ITAT directs inquiry into cooperative society's activities for deduction eligibility

The ITAT allowed the appeal for statistical purposes, directing the Assessing Officer to conduct an inquiry into the activities of the cooperative society to determine their eligibility for the deduction under section 80P(2) of the Income Tax Act. The ITAT emphasized the necessity for a factual examination into the society's activities to establish their entitlement to the deduction, overturning the CIT(A)'s decision to disallow the deduction based on a subsequent judgment.

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Issues:
- Disallowance of deduction u/s 80P(2) of the I.T.Act by Assessing Officer
- Appeal to CIT(A) allowed deduction u/s 80P
- CIT(A) issued notice u/s 154 to rectify order based on subsequent judgment
- CIT(A) passed order disallowing deduction u/s 80P(2) of the I.T.Act
- Appeal filed before ITAT challenging CIT(A) order

Analysis:

Issue 1: Disallowance of deduction u/s 80P(2) by Assessing Officer
The Assessing Officer disallowed the claim of deduction u/s 80P(2) of the I.T.Act for the assessee, a co-operative society engaged in banking activities. This disallowance was based on the insertion of section 80P(4) of the I.T.Act, which restricted the deduction for societies engaged in banking. The AO's reasoning was that the assessee's banking activities made them ineligible for the deduction u/s 80P(2) of the I.T.Act.

Issue 2: Appeal to CIT(A) allowed deduction u/s 80P
The assessee appealed to the CIT(A) against the AO's order, and the CIT(A) allowed the appeal, holding that the assessee was indeed eligible for the deduction u/s 80P of the I.T.Act. The CIT(A) relied on a judgment of the jurisdictional High Court to support the assessee's eligibility for the deduction.

Issue 3: CIT(A) issued notice u/s 154 to rectify order based on subsequent judgment
Subsequently, the CIT(A) issued a notice u/s 154 of the I.T.Act to rectify his earlier order, citing a subsequent judgment of the Full Bench of the jurisdictional High Court. The assessee objected to this notice, but the CIT(A) rejected the objections and passed an order disallowing the deduction u/s 80P(2) of the I.T.Act.

Issue 4: Appeal filed before ITAT challenging CIT(A) order
The assessee filed an appeal before the ITAT challenging the order of the CIT(A) disallowing the deduction u/s 80P(2) of the I.T.Act. The ITAT, after considering the submissions and relevant judgments, found that the CIT(A) should have examined the activities of the assessee society before disallowing the deduction. The ITAT directed the Assessing Officer to conduct an inquiry into the activities of the assessee society to determine their eligibility for the deduction u/s 80P(2) of the I.T.Act. The ITAT allowed the appeal for statistical purposes, emphasizing the need for a factual inquiry into the activities of the assessee society to ascertain their eligibility for the deduction.

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