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TMI Blog2022 (12) TMI 1117X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer vide order dated 11.12.2019 for the assessment year 2017-18 is found to be erroneous in so far as it is prejudicial to the interest of the revenue. 2. That on the facts and in the circumstances of the case, the Id. Principal Commissioner of Income-tax-I, Jaipur grossly erred in holding that "the id. AO passed the assessment order in a routine and perfunctory manner without examining the issue of deduction u/s 80P(2)(d) of the Act" is wholly unjustified, bad in law and deserve to be quashed. 2.1 That the learned Assessing Officer passed the assessment order after appreciating all supporting documents and evidences which was just and proper therefore the assessment order passed by the learned assessing officer is neither erroneous nor is prejudicial to the interest of the revenue. 2.2 That the learned Pr.CIT has gone on assumptions, presumptions, conjecture and surmises which is bad in law. 2.3 That on the facts and in the circunstances of the case, the Id. Principal Commissioner of Income-tax-II, Jaipur grossly erred in denying the claim of the assessee appellant amounting of Rs. 13,00,000/- under section 80(P)(2)(d) of the Act. 3. The appellant craves leav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormity with the law. In reaching such conclusion, I am aided by the following rulings:- The Hon'ble Supreme Court in the case of Malabar Industrial Limited V/S CIT2431TR has held that "An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. 11. From the above facts and circumstances of the case and having regard to the material available on record, the Assessing Officer failed to consider/apply his mind to the information available on record with regard to the deduction allowed to the cooperative society u/s 80P(2)(d) of the Act. This in turn has resulted in passing of an erroneous order by the Assessing Officer in the case due to non-application of mind to relevant material, reflecting non appreciation of facts and an incorrect application of mind to law which is prejudicial to the interest of the revenue. Thus, the order passed u/s 143(3) on 11.12.2019 is erroneous and prejudicial to the interest of the revenue. 12. Accordingly, by virtue of powers conferred on the undersigned un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee appellant objecting to issuance of notice u/s. 263 of the Act. 6 Ignoring the submissions of the assessee appellant, the ld. PCIT passed an order dated 29.03.2022. 7 For ready reference, extracts of relevant provisions of Section 80P is reproduced hereunder: 80P Deduction in respect of income of Co-operative Societies (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any; income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sum specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely: (a) In the case of a co-operative society engaged in - (i) ............. (ii) ............. (iii) the marketing of agricultural produce grown by its members, or] (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members (v) ............. (vi) ............. (vii) ............. the whole of the amount of profits and gains of business attributa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by a co-operative society from its investments held with a co-operative bank, would continue to be entitled for claim of deduction under Sec.80P(2)(d) of the Act since a Cooperative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 or under any other law for the time being enforced in any state for the registration of co-operative societies. 10. The assessee society fulfills all the conditions stated u/s. 80P of the Act, i.e.: * The assessee is a cooperative society duly registered with the Registrar Cooperative Societies under the Rajasthan Cooperative Societies Act. It is undisputed position. * Gross total income of the assessee society includes the income referred to in section 80P(2)(a)(iii), 80P(2)(a)(iv) & 80P(2)(d) of the Act. * The assessee society is engaged in carrying on the business as per its objects and such income is allowable as a deduction u/s. 80P(2)(a)(iii) & 80P(2)(a)(iv) of the Act. * The assessee society has earned interest from Jhunjhunu Kendriya Sahkari Bank Ltd. which is a Registered Cooperative Society and such interest is allowable as a deduction u/s. 80P(2)(d) of the Act. 11. Similar nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication of the relevant statute on an incorrect or incomplete interpretation, a lesser tax than what was just, has been imposed. 12.2 The phrase "prejudicial to the interest of the revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue has a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. For example, when an Assessing Officer adopted one of the courses permissible in law and it has resulted in loss of revenue or where two views are possible and the Assessing Officer has taken one view with which the CIT did not agree with, it cannot be treated as an erroneous order prejudicial to the interest of the revenue because the view taken by the Assessing Officer is unsustainable in law. 12.3 In the instant case, Explanation 2(a) to section 263 is not applicable as the assessment order is not passed by without making inquiries or verification granting any relief without verification. Nor the said provision has been relied upon in the impugned Show Cause No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant PB 77 7 Pune Bench Dr. Jagadale Mama Hospital Employees Coop Credit Society Ltd. v. PCIT {2022 (9) TMI 30 dated 29.08.2022} Index-II, PB 95-100, Relevant PB 99 Amendment made by Finance Act, 2006 referred 8 Pune Bench Shri Sharad Gramin Bigar Sheti Sahakari Pathasanstha Ltd. v. PCIT {2022 (8) TMI 1020 dated 22.08.2022} Index-I, PB 84-88, Relevant PB 86-88 Amendment made by Finance Act, 2006 referred 9 Surat Bench Shri Madhi Surali Vibhag Nagrikshakari Dhiran Mandali Ltd. v. ACIT {2021 (10) TMI 861 dated 15.09.2021} Index-I, PB 116-120, Relevant PB 116-120 10 Vishakhapatnam Bench Krishna District Milk Producer Mutually Aided Co-operative Union Limited v. ACIT {2021 (3) TMI 1108 dated 24.03.2021} Index-I, PB 121-131, Relevant PB 125 13.1 We wish 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 Dugd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han 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 already noted, it has four sections and several sub-sections and clauses. The Parliament has considered the various situations in which the exigible income and the deductable income of the assessee is considered while computing the income of the assessee. For getting deduction, in our considered view, the assessee must also establish that the interest income earned by the assessee is from a Co-operative Society. As a matter of fact, in the case on hand, there is no dispute that it is not from a Co-operative Society registered under Kerala Cooperative Societies Act. The interest income earned from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of interest of RS. 4,00,919 on account of interest received from Nawanshaln Central Co-operative Bank without adjusting the interest paid to the hank. Therefore, the reference is answered against the Revenue in the affirmative and in favour of the assessee." 14 The ld. D/R during the course of hearing has also relied upon various authorities and the same are distinguishable and are not applicable and in this regard, we wish to submit as under: SNo. Title Remarks 01 The Totgars Cooperative Sale Society Ltd. (Supreme Court) * During the relevant assessment years in question, it had surplus funds which the assessee(s) invested in short-term deposits with the Banks and in Government securities. On such investments, interests accrued to the assessee(s). Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Sec. 80P of the Act, however, as a co-operative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being enforced in any state for the registration of co-operative societies, therefore, the interest income derived by a co-operative society from its investments held with a cooperative bank, would be entitled for claim of deduction under Sec.80P(2)(d) of the Act. 03 State Bank of India (Gujarat High Court) * Was dealing with situation wherein the appellant cooperative society had invested in FDR with State Bank of India and not with a cooperative bank, hence, not applicable. * On the contrary, the observations at para 14 are in favour of the assessee appellant, which are as under: 14. Thus, in the light of the principles enunciated by the Supreme Court in Totgars Co-operative Sale Society (supra), in case of a society engaged in providing credit facilities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rajasthan Cooperative Societies Act, 1965 and engaged in the marketing of the agriculture produce grown by its member and purchase of agricultural implements, seeds or other articles intended for agriculture for the purpose of supplying them to its members. During the year under consideration the assessee co-operative society has claimed deduction u/s 80P(2)(d) and 80P(2)(a)(iii)(iv)." Based on the above arguments the ld. AR of the assessee submitted that the ld. AO has already based on the submission of the assessee has taken a view which is plausible view the same is not subjected to proceeding u/s. 263 and he has strongly opposed the action u/s. 263 of the Act. The ld. AR of the assessee also serviced the decision of the jurisdictional high court wherein the court has considered the allowability of the deduction u/s. 80(P)(2)(d) and he also serviced the decision of the coordinate bench of this tribunal in the case of Shahpura Gram Seva Shakari Samiti Ltd. also considered the issue and thus, based on this precedent the view taken by the ld. AO is plausible view and the same cannot be a subject of proceeding u/s. 263 of the Act. 7. Per contra, the ld DR is heard who has relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has applied his mind and allowed the claim of the assessee. 9. Thus, ld.AO has examined that issue as it is evident form the finding recorded in the assessment order. As the case was for this limited purpose the same has been examined and verified by the ld. AO as it emerges from the findings of the AO. The ld. Pr. CIT evidently did not place on record any apparent error on the part of the AO so as to substantiate that order passed by the ld. AO is prejudicial to the interest of revenue. He only mentioned that the AO has not applied his mind to the issue in proper manner. He has not pin pointed any of the enquiry which is required to be made is not made by the ld. AO. and he has to examine the issue on merits. There is no further defect found from the record from the material that has been collected by the ld. AO to verify the point raised in the limited scrutiny. The decision and contentions raised by ld. DR are all related to the fact that the ld. AO either has not examined the issue and the related enquiry on the issue apparently not done or not done to the extent it was required to be examined based on the facts. Since, in this case ld. AO has clearly conducted the enquiry and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the Assessing Officer allows the claim on being satisfied with the explanation of the assessee, the decision of the Assessing Officer cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard. 10. Be that as it may, in our considered view, as the A.O while framing the assessment had taken a possible view, and revenue did not demonstrate the error remain on the part of the ld. AO. In fact, when the ld. AO has conducted the required enquiry and not violated any of the conditions mentioned for revision of order as required by Explanation 2 of Section 263 of the Act, the order passed by the Assessing Officer could not be deemed to be erroneous so as to be prejudicial to the interests of the revenue. For this it is relevant to extract the Explanation 2 of section 263 which the ld. DR has heavily relied upon: Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is pre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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