TMI Blog2024 (2) TMI 1150X X X X Extracts X X X X X X X X Extracts X X X X ..... r with the view taken by ld. AO, without there being any substantive material in possession of such higher authority that has not been considered by ld. AO while forming such opinion. As decided in M/s Malabar Industrial Co. Ltd [ 2000 (2) TMI 10 - SUPREME COURT] if 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 CIT does not agree, it cannot be treated as an erroneous order and it is prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law. Based on the discussion so record we are of the considered view that no action u/s 263 is called for in this matter once the ld. AO has already examined the issue which the ld. PCIT is pointing out in his order as submitted the assessee. This submission of assessee is fortified from the observations in the case of CIT Vs. Max India [ 2007 (11) TMI 12 - SUPREME COURT] wherein held that phrase prejudicial to the interests of the Revenue in section 263 of the Income-tax Act, 1961, has to be read in conjunction with the expression erroneous order passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M 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 interest of substantial justice as held by the Hon'ble supreme Court in case of Collector, Land Acquisition v/s MST Katiji, (1987) 2 SCC 107 that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred . In light of above and the decision of Hon'ble Supreme Court, where substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserved to be preferred. Therefore I requested kindly condone the delay and decided the appeal on merit and obl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 Revenue. 7. That on the facts and circumstances of the case the ld. PCIT, Udaipur grossly erred in representing erroneous and irrelevant finding the order and thereby putting the assessee to erroneous harassment and inconvenience. 8. That the petitioner may kindly be permitted to raise any additional or alternative grounds at or before the time of hearing. 9. The petitioner prays for justice relief. 4. Brief fact of the case is that the assessee filed its return of income for the assessment year 2018-19 on 09.10.2018 declaring total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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 assessee and through the speed post as well. In compliance thereto, the assessee through its authorised representative (AR) filed written submission through ITBA and also furnished the reply physically in the office of ld. PCIT, Udaipur. The ld. PCIT noted that the reply of the assessee and found not tenable. He further noted that as per sub section 4 of section 80P a co-operative bank is not co-operative society and provision of section 80P(2)(d) cannot be applied. Accordingly, the ld. PCIT hold that the order of the FAO is suffering fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciety. (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 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] Karnataka 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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, liable to revision under clause (a) (b) of the Explanation (2) of section 263 of the Income Tax Act, 1961. 8. In the light of above discussion, assessment order passed by the AO in the case of the assessee is Set-aside (fully) to the AO on the above mentioned issue of deduction under section 80(P)(2)(d) of the I.T. Act, 1961. Thereafter. based on outcome of such enquiries and verification, necessary additions, wherever required, may be made to the total income of the assessee as per law by modifying the assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 prove what he has opined in his order Order u/s 263 of the Act setting aside the assessment order merely leads to initiation of proceedings of enquiry by the A.O. and does not in itself results into levy of tax 2. NO LEVY OF TAX BY THE COMMISSIONER IN ORDER U/S 263 MATTER HAS BEEN SET ASIDE PRESENT HIS ISSUES BEFORE THE A.O. SUBSEQUENTLY ASSESSEE CAN 2.1. In the order under section 263 of the Act, the PCIT/CIT has not levied any tax and the matter has set aside to the file of the AO for passi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 may be accepted by a civil court in the absence of any rebuttal. The civil court is neutral It simply gives decision on the basis of the pleading and evidence which comes before it The Income Tax Officer is not only an adjudicator but also an investigator He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 view with that of Assessing Officer The Tribunal upheld the revisional order passed by the CIT and observed that there was no enquiry made during the course of assessment proceeding. Therefore, the order which was silent on the claim made by assessee, and allowing such claim, without any discussion will definitely render it erroneous and prejudicial to the interest of revenue Tribunal dismissing the appeal followed the decision of Apex Court in case of Malabar Industrial Co. Ltd v CIT (2000) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries 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 independent enquiry and pass a speaking order recording his own reasons without being influenced by any of the observations made by the Principal Commissioner (Health Care (P) Ltd.v CIT (2016) 46 ITR 36 (ITAT Chennai)]) 5. MERE FILING OF DETAILS BY THE ASSESSEE IS NOT SUFFICIENT AND DOES NOT ITSELF CONSTITUTES APPLICATION OF MIND BY THE ASSESSING OFFICER PROPER VERIFICATION AND SPECIFIC ENQUIRIES REQUIRED TO BE DONE BY THE ASSESSING OFFICER APPLICATION OF MIND BY THE AO IF NOT DONE MEANS N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue. (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 application where the order of assessment did not address itself to the aspect which was the basis for reopening of the assessment Therefore, it was inconsequential whether or not the material necessary for taking a decision was available to the Assessing officer either generally or in the form of a reply to the questionnaire served upon the assessee: (Consolidated Photo Finvest Ltd v. Asstt. CIT [2006] 281 ITR 394/151 Taxman 41 (Delhi)) 5.6. Records were filed before Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 estimation has reasonable nexus with the maternal on record, whether the estimates made and conclusion drawn by the Assessing officer are unbiased and rationally made and the authority so exercised by the Assessing officer is vindictive or capricious or not. (Hon'ble ITAT, Jaipur A Bench in ITA No. 449/JP/2019 dated 25 10.2019 in the case of Rameshwar Prasad Sharma, AY 2014-15) 6.2. Not application of mind to relevant material or an incorrect assumption of facts or an in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeding 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 judicial precedent cited by both the parties to drive home their respective contentions. The bench noted that the issue of claim of deduction u/s.80P has been raised by the ld.AO (APB-12 13) by issue of notice dated 22.09.2019. The ld. FAO further vide annexure to notice dated 12.11.2020 the details called for by the FAO is also reproduce here in below:- 3. Claim of deduction u/s 80P by entities that have received large amount of interest from a Banking Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 by assessee has been verified during the course of assessment proceedings. It is not the case that the ld. AO had passed the order without conducting any inquiries into the issue under consideration and specific details regarding the deduction claimed was called for the ld. FAO vide notice dated 22.09.2019 and 12.11.2020 and therefore after he has taken a plausible view in the matter and allowed the deduction u/s. 80P(2)(d) claimed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered 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 loss of revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. For example, if 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 CIT does not agree, it cannot be treated as an erroneous order and it is prejudicial to the interest of the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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