Tribunal Upholds Original Assessment; PCIT's Invocation of Section 263 Deemed Unjustified in Deduction Inquiry Case.

Posun Credit Co. Op. Society Limited Versus The Principal Commissioner of Income Tax, Vadodara-1, Vadodara.

Posun Credit Co. Op. Society Limited Versus The Principal Commissioner of Income Tax, Vadodara-1, Vadodara. - TMI Issues:
Appeal against order under Section 263 - Deduction under Section 80P(2)(d) - Proper inquiry by Assessing Officer - Invocation of Section 263 Explanation-2.

Analysis:
The appeal was filed against an order passed by the PCIT, Vadodara-1, for the Assessment Year 2018-19. The primary issue raised by the assessee was regarding the order under Section 263, which held the assessment order passed under Section 143(3) as erroneous and prejudicial to the revenue concerning deduction under Section 80P(2)(d) for interest income from a Co-operative Bank. The PCIT observed that the Assessing Officer allowed the deduction without adequate inquiry, leading to the invocation of Section 263. The PCIT directed a fresh assessment order to be passed denovo by the Assessing Officer, setting aside the original assessment order.

The assessee contended that the Assessing Officer had indeed examined the deduction under Section 80P(2)(d) during the assessment proceedings and disallowed interest income from Nationalised Banks. The interest income from the Co-operative Bank was also thoroughly verified by the Assessing Officer. The assessee argued that the invocation of Section 263 Explanation-2 was unjustified, as proper inquiry was conducted by the Assessing Officer, and the decisions favoring the assessee should be considered, as per legal precedents. The assessee challenged the validity of the order passed under Section 263.

During the hearing, both parties presented their arguments. The Assessing Officer had extensively questioned the assessee regarding the deduction claimed under Section 80P(2)(d) and the interest income from Nationalised Banks and Co-operative Banks during the assessment proceedings. The Assessing Officer had made inquiries and additions related to interest earned from Nationalised Banks. The Tribunal noted that the Assessing Officer had conducted a thorough inquiry into the matter, and there were various judicial decisions favoring the assessee on the issue. Therefore, the Tribunal concluded that the invocation of Section 263 by the PCIT was not justifiable, and the order passed by the CPC, Income Tax Department, was not sustainable. Consequently, the appeal of the assessee was allowed.

In conclusion, the Tribunal found in favor of the assessee, holding that the Assessing Officer had conducted proper inquiries during the assessment proceedings regarding the deduction under Section 80P(2)(d). The Tribunal emphasized that the invocation of Section 263 Explanation-2 by the PCIT was not justified, given the thorough examination conducted by the Assessing Officer and the presence of favorable judicial decisions.