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Issues: (i) Whether the Principal Commissioner could validly exercise revisional jurisdiction under section 263 of the Income-tax Act, 1961 in respect of the assessment order passed under section 143(3); (ii) Whether interest income earned by a co-operative society from deposits with a co-operative bank was eligible for deduction under section 80P of the Income-tax Act, 1961.
Issue (i): Whether the Principal Commissioner could validly exercise revisional jurisdiction under section 263 of the Income-tax Act, 1961 in respect of the assessment order passed under section 143(3).
Analysis: The assessment was made after scrutiny, and the record showed that the claim under section 80P had been considered. Revisional interference under section 263 is permissible only where the assessment order is both erroneous and prejudicial to the interests of the Revenue. Where the Assessing Officer has taken a permissible view on the material before him, the order cannot be revised merely because a different view is possible. The absence of a proper opportunity before the revisional authority also weighed against sustaining the revisional order.
Conclusion: The exercise of jurisdiction under section 263 was not justified and is set aside.
Issue (ii): Whether interest income earned by a co-operative society from deposits with a co-operative bank was eligible for deduction under section 80P of the Income-tax Act, 1961.
Analysis: The deduction claim was examined in the light of the binding jurisdictional precedent holding that interest received from a co-operative bank satisfies the requirement of section 80P(2)(d) and is eligible for deduction. The Tribunal followed the jurisdictional High Court and earlier co-ordinate bench decisions, and rejected reliance on contrary views from other jurisdictions. On that basis, the assessment could not be characterised as erroneous for allowing the deduction.
Conclusion: The deduction under section 80P was held allowable in the present context.
Final Conclusion: The revisional order was quashed and the original assessment was restored, with the assessee obtaining relief on the substantive tax issue.
Ratio Decidendi: An assessment order cannot be revised under section 263 merely because the Principal Commissioner prefers a different view, where the Assessing Officer has adopted a plausible view consistent with binding jurisdictional precedent and the deduction under section 80P is otherwise allowable.
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