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TMI Blog2024 (7) TMI 429X X X X Extracts X X X X X X X X Extracts X X X X ..... the issues involved in the captioned appeals are inextricably interlinked and interwoven, therefore, the same are being taken up and disposed off by way of a consolidated order. 2. We shall first take up the appeal filed by the assessee society in ITA No.48/RPR/2021 for assessment year 2016-17 and the said order shall mutatis-mutandis apply to the connected issues involved in the remaining appeals. The assessee society has assailed the impugned order passed by the Pr. CIT-1, Raipur u/s. 263 of the Act dated 30.03.2021 on the following grounds of appeal: "1. On the facts and circumstances of the case, the learned Principal commissioner of Income Tax, Raipur-1 has erred in holding that no enquiry was conducted and no application of mind applied by the learned assessing officer on the issues of claim of deduction under section 80P(2)(d) and verification of expenditure. 2. On the facts and circumstances of the case, the learned Principal Commissioner of Income Tax, Raipur-1 has erred in holding that no enquiry was conducted and no application of mind was done by the learned assessing officer on the issues of claim of deduction under section 80P(2)(d) and verification of exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .O u/s. 143(3), dated 28.12.2018 was erroneous in so far it was prejudicial to the interest of the revenue on multiple issues, which for the sake of convenience are culled out as under: (i) The Pr. CIT observed that a perusal of the record of the assessee society for the subject year revealed that it had earned interest income as under: Interest earned on FDR Rs. 35,89,32,299/- Interest earned on Savings Account Rs. 1,23,00,968/- Interest earned on record from other sources Rs. 65,370/- Interest earned on FFD A/c. Rs. 4,39,52,970/- Interest earned on Group Gravity a/c. Rs. 31,32,657/- Interested earned on group leave encashment and scheme a/c. Rs. 23,40,819/- Interest earned on Federation seed capital (Apex Bank) Rs. 6,02,40,190/- Total Rs. 48,09,65,273/- It was observed by him that the interest income of Rs. 6,02,40,190/- earned by the assessee society on its seed capital was claimed as a deduction u/s. 80P(2)(d) of the Act. It was further observed by him that all other interest income (supra) except for that earned on the seed capital were adjusted against the various expenses that were incurred for trading and marketing of the forest produce, which thus, had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by him that though the assessee society had claimed deduction of the interest on seed capital u/s. 80P(2)(d) of the Act but had not included the interest income accrued on the balance FDRs in its computation of income for the subject year. Accordingly, the Pr. CIT was of the view that though the interest receipts aggregating to Rs. 2,43,35,41,000/- received by the assessee society from various banks would have formed part of its total income but no details regarding the said issue were called for by the A.O while framing the assessment; AND (iv) The income of Rs. 2,43,35,41,000/- and expenses of Rs. 1,60,35,76,711/-(sic) disclosed in the profit and loss account of the assessee society required further verification. 6. Accordingly, the Pr. CIT based on his aforesaid deliberations was of a firm conviction that the assessment order passed by the A.O was erroneous in so far it was prejudicial to the interest of the revenue. The Pr. CIT issued a "Show Cause Notice" (SCN), dated 11.03.2021 and called upon the assessee society to put forth an explanation as to why the order passed by the A.O u/s. 143(3) r.w.s. 147 of the Act (sic), dated 28.12.2018 may not be revised in exercise of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proximately fourteen lakhs families are getting their livelihood from collection of the forest produce which are grown in the forest area of Chhattisgarh. These persons do not have management bandwidth to get proper value of forest produce collected by them and in order to get them the monetary benefit of the forest produce collected by them; the State Government initiated a structure of co-operative movement so that entire benefit of the forest produce is passed on the person collecting it from the forest. In earlier regime forest used to be allotted by the State Government, to private Contractors through auction. State Government used to earn auction money from such contractors These contractors were free to collect the forest produce from the jungle allotted to them. This method was not giving the benefit of forest produce to the tribal people/ villagers who were actually collecting such forest produce. On the contrary the benefit was getting passed on to the private contractors. It is a well known and acknowledged fact that tribal and villager residing in and around forest should get the benefit of the forest produce. Thus in order to provide proper remuneration to tribal a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the board of directors of the assessee Federation. Thus so far as the assessee federation is concerned, all its agency related activities are devoted towards the mandate received by the State Government to act for the betterment of villagers and tribal(s). Thus there is a three tier structure as under: 1. Upfront prayer of the Assessee federation : 1. The assessee Federation has its own seed capital and the same is deposited with a Cooperative bank. 2. Interest earned on the seed capital forms part of the income portion of the assessee federation. 3. Under the provisions of section 80P (2) of the Income Tax Act such interest is eligible for deduction and accordingly it was claimed by the assessee federation. 4. The case of the assessee Federation for Assessment year 2016-17 was selected for Complete Scrutiny Assessment vide notice dated 05.07.2017 under section 143(2) of the Income Tax Act. During the course of assessment proceedings complete books of accounts including detailed FDR statements, Tax Audit report, evidence for claiming deduction, bye -laws of the Society along with other documents/information as required by the learned assessing officer were duly produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, I find that the order passed u/s. 143(3) r.w.s 147 on 28.12.2017 of the Income Tax Act, 1961 is erroneous in so far as it is prejudicial to the interest of revenue in the following manner." It can be seen that while sending a notice it is mentioned that earlier Assessment order was passed under Section 143(3) read with section 147. This is factually incorrect. There was no proceeding initiated under section 147 against the assessee and record would reflect this submission is factually correct. 1. In Para 4 of the notice received (page 5 of 6) it is mentioned that: "Hence, there is no application of mind on part of the AO to correctly tax the income of the assessee in the return of income and therefore, the assessment order passed u/s 144 of the Act is erroneous in so far as it is prejudicial to the interest of revenue." It is submitted that the assessment of the assessee was made under section 143(3) and not under section 144. At the cost of repetition it is stated that impugned assessment was made after thorough verification of all facts, after considering books of accounts and thus it was not "best judgment" assessment as has been alleged in the notice aforesaid. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing documentary evidence i.e. copy of order of the Chhattisgarh State Government dated 23-02-2001, it was explained that only the interest income accruing on seed capital invested by the Federation is the income of the Federation and for all other activities carried out by it although separate accounts are to be maintained by it, though the accounts are in the capacity of Federation being the agency and not for its own. Thus out of the interest income mentioned above in the table, only interest earned on Federation seed capital i.e. Rs. 6,02,40,190/- is income of the assessee. This has been duly noted by the learned assessing officer and appropriate deduction under section 80P(2)(d) has been allowed to the assessee. 1. Reply for Para 2.1 (Page 2 of 6): In this para of the notice it is mentioned that the assessee has claimed deduction under section 80P(2)(d) of the Income Tax Act in respect of Rs. 6,02,40,190/- which is the interest earned by the federation on the seed money deposited with the Cooperative Bank. In this regard we bring to your kind attention, the Provisions of above section for your ready reference as under: 80P. (1) Where, in the case of an assessee being a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintained by the assessee. As a result of the complete and full verification of all the liabilities, the assessing officer pointed out query on interest income earned which was replied by the assessee to the satisfaction of the learned assessing officer. Hence the statement that it has not been verified is not factually correct and is not based on any evidence on record. 1. Reply for Para 3 (Page 4 of 6): In this Para it is mentioned that on further analysis of Balance Sheet of the assessee, it is found that the FDR has been received from certain banks other than cooperative then a table has been appended. In this regard, it is respectfully submitted that "FDR have not been received" rather these are made out of the funds available to the assessee federation from the agency work carried out by it. It is also respectfully submitted that so far as 80P(2)(d) deduction is concerned, it is not claimed on any of the interest earned on the FDR mentioned in the table mentioned in Para 3 above. The deduction under section 80P(2)(d) has been claimed only in respect of the interest earned on the investment made of the seed capital fund which belongs to the assessee federation. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been attempted to be made that the order passed by the learned Assessing officer was erroneous and prejudicial. This is not based on facts and circumstance and further more Hon'ble Supreme Court in the case of Commissioner of Income Tax Vs. Max India Ltd. (2007) 213 CTR 0266, (2007) 295 ITR 0282, (2008) 166 TAXMAN 0188 has clearly held that where there are two views possible and ITO has already taken one view with which the Hon'ble CIT does not agrees it cannot be held to be erroneous order or prejudicial to the interest of the revenue unless the view taken by ITO is unsustainable in law. In our case the view taken by AO is very much sustainable in law as it is based on facts and circumstances of the case. We have already depicted it in detail that all the material which was available with the learned Assessing officer was clearly establishing that our income from agency work entrusted to us by the State Government is only Rupee 1 per annum. Therefore our income cannot increase by more than that amount by any stretch of imagination and thus the order of AO is neither erroneous nor prejudicial to the interest of the revenue. We attach herewith a copy of the above decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner of Income Tax Vs. M/s Associate Food Products Pvt. Limited, Jabalpur, which was decided on 21.11.2005 in which the above judgment of the Bombay High Court was followed and it was held that it is clear as Crystal that before exercise of power under section 263 of the Act, two requisites are imperative to be present. In the absence of such foundation exercise of a suo motu power is impermissible. It should not be presumed that initiation of power under Suo motu revision is merely an administrative act. It is an act of a quasi judicial authority and based on formation of an opinion with regard to existence of adequate material to satisfy that the decision taken by the Assessing Officer is erroneous as well as prejudicial to the interest of the Revenue. 1. It is respectfully submitted that all desired documents and information were submitted to the learned assessing officer during the course of assessment proceedings. The assessment was also not made in undue hurry or without making any verification of the submissions made by the assessee. 1. The assessee Federation is a government agency engaged in facilitating procurement, processing, storage and disposal of forest produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... G AGENCY vs. COMMISSIONER OF INCOME TAX (2015) 45 CCH 0541 Nag Trib. 1. It is respectfully submitted that we had given all detailed explanation and requisite information with respect to various issues during the assessment proceedings. These have been duly examined by the learned AO before completing the assessment and the AO has taken up the matter and the order was passed by him. This cannot be regarded as to erroneous or prejudicial to the interest of revenue in the absence of any further material on record. It was also held by the than jurisdictional Tribunal ITAT Nagpur in the case of INDO LAHARI BIO POWER LTD. vs. ASSISTANT COMMISSIONER OF INCOME TAX. 1. In case of KAILASHCHAND AGRAWAL vs. PRINCIPAL COMMISSIONER OF INCOME TAX (2016) 48 CCH 0361 Nag Trib, ITAT Nagpur held that It is settled law that issue on which two views were possible and AO had adopted one of views, assumption of jurisdiction u/s 263 by CIT was invalid. 1. It is respectfully submitted that there is no material on record that justifies for jurisdiction under section 263 by the CIT. It was held in case of PURANLAL AGRAWAL (HUF) vs. COMMISSIONER OF INCOME TAX that Thus, the CIT acted beyond his jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not ignore such specific power. 1. It was decided in Garden Silk Mills Ltd. V. CIT, (1996) 221 ITR 861, 865, 866-67 (Guj) that no power to ignore binding decisions. In passing an order of revision under section 263, the Commissioner is not empowered to ignore the binding decisions rendered by the Supreme * Court or even by the jurisdictional High Court. Merely because the Department is contemplating to file a special leave petition, the Commissioner cannot refuse to follow or cannot ignore such binding decision when the Court has settled the law in question. In that view of the matter, when the assessing Officer has passed an order in consonance with the law laid down by the binding decision; it cannot to said that the Assessing Officer's order is erroneous so as to entitle the Commissioner to exercise his revision power. 1. It was decided in CIT v. G.M. Mittal Stainless Steel P. Ltd.. (2003) ITR 255, 258 (SC) that if, at the time when the power of revision under section 263 is exercised the decision of the jurisdictional High Court has not been set aside by the Supreme Court or at least has not been appealed from, it is not open to the Commissioner to proceed on the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as decided in Dawjee Dadabhoy & Co. v. S.P. Jain (1957) 31 ITR 872 (Cal); Add CIT v. Mukur Corporation, (1978) 111 ITR 312 (Guj); CIT v. Gabriel India Ltd., (1993) 203 ITR 108, 115, 116 (Bom); CIT v. Smt. Minalben S. Parikh, (1995] 215 ITR 81, 86-87 (Guj) that prejudicial to the interest of the revenue.- The words "prejudicial to the interests of the revenue" have not been defined, but they must mean that the orders of assessment challenged are such as are not in accordance with law, in consequence where of the lawful revenue due to the State has not been realized or cannot be realized. 1. In other words, the two conditions must be satisfied before the Commissioner can exercise power under section 263, namely, the order of the Assessing Officer must be found to be erroneous and further it must also be found to be prejudicial to the interests of the Revenue. Unless both the conditions are satisfied, the Commissioner does not get jurisdiction to pass an order under section 263 revising the assessment order. It is not necessary that every order which is found erroneous is also prejudicial to the interests of the Revenue [CIT v. Smt. Minalben S. Parikh, (1995) 215 ITR 81, 85 (Guj)]. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration, all the requisite information / evidence in support of the return, had been furnished and it was only after satisfying himself that the information furnished, explains the returns of income, that the assessing officer had framed assessment. 1. Thus, the impugned assessment was not made in undue haste. Hence it is neither erroneous nor prejudicial to the revenue. Since the impugned assessment having been completed in accordance with law, cannot be regarded as erroneous, let alone be prejudicial to the interest of the revenue. It is axiomatic that any assessment, which is in accordance with law cannot, at the same breath, be regarded as erroneous and if the assessment is erroneous, it cannot be prejudicial to the interests of the revenue or for that matter to the interests of the assessee as well. This is on the principle that nothing can be prejudicial either to the department or to the assessee if it is in accordance with the law. (101 ITR page 1 (Kar.) and 163 ITR 129 (Mad.). 1. The fact that the A.O. obtained all the requisite information and evidences and after satisfying himself about their correctness and completeness only, made the impugned assessment as per la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctfully submitted that it was held in Russell Properties Pr. Ltd. v. Addl. CIT, (1977) 109 ITR 229, 245 (Cal) that in order to exercise the power under section 263(1), there must be material for the Commissioner to consider that the order passed by the Assessing Officer was erroneous in so far as it is prejudicial to the interests of the revenue. It is true, unlike section 147/148, for the initiation of proceeding under section 263(1), no conditions precedent are required to be fulfilled but when a statutory authority proceeds to act by virtue of the power conditions precedent are given under a statutory enactment, exercise of which is dependent upon the existence of certain objective factors and when a challenge is thrown that such objective factors are not present and such challenge is made by placing before the court factors which the statutory authority considered to be factors relevant for the exercise of the power, it is open to the court to examine whether such factors are relevant for the exercise of the power. 3. It is respectfully submitted that it was held in Rayan Silk Mills v. CIT, (1996) 221 ITR 155, 161 (Guj) that it is an essential condition of exercise of the pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e taken together and require to be widely construed. 2. It is respectfully submitted that it was held in Jai Kumar Kankaria v CIT [2001] 251 ITR 707 (Cal.) that the term 'erroneous' will be looked into from the facts and circumstances and the materials which were placed before the Assessing Officer at the time of assessment. Therefore is no scope under section neither 263 to reopen an assessment on subsequent event nor any new material. 1. It is respectfully submitted that it was held in H.H. Maharaja Rja Pawer Dewas v. CIT [1982] 138 ITR 518 (MP) that the two essential pre- requisites two pre-requisites must be present before the Commissioner can exercise the revisional jurisdiction conferred on him. First is that the order passed by the ITO must erroneous. Second is that the error must be such that it is prejudicial to the interests of the revenue. If the order is erroneous but it is not prejudicial to the interests of the revenue, the Commissioner cannot exercise the revisional jurisdiction under section 263(1). 1. It is respectfully submitted that it was held in Nazir Singh v. CIT [2001] 252 ITR 820 (MP) that that demonstrative criteria for exercising power of rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2018) 54 CCH 0300 Chd Trib it was held that Mere suspicion cannot be the basis for holding that the enquiry conducted by the AO was insufficient and the order consequently passed was erroneous for the purpose of assuming jurisdiction u/s 263. 1. In the case of LINERS INDIA LIMITED vs. ASSISTANT COMMISSIONER OF INCOME TAX (2018) 54 CCH 0211 Vishakapatnam Trib it was held that Invocation of revisionary power u/s 263 is not justified where AO has called for all the details necessary before allowing the deduction and there was no error in the assessment order. 2. In the case of SANSPAREILS GREENLANDS PVT. LTD. vs. COMMISSIONER OF INCOME TAX (2018) 54 CCH 0486 Del Trib it was held that Commissioner's exercise of revisional jurisdiction under provisions of s. 263 could not be based on whims or caprice. It was trite law that it was a quasi-judicial power hedged in with limitation and not an unbridled and unchartered arbitrary power. Exercise of power was limited to cases where Commissioner on examining records concluded that earlier finding of AO was erroneous and prejudicial to interest of Revenue and that a fresh determination of case was warranted. There must be material to ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly, the Pr. CIT based on his aforesaid observations, concluded that the assessment order passed by the A.O was erroneous in so far it was prejudicial to the interest of the revenue as per the mandate of "Explanation 2" to Section 263 of the Act, and thus, directed the A.O to verify the assessee's claim for deduction of the interest received from the banks on FDRs, FFD and savings banks interest etc. u/s. 80P(2)(d) of the Act AND verify its claim of expenditure. Accordingly, the Pr. CIT set-aside the assessment order and remanded it back to the file of the A.O for fresh adjudication of the issues after conducting necessary enquiries and allowing adequate opportunity of being heard to the assessee society. 9. The assessee society being aggrieved with the order passed by the Pr. CIT u/s. 263 of the Act, dated 30.03.2024 has carried the matter in appeal before us. 10. We have heard the ld. authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. BRIEF BACKGROUND OF THE AS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Sahkari Society Adhiniyam, 1960 read a/w. Chhattisgarh Sahkari Society Rules, 1962. As observed by us hereinabove, as per the order dated 23.02.2001, bearing No.454/2001 issued by the State Government, Forest Environment and Cultural Department, the role of the assessee society was to act as an agency to facilitate collection, storage, processing and disposal of the specified forest produce in the State of Chhattisgarh against a remuneration of Re.1/- (Rupee one) per annum. As per the mandate the assessee society was not supposed to have any income other than the nominal amount of Re.1/- as consideration for having been appointed as an agent under the provisions of Chhattisgarh Vanopaj (Vypar Viniyam) Adhinayam, 1964 read with Section 4 of the said Act. As such, the role and object of the assessee society was to act as a coordinator, whereby the collection of the major forest produce was to be arranged in a transparent manner to maximize the return to the tribals and villagers who were engaged in collection of such forest produce. 13. As regards the organization and working structure of the assessee society, the Ld. AR submitted that 901 primary co-operative societies were const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y co-operative societies. The Ld. AR explaining the basis for distribution/payment of the surplus in the aforesaid ratio, i.e. 80 : 15 : 5 had taken us through the order dated 03.11.2009 of the Government of Chhattisgarh, Forest Environment and Cultural Department, marked as No. F. 13-31/2009/10-2 which contemplated distribution of "net profit" of Tendu leaf business in the aforesaid ratio, i.e. 80 : 15 : 5. For the sake of clarity, the aforesaid order dated 03.11.2009 (supra) is culled out as under (Page 103 of APB): The Ld. AR submitted that income of the assessee society which was comprised of interest income on seed capital of Rs. 6,02,40,190/- (supra) and Re. 1/- that was received as commission for rendering its services as an agent to the State Government were duly accounted for as income in its return of income for the year under consideration. 15. The Ld. AR to fortify his claim that the various aspects based on which the Pr. CIT had revised the assessment order u/s. 263 of the Act were queried and deliberated upon by the A.O while framing the assessment had drawn our attention to the notice(s) issued u/s. 142(1) of the Act dated 29.08.2018 and 27.12.2018. The Ld. AR had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction assumed by the Pr. CIT u/s. 263 of the Act for the reason that he had while exercising his revisionary jurisdiction failed to cumulatively satisfy the pre-conditions set out in the said statutory provision. Elaborating on his contention, the Ld. AR submitted that a cursory glance of Section 263(1) of the Act reveals that it is incumbent on the part of the Pr. CIT to call for and examine the records for any proceeding under the Act, and it is only if he considers that the order passed by the A.O is erroneous in so far it is prejudicial to the interest of the revenue that he may assume jurisdiction under the said statutory provision. 18. Carrying his contention further, the Ld. AR submitted that a conjoint perusal of the SCN dated 11.03.2021 issued by the Pr. CIT u/s. 263 of the Act read along with the reasons recorded for revision of the order u/s. 263 of the Act by the ACIT- 1(1), Raipur, Page 175 to 178 of APB (Volume-IV), revealed that the Pr. CIT without any application of mind had merely acted upon the reasons recorded by the ACIT-1(1), Raipur, and based on the same, had assumed jurisdiction u/s. 263 of the Act. Elaborating further, the Ld. AR submitted that neith ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Ld. AR has further assailed the order passed by the Pr. CIT u/s. 263 of the Act for the reason that he had though set-aside the order passed by the A.O u/s. 143(3), dated 28.12.2018 by treating the same as erroneous in so far it was prejudicial to the interest of the revenue u/s. 263 of the Act but had failed to carry out independent inquires, based on which, he had concluded that the assessment order was erroneous and prejudicial to the interest of the revenue. The Ld. AR vehemently submitted that the Pr. CIT while exercising his jurisdiction u/s. 263 of the Act was statutorily required to arrive at a conclusion that the assessment order was erroneous by conducting necessary inquires, if required, before passing order u/s. 263 of the Act. Elaborating further on his contention, the Ld. AR submitted that as held in the various judicial pronouncements the revisional authority cannot remand the matter to the file of the A.O to decide whether the findings recorded by his predecessor are erroneous. Carrying his contention further, the Ld. AR submitted that it is only where the CIT conducts inquiries and verification and is able to establish and show that an error or mistake had crep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed u/s. 143(3) of the Act for the respective years wherein, the A.Os had categorically observed that the assessee society was functioning as an agent for collection and trading of minor forest produce as per the mandate of the order of the State Government of Chhattisgarh for a commission of Re.1/- only. Also, the Ld. AR had drawn our attention to the observations of the A.Os wherein they had observed that except for the commission of Re.1/- and interest earned on the seed money from the co-operative banks which was eligible for deduction u/s. 80P(2)(d) of the Act the remaining income disclosed in the agency's trading/profit and loss account of the assessee society belonged to the co-operative societies. Carrying his contention further, the Ld. AR submitted that now when the department had consistently after scrutinizing the returns of income of the assessee society in the backdrop of its financial statements for the preceding years arrived at a conscious view that the income of the assessee society was restricted to the extent of the agency commission of Re.1/- and interest on its seed money lying with the co-operative bank which was entitled for deduction u/s. 80P(2)(d) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y application of mind to the material facts emanating therefrom, the Ld. DR submitted that the same was factually incorrect and misconceived. 24. The Ld. DR further assailed the contention of the assesse's counsel that as the A.O had framed the assessment vide his order u/s. 143(3) of the Act, dated 28.12.2018 after making due inquiries and necessary verification on the various aspects, therefore, the Pr. CIT in the garb of powers vested with him u/s. 263 of the Act had wrongly assumed jurisdiction for seeking substitution of his view as against that arrived at by the A.O. Elaborating on his contention, the Ld. DR submitted that as the A.O had failed to carry out the bare minimum verifications and inquiries on certain issues which ought to have been done by him while framing the assessment, therefore, the Pr. CIT had rightly stepped in and set-aside his order with a direction to him to re-adjudicate the same after affording a reasonable opportunity of being heard to the assessee society. The Ld. DR in order to fortify his aforesaid contention had drawn our attention to the assessment order passed by the A.O u/s. 143(3) of the Act, dated 28.12.2018. Taking us through the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Pr. CIT after considering the reply of the assessee society in the backdrop of the queries raised in the SCN, and drawing support from a host of judicial pronouncements, had after due application of mind to the facts before him validly revised the assessment order u/s. 263 of the Act. 26. The Ld. DR submitted that as it was a case of a failure on the part of the A.O to carry out necessary verifications and inquiries while framing of the assessment, a fact which was glaring on the very face of it, therefore, the Pr. CIT taking cognizance of the aforesaid serious lapse of the A.O, after drawing support from a host of judicial pronouncements had rightly held the order passed by him as erroneous in so far it was prejudicial to the interest of the revenue u/s. 263 of the Act. It was, thus, averred by the Ld. DR that it was incorrect on the part of the assessee society to claim that the Pr. CIT while revising the order u/s. 263 of the Act had failed to carry out any inquiries. 27. As regards the claim of the assessee's counsel that as the department had accepted the returned income of the assessee society for the previous years, therefore, there was no justification for the Pr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res that the assessee society had claimed to have received interest income on its FDR (sourced out of its seed capital) with "Apex bank". In so far the entitlement of a co-operative society for deduction u/s. 80P(2)(d) of the interest income received on deposits lying with a co-operative bank is concerned, we find that the said issue is squarely covered by the order of the ITAT, Mumbai in the case of M/s. Solitaire CHS Ltd. Vs. Pr. Commissioner of income Tax-26, Mumbai, ITA No.3155/MUM/2019 dated 29.11.2019. The Tribunal after deliberating at length on the various facets of the issue in hand, i.e. entitlement of a co-operative society for claiming deduction of interest on deposits lying with a co-operative bank u/s. 80P(2)(d) of the Act, had observed as under: "6. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. Our indulgence in the present appeal has been sought, for adjudicating, as to whether the claim of the assessee for deduction under section 80P(2)(d) in respect of interest income earned from the investments/deposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest income derived by an assessee co-operative society from its investments held with any other co-operative society shall be deducted in computing its total income. We may herein observe, that what is relevant for claim of deduction under Sec. 80P(2)(d) is that the interest income should have been derived from the investments made by the assessee co-operative society with any other co-operative society. We are in agreement with the view taken by the Pr. CIT, that with the insertion of sub-section (4) of Sec. 80P, vide the Finance Act, 2006, with effect from 01.04.2007, the provisions of Sec. 80P would no more be applicable in relation to any co- operative bank, other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. However, at the same time, we are unable to subscribe to his view that the aforesaid amendment would jeopardise the claim of deduction of a co-operative society under Sec. 80P(2)(d) in respect of its interest income on investments/deposits parked with a co-operative bank. In our considered view, as long as it is proved that the interest income is being derived by a co-operative society from its investments m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Circular No. 14, dated 28.12.2006, also makes it clear beyond any scope of doubt that the purpose behind enactment of sub-section (4) of Sec. 80P was that the co- operative banks which were functioning at par with other banks would no more be entitled for claim of deduction under Sec. 80P(4) of the Act. Insofar the reliance placed by the Pr. CIT on the judgment of the Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. vs. ITO (2010) 322 ITR 283 (SC) is concerned, we are of the considered view that the same being distinguishable on facts had wrongly been relied upon by him. The adjudication by the Hon'ble Apex Court in the aforesaid case was in context of Sec. 80P(2)(a)(i), and not on the entitlement of a co- operative society towards deduction under Sec. 80P(2)(d) on the interest income on the investments/deposits parked with a co-operative bank. Although, in all fairness, we may herein observe that the Hon'ble High Court of Karnataka in the case of Pr. CIT Vs. Totagars co-operative Sale Society (2017) 395 ITR 611 (Karn), had concluded that a co-operative society would not be entitled to claim of deduction under Sec. 80P(2)(d). At the same time, we fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the order passed by the A.O under Sec. 143(3), date 14.09.2016. 10. Resultantly, the appeal filed by the assessee is allowed." 33. Although, we are principally in agreement with the Ld. AR that the interest income received by a co-operative society on its deposits with a co-operative bank would be entitled for deduction u/s. 80P(2)(d) of the Act, but at the same time, we find from a perusal of the record that the A.O while framing the assessment had at no stage verified the authenticity of the claim of the assessee society that the deduction raised by it u/s. 80P(2)(d) of the Act pertained to the interest income on its deposits parked with a co-operative bank/banks. As nothing is discernible from the record nor any material has been filed before us in the course of hearing of the appeal, which would reveal that the assessee's claim for deduction u/s. 80P(2)(d) of the Act was raised as regards the interest income earned on its deposits lying with a co-operative bank/banks, therefore, to the said extent, we concur with the Pr. CIT that the A.O without carrying out any verification on the aforesaid material aspect had summarily accepted the claim of the assessee society for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by the A.O u/s. 142(1) of the Act does not reveal that he had in the course of the assessment proceedings on any occasion raised any query on the aforesaid material aspect and verified, i.e. whether the interest income of Rs. 6.02 crore (approx.) on seed capital which was claimed as deduction u/s. 80P(2)(d) was earned from its funds parked with a co-operative bank/banks. Accordingly, to the said extent, we are unable to concur with the Ld. AR that as specific queries to the extent relatable to its entitlement for deduction u/s. 80P(2)(d) of the Act were raised by the A.O in the course of the assessment proceedings and were duly answered by the assessee society, therefore, the Pr. CIT in the garb of his powers u/s. 263 of the Act had wrongly assumed jurisdiction and set-aside the order of the A.O. 38. We shall now deal with the Ld. AR's contention regarding the second facet of the observation of the Pr. CIT, based on which, the order of the A.O had been set-aside u/s. 263 of the Act. The Pr. CIT had, inter alia, observed that as the A.O while framing the assessment had failed to verify the assessee's claim of expenditure and summarily accepted the same without carryi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erative societies, but nothing was queried into by the A.O as to what was the basis for bifurcating the aforementioned amount under various heads, viz. (i) to Incentive Wages; (ii) to sale purchase & processing of Non-Nationalized MFP; and (iii) to revolving fund. Also, we find that the Pr. CIT vide SCN, dated 11.03.2021 had, inter alia, observed that the veracity of certain expenses claimed by the assessee as "payable to society" appearing on the debit side of the profit and loss account were not verified in the course of the original assessment proceedings. However, the assessee society instead of coming forth with any plausible explanation as regards the nature as well as veracity of the "payable expenses" had simply stated before the Pr. CIT that the same were verified during the course of the original assessment proceedings. For the sake of clarity, the reply of the assessee society on the aforesaid aspect is culled out as under: "I. Reply for Para 2.2 (Page 3 of 6): In this para, again a factually incorrect statement has been made that the veracity of payable expenses has not been verified during the original assessment. It can be seen that the case was selected for Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oming despite a specific query to the said affect raised by the Bench. Rather, the only reply forthcoming was that as the aforementioned expenses which had scaled down the gross receipts from trading of tendu leaves and interest income on deposits pertained to the primary co-operative societies, therefore, the same were not liable to be looked into in the case of the assessee society. We are unable to comprehend the aforesaid explanation of the assessee society. Admittedly, the assessee society pursuant to the order of the State Government of Chhattisgarh under the provisions of Chhattisgarh Vanopaj (Vypar Viniyam) Adhinayam 1964 read with Section 4 of the said Act is an "agent" of the 901 primary co-operative societies. As the assessee society being an agent, i.e. a representative assessee of the aforesaid 901 primary co-operative societies as per Section 161 of the Income Tax Act, 1961 was subjected to the same duties, responsibilities, liabilities, as if the subject income was the income received by or accruing to or in its favour beneficially, therefore, the A.O was obligated to have verified and inquired into the veracity of the expenses claimed by the assessee society in its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee society had adopted an evasive approach before the Pr. CIT and despite specific directions had not come forth with any explanation much the less any material which would substantiate the authenticity of the aforesaid expenses. Based on our aforesaid deliberations, we find that neither the claim of expenses in the agency profit and loss account of the assessee society, which had resulted to scaling down of the distributable amount to the primary cooperative societies to Rs. 167.91 crore (approx.) had been verified by the A.O nor the basis of allocation of the aforesaid balance distributable/payable amount to the primary co-operative societies under various heads was queried by him while framing the assessment. Further, the Pr. CIT had rightly observed that the A.O had not verified as to whether the aforesaid "payables" were paid by the assessee society in the subsequent year, and also, not looked into the reasons of its recurrence in various years. We, thus, based on the aforesaid facts concur with the Pr. CIT that failure of the A.O to carry out necessary verification on the aforesaid material aspects had rendered the order passed by him u/s. 143(3) of the Act, dated 28.12.2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is statutorily required on the part of the Pr. CIT to call for and examine the records for any proceedings under the Act, and it is only if he considers that the order passed by the A.O is erroneous in so far as it is prejudicial to the interest of the revenue that he may assume jurisdiction under the said statutory provision. Carrying his contention further, the Ld. AR submitted that the Pr. CIT in the present case, had not called for and examined the records of the assessee society and had mechanically acted upon the reasons recorded for revision of the order u/s. 263 of the Act by the ACIT-1(1), Raipur, Page 175 to 178 of APB (Volume-IV). The Ld. AR based on his aforesaid contention had tried to impress upon us that as the Pr. CIT had failed to call for and examine the records of the assessee society, and further failed to apply his independent mind on the said record, therefore, he had wrongly assumed jurisdiction and passed the order u/s. 263 of the Act. The Ld. AR in order to fortify his aforesaid contention had drawn support from the fact that the reasons for revision u/s. 263 of the Act as were recorded by the ACIT-1(1), Raipur had formed part of the SCN, dated 11.03.2021 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder passed by the Pr. CIT u/s. 263 of the Act dated 30.03.2021, reveals that he had at the very thresold made a mention that subsequent to the culmination of the assessment u/s. 143(3) of the Act dated 28.12.2018, he had perused the records of the assessee for the subject year. For the sake of clarity, the observation of the Pr. CIT is culled out as under: (relevant extract) "1. On subsequent perusal of the record of the assessee for the F.Y.2014-15, it is found that the assessee had earned interest income, as under....." (emphasis supplied by us) Also, a reference of perusal of the financial statements of the assessee society can be traced in Para-3 of the order passed by the Pr. CIT u/s. 263 of the Act. Further, the Pr. CIT while concluding that the order passed by the A.O was erroneous in so far it was prejudicial to the interest of the revenue in view of "Explanation-2" to Section 263 of the Act, had observed at Para 5 of his order that he had gone through the case records. For the sake of clarity, the relevant observations of the Pr. CIT are culled out as under: "5. I have gone through the case record and submission of the assessee furnished during assessment proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the (Annexure - 4) would show that on the basis of the document produced before the Joint Commissioner, he was convinced of the fact that such approval would be necessary as the statute mandate. 6. From perusal of the language of the letter (Annexure - 4), we cannot presume that there was no application of mind as the approval need not be a detailed assessment order. The presumption under Section 114 of the Evidence Act would follow when such official Act has been done in accordance with official procedure and will lead to presumption that due diligence was followed. Even otherwise, the order of the ITAT would reflect that the case of appellant was remanded back to the Assessing Officer for fresh adjudication of the issue. Further the liberty was given to the assessee to raise all such issues before the Revenue Authorities and furnish necessary information/evidences in support of his contention. When such right has already been reserved in favour of the assessee, to raise grounds, we do not find that any prejudice has been caused and in fact the ITAT has principally accepted the contention of the appellant and in furtherance to advance the rules of natural justice, opportuni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... framing the assessment had failed to carry out proper verifications. Also, the Pr. CIT referring to the facts as were narrated in the SCN dated 11.03.2021, had observed that as there was no application of mind by the A.O to correctly bring the income of the assessee society to tax, therefore, assessment order so passed by him was rendered as erroneous in so far it was prejudicial to the interest of the revenue. The Pr. CIT after referring to the facts, based on which, the order passed by the A.O u/s. 143(3) dated 28.12.2018 was sought to be revised had called upon the assessee society to explain as to why the said order may not be suitably revised in exercise of powers vested with him, which, inter alia, included the power to set-aside such order. The Pr. CIT had, thereafter, afforded an opportunity to the assessee society to explain its case based on details, documents and necessary evidences along with a word of caution that in case of absence of furnishing of requisite details it would be presumed that it had no objection to the proposed action which shall be accordingly finalized. We are of a firm conviction that though the Pr. CIT had incorporated the reasons recorded by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is indispensably required for valid assumption of jurisdiction u/s. 263 of the Act, but the material or information, i.e. the record that would be available before him for examination may come from any source, which would also include details provided by the A.O. It is incomprehensible that the Pr. CIT in exercise of his revisional jurisdiction would be expected to gather the entire material or information on his own and cannot act upon any such material or information that is shared with him by the assessment unit. If the Ld. ARs view is to be accepted, then it would lead to a situation wherein it would be practically impossible for the Pr. CIT to assume jurisdiction u/s. 263 of the Act. In fact, what is required as per the law is that if the Pr. CIT after calling for and examining the records of any proceeding under the Act, considers that any order passed by the A.O. is erroneous in so far as it is prejudicial to the interest of the revenue, then, he can validly assume jurisdiction to revise the said order after affording a reasonable opportunity of being heard to the assessee. 50. In case, any bottlenecks are placed restricting the sources from where information or material c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Raipur had duly applied his mind to the records before him for arriving at a view that due to certain failure of the A.O to carry out necessary inquiries/verifications the assessment order passed by him u/s. 143(3) of the Act dated 28.12.2018 was rendered as erroneous in so far it was prejudicial to the interest of the revenue and thus, validly assumed jurisdiction u/s. 263 of the Act; and (ii) that there was no restriction on the Pr. CIT to have acted upon material placed before him by the A.O for arriving at a prima facie view that the order so passed u/s. 143(3) of the Act being erroneous and prejudicial to the interest of the revenue was amenable for revision u/s. 263 of the Act, thus are unable to concur with the aforesaid contentions advanced by the Ld. AR. RE : Pr. CIT HAD TAKEN AN INCONSISTENT VIEW AS AGAINST THAT TAKEN BY THE A.O IN THE PRECEDING YEARS. 52. We shall now deal with the contention of the Ld. AR that as the view taken by the A.O while framing the assessment for the subject year, i.e. A.Y.2016-17, was in conformity with that arrived at by his predecessor(s) while framing the assessments for the preceding years u/s. 143(3) of the Act, therefore, the Pr. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comprises of commission of Re.1/- (Rupee one) a/w. interest earned on the seed money from co-operative banks which was eligible for deduction u/s. 80P(2)(d) of the Act, had throughout been accepted by the department, therefore, there was no justification for the Pr. CIT to have arrived at a contrary view based on the same set of facts as were there in the preceding years. 54. We have thoughtfully considered the aforesaid claim of the Ld. AR and are unable to persuade ourselves to subscribe to the same. Admittedly, as per the principle of consistency, there is no justification for the department to take a view other than that arrived at based on same set of facts in the preceding years. At the same time, a mistake cannot be allowed to perpetuate in light of the consistency. Also, there is nothing provided u/s. 263 of the Act which restricts the Pr. CIT from exercising his powers u/s. 263 of the Act for the reason that a wrong claim raised by the assessee in the preceding years was not dislodged by the department. All that is required as per Section 263 of the Act is that in case if the Pr. CIT finds that the order passed by the A.O is found to be erroneous in so far it is prejudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. carrying out either on his own or through the A.O any such inquiries as he deemed necessary before holding the order passed by the A.O as erroneous in so far it was prejudicial to the interest of the revenue u/s. 263 of the Act. As observed by us hereinabove, the Ld. AR had claimed that though the Pr. CIT while exercising jurisdiction u/s. 263 of the Act was statutorily required to arrive at a conclusion that the assessment order was erroneous by conducting necessary inquiries, if required before passing order u/s. 263 of the Act, but he had in the present case failed to do so. Elaborating on his contention, it was the claim of the Ld. AR that the Pr. CIT could not have remanded the matter to the file of the A.O to decide whether the findings recored in the order passed by his predecessor were erroneous. The Ld. AR had stated that it is only where the Pr.CIT conducts inquiries and verification and is able to establish and show that error or mistake had crept in the order passed by the A.O making the same unsustainable in law; or the facts on record per-se justified making of further inquiries or investigation but the A.O had wrongly not undertaken the same, it is only then aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On a careful perusal of the order passed by the Pr. CIT u/s. 263 of the Act dated 30.12.2018, we find that he had after validly putting the assessee society to show cause as regards the issues on which he was of the prima-facie view that the order passed by the A.O u/s. 143(3) of the Act dated 28.12.2018 was erroneous and prejudicial to the interest of the revenue, had after considering the reply filed by the assessee, which as observed by us hereinabove did not divulge the complete details on both the subject issues, on which, the order had been revised, viz. (i) entitlement of the assessee society for claiming deduction u/s. 80P(2)(d) of the Act of the interest on deposits of seed capital claimed to have been made with co-operative bank/banks; and (ii) verification of the assessee's claim of expenditure; therefore, we are unable to comprehend as to what inquiry the Pr. CIT was expected to have either carried out on his own or got done from the A.O when the assessee society itself was hesitant to come forth with the complete details. We are of the view that as per Section 263 of the Act the pre- conditions of making of an inquiry by the revisional authority before passing an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te details was expected. The Pr. CIT in our view after considering the circumstances of the case, in all fairness, remanded the matter for fresh adjudication on the aforesaid issues. We, thus, in terms of our aforesaid observations, finding no substance in the claim of the Ld. AR that the Pr. CIT without carrying out any inquiry had wrongly held the order passed by the A.O u/s. 143(3) of the Act dated 28.12.2018 as erroneous in so far it was prejudicial to the interest of the revenue u/s. 263 of the Act, reject the same. RE : PR CIT HAD PASSED THE ORDER WITHOUT APPLYING HIS MIND TO THE SUBMISSION FILED BY THE ASSESSEE SOCIETY BEFORE HIM 60. We shall now advert to the contention of the Ld. AR that as the Pr. CIT had passed the order u/s. 263 of the Act dated 30.03.2021 without applying his mind regarding the issues, on which, the assessment order dated 28.12.2018 had been set-aside by him, therefore, the same is liable to be set-aside on the said count itself. 61. As observed by us hereinabove, the Ld. AR had submitted that as the order passed by the Pr. CIT is bald, bland and blind in the backdrop of the reply that was filed by the assessee society in response to the SCN dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest of the revenue on multiple issues may not be revised u/s. 263 of the Act. The Pr. CIT had initially sought to revise the assessment order on multiple issues, but thereafter considering the reply of the assessee and perusing the records had confined the revision of the order to only two issues, viz. (i) entitlement of the assessee society for claiming deduction u/s. 80P(2)(d) of the Act of the interest on deposits of seed capital claimed to have made with co-operative bank/banks; and (ii) verification of the assessee's claim of expenditure. In our view, the very fact of initially seeking revising of the assessment order on multiple issues, but thereafter, limiting the same to only two issues in itself reveals due application of mind by the revisional authority. As the assessee society regarding the aforesaid two issues, on which, the Pr. CIT had held the order passed by the A.O u/s. 143(3) of the Act dated 28.12.2018 as erroneous in so far it was prejudicial to the interest of the revenue had not only failed to provide the requisite details to support genuineness of its claim of deduction u/s. 80P(2)(d) of the Act of interest income on deposits and claim for deduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... niel Merchants (P) Ltd. Vs. Income Tax Officer, (2018) 95 taxmann.com 366 (SC), where the A.O had not made any inquiry while making the assessment and had summarily accepted the explanation of the assessee, the CIT was held to have rightly set-aside such assessment order u/s. 263 of the Act. As in the present case before us, the Pr. CIT by drawing support from the powers vested with him under "Explanation 2(a)" to Section 263(1) of the Act which vested with him the jurisdiction to hold the order passed by the A.O as erroneous and prejudicial to the interest of the revenue, if the same had been passed without making any inquiries which should have been made, had set-aside the assessment order, therefore, the exercise of jurisdiction by him in the backdrop of our aforesaid deliberations does not suffer from any infirmity. For the sake of clarity, "Explanation 2(a)" to Section 263 of the Act is culled out as under: (relevant extract) "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 prejudicial to the interests of the revenue, if, in the opinion of the Principal Com ..... X X X X Extracts X X X X X X X X Extracts X X X X
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