TMI Blog2023 (3) TMI 980X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the enquiry which is required to be made is not made by the ld. AO the fact from where the ld. PCIT drawing interference is already on record and based on that information the ld. AO drawn a plausible view on the matter. There is no defect found from the enquiry that has been conducted by the ld. AO. He collected the information based on upon which he has allowed the claim to assessee and has verified the point raised in the limited scrutiny. PCIT did not find any specific error or default of AO and thus we see no reasons in interfering the view that has already been taken. Since, in this case ld. AO has clearly conducted the enquiry and revenue did not pin point the error on the part of the assessing officer the order passed after due application of mind cannot be subjected to proceeding u/s. 263 of the Act. A.O while framing the assessment had taken a plausible view of the matter of while allowing the claim of the assessee, and revenue did not demonstrate the error remain on the part of the ld. AO. 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 Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and the impugned order dated 27.03.2022 deserves to be quashed. 4. The Id. Pr. CIT seriously erred in law as well as on the facts of the case in assuming jurisdiction u/s 263 of the Act by wrongly and incorrectly invoking Explanation 2 to S. 263 as if the same conferred unbridled power upon the CIT even though the facts and circumstances of the case did not justify the application of the said Explanation. 5. The ld. Pr. CIT erred in law as well as on the facts of the case in wrongly setting aside the assessment order dated 25.11.2019 despite there being complete application of mind by the AO on the subjected issues and it was nothing but a case of change of opinion and/or suspicion, based on which, assumption of jurisdiction u/s 263 is not permissible. The impugned order dt. 27.03.2022 therefore, lacks valid jurisdiction u/s 263 of the Act and hence, the same kindly be quashed. 6. Rs. 3,02,09,525/-: The Ld.(CIT) erred in law as well as on the facts of the case in denying the benefit of deduction claimed u/s 80P(2)(d) of Rs. 3,02,09,525/- by considering the receipt of interest income from cooperative bank as not eligible. The denial to the deduction, being contrary to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act is not allowable to the assessee. The PCIT based on these observation stated that the deduction of Rs. 3,02,09,525/- was required to be disallowed and added to the total income of the assessee and the ld. PCIT further stated that AO has not examined the issue of deduction u/s. 80(P)(2)(d) of the Act properly and completed the assessment without conducting enquiry on the issue of the said deduction. In view of these facts ld. PCIT stated that the assessment order is erroneous and prejudicial to the interest of revenue and accordingly a show cause notice u/s. 263 of the Act was issued on 21.02.2022. 5. In response assessee filed a detailed reply in the proceeding u/s. 263 of the Act which is discussed in the order of the ld. PCIT and the same is not repeated to avoid duplication. After examination of the submission of the assessee the ld. PCIT set a side the order of the ld. AO. The relevant finding of the ld. PCIT is reiterated here in below: 4. I have considered the facts of the case and the submission of the assessee. The assessee cited decision of the Hon'ble Supreme Court in the case of Malabar Industrial Company Ltd. Vs CIT 243 ITR 83 (SC) stating that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the decision of the ITAT, Jaipur in ITA Nos. 418 419/JP/2017 in which reference to the judgement of Hon'ble Karnataka High Court in the case of Pr. CIT Vs The Totagars Co-operative Sale Society (2017) 392 ITR 74, wherein it held that Co-operative Bank would be included in the words co-operative society has been made. It is seen that the deduction u/s 80(P)(2)(d) has been claimed on interest received from Co-operative banks. The question for consideration is whether a Co-operative bank is a Co-operative society, hence covered by section 80P(2)(d)? With regard to the reliance on the Hon'ble Kamatak High Court Judgement in the case of Totagar's Cooperative Sales Society (2017) 392 ITR 74, it is pertinent to mention here that the relied upon judgment has been reviewed by the Hon'ble Karnatak High Court in the very same case in Appeal No 100066/2016 decided on 16.06.2017 and its earlier finding on the issue has been reversed. In its subsequent judgment the High court held that the character or nature of income, namely interest on investments or deposits, did not change irrespective of the fact whether it was earned or received from a schedule bank or co-ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held to be erroneous in so far as it is prejudicial to the interests of the revenue for the purpose of section 263 of the I.T. Act. The order of the AO is, therefore, liable to revision under the explanation (2) clause (b) and clause (a) of section 263 of the Income Tax Act, 1961. Therefore, the assessment order on this issue is being set aside to be made afresh. Adequate opportunity of being heard should be allowed to the assessee before passing the fresh order. The order of the AO is, accordingly, set aside on the issues as discussed above. 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 so raised, which is extracted in below; FACTS: The assessee had filed its return of income for A.Y. 2017-18 on 04.08.2017 declaring total income of Rs. Nil (Agriculture Income of Rs 4,45,910). Thereafter, the case of the assessee was selected for scrutiny through CASS to examine the issue deduction under Chapter VI-A . The A.O. completed the scrutiny assessment of the assessee u/s 143(3) of the I.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ety. It is seen that the deduction u/s 80(P)(2)(d) has been claimed on interest received from Co-operative banks. The question for consideration is whether a Co-operative bank is a Co-operative society, hence covered by section 80P (2)(d)? With regard to the reliance on the Hon ble Karnataka High Court Judgement in the case of Totagar s Cooperative Sales Society (2017) 392 ITR 74, it is pertinent to mention here that the relied upon judgment has been reviewed by the Hon ble Karnatak High Court in the very same case in Appeal No 100066/2016 decided on 16.06.2017 and its earlier finding on the issue has been reversed. x--------------x-------------------x--------------------------x------------------------x-------- ----------x Thus, it is clear that for the purpose of section 80P(2)(d), the investment in Co-operative bank is not different from an investment made in a schedule bank. As the Co-operative bank is not in the nature of Co-operative society for the purpose of section 80P(2)(d), the interest received on FDRs maintained with the Co-operative Bank cannot be treated as eligible for deduction u/s 80P(2)(d). It is further stated that the co-operative soci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law. Kindly refer Malabar Industrial Co. Ltd. v/s CIT (2000) 243 ITR 83 (SC). 1.2 Also kindly refer CIT v/s Max India Ltd. (2007) 295 ITR 282 (SC) wherein it is held that: The phrase prejudicial to the interests of the Revenue in S. 263 of the Income Tax Act, 1961, has to be read in conjunction with the expression erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when the Assessing Officer adopts one of two 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 Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the Revenue, unless ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired of books of account, other records, the binding judicial guideline etc. 2.1.2 The relevant para of the assessment order dated 25.11.2019 (P.B 6-7) showing that the AO has examined each any every documents submitted by assessee during scrutiny proceedings, is reproduced below: Return declaring Nil income (Agriculture income of Rs.4,45,910/-) was filed online by the assessee samiti on 04.08.2017 vide acknowledgement No. 132729291040817, which was processed u/s 143(1). The case was selected for scrutiny through CASS (Computer Aided Scrutiny Selection); to examine the issue Deduction under chapter VI-A , hence notice u/s 143(2) was issued on 10.08.2018 which was duly served upon the assessee by e-mail as well as served through regd. AD post. Due to change of incumbent, a notice u/s 142(1) along with Query letter issued to the assessee on 02-11- 2019 along with questionnaire requiring the assessee to furnish required details/ documents on or before 11/11/2019 online through e-assessment proceedings. No compliance was made by the assessee samiti. Thereafter again notice under section 142(1) of the I.T. Act, 1961 was issued on 12.11.2019 for compliance on or before 18.11.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issues involved the ld. PCIT had wrongly set aside the assessment order dated 25.11.2019. Therefore, it was nothing but a case of change of opinion and suspicion, hence, assumption of jurisdiction u/s 263 is not permissible. 3. Binding judicial guideline: It cannot be disputed that the AO was bound by the Rule of Precedence hence, he could not have ignored the binding decisions of the ITAT and the High Court to which he was subordinate. Therefore, he committed no error. 3.1 The Hon ble ITAT in Jaipur A Bench in assessee s own case for assessment year 2013-14 2014-15 in ITA No. 418 419/JP/2017 vide order dated 31.01.2018 (PB 33-48), held as under: As regards the claim u/s 80P(2)(d), we find that the only condition for availing the deduction under this provision is any income by way of interest or dividend derived by the Cooperative society from its investment with any other cooperative society, the whole of such income is allowable for deduction u/s 80P(1). Therefore, there is no condition for the assessee society to engaged in the activity of provide credits to the Members or banking business for availing the deduction u/s 80P(2)(d) read with Section 80P (1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P(2)(d) in respect of interest income from deposits/FDRs with the Co-operative Banks. In absence of further challenge, has attained finality. 3.2 Since the AO acted in accordance with the law as interpreted by the jurisdictional HC, ITAT which prevailed on the date of the passing assessment order and continued even when Sec.263 order was passed hence, no fault can be found in his action and in particular, proceeding u/s 263 cannot be invoked in such a case. Kindly refer CIT vs. G.M. Mittal Stainless Steel (P.) Ltd. [2003] 130 Taxman 67/263 ITR 255 (SC) (DPB 53-56) wherein it was held: In the instant case, the Commissioner had not recorded any reason whatsoever for coming to the conclusion that the Assessing Officer was erroneous in deciding that the power subsidy was capital receipt. Given the fact that the decision of the jurisdictional High Court was operative at the material time, the Assessing Officer could not be said to have erred in law. The fact that the instant Court had subsequently reversed the decision of the High Court would not justify the action of the Commissioner in treating the Assessing Officer's decision as erroneous. The power of the Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner (Appeals) had erred in confirming rejection of assessee's claim for deduction of dividend income under section 80P(2)(d)? It is viewed that a Co-operative bank falls within the realm of the definition of Cooperative Society' as contemplated in section 2(19), therefore, the view taken by the lower authorities that dividend income received by the assessee from a Co-operative Bank, would not eligible for deduction under section 80P(2)(d) cannot be sustained. Thus, the view taken by the lower authorities is not agreeable and the disallowance of the assessee's claim for deduction under section 80P(2)(d) is vacated. Thus, this Ground of appeal is allowed in terms of the aforesaid observations. [Para 22] ii. Solitaire CHS Ltd. vs. Pr. CIT [IT Appeal No. 3155 (Mum.) of 2019, dated 29-11-2019]; (ITAT G Bench, Mumbai); iii. Kaliandas Udyog Bhavan Premises Co-Op. Society Ltd. v. ITO [2018] 94 taxmann.com 15 (ITAT Mumbai); and iv. Majalgaon Sahakari Sakhar Karkhana Ltd. v. Asstt. CIT [2019] 105 taxmann.com 100 (Pune - Trib.). v. DCIT-tax, Circle-6, Jaipur Vs. Jaipur Zila Dugdh Utpadak Sahakari Sangh Ltd. ITA No. 633 634/JP/2019 for AY 2011-12 2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned order, the ld. PCIT imposed his opinion, which shows that it is a case of substitution of opinion. The later decision of Karnataka High Court was wrongly relied upon in the context of Sec 263 when the AO was bound by the Rajasthan High court decision in Rajasthan sahakari (Supra) and of ITAT Jaipur (supra). Notably, both the decisions remained unchallenged hence attained finality. Moreover, the majority of the High Courts and Tribunals have taken a favorable view whereas, Totagar 395 ITR 611 later judgement appears to be single High Court decision. Thus, the AO has taken a possible view and if a legally possible view has been taken by the AO, the CIT cannot invoke revisionary powers. 5.2 Supporting case laws on non-applicability of sec 263 in the context of sec 80P(2)(d): There are various decisions holding that where the AO has taken a possible view taking in mind the decision of both side; Sec 263 cannot be invoked. 5.2.1 Held in the cases of Bardoli Vibhag Gram Vikas Co.Op. Credit Society Ltd. Vs. PCIT-2, Surat [2021] 127 taxmann.com 334 (Surat-Trib.) (21.05.2021) (DPB 47-52) 5.2.2 Recently the Hon ble ITAT Pune Bench 'B' in Rena Sahakari Sakhar Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not erroneous. 6. Rule of Consistency to be maintained: The Rule of Consistency mandatorily requires that in absence of any material change in the facts and circumstances, the earlier decision rendered by the ITAT in the case of the same assessee must be followed. Kindly refer para-38 of Godrej Boyce Manufacturing Co. Ltd. v/s DCIT Anr. (2017) (2017) 394 ITR 449/295 CTR 121(SC) wherein held that: ----While it is true that the principle of res judicata would not apply to assessment proceedings under the Act, the need for consistency and certainty and existence of strong and compelling reasons for a departure from a settled position has to be spelt out which conspicuously is absent in the present case. In this regard we may remind ourselves of what has been observed by this Court in Radhasoami Satsang vs. Commissioner of Income-Tax[6]. We are aware of the fact that strictly speaking res judicata does not apply to income tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has strongly opposed the action u/s. 263 of the Act. The ld. AR of the assessee also serviced the decision of ITAT in assessee s own case for A. Y. 2013-14 wherein the deduction of 80(P)(2)(d) is considered as allowable. The ld. AR of the assessee further submitted that the section of the case was under CASS for verify specific issue of deduction under chapter VIA wherein the ld. AO has called for the details, applied his mind and given categorically finding in the assessment order the order cannot be considered as subject to revision u/s. 263 of the Act. To drive home to this contention the ld. AR of the assessee relied upon the various judgments as submitted in the written submission. Relying on that judicial precedent the ld. AR of the assessee submitted that 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 on the findings of the PCIT and has submitted the compilation of case law vide his submission dated 20.07.2022 the same is reiterated here in below:- Hon ble High Court of Karnataka Principal Commissioner of Income Tax vs. Totagars Co-operative Sale Soci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we find that he has applied his mind and allowed the claim to 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 to substantiate that order passed by the ld. AO is prejudicial to the interest of revenue. She only mentioned that the AO allowed deduction u/s. 80(P)(2)(d) on the interest income received from co-operative bank and thus AO erred in allowing the deduction u/s. 80(P)(2)(d) on such interest income. She has not pin pointed any of the enquiry which is required to be made is not made by the ld. AO the fact from where the ld. PCIT drawing interference is already on record and based on that information the ld. AO drawn a plausible view on the matter. There is no defect found from the enquiry that has been conducted by the ld. AO. He collected the information based on upon which he has allowed the claim to assessee and has verified the point raised in the limited scrutiny. The d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmine 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 with the conclusion. (viii) The Commissioner of Income-tax, before exercising his jurisdiction under section 263 of the Act must have material on record to arrive at a satisfaction and (ix) If the Assessing Officer has made 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 elab ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
