PCIT's revision order under section 263 set aside, cooperative society's deduction under section 80P(2)(d) for interest from cooperative bank upheld

ITAT Chandigarh set aside PCIT's revision order u/s 263 and upheld AO's decision allowing deduction u/s 80P(2)(d) to cooperative society. The assessee received interest income from deposits with Yamuna Nagar Central Co-op Bank Ltd. AO correctly allowed deduction for interest from cooperative bank while disallowing similar claims from scheduled commercial banks (HDFC, ICICI, AXIS). ITAT held AO properly examined facts and followed jurisdictional HC precedent. Since interest was earned from another cooperative society as required under section 80P(2)(d), AO's order was neither erroneous nor prejudicial to revenue. PCIT lacked justifiable basis for invoking section 263 powers.

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Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act.
2. Deduction under Section 80P(2)(d) on interest income.
3. Substitution of opinion by the Principal Commissioner of Income Tax (PCIT).
4. Consideration of submissions by the PCIT.
5. Correctness of the assessment order.

Summary:

1. Jurisdiction under Section 263 of the Income Tax Act:
The assessee argued that the Principal Commissioner of Income Tax (PCIT) wrongly assumed jurisdiction under Section 263 to set aside the assessment order dated 13.03.2021, as the order was neither erroneous nor prejudicial to the interest of Revenue. The PCIT held that the Assessing Officer (AO) erred in not correctly appreciating the decision of the Hon'ble Supreme Court and other High Courts, and thus the assessment order was erroneous and prejudicial to the interest of Revenue.

2. Deduction under Section 80P(2)(d) on Interest Income:
The assessee, a cooperative society, claimed a deduction under Section 80P(2)(d) for interest income received from deposits with Yamuna Nagar Central Co-op Bank Ltd. The AO allowed this deduction, but the PCIT contended that the AO did not properly consider the relevant judicial decisions and the nature of the funds (idle/surplus) used for earning the interest. The Tribunal found that the AO had duly examined the facts and allowed the deduction in compliance with Section 80P(2)(d).

3. Substitution of Opinion by the PCIT:
The assessee argued that the PCIT merely substituted her opinion over the plausible opinion taken by the AO, which was arbitrary and unjustified. The Tribunal agreed with the assessee, noting that the AO had followed the relevant judicial precedents and the provisions of Section 80P(2)(d).

4. Consideration of Submissions by the PCIT:
The assessee contended that the PCIT failed to consider the various replies and submissions placed on record correctly. The Tribunal observed that the AO had thoroughly examined the claim of deduction under Section 80P(2)(d) during the assessment proceedings and had allowed the deduction based on a detailed analysis of the facts and applicable legal provisions.

5. Correctness of the Assessment Order:
The Tribunal held that the AO's order was not erroneous or prejudicial to the interest of Revenue. The AO had correctly allowed the deduction under Section 80P(2)(d) after due examination of the facts and legal position. The Tribunal found no legal and justifiable basis for the PCIT to invoke the provisions of Section 263.

Conclusion:
The Tribunal set aside the order passed by the PCIT under Section 263 and sustained the AO's order, allowing the deduction under Section 80P(2)(d). The appeal of the assessee was allowed.

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