Reassessment: TDS: S/s. 143(3), 147 proviso and 148: A. Y. 2005-06: Disclosure in return of cancellation of assessee’s banking licence: Assessment u/s. 143(3): Reopening of assessment beyond four years on the ground that the assessee was no longer in the banking business is not valid: No failure to disclose truly and fully material facts:

The petitioner is a co-operative bank in liquidation. For the A. Y. 2005-06, the petitioner had filed its return of income on 31-10-2005, declaring a total loss of Rs. 7,95,82,108/-. Assessment was completed u/s. 143(3) of the Income-tax Act, 1961 by an order dated 27-12-2007 accepting the returned loss. On 15-03-2012, the Assessing Officer issued notice u/s. 148 for treating the loss of Rs. 7,95,82,108/- as non-business loss on the ground that the assessee’s banking licence was cancelled by the RBI on 30-07-2003.

The Gujarat High Court allowed the writ petition filed by the assessee challenging the validity of notice u/s. 148 and held as under:

“i) The fact that the assessee’s licence had been cancelled by the RBI was clearly and in no uncertain terms was brought on record in the return filed by the assessee. The assessee, in fact, asserted that in view of such cancellation of the licence, the banking activities of the assessee were carried out only for the purpose of recovery of advances and payment to the depositors. It was further conveyed that in view of such facts, the profit and loss account was prepared on certain conditions and guidelines indicated therein.

ii) Apart from the declaration and disclosure on the part of the assessee, in the reasons recorded by the Assessing Officer also, he started with the narration, “on verification of the case records, it was found that the assessee’s banking licence was cancelled by the RBI on 30-07-2003”. Thus the Assessing Officer gathered this fact from the verification of the case record and not from any other source.

iii) The crucial fact that the banking licence of the assessee had been cancelled by the RBI was disclosed in the original return itself. Thus, there was no failure on the part of the assessee to disclose truly and fully all material facts. The averment of the Revenue that despite such cancellation of the banking licence, the assessee lodged a false claim, even if it were to be corrected, would not per se indicate that there was any failure on the part of the assessee to disclose truly and fully all material facts. As long as this requirement was satisfied, it was simply not open for the Assessing Officer to reopen the assessment beyond the period of four years from the relevant assessment year.

iv) In the result, the impugned notice is quashed and set aside.”