TaxTMI 
TaxTMI 
2020 (3) TMI 601
X X X X Extracts X X X X
X X X X Extracts X X X X
.... facts in disallowing Rs. 32,37,381/- claimed as deduction u/s. 80P(2)(a)(i) of the Act on the ground that the appellant is not a Co-operative Society since it is registered under Karnataka SouhardaSahakari Act, 1997. 6. That the learned lower authorities erred in law and on facts in disallowing Rs. 32,37,381/- claimed as deduction u/s. 80P(2)(a)(i) of the Act on the ground that the appellant being a Co-operative Society deals with associate members and nominal members. 7. That the learned lower authorities erred in law and on facts in disallowing interest income of Rs. 6,06,914/- earned from surplus funds kept as deposits in nationalised Banks and Co-operative banks since they are attributable to the business activities of the appellant which is eligible for deduction u/s. 80P(2)(a)(i) of the Act. 8. That the learned lower authorities erred in law and on facts in disallowing the deduction u/s. 80P(2)( d) of the Act on the interest income earned from deposits kept in the Co-operative Banks. 9. That the learned lower authorities ought to have provided deduction u/s 80P(2)(a)(i) proportionately to the extent of profit from the activities with the regular and associate members....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r section 80P(2)(a)(i) of the I.T.Act on the basis of the decision of the Hon'ble Supreme Court in the case of Citizen Co-operative Society Ltd. Vs. Assistant Commissioner of Income Tax) Circle 9(l), Hyderabad (2017) 84 taxmann.com 114(SC) wherein the Court held that an assessee cannot be treated as a co-operative society meant only for its members and providing credit facilities to its members if it has carved out a category called 'nominal members' and hence the principle of mutuality was compromised. 4. Aggrieved by the order of the Assessing Officer, assessee carried the matter in appeal before the CIT(A), who confirmed the reopening of assessment and also decided the issue against the assessee. Against this, the assessee is in appeal before the Tribunal. 5. Before me, on the reopening of assessment, the learned AR submitted that the Assessing Officer has issued a notice dated 07.12.2017 and furnished the reasons recorded for reopening the assessment u/s 147 of the I.T.Act as "During the financial year 2013-14 relevant to assessment year 2014- 15, the assessee society has earned interest income from various banks to the tune of Rs. 6,06,914. The interest income ea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d truly all material facts. The learned AR submitted that a perusal of the recorded reasons shows that the alleged formation of belief is based on the original assessment proceedings. Hence, it is clear that the material for formation of belief has not come from external source. On this ground also, the reassessment is bad in law. To support his case, the learned AR relied on the following judgments:- (i) CIT v. Ramakrishna Hedge [(2010) 326 ITR 347 (Kar.)] (ii) CIT v. Stndard Chartered Finance Ltd. [(2012) 207 Taxman 136 (Kar.) (Mag.)] / [(2012) 21 Taxman.com 495 (Kar.)] (iii) Parixit Industries (P.) Ltd. v. ACIT [(2013) 352 ITR 349 (Guj.)] (iv) H.K.Buildcon Ltd. v. ITO [(2011) 339 ITR 535 (Guj.)] (v) Lahneyer Holdings GmbH v. DCIT [376 ITR 70 (Del.)] Accordingly, the learned AR pleaded that the proposed reopening is bad in law and the assessment order is to be quashed. 6. On the other hand, the learned Departmental Representative submitted that in this case, the scrutiny assessment was completed on 18.11.2016. Subsequently, the judgment of the Hon'ble Kamataka High Court in the case of Pr.CIT Hubballi and Anr. vs. The Totagars Co-operative Sale Society, Sirsi in I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....icer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces in Central Provinces Manganese Ore Co. Ltd. VITO (1991) 191 ITR 662, for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfilment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is 'reason to believe', but not the established fact or escapement if income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the material would conclusively prove the escapement is not the concern at that stage. This is also because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction [see ITO v Selected Dalurband Coal Co. P. Ltd. (1996) 217 ITR 597 (SC); Raymond Woollen Mills Ltd. V ITO [(1990) 236 34(SC)]. 6.1 The learned DR further submitted that the scope and effect of section 147 as su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct. According to the A.O., this income should be taxed as "income from other sources" u/s 56 of the I.T.Act. Hence, the assessee's case was reopened u/s 147 of the I.T.Act after obtaining approval from Joint Commissioner of Income-tax, Range 6(3), Bengaluru and by recording the reasons as follows:- "The assessee M/s Akshaya Souharda Credit Cooperative Ltd is assessed to tax vide PAN AABAA2870N before Income Tax Officer, Ward-T, Chikkaballapur. In the instant case scrutiny assessment u/s. 143(3) for the A.Y. 2014-15 was completed by the assessing officer on NIL Income. However, on examination of the financial statement filed before the Assessing Officer, the assessee during the financial year 2013-14 relevant to the assessment year 2014-15 has earned interest income of Rs. 6,06,915/- for the A.Y. 2014-15 on the fixed deposit parked with the nationalised bank and has claimed deduction u I». 80P of Income tax Act, 1961. However, the Interest income earned by the assessee should be taxed as Income from Other Sources u/s. 56 of Income tax Act, 1961. Hence, the assessee's case was re-opened u/s 147 of Income tax Act, 1.961 after the prior approval of the Joint Commissioner....