2023 (7) TMI 1042 - AT - Income Tax

Tribunal overturns Commissioner's decision, upholds deductions under Section 80P(2)(d)

Shree Madhi Vibhag Khand Udyog Sahakari Mandli Ltd. Versus Pr. C.I.T. -1, Surat

Shree Madhi Vibhag Khand Udyog Sahakari Mandli Ltd. Versus Pr. C.I.T. -1, Surat - TMI Issues Involved:1. Jurisdiction under Section 263 of the Income Tax Act.2. Denial of deduction under Section 80P(2)(d) of the Income Tax Act.3. Invocation of revision proceedings under Explanation 2(a)/(b) below Section 263.4. Examination and appreciation of evidence and materials for deduction under Section 80P(2)(d).5. Consistency in allowing deduction under Section 80P(2)(d) in previous assessments.Summary:1. Jurisdiction under Section 263 of the Income Tax Act:The assessee challenged the jurisdiction of the learned Principal Commissioner of Income Tax (Pr. CIT) under Section 263 of the Act, arguing that the Pr. CIT substituted his subjective view in place of the judicious view taken by the Assessing Officer (AO). The Tribunal found that the AO had conducted a thorough inquiry and verification of the relevant assessment records, thus the order passed under Section 263 by the Pr. CIT was without jurisdiction, bad in law, and void ab initio.2. Denial of deduction under Section 80P(2)(d) of the Income Tax Act:The assessee, a cooperative society, claimed a deduction under Section 80P(2)(d) for interest and dividend income earned from a cooperative bank. The Tribunal noted that the AO had issued a specific show cause notice and examined the issue during the assessment proceedings. The Tribunal concluded that the assessment order was neither erroneous nor prejudicial to the interest of the revenue, and thus, the Pr. CIT's direction to deny the deduction was incorrect.3. Invocation of revision proceedings under Explanation 2(a)/(b) below Section 263:The assessee argued that the Pr. CIT invoked revision proceedings solely based on revenue audit objections without examining the records of the proceedings. The Tribunal referred to the decision in Sirpur Paper Mill Ltd. Vs. CWT, where it was held that revision proceedings influenced by audit objections and without an independent application of mind are without jurisdiction and bad in law.4. Examination and appreciation of evidence and materials for deduction under Section 80P(2)(d):The Tribunal found that the AO had examined the admissibility of the deduction under Section 80P(2)(d) during the assessment proceedings. The assessee had provided complete details and explanations, and similar deductions had been allowed in previous assessment years. The Tribunal held that the Pr. CIT failed to appreciate the evidence and materials properly and relied on distinguished judgments arbitrarily.5. Consistency in allowing deduction under Section 80P(2)(d) in previous assessments:The Tribunal emphasized the rule of consistency, noting that similar deductions had been allowed in previous assessment years. The Tribunal cited various decisions, including Bardoli Vibhag Gram Vikas Co-op Credit Society Ltd. Vs PCIT and Surat Vankar Sahakari Sangh Ltd. Vs ACIT, which supported the assessee's claim for deduction. The Tribunal concluded that the order passed by the Pr. CIT was in violation of the rule of consistency and thus, bad in law.Conclusion:The Tribunal allowed the appeal of the assessee, setting aside and quashing the order passed by the Pr. CIT under Section 263. The Tribunal held that the assessment order was not erroneous or prejudicial to the interest of the revenue, and the grounds of appeal raised by the assessee were allowed in favor of the assessee and against the revenue.