TaxTMI 
TaxTMI 
2024 (6) TMI 1356
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....ct (subject to the availability of gross total income), by holding that the order passed u/s 143(3) of the Act dtd. 06-11-2019 was erroneous in so far as it is prejudicial to the interest of the revenue and being unsustainable in law, is liable to be nullified or annulled in toto. 2. On the facts and in the circumstances of the case as well in law, the learned Pr. CIT, Rajkot-1, Rajkot erred in having assumed jurisdiction u/s 263 of the Act directing the AO to deny the deduction claimed u/s 80P(2)(d) of the Act, as allowed in the assessment order u/s 143(3) of the Act passed, after due inquiry and in-depth verification of the relevant assessment records and therefore, the order u/s 263 of the Act passed by the Pr. CIT, Rajkot-1, Rajkot arbitrarily, prejudicially and subjectively on incorrect and inappropriate facts and figures, being without jurisdiction, bad in law, void ab initio, illegal and hence, is liable to struck down. 3. On the facts and in the circumstances of the case as well in law, the learned Pr. CIT has wrongly invoked the revision proceedings under Explanation 2(a) below Section 263 of the Act, solely on the basis of revenue audit objections, without examination....
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.... that the assessee had shown interest income of Rs. 5,60,55,842/- from its investment in three Co.-Op. Banks (Rs. 3,18,51,280/- in Cosmos Co-Operative Bank Ltd., Rs. 1,59,27,427/- in Kutch District Central Co-Operative Bank Ltd., and Rs. 82,77,425/- in Rajkot Nagrik Sahkari Bank). The PCIT was of the view that in light of Section 80P(2)(d), deduction to co-operative society will be allowable only in respect of any income by way of interest or dividends derived by the assessee cooperative society from its investments with any other co-operative society and not from co- operative banks. The assessee had received interest income of Rs. 5,60,55,842/-from Co-op. Banks, hence interest income of Rs. 5,60,55,842/- was required to be taxed and benefit of deduction claimed by the assessee society under Section 80P(2)(d) of the Act should have been disallowed. However, the AO while completing the assessment had not examined the facts of the case and the issue under consideration. Therefore, according to PCIT, this has rendered the order erroneous as well as prejudicial to the interest of the revenue. In view of the above, after taking the submissions of the assessee on record, the PCIT held t....
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....s. The counsel for the assessee drew our attention to page 68 of the appeal papers (Reply of the assessee dated 25.04.2019) where in the assessee had submitted that it had claimed deduction of interest income received from cooperative bank and dividend income from cooperative society under Section 80P of the Act. The counsel for the assessee further drew our attention to notice dated 23.10.2019 issued by assessing officer, wherein a specific query on this aspect was asked by the assessing officer (reference query number 2 and query number 4 of the aforementioned notice). The counsel for assessee drew our attention to reply of the assessee dated 25.10.2019, in response to the above query made by the assessing officer with respect to details of interest received from cooperative banks by assessee on which deduction under Section 80P of the Act was claimed by the assessee. Further, the counsel for the assessee invited our attention to the computation of income, wherein the assessee had specifically declared the details of interest received by the assessee from cooperative banks and corresponding claim of deduction under Section 80P of the Act on such interest income. Accordingly, the ....
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....voking revisionary powers under Section 263 of the Act cannot impose his own understanding of the extent of inquiry. There were a number of judgments by various High Courts in this regard. 8. Delhi High Court in the case of CIT Vs. Sunbeam Auto 332 ITR 167 (Del.), made a distinction between lack of inquiry and inadequate inquiry. The Hon'ble court held that where the AO has made inquiry prior to the completion of assessment, the same cannot be set aside u/s 263 on the ground of inadequate inquiry "12 There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under Section 263 of the Act,....
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....The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity." 10. The Mumbai ITAT in the case of Sh. Narayan Tatu Rane Vs. ITO, I.T.A. No. 2690/2691/Mum/2016, dt. 06.05.2016 examined the scope of enquiry under Explanation 2(a) to Section 263 in the following words: "20. Further clause (a) of Explanat....
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....ecured loans. The Principal Commissioner of Income-tax invoked Section 263 of the Act, 1961 for revising the assessed income of the respondent assessee. It was noticed by the PCIT that the unsecured loans obtained by the respondent assessee are shown as investment in the name of the assessee in the share application as well as in the balance sheet of the respective companies. The PCIT passed an order under Section 263 of the Act directing the Assessing Officer to pass fresh assessment order under Section 143(3) of the Act, 1961 on the aspect of unsecured loans shown by the respondent assessee. The Hon'ble Supreme Court made the following observation while deciding in favour of the assessee: "Thus, the Tribunal has considered in detail the aspect of revisional power to be exercised by the PCIT in the facts of the case and has given a finding of facts that the Assessing Officer has made inquiries in detail and after applying mind, accepted the genuineness of loans received by the respondent assessee from the aforesaid two companies and such view of the Assessing Officer is a plausible view, and therefore, the same cannot be said to be erroneous or prejudicial to the interest of the....