TMI Blog2022 (2) TMI 1275X X X X Extracts X X X X X X X X Extracts X X X X ..... RT] wherein the Hon ble High Court, while following the judgment of Hon ble Supreme Court, in the case of The Totgars Cooperative Sale Society Ltd. [ 2010 (2) TMI 3 - SUPREME COURT] , have held that interest received by the assessee from Commercial banks was not covered by Section 80P(2)(a)(i) of the Act and was taxable under section 56, being income from other sources. We held such interest income is to be charged to Tax as income from other sources in the context of the assessee due to the non-availability of deduction u/s.80P(2)(d) on such amount. We find no infirmity in the order of the Pr. CIT passed U/s 263 of the Act by holding the assessment order as prejudicial to the interest of revenue because the interest income was charged to Tax as income from other sources in the context of the assessee due to the non-availability of deduction u/s.80P(2)(d) on such amount. - Decided against assessee. - ITA No. 259/(Asr)/2019 - - - Dated:- 21-2-2022 - SH. RAVISH SOOD, JUDICIAL MEMBER AND Dr. M. L. MEENA, ACCOUNTANT MEMBER Appellant by : Sh. Surinder Mahajan, Adv. Respondent by: Shri Sunil Gautam, CIT-D.R. ORDER Per Dr. M. L. Meena, AM: The appeal ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case, Learned Commissioner of Income Tax, Jalandhar-I( Ld. CIT ) has grossly erred in setting aside the assessment framed with the directions to pass fresh order after considering all aspects of the matter and after carrying out proper enquiries. Non issuance of specific directions for assessment to be framed clearly proves that it is a case of only change of opinion and the assessment framed is neither erroneous nor prejudicial to the interest of the revenue. 8. That the Appellant requests for leave to add or amend the grounds of appeal before the appeal is heard or disposed off. 2. The assessee filed return of Income for A.Y. 2013-14 electronically filed by declaring total Income of Rs.2,08,280 and the case was selected under scrutiny assessment for the verification of large deduction claimed under Chapter-VIA of the Act. On perusal of the order u/s 143(3) of the Income-tax Act, 1961 dated 23.12.2016, and on examination of record for the assessment year 2014-15, in the above noted assessee, the Pr. CIT has noticed the following discrepancies:- (i) The assessee filed return of income for the asstt. year 2014-15 on 23.11.2014 showing total income at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax, Jalandhar-I ( Ld. CIT ) in invoking provisions of section 263 of the Act is illegal bad in law; that the proceedings u/s. 263 of the Act were initiated by Pr. Commissioner of Income Tax-1 by holding that assessee has indulged in banking business and as such not entitled to deduction claimed u/s 80P(2) of the Act. and Order u/s 263 of the Act has been passed by holding that order passed by the Assessing Officer is erroneous and prejudicial to interest of revenue since activities of the appellant are in violation of the cooperative society Act and the principle of mutuality is missing in the case. Initiating proceedings on one issue and passing order on another issue for which no show cause notice has been issued, makes the order illegal and bad in law. He further submitted that order passed u/s 263 of the Act by Pr. Commissioner of Income Tax-1 holding order passed by the Assessing Officer to be erroneous and prejudicial to interest of revenue since interest on funds with HDFC Bank is not exempt u/s. 80P(2) of the Act is illegal and bad in law since there was no such show cause notice to the assessee. To support, the Ld. Ar has filed a written synopsis which reads as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a High Court in ITA No. 100092 of 2014 in the case of CIT Belgaum vs Sh. Basaveshwar Cooperative Credit Society Ltd. Belgaum wherein the Hon ble Court have held that in view of the Explanation below the relevant clauses, in the event of a dispute as to the primary object or principal business of any other cooperative society referred to in clauses (cciv), (ccv) and (ccvi) of section 56 of the Banking Regulation Act, 1949, it would require the dispute to be resolved by the Reserve Bank of India, before the Income Tax Authorities could term the assessee as a Cooperative Bank for the purposes of section 80P of the Act. viii) . Further it was submitted that out of deposits of Rs. 3,69,62,6131- specified in the balance sheet as non-members in the saving accounts includes deposits of Rs. 3,46,63,739/- from nominal members and only 22,98,874/- from non-members. Similarly, amount of fixed deposits from non-members was Rs. 6,59,943/- only. 4 That learned assessing officer after going through submissions as given in para 3 above framed assessment at returned income at Rs. 208280/- with following observations: a) The assessee is registered as a cooperative society and its Memorandu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng from the Reserve Bank of India, it should be allowed deduction u/s 80P of the Act, as has been held by the Hon ble Karnataka High Court. d) Therefore, it was noticed that there was no change in the activities of the assessee from that in the preceding year; that the Hon ble High Court have also not negated the fact that for deciding categorization of credit society as cooperative bank, fulfillment of conditions referred to in clauses (cciv), (ccv), (ccvi) of the section 56 of the B.R. Act 1949, have to be verified and that if there is dispute on the nature of activities i.e. decision of the RBI would be final; hence keeping in view the Explanation below clauses (cciv), (ccv) and (ccvi) of section 56 of the Banking Regulation Act 1949, and the judgment of Hon ble Karnataka High Court referred to above, this office has referred the issue to the Reserve Bank of India. e) After considering these submissions of the assessee though it is felt that the judgment depends upon facts of each case which may be similar or different, in view of the fresh submissions of the assessee, deduction u/s 80P of the Act on the amount of income from business, is for time being allowed to the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er bad in law. Whole exercise carried out by the Pr. CIT is based on appeal order of CIT(A) for A.Y. 2013-14. This makes the order u/s 263 of the Act bad in law. Reliance is being placed on: a) JASWINDER SINGH VS. COMMISSIONER OF INCOME TAX IN THE ITAT CHANDIGARH (2012) 150 TTJ 0033 (UO) b) B A PLANTATION INDUSTRIES LTD. ANR. VS. COMMISSIONER OF INCOME TAX ORS HIGH COURT OF GAUHATI (2007) 290 ITR 0395 c) COMMISSIONER OF INCOME TAX VS. SOHANA WOOLLEN MILLS HIGH COURT OF PUNJAB AND HARYANA (2008) 296 ITR 0238 d) COMMISSIONER OF INCOME TAX VS. SAT PAL AGGARWAL HIGH COURT OF PUNJAB HARYANA (2007) 293 ITR 0090 That Pr. CIT-1, Jalandhar passed order u/s 263 of the Act wherein Ld. Pr. CIT-1, Jalandhar has observed as under: - In view of the above discussion and the judgment of the Hon ble Supreme Court, the order of the Assessing Officer in case of M/s Bains Cooperative Thrift Credit Society Ltd, A.Y. 2014-15 dated 23.12.2016 is erroneous and prejudicial to revenue Considering all these facts, the order passed by the A.O. is held to be erroneous and prejudicial to the interest of the revenue. In view of the above facts and discussions, I am satisfied t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usion cannot be termed to be erroneous. It may be said in such a case that the order in question is prejudicial to the interest of the revenue. Reliance is being placed on a) COMMISSIONER OF INCOME-TAX VS. GHABRIAL INDIA LTD. 203 ITR 108 (BOM.) b) MALABAR INDUSTRIAL CO. LTD, VS. COMMISSIONER OF INCOME-TAX 243 ITR 83 (SUPREME COURT) 8. That order passed by the Assessing Officer after enquiring on all the matters cannot be held to be erroneous because every loss of revenue as a consequence of an order of A.O., cannot be treated as prejudice to the interest of revenue. For this proposition reliance is being placed on: a) COMMISSIONER OF INCOME-TAX vs. ARVIND JEWELLERS HIGH COURT OF GUJRAT (2002) 177 CTR (Guj) 546 : (2003) 259 ITR 502 ( Guj) (2002) 124 TAXMAN 615. b) COMMISSIONER OF INCOME TAX vs. SUNBEAM AUTO LTD. HIGH COURT OF DELHI (2009) 227 CTR (Del) 133 : (2011) 332 ITR 167 : (2010) 189 TAXMAN 436 : (2009) 31 DTR 1 c) COMMISSIONER OF INCOME TAX vs. VINOD KUMAR GUPTA HIGH COURT OF PUNJAB HARYANA (2007) 165 TAXMAN 225 (P H) d) COMMISSIONER OF INCOME TAX vs. DESIGN AUTOMATION ENGINEERS ( BOMBAY) (P) LTD. HIGH COURT OF BOMBAY (2008) 13 DTR (Bom) 145 : (201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he impugned orders, and the case law cited. It is admitted fact that the assessee society is registered under Punjab Cooperative Societies Act and receiving interest on deposits from commercial banks HDFC. The assessee, a co-op credit society, was engaged in providing credit facilities to its members. The assessee had surplus funds which it invested in deposits with Commercial Banks. The question before us is whether the said interest earned on the said deposits was business profits and eligible for deduction u/s 80P(2)(a)(i)? 7. The ld. AR for the assessee argued that its activity of providing credit facilities to its members was an eligible activity u/s 80P(2)(a)(i) and that as the investments were made not with the idea of investments, but for the reason that cash should be available with the appellant as and when it was needed for the purpose of its business. 8. The Ld AR argued that The Pr. CIT observed that the assessee has been indulged in banking business and as such not entitled to deduction claimed u/s 80P(2) of the Act. But the Order u/s 263 of the Act has been passed by holding that order passed by the Assessing Officer is erroneous and prejudicial to interest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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