In the major relief to the HDFC Bank, the Bombay High Court has quashed the reassessment notice as the jurisdictional condition for invoking the power under Section 147 of the Income Tax Act not satisfied.
Factual Background
The petitioner/assessee is engaged in the business of banking. The petitioner has numerous branches across India. The petitioner, being a scheduled bank and having branches in rural areas, is entitled to deduction under Section 36(1) (viiia) of the Act 1961 for bad and doubtful debts equivalent to 71 percent of the total income and 10 percent of aggregate advances made by the rural branches of the petitioner.
The Jurisdiction Assessing Officer issued a notice under Section 148 of the Act, 1961 proposing to reopen the assessment. The Assessing Officer was of the opinion that there was no failure to take into account the enhanced deduction under Section 36 (1)(vii) while allowing the deduction towards bad debts in assessment year 2006-07, and thus he had reason to believe that income had escaped assessment for assessment year 2006-07. Eventually, an assessment income order was passed under Section 143 (3) read with Section 147 of the Act, 1961 revising the total income.
Case of the Petitioner
The petitioner asserted, since the notice came to be issued beyond four years of the end of the assessment year 2006-07, and assessment under Section 143(3) of the Act, 1961 had been effected, not once but twice, the resort to the provisions contained in Section 147 of the Act was impermissible unless there was failure on the part of the petitioner to disclose fully and truly all the material facts for the purpose of the assessment. Counsel for the petitioner, strongly apprised the impugned order on the note of being arbitrary.
Case of the Respondent
The counsel for the revenue submitted that the petitioner has not challenged the reopening of the assessment for the assessment years 2007-2008, 2008-09 and 2009-10 on the same ground and eventually, orders were by the ITAT in the context of assessment in respect of those assessment years.
Observation of the Court
The Court noted that it is trite law that once the AO on consideration of the material on record and the explanation offered, arrives at a final conclusion that the assesses is entitled to deduction as claimed then, on the basis of the very same material, the AO cannot form a prima facie opinion that the deduction is not allowed and accordingly reopen the assessment on the ground that income chargeable to tax has escaped assessment.
Case Details
Before: Bombay High Court
Case Title: HDFC Bank Ltd. v. Assistant Commissioner of IncomeTax
Coram: Hon’ble Justice K.R. Shriram and Justice N.J. Jamadar
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