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TMI Blog2021 (8) TMI 1087X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, passed the order. The Assessing Officer has not violated any instruction, direction and or provision of section 119 of the Act. The initiation of action u/s 263 is absolutely illegal, bad in law and unwarranted. (2) Without Prejudice to above, On the facts and in the circumstances of the case and in law, the Ld.PR CIT-I,Surat has erred in directing the assessing officer to recompute income after making disallowance of wrong claims of Rs. 3157772/- u/s 80P(2)(d) of the Act. (3) On the facts and in the circumstances of the case and in law, the Ld. PR CIT Surat- I has also erred in interpreting the Concept of mutuality; Concept of Investment, Concept of Co.Op.Society & Bank and provision of section 80P(2)(d ) of the Act. (4) It is therefore, prayed that the order of the Ld PR CTI-Surat-I, be annual and be set-aside." 2. Briefly stated, the relevant material facts are as follows. The assessee, M/s Sarjan Co-op Housing Society Ltd, is a Co-operative Housing Society registered in 1965 under the Gujarat Co-operative Societies Act. The main object of the society is to maintain the assets of the Society and to provide the common facilities to the members for which they collect c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent order passed u/s 143(3) of the I.T Act, 1961 in this case is considered erroneous and prejudicial to the interest of the Revenue." are seems to be contradictory/inconsistent with the IT provisions and we feel that there is misunderstanding at your end about source and nature of interest. Interest earned on deposits with another Co-operative Bank only. We have rightly claimed deduction u/s 80P(2)(d) for the following income as per Computation of Income & Audited Statement of accounts (Xerox Copy attached). i. Interest on S/B A/c with The Surat Dist. Co Op Bank Ltd. 22430/- ii. Interest on F/D with The Surat Dist. Co Op Bank Ltd. 3135327/- iii. Dividend from The Surat Dist. Co Op Bank Ltd. 15/- Total 3157772/- Sub Section 2(d) of Section 80P says that any co-operative society have gross income which includes interest or dividend derived from its investments with any other Co-Operative Society, the whole such income is eligible for deduction. (2)The Surat District Co Op Bank Ltd. (from which Interest/Dividend Income is earned] is a duly registered Co-Operative Society vide Reg. No. S.E./526 of 1965. We are enclosing herewith copy of letter issued by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t earned by a co-operative society from surplus deposits kept with a co-operative bank are not eligible for deduction. Apart from this, learned PCIT also placed the reliance on the judgment of Hon'ble High Court of Karnataka in the case of Principal Commissioner of Income-tax, Hubballi vs. Totagars Co-operative Sale Society [2017] 83 taxmann.com 140 (Karnataka) wherein it was held by the Court that interest earned by assessee, a co-operative society, marketing members' agriculture product, from surplus deposits kept with a co-operative bank, was not eligible for deduction under section 80P(2)(d) of the Act. In view of the above facts, learned PCIT held that as per Section 80P(2)(d) of the Act, the deduction claimed by the assessee was not allowable and it was required to be disallowed which was not done in the assessment proceedings. Therefore, learned PCIT held that there was an under assessment of income to the tune of Rs. 31,57,772/-. Therefore, learned PCIT held that the order passed by the AO under section143(3) of the Act dated 18.10.2016 is erroneous and prejudicial to the interest of the Revenue and therefore, he directed the AO to pass a fresh assessment order after c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttended on various dates and furnished relevant details, documents, explanation, clarifications etc. The case was discussed with the AR on the dales of hearings. Relevant details, as required vide questionnaire and as required in the course of discussions during .hearings have been filed vide letters dated 18/04/2016, 22/09/2016, 17/10/2016 and their annexure. The same are examined and placed on record. The assessee is a Co-operative Housing Society registered in 1965 under the Gujarat Co- Operative Societies Act. As per details, the main object of the society is to maintain the assets of the Society and to provide the common facilities to the members for which they collect contributions from the members. The assessee has shown income from other sources comprising interest income from savings bank accounts, bank fixed deposits, Sale proceeds of old news papers etc. After verification of details, documents and explanations and discussion with the AR, the income returned by the assessee is accepted. Returned Income NIL Assessed Income NIL Assessed u/s 143(3) of the I.T.Act at the returned NIL income. Calculate tax and interest accordingly. Give credit for pre-paid taxes. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details, documents, explanations, clarifications etc. to establish that the concerned section wise provisions of the Act are duly satisfied by the assessee for claiming the deduction. Certified copies of documentary evidence in support of the details, documents, explanations, clarifications etc. may also be furnished." 13. In response to the notice of the AO under section 142(1) of the Act, the assessee has submitted its reply, dated 22nd September, 2016, which is reproduced below (to the extent relevant for our analysis): "To, 22/09/2016 The Dy. Commissioner of Income Tax, Circle-1 [3], Aaykar Bhavan, Room No.301, Majura Gate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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