Reassessment under sections 147, 148, 144B quashed as mere change of opinion on section 80P deduction

ITAT Mumbai quashed the reassessment initiated under s.147 r.w.s. 144B, holding the notice issued under s.148 to be invalid. The Tribunal found that the same income and the assessee's claim of deduction under s.80P had already been examined in the original assessment, with the addition deleted by CIT(A) and the legal issue now settled by SC. As no fresh, tangible material was brought on record, the reopening was held to be a mere change of opinion, which is impermissible in law. Consequently, the reassessment order was set aside.

---

---

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the reassessment proceedings initiated under sections 147 and 148, beyond four years from the end of the assessment year, on the very same income and material already considered in the original assessment under section 143(3), were valid in law.

1.2 Whether, in the facts of the case, the reasons recorded for reopening constituted a mere "change of opinion" without any fresh tangible material or specific allegation of failure to disclose fully and truly all material facts necessary for assessment.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Validity of reassessment under sections 147/148; absence of fresh material; change of opinion; reopening beyond four years

Legal framework (as discussed)

2.1 The Tribunal noted the statutory requirements of section 147, including the necessity of "reason to believe" that income chargeable to tax has escaped assessment, and, where more than four years have elapsed from the end of the relevant assessment year, the additional condition of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment.

2.2 The Tribunal referred to judicial principles laid down by the jurisdictional High Court and the Supreme Court, inter alia, that:
(a) It is impermissible for an Assessing Officer to reopen an assessment based on the very same material with a view to take another view once one view is conclusively taken.
(b) A mere change of opinion does not constitute "reason to believe".
(c) A general or vague statement regarding failure to disclose is insufficient; the Assessing Officer must indicate what material fact was not fully and truly disclosed.
(d) Once a query is raised during original assessment and replied to by the assessee, that issue is deemed to have been considered, even if not discussed in the assessment order.

Interpretation and reasoning

2.3 The Tribunal recorded that the assessee's original assessment was completed under section 143(3), wherein:
(i) The interest income from investments in co-operative banks and the related deduction under section 80P were examined and allowed; and
(ii) The other incomes (e.g., receipts from certain companies and service tax credited to the income and expenditure account) were also considered and adjudicated, with additions made and partially deleted by the first appellate authority relying on a coordinate bench decision and the principle of mutuality.

2.4 The reasons recorded for reopening under section 148 specifically relied on:
(a) Interest received from fixed deposits with co-operative banks and a nationalised bank allegedly not eligible for deduction under section 80P(2)(d); and
(b) Certain receipts from companies and service tax credited to the income and expenditure account allegedly not covered by the principle of mutuality.

2.5 The Tribunal found that these very items of income and the eligibility of deduction under section 80P had already been examined during the original assessment proceedings, and the corresponding additions had been dealt with in appeal. The Tribunal held that there was no new or additional tangible material brought on record by the Assessing Officer at the time of recording reasons for reopening.

2.6 The assessee, in response to the section 148A(b) notice, specifically pointed out that:
(a) The original assessment had been completed after detailed inquiries and submissions; and
(b) There was no change in facts or any new tangible material to justify reopening; and
(c) The purported escapement was only on account of re-examination of the same issues, amounting to a change of opinion.

2.7 The Assessing Officer, in the order under section 148A(d), reiterated the same reasoning as in the recorded reasons, namely that interest from co-operative banks was not eligible for deduction under section 80P(2)(d), without identifying any fresh material or any specific failure of disclosure by the assessee.

2.8 The Tribunal noted that:
(i) The reassessment was clearly founded on the same material and the same heads of income considered earlier;
(ii) The Assessing Officer had not demonstrated which material fact was not truly and fully disclosed by the assessee in the original assessment; and
(iii) The reassessment was therefore an attempt to review or revisit an earlier concluded view, which the settled law does not permit.

2.9 In support, the Tribunal relied on:
- The jurisdictional High Court decision holding that reopening on the very same material, to take another view, is impermissible and that a mere change of opinion cannot justify reopening; and
- The principle that once queries are raised and answered in original assessment, the issue is deemed to have been considered, and reopening on that very issue constitutes a change of opinion.

2.10 The Tribunal also noted that the legal position regarding deduction under section 80P(2)(d) on interest from co-operative banks has since been conclusively settled by the Supreme Court, but emphasized that, even independently of that, the reassessment fails at the threshold for want of fresh tangible material and for being a change of opinion.

Conclusions

2.11 The Tribunal held that:
(a) The reassessment was initiated on the very same grounds and income items that were already examined and concluded during the original assessment proceedings;
(b) No fresh tangible material was brought on record to justify reopening under section 147;
(c) The reasons recorded amounted to a mere change of opinion of the Assessing Officer; and
(d) The mandatory condition, in a case beyond four years, of demonstrating failure by the assessee to disclose fully and truly all material facts was not satisfied.

2.12 Consequently, the Tribunal declared the reassessment proceedings invalid in law and quashed the reassessment order passed under section 147 read with section 144B. The appeal was allowed on this legal ground, rendering further adjudication on merits unnecessary.

---