Case Note & Summary
The appeal was filed by the Commissioner of Income Tax-3, Mumbai (revenue) under Section 260A of the Income Tax Act, 1961 against the order dated 27/8/2010 of the Income Tax Appellate Tribunal (Tribunal) relating to assessment year 1996-97. The respondent, ICICI Bank Ltd., a public financial institution, had filed its return of income for assessment year 1995-96 disclosing complete working of fund based income (long term finance) and that 79.99% of its total income was attributable to it. The original assessment was completed under Section 143(3) of the Act. Subsequently, the Assessing Officer issued a notice under Section 148 to reopen the assessment on the ground that the assessee had claimed excess deduction under Section 36(1)(viii) on income which included non-fund based income and income from short term finance. The assessee objected, contending that the reopening was based on mere change of opinion. The Tribunal held the notice bad in law. The revenue appealed to the High Court. The court considered the substantial question of law whether the notice for reopening was bad in law as based on mere change of opinion. The court noted that during the original assessment, the assessee had disclosed all relevant facts, including the working of fund based income, and the Assessing Officer had applied his mind and allowed the deduction. The reopening notice sought to revisit the same issue without any fresh material. The court held that the reopening was based on mere change of opinion and therefore invalid. The appeal was dismissed, affirming the Tribunal's order.
Headnote
A) Income Tax - Reopening of Assessment - Section 148, Income Tax Act, 1961 - Change of Opinion - The issue was whether a notice for reopening of assessment under Section 148 was valid when based on a change of opinion regarding the allowability of deduction under Section 36(1)(viii) on non-fund based income. The court held that the reopening was based on mere change of opinion and therefore bad in law, as all relevant facts were disclosed during original assessment and the Assessing Officer had applied his mind. (Paras 2-6) B) Income Tax - Deduction under Section 36(1)(viii) - Fund Based Income - The assessee, a public financial institution, claimed deduction under Section 36(1)(viii) on its entire income, including non-fund based income. The court noted that the original assessment had allowed the deduction after considering the working of fund based income. The reopening notice sought to revisit this issue, which was held to be a change of opinion. (Paras 4-6)
Issue of Consideration
Whether the notice for reopening of assessment under Section 148 of the Income Tax Act, 1961 was bad in law as being based on mere change of opinion, even though the assessment was reopened within four years and the assessee had claimed excess deduction under Section 36(1)(viii) on income which included non-fund based income and income from short term finance.
Final Decision
Appeal dismissed. The notice for reopening of assessment under Section 148 of the Income Tax Act, 1961 was held to be bad in law as it was based on mere change of opinion.
Law Points
- Reopening of assessment based on mere change of opinion is invalid
- even within four years
- Section 148 notice must be based on fresh material
- Deduction under Section 36(1)(viii) on fund based income only
