Law:

Section:

Section 148, read with section 80P, of the Income-tax Act, 1961 - Income escaping assessment - Issue of notice for - Assessment years 1995-96 to 1997-98 - Assessing authority while passing assessment order under section 143(1) granted to assessee-bank exemption from tax on income accrued from investment - Subsequently, on basis of a decision of Supreme Court wherein it was held that only income from banking business was exempt under section 80P, assessing authority issued to assessee notices under section 148 on ground that income from investments made by assessee had escaped assessment by reason of excess allowance of deduction under section 80P - Aforesaid of Supreme Court on basis of which notice under section 148 was issued, was subsequently overruled by Supreme Court in its another decision - Whether, on facts, very foundation of notices under section 148 had totally disappeared and, therefore, it was not open to Department to contend that only banking business was exempt under section 80P and investment income was not exempt - Held, yes - Whether subsequent pronouncement should be deemed to be operative by fiction of law on date of assumption of jurisdiction by assessing authority and day on which he formed belief that income had escaped assessment - Held, yes - Whether, therefore, re-assessment notices under section 148 were totally without jurisdiction and were to be quashed - Held, yes FACTS The petitioner-assessee, a regional rural bank, in the course of its banking business, made investment with the nationalized bank and financial institutions, etc., to earn income. For the assessment years 1995-96 to 1997-98 the assessing authority while passing the assessment order under section 143(1), granted exemption from tax on the income accrued from the investment. Presumably, it was treated as income attributable to the banking business under section 80P. Subsequently, the department issued notices under section 148 to reopen the assessment orders passed under section 143(1)(a) and to reassess the income of the assessee on the ground that the Supreme Court in the case of M.P. Co Operative Bank Ltd. v. Addl. CIT [1996] 218 ITR 438 had held that only the…

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