Case Note & Summary
The petitioner, State Bank of India, filed a writ petition under Article 226 of the Constitution of India challenging a notice dated 30.03.2001 issued under Section 148 of the Income Tax Act, 1961 for reopening its assessment for the assessment year 1990-91, along with subsequent notices under Sections 143(2) and 142(1). The petitioner, a corporation established under the State Bank of India Act, 1955, is engaged in banking and had filed its return of income for AY 1990-91 declaring total income of Rs.230,49,30,716. In the return, it claimed exemption under Section 10(15)(iv) for interest on certain bonds and other investments, noting that details were being collected. During the original assessment, the assessing officer issued a letter dated 14.08.1992 calling upon the petitioner to explain whether borrowed funds were used for making investments to earn exempt income. The petitioner replied on 22.08.1992 furnishing full details. The assessing officer passed an assessment order under Section 143(3) on 26.03.1993, but initially overlooked the exemption claim under Section 10(15)(iv) (except for tax-free bonds). Upon the petitioner's representation, the officer passed a rectification order under Section 154 on 23.06.1993 allowing the exemption for an amount of Rs.2,58,45,37,461. Subsequently, on 23.12.1993, the officer issued a notice under Section 148 seeking to reopen the assessment. The petitioner filed a return in response, claiming exemption of Rs.4,69,92,61,038 under various clauses of Section 10(15)(iv). The main legal issue was whether the reopening notice was valid when the exemption claim had already been examined and allowed during the original assessment. The petitioner argued that the reopening was based on a mere change of opinion and lacked fresh tangible material. The respondents contended that the petitioner had not disclosed full material facts. The court analyzed the records and found that the assessing officer had specifically inquired about the use of borrowed funds and received a detailed reply during the original assessment. The court held that the reopening notice was invalid as it was based on the same material already considered, constituting a change of opinion. The court quashed the notice under Section 148 and all subsequent proceedings.
Headnote
A) Income Tax - Reassessment - Section 147/148 of Income Tax Act, 1961 - Reopening of assessment beyond four years requires failure to disclose material facts - The assessing officer issued notice under Section 148 to reopen assessment for AY 1990-91 on ground that exemption under Section 10(15)(iv) was allowed without verifying that borrowed funds were not used for investments. However, during original assessment, the officer had specifically called for and received details regarding use of borrowed funds. Held that reopening based on same facts constitutes change of opinion and is invalid (Paras 2-10). B) Income Tax - Change of Opinion - Section 147 of Income Tax Act, 1961 - Reassessment cannot be based on mere change of opinion - The assessing officer had examined the claim for exemption under Section 10(15)(iv) during original assessment and allowed it after rectification under Section 154. The subsequent notice under Section 148 was based on the same material without any fresh tangible information. Held that reopening on change of opinion is not permissible (Paras 11-15).
Issue of Consideration
Whether the notice under Section 148 of the Income Tax Act, 1961 for reopening the assessment for the year 1990-91 was valid when the assessing officer had already considered and allowed the exemption claim under Section 10(15)(iv) during the original assessment proceedings.
Final Decision
The court quashed the notice dated 30.03.2001 issued under Section 148 of the Income Tax Act, 1961 and all subsequent notices under Sections 143(2) and 142(1) for the assessment year 1990-91. The writ petition was allowed.
Law Points
- Reassessment under Section 147/148 of Income Tax Act
- 1961 requires tangible material and change of opinion not permissible
- Section 10(15)(iv) exemption claim considered in original assessment
- Notice beyond four years requires failure to disclose material facts
