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2015 (4) TMI 94 - AT - Income TaxRevision u/s 263 - AO has overlooked the provisions of s. 80P(2)(d) and has also failed to conduct any enquiry in respect to interest received by Assessee from SBI and thus there was no application of mind by the AO and thus AO has erred in treating interest received from SBI as deductible u/s 80P(2) of the Act which has resulted in loss to Revenue - Held that:- Here it will be relevant to note that Section 80P(2)(d) provides that interest and dividend received by a cooperative society from investments with other cooperative society is exempt from tax. It is also an undisputed fact that SBI is not a cooperative society and therefore the interest received from SBI cannot be considered to be exempt u/s 80P(2)(d) of the Act. In the present case, the interest income earned on extending credit facilities by the Assessee to its members will be business income as there exists nexus between the income and the business of the society, which is extending credit facility to its members but it cannot be said that there is such nexus between the interests earned on deposits made with the SBI. It may be true that deposits are made in banks so that the funds are not kept idle but we are of the view that the motive for making deposits with SBI cannot change the character of interest income earned on deposit made from SBI to be one arising from business of providing credit facility to its member We are not in agreement with the submission of the Ld AR for the reason that though we find that AO had raised a query with respect to claim with respect to deduction u/s 80P but neither there was any query of the AO, with respect to the claim of deduction 80P(2)(d) and therefore no submission of the Assessee, with respect to interest earned from SBI and therefore it cannot be said that there was application of mind by the AO on that issue and for which we also find support by the decision in the case of Gee Vee Enterprises vs. Addl CIT & ORS (1974 (10) TMI 29 - DELHI High Court) wherein observed that the 1TO is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word "erroneous" in s. 263 emerges out of this context. It is because it is incumbent on the ITO to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in s. 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. Thus order of the AO which was revised by the CIT in his order u/s 263 was erroneous and therefore exercise of jurisdiction u/s 263 by ld. CIT was justified. - Decided against Assessee.
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