TaxTMI 
TaxTMI 
2023 (3) TMI 980
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.... void abinitio, the same may kindly be quashed. 2. The Id. Pr. CIT seriously erred in law as well as on the facts of the case in assuming jurisdiction u/s 263 of the Act without recording a specific and categorical finding that the subjected assessment order passed u/s 143(3) dated 25.11.2019 is erroneous and prejudicial to the interest of the revenue, in absence of which the entire proceedings u/s 263 is vitiated. Therefore, the impugned order dated 27.03.2022 u/s 263 of the Act kindly be quashed. 3. The ld. Pr. CIT seriously erred in law as well as on the facts of the case in assuming jurisdiction u/s 263 of the Act by wrongly and incorrectly holding that the AO failed to examine and verify the deduction claimed u/s 80P(2)(d) and seriously erred in cancelling/ setting aside the subjected assessment order passed u/s 143(3) dated 25.11.2019, with a direction to the AO to examine the claimed deduction so by the assessee. The assumption of jurisdiction u/s 263 and the impugned direction, being contrary to the provisions of law and facts on record hence, the proceedings initiated u/s 263 of the Act and the impugned order dated 27.03.2022 deserves to be quashed. ....
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....k account with the cooperative Banks. On examination of assessment order, it is seen that the assessee did not carry out any business activities since so many years including the year under consideration and the source of income is only interest income from investments in saving account and FDRs from various banks. The ld. PCIT further observed that the assessee co-operative society received FDR interest income from the Kota Nagrik Sahakari Bank at Rs. 1,49,81,040/- and from the Bundi Central Co-operative Bank Ltd. at Rs. 1,51,84,959/- and saving bank interest of Rs. 43,526/- from both the cooperative banks. The assessee claimed deduction u/s. 80(P)(2)(d) on the interest income of Rs. 3,02,09,525/- which was allowed by the AO. On this issue it is stated that deduction u/s. 80(P)(2)(d) of the Act, is allowable on the interest income received from any other cooperative society and not on the interest income received from any other co-operative banks. As the said interest income was received from other than co-operative society hence provision of section 80(P)(2)(d) are not applicable in this case. Consequently, deduction u/s. 80(P)(2)(d) of the Act is not allowable to the assessee. T....
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....ese cooperative banks cannot be treated as cooperative society. In its reply the assessee has furnished that Bundi Central Co-Operative Bank is registered under section 12, sub-section 2, clause (a)/(b) of the Rajasthan Co-operative society Act IV of 1953. As per part V of Banking Regulation Act 1949 Co-operative bank means a "state co-operative bank, a central co-operative bank and a primary co-operative bank and "Co-operative society means a society registered or deemed to have been registered under any Central Act for the time being in force relating to the multi-State co-operative societies, or any other Central or State law relating to cooperative societies for the time being in force As per part V of Banking Regulation act, 1949 a co-operative bank is different from the cooperative society. It is seen that during the year deduction of Rs.3.02.09,525/- u/s 80P was allowed to the assessee which was received by the assessee on interest on FDR maintained with the Co-operative banks and other scheduled banks. The assessee has claimed that deduction on interest on FDR maintained with Cooperative bank is covered under section 80P(2)(d). ....
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....ined with the Co-Operative Bank cannot be treated as eligible for deduction u/s 80P(2)(d). It is further stated that the co-operative societies accepted deposits of their members only and the societies advanced loans to their members only. whereas the Co-operative Bank accepted deposits and advanced loans to the general public also. This is the main difference between the cooperative society and the Co-operative Bank. As per sub section 4 of section 80P of the IT Act, 1961, the provisions of section 80P shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. As per sub section 4 of section 80P, Co-Operative Bank is not a co-operative society and provisions of section of this section are not applied on it. The AO allowed deduction u/s 80P(2)(d) on the interest income received from Co-operative Banks. The AO has thus erred in allowing the deduction u/s 80(P)(2)(d) on such interest income. Considering all the facts and circumstances of the case, the assessment order dated 25.11.2019 for A.Y. 2017-18 passed by the AO, allowing the....
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....o the total income of the assessee. However, such amount was not disallowed by the Assessing Officer. In view of above discussion, it is clear that the A.O. has not examined the issue of deduction u/s 80P(2)(d) of the I.T. Act, 1961 properly and completed the assessment in this case without conducting proper enquiry on the issue of the said deduction." Show Cause Notice u/s 263 was issued on 21.02.2022. (PB 49-51) and duly replied by the assessee vide written submissions dated 26.02.2022 (PB 52-55), partly reproduced in para 3 of the impugned order. The ld. CIT however, not feeling satisfied, held the assessment order dated 25.11.2019 as erroneous and prejudicial to the interest of the revenue stating that (relevant extracts only): The reply of the assessee is considered on this issue but not accepted because on the RBI has given certificate/license to the cooperative banks for doing banking business and on the basis of the registration under Rajasthan Co-operative Societies Act, IV of 1953 these cooperative banks cannot be treated as cooperative society. x--------------x-------------------x--------------------------x------------------------x-------- ----....
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....ial Guideline: Before proceeding, we may submit as regards the judicial guideline, in the light of which, the facts of this case are to be appreciated. 1.1 The pre-requisites to the exercise of jurisdiction by the Commissioner u/s 263, is that the order of the Assessing Officer is established to be erroneous in so far as it is prejudicial to the interest of the Revenue. The Commissioner has to be satisfied of twin conditions, namely (i) The order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If any one of them is absent i.e. if the assessment order is not erroneous but it is prejudicial to the Revenue, S.263 cannot be invoked. This provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous as also prejudicial to revenue's interest, that the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase 'prejudicial to the interest of the revenue' has to be read in conj....
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....e course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the Assessing Offer allowed the claim being satisfied with the explanation of assessee, the decision of the Assessing Officer cannot be held to be erroneous simply because in his order not make an elaborate discussion in that regard." 1.5 Abdul Hamid vs. ITO [2020] 117 taxmann.com 986 (Gauhati - Trib.) it was held that only probability and likelihood to find error in assessment order is not permitted u/s 263. Ratio of these cases fully apply on the facts of the present case, in principle. 2. Due application of mind: 2.1 In the present case jurisdiction u/s 263 of the Act is assumed on the ground that while completing assessment proceedings the AO did not verify / examine the deduction claimed u/s 80P(2)(d) properly and wrongly allowed the same. However, the DCIT seriously erred in cancelling/setting aside the subjected Assessment Order passed u/s 143(3) dated 25.11.2019. The assumption of Jurisdiction u/s 263 and the impugned direction, being contrary to the provisions of the law. 2.1.1 At the outset it is ....
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....er consideration. In return assessee samiti has declared gross total income of Rs.30218447/- and claimed deduction under chapter VI-A at Rs.3,02,18,447/- [deduction under section 80P(2)(c) (ii) of Rs.8922/- + deduction under section 80P(2)(d) at Rs.30209525/-] after that total income shown at Nil. Case of the assessee samiti was selected for scrutiny to examine the claim of deduction under chapter VI-A. The issue on which case was selected for scrutiny was examined. After considering the facts and submission of the assessee, return income declared by the assessee samiti is accepted." 2.3 Selection of the case under CASS: Moreover, the very fact of selection of the case under CASS on the ground of deduction claimed u/s 80P(2)(d) followed by the issuance of the notices u/s 143(2), 142(1) along with questionnaire to the assessee. The AO raised very specific and relevant queries/called for explanation and evidences asking various details w.r.t., to produce Cash Book, Bank Book etc., goes to fully establish that the AO was fully alive to the issue in hand from all angles, whether it is factual or legal aspect involved. In the response of the notices, the assessee filed complete....
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....------x-------------------x--------------------------x------------------------x-------- ----------x Further the Hon'ble Karnataka High Court in case of PCIT and Another vs. Totagars Co-operative Sale Society (2010) 392 ITR 0074 as relied upon by the Ld. AR of the assessee as held in para 7 to 11 as under: - x---------------x-------------------x----------------------------x---------------------------x-- -------------x 11. The learned counsel has relied on the case of The Totgars Cooperative Sale Society Ltd. Vs. Income Tax. Officer, (supra). However, the said case dealt with the interpretation, and the deduction, which would be applicable under Section 80P(2)(a)(i) of the I.T. Act. For, in the present case the interpretation that is required is of Section 80P(2)(d) of the I.T. Act and not Section 80P(2)(a)(i) of the I.T. Act. Therefore, the said judgment is inapplicable to the present case. Thus, neither of the two substantial questions of law canvassed by the learned counsel for the Revenue even arise in the present case." x--------------x-------------------x--------------------------x------------------------x-------- ----------x Thus, t....
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....fferent nature, involving in different activities viz. cooperative purchase society, cooperative sales society, or cooperative bank etc. The cooperative bank thus, is a mere species of the genus and hence, would necessarily be covered by the word cooperative society. 4.2 Further, in Sec 2(19) of the Act, the term Cooperative Society has been defined as under: "co-operative society" means a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies". The Act has not recognized Co-operative bank. The two banks are Cooperative Society registered under Rajasthan Co-operative Society Act, 1953 and getting benefit under Act also as a Co-operative Society. 4.3 There apart, even Sec 56(i)(ccv) of the Banking Regulations Act, 1949 defines a Primary Cooperative Society Bank as a Cooperative Society. Therefore, a Cooperative Society Bank is impliedly included in the word 'Cooperative Society'. This view has been taken in the cases of: 4.4 Other supporting case laws on merit: i. The ITAT Raipur Bench in....
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....in case of conflicting judgement, the view favorable to the assessee must be accepted as held in the case of Vegetable Product 88 ITR 192 (SC). and K. Subramanian 156 ITR 11 (Bom.) 4.7 Rule of Consistency Obliged the AO: There is no dispute that not only in the subjected AY but since last several years including A.Y. 2013-2014, 2014-2015 when this controversy arose and was decided in favour assessee, in the later year from A.Y. 2015-2016 onwards till AY 2017-2018, the same facts and circumstances continued and the assessee had been making claim u/s 80P(2)(d) only on the subjected interest income yet however, the department never took a departure. All those assessments stood competed u/s 143(1) and were not disturbed u/s 147 and/or u/s 263 and hence had attained finality. This was because all the earlier Assessing Officer including the present one had been following the rule of consistency and therefore were correctly allowing the deduction so claimed, so also did the A.O. in the subjected year. Therefore, there was no scope of any error in such an action. 5.1 Substitution of opinion, not Permissible-Possible view taken by the AO: Thus, the AO certainly did form an....
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....T invoked revision jurisdiction on ground that for claiming deduction under section 80P(2)(d), interest income should be received from co-operative society and not from co-operative bank which was commercial in nature - Accordingly, he passed a revision order denying benefits of deduction to assessee - Whether since co-operative bank from which assessee received interest income was registered as co-operative society under Co-operative Societies Act, 1912, interest income received from it was eligible for deductions under section 80P(2)(d) - Held, yes - Whether further, since Assessing Officer while framing assessment had taken a possible view and allowed assessee's claim for deduction under section 80P(2)(d) on interest income earned on its deposits with a co-operative bank, Pr. CIT was in error in exercising his revisional jurisdiction under section 263 for dislodging same - Held, yes [Paras 8 to 10] [In favour of assessee]" 5.2.3 Covered Matter: Pertinently, the very issue of invoking Sec 263 in the context of the deduction allowed u/s 80P(2)(d) w.r.t interest received from Cooperative Bank, has also been decided by this honorable bench Rajasthan Cooperative Dairy Fe....
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.... 7. The cases cited by the revenue based on peculiar facts, not available in the instant case and particular none of them is rendered in the context of Sec.263 hence, not applicable. In view of the above legal and factual position, the proposed action u/s 263 is completely beyond the S. 263 and therefore, the impugned order deserves to be quashed." Relying on the above written submission and paper book so filed by the ld. AR of the assessee, he has submitted that the case of the assessee was selected for limited scrutiny. The ld. AO on the very issue as raised by the ld. PCIT has already taken a plausible view and the same is clearly portrayed in the assessment order. The relevant finding of the ld. AO is reiterated here in below: "Brief facts of the case are that the assessee samiti derived interest income and agriculture income during the year under consideration. In return assessee samiti has declared gross total income of Rs.30218447/- and claimed deduction under chapter VI-A at Rs.3,02,18,447/- [deduction under section 80P(2)(c) (ii) of Rs.8922/- + deduction under section 80P(2)(d) at Rs.30209525/-] after that total income shown at Nil. Case of th....
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..... AO is subject matter of revision u/s. 263 of the Act and has thus, justified the order of the ld. PCIT. 8. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of applicable legal position and decisions relied upon. We find that the assessment was taken up for scrutiny under CASS to examine the deduction claimed chapter VIA for limited purpose and on this issue, there is finding of the ld. AO in the assessment order. Yet, learned PCIT has subjected the assessment order to revision proceedings on the short ground that the Assessing Officer passed the assessment order is erroneous in so far as it prejudicial to the interest of revenue for the purpose of section 263 of the Act and liable to revision under the explanation (2) clause (b) and clause (a) of section 263 of the Act as the ld. AO allowed the deduction u/s. 80(P)(2)(d) of the Act which is not allowable to the assessee considering the facts placed on record. Thus, the main question centers on whether action of the assessing officer in allowing the claim of the assessee us/s. 80(P)(2)(d) is found faulted with, whether the assessee ought to have produced the ....
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....ceeding u/s. 263 of the Act. The ITAT Mumbai bench in the Mrs. Khatiza S. Oomerbhoy addressed this issue elaborately after referring to number of cases on revisionary powers vested in the Commissioner of Income-tax under section 263 of the Act and summed up the fundamental principles emerging from several cases as under- (i) The CIT must record satisfaction that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 of the Act cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the Assessing Officer has adopted one of the courses permissible under law or where two views are possible and the Ass....