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2022 (2) TMI 1275
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....andhar-I ('Ld. CIT') in invoking provisions of section 263 of the Act is illegal & bad in law. 3. That proceedings u/s. 263 of the Act were initiated by Pr. Commissioner of Income Tax-1 by holding that assessee has indulged in banking business and as such not entitled to deduction claimed u/s 80P(2) of the Act. Order u/s 263 of the Act has been passed by holding that order passed by the Assessing Officer is erroneous and prejudicial to interest of revenue since activities of the appellant are in violation of the cooperative society Act and the principle of mutuality is missing in the case. Initiating proceedings on one issue and passing order on an another issue for which no show cause notice has been issued, makes the order illegal and bad in law. 4. That order passed u/s 263 of the Act by Pr. Commissioner of Income Tax-1 holding order passed by the Assessing Officer to be erroneous and prejudicial to interest of revenue since interest on funds with HDFC Bank is not exempt u/s. 80P(2) of the Act is illegal and bad in law since there was no such show cause notice to the assessee. 5. That various written submissions filed during proceedings u/s 263 of the ....
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....come tax Act, 1961 observing that the assessee was indulging in banking business and was thus not entitled to this deduction u/s 80P(2) allowable to a society. (ii) Since the facts of the case of the assessee for the assessment year 2014-15 are similar to that of the assessment year 2013-14, the assessment order passed u/s 143(3) of the Income Tax Act, 1961 for the assessment year 2014-15 in which deduction u/s 80P(2) of the Income Tax Act, 1961 was allowed, becomes erroneous in so far as it is prejudicial to the interest of the revenue. 3. In view of the above discrepancy, The Pr. CIT has issued a show cause notice u/s.263 of the Income Tax Act, 1961 to the assessee on 25.10.2018. He noted that the decision of Hon'ble ITAT in the case of Mantola Cooperative Thrift and credit Society also covers all the aspects and grounds raised by the assessee. He has discussed that the fact of the case of Totgar's Co-operative Sale Society Ltd. are similar to the assessee's case, where interest income on surplus fund is to be taxed under the head income from other sources and benefit of section 80P is not available on such interest income. Accordingly, the Pr. CIT has hel....
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..... That in the notice u/s 142(1) of the Act issued on 17.11.2015, the assessee was asked, vide question no. 17 to justify its claim for deduction u/s 80P of the Act or to show cause as to why the deduction u/s 80P should not be disallowed in view of findings in the assessee's case as per the assessment framed for the A.Y. 2013-14. 3. That assessee in response to the notice u/s 142(1) of the Act filed following submissions: i) That the society was not doing any banking activities but was a cooperative society helping and providing credit facilities to its members, encouraging thrift and working only for members as per the cooperative rules, and its activities were not covered under the Banking Regulation Act, 1949 since it was not dealing with the public; ii) That every year being an independent year, findings of the preceding year could not be applied without verification of facts; iii) That there were 565 regular members, 366 nominal members and only 52 non-members of the society during the year as against findings by the A.O. in the A.Y. 2013-14 that there were 500 odd nonmembers of the society, which was incorrect since the figure of nonmembers....
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....ourse of assessment proceedings for the assessment year 2013-14, the existence of nominal members with the society was never brought on record by the assessee. Further as per the deposit ledgers, the deposit accounts, both saving and fixed deposit, both in the preceding year as well as the current year, have been classified under two heads -Members' and 'Non-members' only. On being pointed out, assessee had submitted that deposits from nominal members were also included under the head non-members deposits. c) That during the course of assessment proceedings for the assessment year 2013-14 on being asked to justify its claim for deduction u/s 80P of the Act, assessee explained case but certain facts were not clarified. Based on explanation of assessee, it was concluded that, it was not eligible for deduction u/s 80P(2) of the Act in view of provisions of section 80P(4) of the Act. However, during the proceedings for the current assessment year, i) the assessee had claimed that its primary object was to provide credit facilities to its members only and it was not engaged in any type of banking activities, it is not fulfilling the conditions prescribed for a Primary ....
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....was confirmed by CIT(A) Jalandhar and facts of the case for A.Y. 2014-15 being same, deduction allowed u/s 80P(2) of the Act is erroneous and prejudice to interest of revenue. Only reason for initiation of proceedings u/s 263 of the Act was deduction allowed u/s 80P(2) of the Act. Pr. CIT-1, Jalandhar in para 4.1 has concluded as under:- "Thus during assessment year 2014-15 deposits have been received from members and also non- members. The concept of mutuality has thus been violated and activities of the Co-Operative Society are in violation of the co-operative Societies. The assessee has indulged in business with members, nominal-members and non-members without any approval from the Registrar of the societies. The activities of the appellant are in violation of the co-operative Societies Act. The principle of mutuality is missing in the case., The ratio of the judgment of the Hon'ble Supreme Court in the case of The Citizen Co-Operative Society Limited versus Assistant Commissioner of Income Tax is squarely applicable in case of the assessee. " Conclusion drawn by Pr. CIT-1, Jalandhar is not based on assessment record. There is no material to support conclusion drawn ....
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....see of being heard. " From the observations of the Ld. Principal Commissioner of Income Tax-1, Jalandhar, it will be observed that there is no specific direction by the Ld. Principal Commissioner of Income Tax-1, Jalandhar. No decision about the erroneous nature of the order has been taken by Ld. Principal Commissioner of Income Tax-1, Jalandhar since Ld. Principal Commissioner of Income Tax-1, Jalandhar in para 6 has directed Assessing Officer to pass fresh order after making necessary enquiries/investigations. Order u/s 263 of the Act without proper directions is illegal and bad in law. Reliance is being placed on a) COMMISSIONER OF INCOME TAX vs. KANDA RICE MILLS HIGH COURT OF PUNJAB AND HARYANA (1989) 178 ITR 0446 b) COMMISSIONER OF INCOME TAX vs. UNIQUE AUTOFELTS (P) LTD. HIGH COURT OF PUNJAB AND HARYANA (2009) 30 DTR 0231 c) SATISH KUMAR VS PR CIT ITA NO. 258/ASR/2019 7. That words erroneous and prejudicial to the interest of revenue have not been defined in the law. An order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law make certain assessment, the same cannot be branded as erro....
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....ANSAL HIGH COURT OF ALLAHABAD (2008) 214 CTR (All) 349 : (2008) 297 ITR 99 (All) h) COMMISSIONER OF INCOME TAX vs. DEEPAK MITTAL HIGH COURT OF PUNJAB AND HARYANA (2010) 37 DTR 0008, (2010) 324 ITR 0411 i) COMMISSIONER OF INCOME TAX vs. LEISURE WEAR EXPORTS LTD. HIGH COURT OF DELHI (2010) 46 DTR 0097, (2012) 341 ITR 0166 j) NARAIN SINGLA VS. PR. CIT', 62 TAXMAN.COM 225 (CHD. TRIB.) k) JIWAN KUMAR VS. PCIT ITAT AMRITSAR BENCH, AMRITSAR, ITA NO. 182/ASR/2016 I) DHARAMPAL VS. PCIT ITAT AMRITSAR BENCH, AMRITSAR, ITA NO. 219 & 672/ASR/2015 m) RAMAN LAKHA VS. ITO WARD-2, HOSHIARPUR ITA NO. 324/ASR/2016 9. That in para 3, page 14 of the order, Ld. Principal Commissioner of Income Tax-1, Jalandhar has observed that position of law stands substantially altered with the inception of explanation 2 in section 263 by Finance Act 2015. As the provision in that section has been specifically invoked the decision relied upon by the assessee pertaining to the pre amended section 263 would no way hold good. It is submitted that it is an established law that explanation 2 in section 263 is not applicable retrospectively. For this proposition reliance is being place....
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....-1 holding order passed by the Assessing Officer to be erroneous and prejudicial to interest of revenue since interest on funds with HDFC Bank is not exempt u/s. 80P(2) of the Act is illegal and bad in law since there was no such show cause notice to the assessee. 9. From the aforesaid show cause notice, it is evident that in the appeal, the CIT(A)-I, Jalandhar had confirmed the addition made by the Assessing Officer u/s 80P(2) of the Income tax Act, 1961 observing that the assessee was indulging in banking business and was thus not entitled to this deduction u/s 80P(2) allowable to a society. The allegation of the assessee that Order u/s 263 of the Act has been passed by holding that order passed by the Assessing Officer is erroneous and prejudicial to interest of revenue since activities of the appellant are in violation of the cooperative society Act and the principle of mutuality is missing in the case is factually incorrect. While concluding the discussion the Pr.CIT has held that interest income on surplus fund is to be taxed under the head income from other sources and benefit of section 80P is not available on such interest income. Accordingly, the Pr. CIT has held th....