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TMI Blog2024 (2) TMI 1150X X X X Extracts X X X X X X X X Extracts X X X X ..... days on following reasonable grounds. 1. That local chartered account of appellant had send the documents and order to Adv, Rajendra Jain, Jodhpur for preparation and filing of appeal before Tribunal. 2. That due to serious medical condition of father of Adv, Rajendra Jain, he had to rush to Jaipur for his father's treatment and subsequently he was expired. That due to such unavoidable reason, there was delay in filling of appeal. 3. The Hon'ble Delhi High Court's decision in case of HL Malhotra & Company Pvt. Ltd. Vs DCIT, Circle 12, New Delhi (ITA No. 211/2020 & CM Appeals 32045-32047/2020 dated 22nd December, 2020) wherein delay of 498 days in filing was condoned by the Hon'ble Delhi High Court and it was held that in absence of anything male fide or deliberate delay as a dilatory tactic, the Court should normally condone the delay as the intent is always to promote substantial justice following the Hon'ble Supreme Court decisions in the case of Collector, Land Acquisition, Anantnag & Anr. Vs Mst. Katiji and others (1987) 2 SCC 107 and N. Balakrishnan Vs M. Krishnamurthy 1998 (7) SCC 123. 4. Therefore in the light of above reason and looking to inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and circumstances of the case the ld. PCIT, Udaipur grossly erred in issued notice u/s 263 of the Act as same was issued without conducting basic enquiry as per law. 3. That on the facts and circumstances of the case the ld. PCIT, Udaipur erred in not recording own satisfaction in respect of assessment order passed by the ld. AO is erroneous so as it prejudicial the interest of revenue as per provision of section 263 of the Act. 4. That on the facts and circumstances of the case the ld. PCIT, Udaipur grossly erred in holding the order of the AO is erroneous and prejudicial to the interest of the revenue by treating the inquiry in the wake of a notice under section 263 is just an empty formality. 5.That on the facts and circumstances of the case the ld. PCIT, Udaipur grossly erred in not considering the provisions of the law and law decided by Hon'ble courts in right prospective and judicious manner. 6. That on the facts and circumstances of the case the ld. PCIT, Udaipur grossly erred in setting aside the assessment order passed by the u/s 143(3) without any finding as to how the assessment order passed by the ld. AO is erroneous so as it prejudicial the interest of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowable as per provisions of section 80P(2)(d) of the Act. Since no such disallowance has been made by the AO the assessed income has been under computed/assessed by this amount of Rs. 81,73,496/-. 5.2 In view of the facts, as categorically mentioned above it was clear that the AO (FAO in this case) had failed to examine the issues of disallowance u/s 80P(2)(d) of the IT. Act, 1961. Therefore, due to lack of enquiry and also due to incorrect and incomplete appreciation of facts and also the incorrect application of law, the assessment order duly passed u/s 143(3) of the IT Act on 15.01.2021 for the A.Y. 2018-19 is erroneous insofar as it is prejudicial to the interest of revenue. Therefore, the order was proposed to be suitably modified/enhanced/cancelled by invoking the provisions of the section 263 of the I.T. Act, 1961. The ld. PCIT before doing so a notice u/s 263 of the Act was duly issued on 30.01.2023 to the assessee, for giving an opportunity of being heard as well as requiring the assessee to furnish its submission on the issue of allowability of deduction u/s 80(P)(2)(d) of the Act. The notice so issued was duly served through ITBA, through registered e-mail of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king Regulation Act, 1949 "Co-operative bank means a "state co- operative bank, a central co-operative bank and a primary co-operative bank" and "Co-operative society" means "a society registered or deemed to have been registered under any Central Act for the time being in force relating to the multi-State co- operative societies, or any other Central or State law relating to co-operative societies for the time being in force. As per part V of Banking Regulation act, 1949 a co- operative bank is different from the cooperative society. (iv) The assessee relied upon the decision of the ITAT, Jaipur 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 Karnataka High Court Judgement in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lopment bank. As per sub section 4 of section 80P a Co-Operative Bank is not a co-operative society and provisions of section of this section is not applied on it. (vii) As the said interest income was received by the assessee from other than the cooperative society, hence Provisions of section 80P(2)(d) was not applicable in this case. Consequently, deduction u for Rs. 81,73,496/-(80,62,620+1,10,876) was not allowable to the assessee and hence, the same was required to be disallowed and added to the total income of the assessee. However, such amount was not disallowed by the Assessing Officer while completing the assessment u/s 143(3) of the Act, on 15.01.2021. In this case, the AO allowed deduction u/s 80P(2)(d) on the interest income received from Co-operative Banks. The AO has thus erred in allowing the deduction u/s 80(P)(2)(d) on such interest income, 7. Considering the above facts, it is held that the order passed by the Assessing Officer (FAO) u/s 143(3) of the I.T. Act dated 15.01.2021 is suffering from specific defects, hence, order so passed by the AO is erroneous and also prejudicial to the interest of the revenue. The order of the assessing officer is therefore, li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 1.2. There can be no doubt that merely on the basis of presumption or surmise or suspicion, an order under section263 cannot be passed. The Tribunal faited to appreciate that in this case the inference drawn by the Commissioner was not based either on presumptions or surmises or suspicion. Therefore, the Tribunal was not justified in setting aside the order of the Commissioner. (PCIT v. India Finance Ltd (2016) 389 ITR 242 (2017) 81 taxmann.com 135 (Cal.)) 1.3. It is the order of the PCIT/CIT which is in challenge before the Hon'ble Tribunal The appellant is required to show and prove the "reasons to interfere with the order of the PCIT/CIT It is not proven by the assesse that the opinion of the PCIT is based on either presumptions or surmises or suspicion, It is not proven by the assesse that the opinion of the PCIT is malafide or without jurisdiction. The law has granted "judicial discretion to the PCIT/CIT in exercise of his powers and the same can not be substituted in appeal proceedings on merits if there is mere disagreement with such opinion of the PCIT. PCIT is to form a "prima-facie" finding and he is mere required to come to an opinion" and he is not required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has stated in his return and fails to make enquiries or examine the genuineness of the claim which are called for in the circumstances of the case. Supported by the decisions of the Hon'ble Supreme Court in Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84. Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC), and Malabar Industrial Co Ltd 's ([2000] 243 ITR 83 (SC)) 3.2. The Apex Court in Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 (SC) laid down a four-way test for orders being erroneous in-so-far as they are prejudicial to the interest of the revenue, liable for revision, viz incorrect application of law, wrong assumption of facts, non-observance of the principles of natural justice, and lack of inquiry. The Hon'ble Supreme Court in the instant case held that if the AO has accepted the entry in the statement of account filed by the taxpayer without making enquiry, the said order of the AO shall be deemed to be erroneous and prejudicial to the interest of the Revenue: 3.3. The position and function of the Income Tax Officer is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cipal Commissioner was justified in making revision of assessment order under section 263. (AvathanMarimuthuVs Assistant Commissioner of Income tax, Circle-III, Trichy, the Ho'ble ITAT Chennai Bench 'C', [2017] 84 taxmann.com 104 (Chennai - Trib)) 3.7. If the Assessing Officer fails to conduct the said investigation, he commits an error and the word "erroneous" includes failure to make the enquiry. In such cases, the order becomes erroneous because enquiry or verification has not been made and not because a wrong order has been passed on ments (ITO versus DG Housing Projects Limited. (2012) 343 ITR 329 (Delhi)) 3.8. The assessee claimed provision made for standard assets also as a provision for bad and doubtful debts under section 36(1)(viia) Assessing Officer allowed the deduction under section 36(1)(viia). CIT initiated proceedings under section 263 of the Act. As per CIT, the provision for standard assets could not be considered as provision for bad and doubtful debts which could be allowed under section 36(1)(vila) of the Act. Before the Tribunal the assessee submitted that Assessing Officer has taken a lawful view and therefore, CIT could not substitute his vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture and Poultry Farming was exempted from tax (Gauhati High Court in the case of CIT v. JawaharBhattacharjee [2012] 24 taxmann com 215/209 Taxman 174) 4.3. The assessee claimed depreciation on goodwill and operational expenses The Principal Commissioner invoked the provisions of section 263 of the Act on the ground that the Assessing Officer had not discussed and veified the claim of the assessee. On appeal, the assessee contended that the Assessing Officer had raised specific enquiries during the course of assessment proceedings and accepted its claim and it was not necessary to discuss about the enquiries made by the Assessing Officer in the assessment order. Held that the Assessing Officer had not discussed the issues that arose for consideration in the assessment order The proceedings before the Assessing Officer being judicial proceedings, he was expected to record his own reasons for the conclusion reached Whether it was an administrative order or judicial order, the reasons for the conclusion or decision taken had to be recorded in the order itself There was no infirmity in the order of the Principal Commissioner The Assessing Officer was directed to conduct an independen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re valued at costs. No method of valuation of the shares was submitted to the Assessing Officer during the proceedings, leading to the assessment order It, therefore, appeared that the Assessing Officer after having asked a pertinent question of the method of valuing unlisted shares did not pursue that line of enquiry. Thus, this was a case of non-enquiry and not inadequate enquiry. Therefore, the order of the Assessing Officer was certainly erroneous and prejudicial to the revenue. (Jeevan Investment & Finance (P) Ltd. Vs Commissioner of Income Tax, City-1. Mumbai, [2017] 88 taxmann.com 552 (Bombay)) 5.4. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Assessing Officer should have made further inquiries before accepting the statements made by the assessee in his return. (Rajalakshmi Mill Ltd vs. ITO, Coimbatore [2009] 31 SOT 353 (Chennai) (SB)) 5.5. The principle that a mere change of opinion could not be a basis for reopening completed assessments would be applicable only to situations where the Assessing Officer had applied his mind and taken a conscious decision on a particular matter in issue. It would have no app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch disallowance was accepted by the assessee The CIT exercised revisionary powers under section 263 and directed the Assessing Officer to modify the assessment order since according to the CIT the 4 aspects mentioned in his notice were not considered by the Assessing Officer. Tribunal set- aside the order of the CIT. On appeal by the department, the High Court observed that there was no application of mind on the part of the Assessing Officer and that the 4 points mentioned by the CIT have not been considered by the Assessing Officer. Accordingly, the High Court allowing the appeal held that the CIT was justified in directing the Assessing Officer to redo the matter afresh. (CIT v. Alloy Steels (2013) 359 ITR 355: 217 Taxman 262: 36 taxmann.com 514 (Karn.)) 6. APPLICATION OF MIND BUT INCORRECT ASSUMPTION OF FACTS/ INCORRECT APPLICATION OF LAW BY THE ASSESSING OFFICER APPLICATION OF MIND BUT BASIS OF ESTMATION BY THE A.O. IS EITHER NOT HAVING REASONABLE NEXUS WITH MATERIAL ON RECORD OR THE SAME IS NOT UNBIASED OR THE SAME IS NOT RATIONALLY MADE 6.1. Pr. CIT while exercising his revisionary jurisdiction u/s 263 can examine the basis for estimation, whether such basis for estima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the order is passed allowing any relief without inquiring into the claim, the order shall be deemed to be erroneous and prejudicial to the interest of Revenue. (Anuj Jayaendra Shah vs PCIT-35. Mumbai [2016] Reported in 67 taxmann.com 38) The ratio of above noted judgments is clearly attracted on the facts of the present case at hand Also, it is apparent that the relevant issues, as discussed above were not properly examined during the course of assessment proceeding by the Assessing Officer The assessment order was passed by the Assessing Officer without making proper inquiries and relevant verifications, which he was statutorily required to do so The assessment order was passed by the AO without making the necessary enquiries and verification of these issues, which he was bound to make for ascertaining the relevant facts for the purpose of deciding the issues at hand. The assessment order, suffers from infirmities and the same is erroneous in so far as it is prejudicial to the interest of the revenue in terms of the provisions of section 263 of the Act." 8. We have heard the rival contentions, perused the material placed on record and gone through the written submission and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion how the interest income earned from a banking company is eligible for deduction u/s 80P of the Act. From the above notices issued by the ld. FAO it is evidently clear that the ld. FAO has raised the issue on hand and has allowed the claim of the assessee after applying his mind on the issue. Thus, the contention of the ld. PCIT is nothing but making the review of the assessment under taken by the ld. FAO and PCIT intend to impose his view on the order passed by the FAO and the same is not permitted under the provisions of section 263 of the Act. The view taken by the ld. FAO is purely a view permissible in the law. As argued by the ld. AR of the assessee that the powers of PCIT to invoke the provisions of Sect 263 requires two conditions precedent one the order passed by the Assessing Officer is erroneous second such order is prejudicial to the interest of Revenue. Where even one of the conditions mentioned above is satisfied but the other one is not the power of revision invoked by ld PCIT may be challenged. He also argued that in the instant case the AO has passed the assessment order after considering entire material available on record, called for the details and submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on no material, it was liable to be set aside. Jurisdiction under Section 263 cannot be invoked for making short enquiries or to go into the process of assessment again and again merely on the basis that more enquiry ought to have been conducted to find something. 12. The finding of the Tribunal that the ITO had passed assessment order after relevant enquiries and considering the aspects of the matter required by the CIT to be considered by him is a finding of fact and on the basis of which, the jurisdiction assumed by the CIT being non-existent must be held to be not sustainable" 9. Even the apex court has also held in the case of M/s Malabar Industrial Co. Ltd it has been held that, "This provision cannot be invoked to correct each and every type of mistake or error committed by the AO; it is only when an order is erroneous as also prejudicial to Revenue's interest, that the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase 'prejudicial to the interest of the Revenue' has to be read in conjunction with an erroneous order passed by the AO. Every ..... X X X X Extracts X X X X X X X X Extracts X X X X
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