2023 (4) TMI 102 - AT - Income Tax

Assessment order found erroneous due to failure in verifying deduction eligibility

Poona Post and Telecom Co. Op. Credit Society Ltd. Versus The Pr. Commissioner of Income Tax-4, Pune.

The Tribunal upheld the Principal Commissioner of Income Tax's action under section 263, finding the assessment order erroneous due to the Assessing ... Revision u/s 263 - as per CIT AO has not verified properly the claim of deduction u/s. 80P - HELD THAT:- In this case, as discussed no enquiry has been made by the Assessing Officer during the assessment proceedings regarding the eligibility of the assessee for deduction under section 80P of the Act. Therefore, the assessment order is erroneous and prejudicial to the interest of the Revenue. Hence, we uphold the order under section 263 of the Act dated 29.03.2022. Accordingly, Ground No.1, 2 and 4 are dismissed. Claim of deduction under Chapter-VIA - HELD THAT:- AR has not produced any document to rebut the findings given by ld.Pr.CIT that the case of assessee was selected to verify assessee’s claim of deduction under Chapter-VIA. Since the case of assessee was selected for verification of assessee’s claim of deduction under Chapter-VIA, as observed by us, the AO had not carried out any enquiries and ld.AR has not submitted any document to prove that AO had verified Chapter-VIA deductions, the ld.Pr.CIT had jurisdiction to invoke powers under section 263 of the Act. Therefore, Ground No.1 and 3 raised by the assessee are dismissed. Applicability of the Hon’ble Supreme Court’s decisions - Assessee has referred to the Hon’ble Supreme Court’s decision in the case of Tolgar’s Co-op Sale Society [2010 (2) TMI 3 - SUPREME COURT]; Mavilayi Services Cooperative Credit Society Ltd. [2021 (1) TMI 488 - SUPREME COURT] and Tumkur Merchants Suharda Credit Co-op Society Ltd [2015 (2) TMI 995 - KARNATAKA HIGH COURT]- HELD THAT:- As mentioned in earlier paragraphs no factual details have been brought on records by ld.AR, therefore in the absence of factual details the assessee cannot plead applicability of the Hon’ble Supreme Court’s decision as mentioned above. Therefore, Ground No.4, 5 and 6 are dismissed. Notice was not served on assessee - assessee has claimed that notice under section 263 was collected by him from the Income Tax Department - HELD THAT:- It is an admitted position by the assessee that notice under section 263 has been received by assessee. Whether the Department sends the notice by post or whether assessee collects the notice, in both the scenario the service of notice is complete, when assessee receives it and in this case it is an admitted fact that the assessee had received the notice u/s.263 of the Act. In these facts and circumstances of the case, once valid notice under section 263 has been served on the assessee, the proceedings under section 263 cannot be held to be without jurisdiction. Therefore, the Ground No.7 is dismissed. Issues Involved:1. Validity of action under section 263 by the Principal Commissioner of Income Tax (Pr. CIT).2. Eligibility for deduction under section 80P(2)(a)(i) of the Income Tax Act.3. Assessment being termed erroneous and prejudicial to the interests of Revenue.4. Applicability of Supreme Court and High Court judgments.5. Jurisdictional notice and its service.6. Delay in filing the appeal.Summary:Issue 1: Validity of action under section 263 by the Principal Commissioner of Income Tax (Pr. CIT)The Assessee contended that the action under section 263 by the Pr. CIT was invalid as the assessment was selected for 'Limited Scrutiny' and the AO could not travel beyond the issues selected for scrutiny. The Tribunal held that the Pr. CIT rightly invoked section 263 as the AO failed to verify the claim of deduction under section 80P, rendering the assessment order erroneous and prejudicial to the interests of Revenue.Issue 2: Eligibility for deduction under section 80P(2)(a)(i) of the Income Tax ActThe Assessee claimed entitlement to deduction under section 80P(2)(a)(i). However, the Tribunal noted that the AO did not conduct any enquiry regarding the eligibility of the Assessee for this deduction. The Tribunal upheld the Pr. CIT's order, emphasizing that the AO's failure to verify the claim made the assessment order erroneous and prejudicial.Issue 3: Assessment being termed erroneous and prejudicial to the interests of RevenueThe Tribunal agreed with the Pr. CIT that the AO did not verify the principle of mutuality or whether the loans/deposits taken by the Assessee were given back to the members. This lack of enquiry justified the revision of the assessment order under section 263.Issue 4: Applicability of Supreme Court and High Court judgmentsThe Assessee referred to Supreme Court and High Court judgments to support their claim. However, the Tribunal dismissed these grounds as the Assessee did not provide any factual details or documents to establish the applicability of these judgments to their case.Issue 5: Jurisdictional notice and its serviceThe Assessee argued that the notice under section 263 was not properly served. The Tribunal dismissed this ground, stating that the Assessee admitted to receiving the notice, making the service of notice complete and the proceedings under section 263 valid.Issue 6: Delay in filing the appealThe Tribunal condoned the delay in filing the appeal, allowing it to be admitted for hearing.Conclusion:The Tribunal dismissed the appeal of the Assessee, upholding the Pr. CIT's order under section 263. The Tribunal emphasized that the AO's failure to conduct necessary enquiries regarding the Assessee's eligibility for deduction under section 80P rendered the assessment order erroneous and prejudicial to the interests of Revenue.