TMI Blog2023 (5) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... osits with scheduled bank has been held as eligible by the Tribunal Shri Laxmi Narayan NagriSahkari Pat Sansthan Maryadait [ 2015 (8) TMI 1085 - ITAT PUNE ] and Gunja Samabay Krishi Unnayan Samity Ltd. [ 2023 (1) TMI 783 - CALCUTTA HIGH COURT ] under section 80P(2)(a)(i) of the Act and not under the section 80P(2)(d) - We are of the view that the Ld. CIT(A) has not adjudicated the issue in dispute of eligibility of deduction of interest from scheduled bank u/s 80P(2)(d), therefore the assessee should be given one more opportunity to appear before the Ld CIT(A) so that he can give his finding on the matter. We feel it appropriate to restore this issue back to the file of the Ld. CIT(A) for deciding after providing adequate opportunity of being heard to the assessee. Ground of appeal of the assessee is accordingly allowed for statistical purposes. Penalty u/s 272A - non-compliance on the part of the assessee for various notices issued u/s 142(1) - HELD THAT:- Assessee could not comply with the issue of notices due to the reason that the authorized representative of assessee was occupied in regulatory compliance on some occasions and on one occasion, he could not respond due to m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowing 80P deduction on account of interest received from other than cooperative bank. 4. The Appellant keep its right reserve to add/modity/delete the any grounds of appeal. 3. Briefly stated, facts of the case are that the assessee is a credit co-operative society constituted under the Maharashtra Cooperative Society Act, 1960. For the year under consideration, the assessee filed return of income u/s 139(1) of the Income-tax Act, 1961 (in short the Act ) on 19.09.2013 declaring total income at Rs. Nil. The assessment u/s 143(3) of the Act was completed on 07.03.2016 wherein total income was assessed at Rs.1,18,440/-. Subsequently, the case was reopened u/s 147 of the Act. The Assessing Officer recorded reasons to believe that income escaped assessment due to wrong claim of the assessee for deduction u/s 80P(2)(d) of the Act on the interest received from fixed deposits with co-operative as well as nationalized banks . The Assessing Officer in the reassessment order passed u/s 147 read with section 143(3) of the Act on 03.12.2019, denied the deduction u/s 80P(2)(d) of the Act in respect of interest income of Rs.97,49,707/- earned by the assessee s society from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page 1 of the assessment order). For ready reference same is reproduced as under: The assessee, Sai Prerna Co-op. Credit Society Ltd., is assessed to tax in this charge. Assessee e filed its return of income for AY 2013-14 on 08.09.2012 showing income of Rs. Nil. The case was duly concluded vide order us 143(3) dated 07.03.2016 at Rs NIL/-. Assessee is a Co-operative credit society. 2. Subsequently, in this case, it is found that assessee has claimed deduction under section 80P(2) of the Act of RS 97,49,7071- and the same was also allowed in the order. 3. As per the records from Profit Loss A/C, it was noticed that assessee received interest on FD of Rs 163,45,298/-. The FD's as seen from the Balance sheet were mainty with Co-operative banks and not with Co-operative society. This clearly showed that assessee has earned income from Co-operative banks and not from society. Section 80P(2)(d) does not extend the benefit of deduction for interest received from investments made with Co-operative banks, hence the deduction was required to be disallowed. 4. Assessee claimed deduction u/s 800(2) which is clearly in contravention to provisions of the Act. The incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not based upon any material other than obtained on amount of perusal of the record , and hence it was based on change of opinion. The relevant finding of the Hon ble High Court is reproduced as under: 8. We have heard learned Counsel for the parties. 9. It is no longer res integra that the action of the A.O. in initiating reassessment proceedings have to be tested on the touch stone of the reasons recorded. On a perusal of the reasons recorded as have been reproduced partially in the preceding paragraphs, it is clear that the A.O. felt that the claim of deduction under Section 80P(2)(d) of the Act which had been allowed in favour of the Petitioner was not in conformity with the provisions of the said section, which consequently had resulted in an under assessment of income of Rs.92,08,876/- and a consequent short levy of tax of Rs.28,45,542/-. This satisfaction recorded by the A.O. in the reasons was not based upon any material other than obtained on account of perusal of the record . 10. It can be noticed that in the present case the assessment was under Section 143(3) of the Act, during which the Petitioner had been served with the notice under Section 142(1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish the vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. In the aforementioned case the Court set aside the notice under Section 148 of the Act impugned therein, on the ground that the jurisdictional requirement of the proviso to Section 147 of the Act had not been complied with as the A.O. had nowhere stated in the reasons recorded that there was failure on the part of the assessee to disclose fully and truly all material facts. Similar facts situation exists even in the present case where the reasons recorded do not at all alleged any such failure on the part of the assessee which was a condition prerequisite for invoking jurisdiction for reopening in addition to the condition of reasons to believe as this was a case of reopening beyond the period of four years. 13. For the reasons mentioned hereinabove, we have no hesitation in holding that in the facts and circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his order, admittedly, between the date of the orders of assessment sought to be reopened and the date of forming of opinion by the Income-tax Officer nothing new has happened. There is no change of law. No new material has come on record. No information has been received. It is merely a fresh application of mind by the same Assessing Officer to the same set of facts. While passing the original orders of assessment the order dated February 28, 1994, passed by the Commissioner of Income-tax (Appeals) was before the Assessing Officer. That order stands till today. What the Assessing Officer has said about the order of the Commissioner of Income-tax (Appeals) while recording reasons under Section 147 he could have said even in the original orders of assessment. Thus, it is a case of mere change of opinion which does not provide jurisdiction to the Assessing Officer to initiate proceedings under Section 147 of the Act. It is also equally well settled that if a notice under Section 148 has been issued without the jurisdictional foundation under Section 147 being available to the Assessing Officer, the notice and the subsequent proceedings will be without jurisdiction, liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch, 2021 under Section 148 of the Act and the impugned order dated 10th March, 2022 are held to be unsustainable and are accordingly quashed. 6.3 In the case of Surat District Co-op Milk Producers Union Ltd Vs ITO in (2013) 29 taxmann.com 81 (Gujrat), Hon ble high Court of Gujrat held that when the assessee had given full details of dividend income, interest income, essential requirement to reopen assessment after four years was not satisfied. The relevant finding of the Hon ble High Court id reproduced asunder: 12. Having thus heard learned counsel for the parties and having perused the materials on record, we notice that in the return filed by the petitioner, in addition to claiming deduction of gross income of interest and dividend of Rs.1,81,27,606 under Section 80P(2)(d) of the Act, the petitioner further provided various details. For example, in the Annexure-VII to the return, such deduction under Section 80P(2)(d) was bifurcated into dividend income of Rs.53,71,450 and interest income of Rs.1,27,56,156. Further, the petitioner had also supplied the full details of the statement showing dividend and interest income received from cooperative societies along with di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly allowed. 7. In ground No. 3, the assessee is seeking deduction u/s 80P of the Act in respect of interest received from other than co-operative banks. Since we have already quashed the reassessment proceedings, therefore, the issue is rendered merely academic and therefore, we are not adjudicating upon the same in this appeal. 8. Now we take up the appeal of the assessee in ITA No. 220/M/2023 for assessment year 2016-17. The relevant grounds of the assessee are reproduced as under: 1. On the facts and circumstances of the case in Law, CPC made disallowance of 80P deduction which is not permissible while passing order us 143(1) which is bad in Law. 2. On the facts and circumstances of the case in Law, no addition is permissible while processing return u/s 143(1) on debatable issue. 3. On the facts and circumstances of the case in Law, Ld. CIT(A) erred in disallowing 80P deduction on account of interest received from other than cooperative bank. 4. The Appellant keep its right reserve to add/modify/ delete the any grounds of appeal. 9. We find that the in the case, the Computer Processing Center (CPC) Bangalore of the Income-tax Department, while pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inition of Co- operative Society and requiring them to deduct income tax at source under Section 194A of the Act that also makes the legislative intent clear that the Cooperative Banks are not that specie of genus co-operative society, which are entitled to claim deduction under the special provisions of Chapter VIA in the form of Section 80P of the Act. 2. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was correct in allowing deduction u/s.80P(2)(d) of the Income Tax Act in respect of interest earned from deposits in cooperative bank ignoring firstly, the purpose of bringing on the statute book sub-section (4) in Section 80P of the Act to exclude the applicability of Section 80P of the Act altogether to any co-operative bank and secondly, ignoring the fact that words used in section 80P(4) are in relation to that can include within its ambit and scope even the interest income earned by the respondent assessee, a co-operative Society from a Co-operative Bank and this exclusion by Section 80P(4) of the Act even though without any amendment in Section 80P(2)(d) of the Act is sufficient to deny the claim of the assessee for deduction under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est from nationalized banks. 14. Before us, the Revenue is aggrieved with respect to deduction allowed by the Ld. CIT(A) in respect of interest from cooperative bank whereas the assessee is aggrieved with deduction not allowed in respect of interest from the nationalized bank. 15. We have heard rival submission of the parties on the issue-in dispute and perused the relevant material on record. As far as ground of appeal of the Revenue are concerned, we find that the Tribunal in the case of the assessee for assessment year 2014-15 in ITA No. 5741/Mum/2018, after considering the decision of the Hon ble Karnataka High Court in the case of PCIT v. Totagar s Cooperative Sales Society (392 ITR 74), which was relied upon by the Assessing Officer, has allowed the claim of the assessee observing as under: 7. Having heard the rival contentions, we noticed that there is merit in the contentions of the assessee as it is supported by the order passed by the SMC Bench in the case of Citiscape Co-operative Housing Society Ltd. (supra) and also the decision rendered by the Division Bench in the case of Sea Grean Co-operative Housing Society Ltd. (supra). For the sake of convenience, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of an assesssee 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 sums 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) Carrying on the business of banking or providing credit facilities to its members. The whole of the amount of profits and gains of business attributable to any one or more of much attributes. (d)In respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income. From the close perusal of the provisions of u/s 80P(2)(a)(i) and 80P(2)(d) it is clear that the former deals with deduction in respect of profits and gain of business in case of the cooperative society carrying on business of banking or providing credit facilities to its members if the said income is assessable as income from business whereas latter provides for ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of State Bank of India Employees Co-operative Credit Society Ltd 57 taxman.com 367. It is further noted by the CIT(A) that the said decision of the Ahmedabad Bench of the Tribunal has been referred to by the SMC Bench of Mumbai Tribunal in the case of Shri Saidatta Cooperative Credit Society Ltd. (supra). In our view, the reliance placed by the CIT(A) on the judgment of the Ahmedabad Bench of the Tribunal is quite untenable, inasmuch as, in the said case the interest income in question was earned from deposits kept with State Bank of India. Obviously, State Bank of India is not a Co-operative society so as to justify the claim that such interest earnings fall within the scope of section 80P(2)(d) of the Act. Further, the reliance placed by the CIT(A) on the decision of the SMC Bench of Mumbai Tribunal in the case of Shri Saidatta Cooperative Credit Society Ltd.(supra) is also of no avail, inasmuch as, the Bench merely set-aside the matter to the file of the Assessing Officer for examination afresh, whereas in the case of Lands End Co-operative Housing Society Ltd(supra), the claim of exemption under section 80P(2)(d) of the Act with respect to the interest earned from a Cooperativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax Act in respect of interest earned from deposits in cooperative bank ignoring the amendment made by Finance Act, 2015 in section 194A(3)(v) of the Act which excludes the Cooperative Banks from the definition of Co- operative Society and requiring them to deduct income tax at source under Section 194A of the Act that also makes the legislative intent clear that the Cooperative Banks are not that specie of genus co-operative society, which are entitled to claim deduction under the special provisions of Chapter VIA in the form of Section 80P of the Act. 2. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was correct in allowing deduction u/s.80P(2)(d) of the Income Tax Act in respect of interest earned from deposits in cooperative bank ignoring firstly, the purpose of bringing on the statute book sub-section (4) in Section 80P of the Act to exclude the applicability of Section 80P of the Act altogether to any co-operative bank and secondly, ignoring the fact that words used in section 80P(4) are in relation to that can include within its ambit and scope even the interest income earned by the respondent assessee, a co-operative Society fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, the Assessing Officer issued statutory notices u/s 142(1) of the Act dated 09.08.2018; 21.08.2018; 25.09.2018; 28.01.2019 and 30.09.2019. According to the Assessing Officer those notices were not responded/complied by the assessee. It was contended by the assessee that counsel of the assessee was busy on some occasions in complying filing of return/audit and on other occasions, he had undergone eye operation and therefore, no compliance was made. But the ld AO rejected the contention of the assessee and imposed penalty of Rs.10,000/- for each default totaling to Rs.50,000/-. 20. On further appeal, the Ld. CIT(A) also upheld the penalty observing that there was no reasonable cause for failure on the part of the assessee. The relevant finding of the Ld. CIT(A) is reproduced as under: 4.0 The records of the assessee and its submissions were duly perused. It is found that Notice us 142(1) were issued and served on the assessee on 09/8/2018, 21/08/2018, 25/09/2018, 28/01/2019 and 30/09/2019, fixing the dates for hearing on 23/8/2018, 10/10/2018, 06/02/2019, 07/10/2019 and 12/12/2019 respectively but there was no compliance on the part of the assessee. As per Page 2 of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entative of the assessee was busy in preparation of profit and loss account and balance sheet for tax payers as the due date of filing for income-tax return for assessment year 2018-19 in the case of nontax audit taxes was 31.07.2019 and in the case of tax audit, was on 30.09.2018 ,therefore, due to rush of filing income-tax returns, he could not respond to the Assessing Officer. Regarding the notice dated 28.01.2019, it was submitted that representative of the assessee was operated by a doctor for eye surgery and therefore said notice could not be complied. 21.1 Regarding the notice for 30.09.2019, it was submitted that due to date of filing of return of income for non-tax audit cases, he could not respond to the notice. It was submitted on the part of the assessee that there was no deliberate intention to non-cooperate to the Assessing officer. Before us, the Ld. Counsel of the assessee relied on the decision of the Tribunal in the case of Triumph International Finance India Ltd in ITA No. 1870/Mum/2020. The relevant finding of the Tribunal(supra) is reproduced as under: 4. We have heard the submissions made by rival sides. The Assessing Officer vide order dated 21/12/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to show reasonable cause for the failure to comply with statutory notice u/s. 142(1) of the Act. Thus, in our view penalty levied u/s. 272A(1)(d) of the Act is unsustainable. The Assessing Officer is directed to delete the penalty. 21.1.1 In the case of BU Bhandari Auto P ltd in ITA No. 324/PUN/2022 also the Tribunal deleted the penalty u/s 272A(1)(d) observing as under: 6. We have carefully gone through the impugned orders and find that on receipt of notice u/s 142(1) dated 05.09.2019, the appellant sought time for 15 days to file the required details and the requisite details were filed on 04.11.2019. From the material on record, it appears that when the appellant sought time to file the details, the said application was not disposed of by the Assessing Officer either rejecting the said application or granting time. We also find that ultimately the assessment was completed by the Assessing Officer u/s 143(3) of the Act accepting the returned income. Thus, it will conclusively prove that no prejudice was caused to the Assessing Officer on account of non-complying with the notice u/s 142(1) issued on 05.09.2019 and inaction of the Assessing Officer on the adjournment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot that specie of genus co-operative society, which are entitled to claim deduction under the special provisions of Chapter VIA in the form of Section 80P of the Act. 2. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was correct in allowing deduction u/s.80P(2)(d) of the Income Tax Act in respect of interest earned from deposits in cooperative bank ignoring firstly, the purpose of bringing on the statute book sub-section (4) in Section 80P of the Act to exclude the applicability of Section 80P of the Act altogether to any co-operative bank and secondly, ignoring the fact that words used in section 80P(4) are in relation to that can include within its ambit and scope even the interest income earned by the respondent assessee, a co-operative Society from a Co-operative Bank and this exclusion by Section 80P(4) of the Act even though without any amendment in Section 80P(2)(d) of the Act is sufficient to deny the claim of the assessee for deduction under Section 80P(2)(d) of the Act. 3. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was correct in allowing deduction u/s.80P(2)(d) of the Income Tax Act in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dividend received from Mumbai Dist. Central Co-op. Bank 5,246/- 4. Other receipts 16,53,669/- 24. However, we find that ultimately in the assessment order, the Assessing Officer has assessed income u/s 56 of the Act in respect of interest earned from deposits with bank amounting to Rs.3,50,60,858/- and after reducing the corresponding expenses of Rs.1,20,70,152/-, he made addition of Rs.2,46,59,438/-. Therefore, no addition has been made by the Assessing Officer in respect of other receipts of Rs.16,53,669/- and therefore, the ground No. 2 raised by the assessee being infructuous, same is rejected. 25. Now, we take up the cross appeals filed by the assessee and the Revenue for AY 2020-21. The grounds raised by the Revenue are reproduced as under: 1. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was correct in allowing deduction us.80P(2)(d) of the Income Tax Act in respect of interest earned from deposits in cooperative bank ignoring the amendment made by Finance Act, 2015 in section 194A(3)(v) of the Act which excludes the Cooperative Banks from the defini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about the allowability of interest earned from deposits. with Cooperative Bank u/s. 80P(2)(d) of the Income Tax Act in favour of the Revenue. 25.1 The ground raised by the assessee is reproduced as under: 1. On the facts and circumstances of the case in Law, Ld. CIT(A) erred in confirming disallowing 80P deduction on account of interest received from other than cooperative bank. 2. On the facts and circumstances of the case in Law, Ld. CIT(A) erred in confirming addition of Rs. 23,16,155/-. 26. The grounds raised by the assessee and the Revenue in the above appeals are identical to grounds raised in assessment year 2018-19 therefore, same are adjudicated mutatis mutandis. 27. In the result, appeals of the assessee and the Revenue are decided as under: Sr. No. ITA No. Assessment Year Result 1. 217/M/2023 2013-14 allowed 2. 220 /M/2023 2016-17 dismissed 3. 221/M/2023 2016-17 Allowed for s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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