2020 (12) TMI 222 - AT - Income Tax

Tax Tribunal Upholds Deduction Decision

The Tribunal held that the Principal Commissioner of Income Tax erred in invoking revisional jurisdiction under section 263 without meeting the necessary ... Revision u/s 263 - as per CIT Section 80P deduction has not been correctly granted by the AO - HELD THAT:- In Hon’ble High Court in CIT vs. Baroda Peoples Co-operative Bank [2005 (7) TMI 33 - GUJARAT HIGH COURT] we find merit in the submission of the ld. A.R that the Ld PCIT has erred in relying on the decision of Hon’ble Supreme Court in Totgar’s Co-operative Sales Society Ltd.[2010 (2) TMI 3 - SUPREME COURT] since it was in respect of society providing credit facilities to its members and not an assessee which is a bank. In the light of judicial precedence laid down by the Hon’ble Apex Court in Malabar Industries Ltd. [2000 (2) TMI 10 - SUPREME COURT] wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 by the CIT. In this case, we note that the view of Assessing Officer cannot be held to be erroneous, since Section 80P deduction has been correctly granted by the AO in consonance with the ratio of the decision of Hon’ble Gujrat High Court in CIT vs. Baroda Peoples Co-operative Bank Ltd. (supra), so the view of AO is a plausible view and therefore Ld. PCIT erred in invoking the revisional jurisdiction u/s 263 without satisfying the condition precedent essential to invoke revisional jurisdiction. PCIT ought not to have invoked the power u/s 263 and therefore, the invoking of the revisional jurisdiction itself is held to be bad in law and therefore quashed. - Appeal of the assessee is allowed. Issues Involved:1. Delay in filing the appeal.2. Invocation of revisional jurisdiction under section 263 of the Income Tax Act, 1961.3. Applicability of Section 80P deduction to the interest earned from NABARD bonds.Issue-wise Detailed Analysis:1. Delay in filing the appeal:The appeal was filed with a delay of 293 days. The assessee submitted a condonation petition supported by an affidavit from the chairman, explaining that the delay was due to the negligence of the bank's accountant, who had misplaced the file. The Tribunal found no mala fide intention on the part of the assessee and, in the interest of justice, condoned the delay after hearing the Departmental Representative (D.R).2. Invocation of revisional jurisdiction under section 263 of the Income Tax Act, 1961:The assessee challenged the Principal Commissioner of Income Tax (PCIT)'s action of invoking revisional jurisdiction under section 263 of the Act. The PCIT had issued a show cause notice (SCN), stating that the Assessing Officer (AO) did not make adequate inquiries regarding the interest earned from NABARD bonds amounting to Rs. 4,55,000/-, which the PCIT believed could not be claimed as a deduction under section 80P of the Act. The PCIT relied on the Supreme Court judgment in Totgar’s Co-operative Sales Society Ltd. vs. ITO. However, the Tribunal noted that the AO had indeed examined the documents and allowed the deduction based on the assessee's compliance with the requirements of section 80P. The Tribunal also highlighted that the case of Totgar’s Co-operative Sales Society Ltd. was not applicable as it pertained to a society providing credit facilities to its members, unlike the assessee, which is a co-operative bank.3. Applicability of Section 80P deduction to the interest earned from NABARD bonds:The Tribunal referred to the Gujarat High Court decision in CIT vs. Baroda Peoples Co-operative Bank Ltd., which clarified that income arising from investments made in permissible securities is attributable to the business of banking and eligible for deduction under section 80P(2)(a)(i) of the Act. The Tribunal emphasized that the business of banking includes investing funds in securities to ensure liquidity and safety, which is a normal part of banking operations. Therefore, the interest earned from NABARD bonds qualifies for deduction under section 80P. The Tribunal concluded that the AO's view was a plausible one and in line with the judicial precedent, making the PCIT's invocation of section 263 erroneous and prejudicial to the interest of justice.Conclusion:The Tribunal found that the PCIT erred in invoking revisional jurisdiction under section 263 of the Act without satisfying the condition precedent. The AO's decision to grant the deduction under section 80P was correct and based on a plausible view supported by judicial precedent. Consequently, the Tribunal quashed the PCIT's order and allowed the appeal of the assessee.Order Pronouncement:The order was pronounced in the open court on 03.12.2020.