were rightly deleted.

Final Conclusion: The revenue appeals failed on merits, and the assessee's cross-objections did not survive independently after the substantive relief granted on the main issue.

Ratio Decidendi: Where a co-operative bank holds securities in compliance with statutory banking requirements and the interest thereon is attributable to its banking business, such income is entitled to exemption under section 80P(2)(a)(i); reassessment is not barred merely because the original processing did not record a prior opinion on the issue.

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