Condonation of Delay upheld; revisionary power cannot overturn legally sustainable deductions for cooperative societies in tax assessments.

Delay in filing an appeal of 462 days was condoned due to lack of awareness and prompt action once orders were discovered, admitting the appeal. The note clarifies that revisionary powers cannot be exercised where the assessing officer has taken a legally sustainable view or where correction would not be prejudicial to revenue; accordingly an order under the revisionary power directing reconsideration of interest on cooperative bank investments and of tax debited to profit and loss was quashed and the original assessment restored for the relevant year.

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Issues: (i) Whether the delay of 462 days in filing the appeal is liable to be condoned; (ii) Whether the order under Section 263 of the Income-tax Act, 1961 setting aside the assessment is valid insofar as it directs reconsideration of (a) interest income earned on investments with cooperative banks (claimed under Section 80P(2)(d)) and (b) income tax debited to profit and loss account (impugned for disallowance) for AY 2018-19.

Issue (i): Whether the delay in filing the appeal is liable to be condoned.

Analysis: The reasons furnished explain lack of awareness of the appellate and revisionary orders due to transfer of tax advisory responsibilities, limited resources of the assessee-society, and subsequent discovery of the orders during later filings. The explanation includes prompt action once the orders came to light and absence of deliberate delay or gain to the assessee from filing late.

Conclusion: Delay of 462 days is condoned and the appeal is admitted for adjudication.

Issue (ii): Whether the revisionary order under Section 263 is sustainable in respect of (a) interest income from investments with cooperative banks and (b) income tax debited to profit and loss account.

Analysis: (a) Interest income from investments held with cooperative societies/banks falls within the scope of deduction available to cooperative societies under the legal framework applicable to deduction for cooperative societies. The allowance of such deduction under Section 80P(2)(d) is supported by prevailing authoritative decisions and thus the assessing order allowing the claim is not found to be erroneous or prejudicial in law. (b) Income tax paid and debited to profit and loss is generally disallowable, but where the assessee is entitled to deduction under Section 80P(2)(a)(i) the addition of such amount would only increase the allowable deduction and therefore would not prejudice revenue or alter total taxable income; consequently the assessing order's treatment does not render it erroneous and prejudicial to revenue within the meaning of Section 263.

Conclusion: The revisionary order under Section 263 is quashed; the assessment order dated 12.04.2021 is restored. Grounds of appeal challenging the Section 263 order are allowed in favour of the assessee.

Final Conclusion: The appeal is allowed and the impugned order passed under Section 263 is set aside, with the assessment order restored for AY 2018-19; the delay in filing the appeal is condoned.

Ratio Decidendi: Section 263 cannot be invoked to set aside an assessing officer's order where the officer has taken a legally sustainable view or where correction would not be prejudicial to revenue; deductions properly claimable by cooperative societies under Sections 80P(2)(d) and 80P(2)(a)(i) preclude a finding that the assessment order is erroneous and prejudicial to the interests of revenue.

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