TMI Blog2022 (12) TMI 1117X X X X Extracts X X X X X X X X Extracts X X X X ..... e did not write specific reasons of accepting the explanation. As for learned PCIT's observations regarding accepting the explanation in a routine and perfunctory manner , there is nothing to question the bonfides of the AO or to elaborate as to what should have been 'appropriate' evidence. The fact remains that the specific issue mentioned and has been examined and the contention of the assessee accepted by the Assessing Officer. Merely because the Assessing Officer did not write specific reasons for accepting the explanation of the assessee cannot be reason enough to invoke powers under section 263, and non-mentioning of these reasons do not render the assessment order erroneous and prejudicial to the interest of the revenue . We vacate the impugned revision order. The assessee gets the relief accordingly. - ITA No. 150/JP/2022 - - - Dated:- 15-12-2022 - Dr. S. Seethalakshmi, JM And Shri Rathod Kamlesh Jayantbhai, AM For the Assessee : Sh. Sidharth Ranka (Adv.) For the Revenue : Sh. Sanjay Dhariwal (CIT) ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal is filed by the assessee aggrieved from the order of the Pr. Commissioner of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee filed written submission electronically. The assessment was completed as per provision of section 143(3) on declared income on 11.12.2019 where in the returned income was accepted. 4. On culmination of assessment proceeding the Principal Commissioner of Income tax, Jaipur -2 [ here in after referred as PCIT ] on examination of the assessment records observed that the assessee has claimed deduction of interest income of Rs. 13,00,000/- u/s. 80(P)(2)(d). This interest was received from Jhunjjhunu Kendriya Sahakari Bank Limited and the same was allowed by the ld. AO. The ld. PCIT noted that the ld. AO has not verified the issue of allowability of deduction u/s. 80(P)(2)(d) while passing the order u/s. 143(3) of the act and the order is erroneous in so far as it is prejudicial to the interest of revenue. On account of this observation the ld. PCIT has issued a show cause notice u/s. 263 dated 19.02.2022 asking the assessee to explain as to why the assessment order passed by the Assistant Commissioner of Income tax, Sikar may not be revised and may not be treated as erroneous and prejudicial to the interest of revenue regarding the non-application of the law on the grant o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer is therefore liable to revision under the clause (a) (b) of Explanation (2) to section 263 of the Income Tax Act. Hence, the assessment order is set aside as discussed above on the issue of deduction allowed u/s 80P(2)(d) of the Act. 6. Feeling aggrieved from the order of the ld. PCIT the assessee has marched this appeal on the grounds as raised here in above. The ld. AR appearing on behalf of the assessee has placed their written submission to support the grounds raised, which is extracted in below; As per directions of the Hon ble Bench, written submissions on behalf of the assessee appellant are as under: 1 The Assessee Appellant Society is a Co-operative Society registered under the Rajasthan Cooperative Societies Act, 1965 and is engaged in the business of marketing of the agricultural produce grown by its members and purchase of agricultural implements, seeds or other articles intended for agricultural for the purpose of supplying to its members. During the year under consideration, it earned interest on FDR kept with M/s. Jhunjhunu Kendriya Sahkari Bank Ltd. 2 The ld. Assessing Officer has raised queries during the course of assessment proceedings i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive bank and primary agricultural credit society shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949); (b) primary co-operative agricultural and rural development bank means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities.] 8. Finance Ministers Budget Speech while introducing sub-section 80P(4) of the Act is as follows: Cooperative Banks, like any other bank, are lending institutions and should pay tax on their profits. Primary Agricultural Credit Societies (PACS) and Primary Cooperative Agricultural and Rural Development Banks (PCARDB) stand on a special footing and will continue to be exempt from tax under section 80P of the Income Tax Act. However, I propose to exclude all other cooperative banks from the scope of that section. 9 CBDT Circular dated 28.12.2006 containing explanatory notes on provisions contained in the Finance Act, 2006, reads as follows: 22.2. The cooperative banks are functioning at par with other commercial banks, which do not enjoy any tax benefit. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer has taken a view which is not legally tenable. Per contra, if two views are available on a particular issue and the AO adopts one of such views, the case goes outside the purview of revisional power exercisable by the Pr.CIT u/s.263 of the Act . Proceedings u/s. 263 cannot be sustained where the ld. CIT holds a view which was different from that of the Assessing Officer . Section 263 of the Act does not visualize a case of substitution of the judgment of the Revisional Commissioner for that of AO unless the decision of the AO is found to be erroneous . Minal Nayan Shah v. PCIT 2019 (10) TMI 730 ITAT Ahmedabad. 12.1 The language used by the legislature in section 263 is to the effect that the CIT may interfere in revision, if he considers that the order passed by the Assessing Officer is erroneous insofar as it is prejudicial to the interest of the revenue. It is quite clear that two conditions must coexist in order to give jurisdiction to the CIT to interfere in revision. The order of the Assessing Officer in question must not only be erroneous but also it must be prejudicial to the interest of the revenue. In other words, merely because the assessment or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicable as the assessment order is not contrary to any order, direction or instruction issued by the Board under section 119 . Nor the said provision has been relied upon in the impugned Show Cause Notice and thus deserves to be ignored. 12.6 In the instant case, Explanation 2(d) to section 263 is not applicable as the show cause notice has not referred to any judgment of the Hon ble jurisdictional High Court or of the Hon ble Supreme Court . Nor the said provision has been relied upon in the impugned Show Cause Notice and thus deserves to be ignored. 13 We wish to refer and rely upon following authorities which have under identical factual backdrop have held that initiation of proceedings u/s. 263 of the Act is bad in law and have even otherwise held that benefit of deduction u/s. 80P(2)(d) ought to be given to the assessee societies wherein interest is earned from cooperative banks: SNo. Tribunal Particulars Paper Book Remarks Exercise of section 263 read with section 80P(2)(d) 80P(4) of the Act 1. Jaipur Bench Raja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to refer and rely upon following authorities which have under identical factual backdrop have held that benefit of deduction u/s. 80P(2)(d) ought to be given to the assessee societies wherein interest is earned from cooperative banks: SNo. Tribunal Particulars Paper Book Remarks Section 80P(2)(d) 80P(4) of the Act read with section 143(3) of the Act 1. Jaipur Bench Jaipur Zila Dugdh Utpadak Sahkari Sangh Ltd. v. DCIT {2020 (3) TMI 631 dated 04.03.2020} Index-I, PB 41-58, Relevant PB 44-45 2 Jaipur Bench Shahpura Gram Seva Sahkari Samiti Ltd. v. ITO {2020 (10) TMI 715 dated 15.10.2020} Index-I, PB 59-64, Relevant PB 60-64 3 Jaipur Bench Jaipur Zila Dugdh Utpadak Sahkari Sangh Ltd. v. ACIT {2019 (9) TMI 1338 dated 30.09.2019} Index-I, PB 65-73, Relevant PB 72 4 Madras Bench NLC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein interest is earned from cooperative banks: SNo. Court Particulars Paper Book Remarks Section 80P(2)(d) 80P(4) of the Act read with section 143(3) of the Act 1 Rajasthan High Court CIT v. Rajasthan Rajya Sahakari Kray Vikray Sangh Ltd {2016 (9) TMI 1385 dated 01.09.2016} Index-II, PB 107-115 2 Rajasthan High Court PCIT v. Kekri Sahakari Bhumi Vikas Bank Ltd {2016 (12) TMI 1649 dated 08.12.2016} Index-II, PB 116-125 3 Rajasthan High Court PCIT v. Kekri Sahakari Bhumi Vikas Bank Ltd {2018 (11) TMI 571 dated 08.08.2017} Index-II, PB 126-134 4 Kerala High Court PCIT v. Peroorkada Service Co-operative Bank Ltd {2021 (2) TMI 1084 dated 01.11.2021} Index-II, PB 135-146 12.2 Section 80P deals with Cooperative Societies' computation of income. As a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 150-156 8. Section 80P(2)(d) of the Act allows whole deduction of an income by way of interest or dividends derived by the cooperative society from its investment with any other co-operative society. This provision does not make any distinction in regard to source of the investment because this Section envisages deduction in respect of any income derived by the co-operative society from any investment with a cooperative society. It is immaterial whether any interest paid to the cooperative society exceeds the interest received from the bank on investments. The Revenue is not required to look to the nature of the investment whether it was from its surplus funds or otherwise. The Act does not speak of any adjustment as sought to be made out by learned counsel for the Revenue. The provision does not indicate any such adjustment in regard to interest derived from the co-operative society from its investment in any other co-operative society. Therefore, we do not agree with the argument advanced by learned counsel for the Revenue. In our opinion, the learned Tribunal was right in law in allowing deduction under Section 80P(2)(d) of the Incometax Act, 1961. in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him. Hon ble Apex Court in the case of The Mavilayi Service Co-operative Bank Ltd. Ors Versus Commissioner of Income Tax Calicut Anr {Civil Appeal Nos. 7343-7350 of 2019 decided on 12th January 2021} held that Section 80P of the IT Act, being a benevolent provision enacted by Parliament to encourage and promote the credit of the co-operative sector in general must be read liberally and reasonably, and if there is ambiguity, in favour of the Assessee. Hon ble Karnataka High Court rendered in the case of PCIT Vs. Totagars Co-operative Sale Society (2017) 392 ITR 74 has clearly held that the issue whether a Co-operative Bank is considered to be a Co-operative Society is no longer res integra. The Co- operative Bank which is a species of the genus would necessarily be covered by the word Cooperative Society . Various judgment passed by the Tribunals which have been relied upon by the assessee appellant have considered the same and have distinguished / held it to be non-jurisdictional High Court, hence, inapplicable. The Co-operative Bank pursuant to the insertion of Sub-section (4) of Sec. 80P would no more be entitled for claim of deduction under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the assessee appellant. 05 Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd. (Gujarat High Court) Pertaining to initiation of proceedings u/s. 148 of the Act on the premise of Change of Opinion. Proceedings u/s. 148 were initiated within a period of 4 years. The assessee had failed to disclose fully and truly all material facts necessary for assessment. On merits various authorities in favour of the assessee including Gujarat High Court itself not considered nor cited. In light of above, the impugned proceedings-initiated u/s. 263 of the Act are illegal, bad-inlaw and it thus deserves to be set-aside and quashed. Relying on the above paper book the ld. AR of the assessee submitted that the case of the assessee was selected for limited scrutiny. The ld. AO on the very issue as raised by the ld. PCIT has already taken a plausible view and the same is clearly portrayed in the assessment order. The relevant finding of the ld. AO is reiterated here in below: 2. The assessee is a Co-operative society registered under the Rajasthan Cooperative Societies Act, 1965 and engaged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of applicable legal position and decisions relied upon. We find that there limited scrutiny and on this issue there is finding of the ld. AO. Yet, learned PCIT has subjected the assessment order to revision proceedings on the short ground that the Assessing Officer passed the assessment order is erroneous in so far as it prejudicial to the interest of revenue as the said order has been passed by the assessing officer in a routine and perfunctory manner without examining the issue of deduction u/s. 80(P)(2)(d) of the Act. Thus, the main question centers on whether action of the assessing officer in allowing the claim of the assessee us/s. 80(P)(2)(d) is found faulted with, whether the assessee ought to have produced the appropriate evidence and whether non-recording of the reasons for accepting explanation will render the order erroneous and prejudicial to the interest of the revenue. In fact, there is a specific finding and reference of the deduction claimed by the assessee founded place in the assessment order. Thus, we are of the considered view that he ld. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the Assessing Officer has adopted one of the courses permissible under law or where two views are possible and the Assessing Officer has taken one view with which the does not agree. If cannot be treated as an erroneous order, unless the view taken by the Assessing Officer is unsustainable under law (vi) If while making the assessment, the Assessing Officer examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the Commissioner of Income-tax, while exercising his power under section 263 of the Act is not permitted to substitute his estimate of income in place of the income estimated by the Assessing Officer. (vii) The Assessing Officer exercises quasi-judicial power vested in his and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the Commissioner of Income-tax does not fee stratified wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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