2014 (6) TMI 184 - HC - Income Tax

Appellant's Tax Status Reviewed under Section 80P: Fresh Assessment Ordered

The High Court determined the appellant's status as a cooperative bank or credit society for tax benefits under section 80P. Due to the Assessing ... Validity of revisional order - Status of assessee - Co-operative bank or a primary co-operative credit society – Claim of benefits u/s 80P of the Act - Held that:- The entire discussion of the revisional authority is directed against the application of mind by the AO with reference to the nature of business conducted by the assessee - the AO is required to apply his mind and conduct proper enquiry and also verification at the time of assessment - Lack of this exercise on the part of the AO leads to erroneous order - the reasoning of the revisional authority was not merely based on the name of the assessee but with reference to the factual situation in relation to an enquiry to arrive at a conclusion whether the benefits can be extended or not in the light of section 80P(4) of the Act. The revisional authority observe that the AO has to reconsider the matter in the light of the observation made in the order of the revision by which it means what exactly should be the nature of enquiry to be conducted by the AO and it does not mean that he has to complete his assessment proceedings after concluding the same similar to the conclusions arrived at by the revisional authority – there was no erroneous observations made by the revisional authority – the AO is directed to pass a fresh assessment order after making necessary enquiries as observed in the order of revisional authority – Decided against the assessee. Issues:1. Determination of the exact status of the appellant-assessee as a co-operative bank or a primary co-operative credit society for claiming benefits under section 80P of the Income-tax Act.2. Assessment year 2009-10 - Reopening of assessment due to erroneous and prejudicial orders by the Assessing Officer.3. Application of mind by the Assessing Officer in conducting proper enquiry and verification during assessment.4. Justification of the revisional authority's orders based on factual situation and enquiry into the nature of business conducted by the appellant-assessee.5. Upholding the opinion of the revisional authority by the Tribunal regarding the need for proper enquiry by the Assessing Officer.6. Direction to the Assessing Officer to pass a fresh assessment order after necessary enquiries without being influenced by the revisional authority's opinions.Analysis:1. The High Court addressed the controversy regarding the appellant-assessee's status, emphasizing the importance of determining whether it is a co-operative bank or a primary co-operative credit society to claim benefits under section 80P of the Income-tax Act. The Assessing Officer's failure to consider the nature of transactions conducted by the assessee led to erroneous and prejudicial orders, necessitating a fresh assessment.2. The Court highlighted the need for the Assessing Officer to apply his mind and conduct proper enquiry during assessment to avoid erroneous orders prejudicial to Revenue interests. The revisional authority's detailed analysis of the factual situation and the nature of business conducted by the appellant-assessee justified the reopening of the assessment for the year 2009-10.3. The revisional authority's orders, supported by the Tribunal, emphasized the importance of conducting an enquiry into whether the appellant-assessee qualifies as a primary agriculture credit society or a primary co-operative agricultural and rural development bank to extend benefits under section 80P(4) of the Act. The Assessing Officer was directed to reconsider the matter independently without being influenced by the revisional authority's opinions.4. The Court found no erroneous observations by the revisional authority but directed the Assessing Officer to conduct necessary enquiries and pass a fresh assessment order based on the nature of enquiry outlined in the revisional order. The judgment concluded with the disposal of the appeal, highlighting the importance of an unbiased assessment process by the Assessing Officer.