TaxTMI 
TaxTMI 
2025 (11) TMI 1747
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....on 80P of the Act during the course of assessment proceedings r.w.s 143 of the Act. 4. The Learned PCIT has erred in concluding that the Ld. AO has failed to verify the allowability of deduction under Section 80P, without appreciating the fact that the Ld. AO had issued a notice under Section 142(1) regarding the specific deduction and had examined the same. 5. The Learned PCIT has failed to appreciate that the deduction under Section 80P was allowed by the Ld. AO after due examination, and mere disagreement with the Ld. AO's order does not constitute the assessment order erroneous or prejudicial to the interest of revenue. 6. The Ld PCIT has failed to appreciate the fact that he has no jurisdiction u/s 263 of the Act in a case where the AO has taken a view after considering the submissions of the Appellant. 7. The Learned PCIT has incorrectly set aside the assessment order and directed the Ld. AO to conduct a fresh assessment without demonstrating any specific error in the AO's findings. 8. The appellant craves to consider each of the above grounds of appeal without prejudice to each other and craves leave to add, alter, amend, ....
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....vity of a cooperative society. Thus, the learned AR has submitted that the disallowance of claim of deduction u/s 80P in the earlier year was based on the specific fact that the assessee was doing the business activity of finance with the nominal members and not restricted the activity with its regular members which is held in violation of the cooperative societies Act and therefore, the society was not entitled to the deduction u/s 80P of the Act. However, in the year under consideration, the assessee has not carried out any business with the nominal members and therefore, the order of the denial of deduction u/s 80P in the earlier year cannot be held as a precedent for the year under consideration. Thus, the learned AR has submitted that after the judgment of the Hon'ble Supreme Court, the assessee revised its business and now doing the business activities only with the regular members of the society. The Pr. CIT has stated in the impugned order that the Assessing Officer failed to verify the availability of deduction u/s 80P during the assessment proceedings and also not applied the correct legal provision while passing the impugned order and allowing the claim of deduction ....
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....laim of the assessee u/s 80P of the I.T. Act. He has thus contended that the impugned order passed by the Assessing Officer conducting a proper inquiry cannot be held to be erroneous for want of any inquiry. 6. The learned AR has further submitted that once the Assessing Officer has conducted inquiry on the issue, it is also a subject matter of the scrutiny undertaken under CASS, then the order of the Assessing Officer cannot be held as erroneous on the ground of lack of inquiry. The learned Pr. CIT, while passing the revision order u/s 263 of the Act ought to have given a concluding finding as to how the order passed by the Assessing Officer is erroneous, being contrary to the provisions of the I.T. Act. The learned AR has submitted that once the Assessing Officer has taken a view after conducting an inquiry, then the order cannot be held as erroneous on the ground of lack of inquiry and further the Pr. CIT cannot remand the matter back to the Assessing Officer for reconsideration of the same issue which were already decided by the Assessing Officer while passing the assessment order. In support of his contention, he has relied upon the following decisions: i) Hon'....
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....e Assessing Officer ought to have given a finding before allowing the claim of the deduction u/s 80P for the year under consideration. The assessment order is completely silent as how the assessee is eligible for deduction u/s 80P and therefore, the learned Pr. CIT has rightly held that the order passed by the Assessing Officer without application of mind is erroneous in so far it is prejudicial to the interest of the Revenue. He has relied upon the impugned order of the Pr. CIT as well as the judgment of the Hon'ble Delhi High Court in the case of CIT vs. M/s. Celebi Delhi Cargo Management India Pvt Ltd reported in [2025] 172 taxmann.com 3 (Delhi) dated 30th January 2025. 9. We have considered the rival contentions as well as the relevant material available on record. The assessee is a Cooperative Society registered under the Multi State Cooperative Act, 2002 w.e.f. 26/07/2005. Prior to that, the assessee was formed under the Andhra Pradesh Mutually Aided Cooperative Society Act w.e.f. 31/05/1997. The assessee filed its return of income on 26/11/2020 declaring total income of Rs. 1,20,22,790/- after claiming deduction u/s 80P of the Act. The case of the assessee was selecte....
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....d the assessment u/s. 143(3) r.w.s 144B of the Income Tax Act, 1961 was completed on 26.09.2022 by accepting the income computed u/s.143(1) of the Act at Rs. 1,40,94,840/-. On perusal of the record, I am of the view that the said order is erroneous in so far as it is prejudicial to the interests of revenue for the following reasons: 1. On verification of the assessment record, it is observed that that the assessee has claimed deduction of Rs. 50,61,07,879/- u/s. 80P of the I.T.Act, 1961 for the AY 2020-21 though the principles of mutuality were absent and the assessee did not provide sufficient documentary evidence to support the claim. For the AY 2020-21 the claim of deduction under Section 80P needs to be disallowed. Therefore, you are required to furnish clarification, in this regard, along with supporting documents to substantiate the claim. In view of the above, the assessment completed by the Assessing Officer by not verifying the issues, as mentioned above, is erroneous in so far as it is prejudicial to the interest of revenue. You are, therefore, requested to show cause as to why the order under section 143(3) r.w.s 144B of the Income Tax....
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....ble opportunity to the assessee. Apart from issuing the directions for the year under consideration, the Principal CIT also directed the Assessing Officer to verify the claim of deduction u/s 80P, if any, in the return of income for the A.Y 2019-20 and initiated suitable remedial action in the concluding paras 7 & 8 of the impugned order as under: 7. Considering the facts, issues and circumstances of the case, the assessment order under section143(3) r.w.s. 144B of the Act made by the Assessing Officer on 26.09.2022 is erroneous, as it is prejudicial to the interest of revenue. Hence, the AO is directed to pass a fresh assessment order after affording reasonable opportunity to the assessee. 8. The AO is also directed to verify the claim of 80P deduction, if any, in the return of income for the AY 2019-20 in the assessee's case and initiate suitable remedial action. 13. So far as the directions given by the Principal CIT to verify the claim of deduction u/s 80P for the A.Y 2019-20 is concerned, the same are beyond the jurisdiction of the Principal CIT u/s 263 of the Act being barred by limitation as well as beyond the scope of show cause notice dated 27/01/2....
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....s and phone number of the person 2. Total payments made during the relevant financial year 3. Total payments made one year prior to the relevant financial year 4. Total payments made one year next to the relevant financial year. V. With respect to the deductions under Chapter VI-A during the year under consideration, kindly submit the below specified details: 1. Section/sub-section wise details of deductions claimed under VI-A. 2. Details of earnings under the relevant heads against which deduction claimed. 3. Note on eligibility criteria of deductions claimed under different sections of Chapter VI- A. 4. Copy of bank statement to support the claim. 5. Documentary evidence in respect of investment/ expenditure/ payment etc. made to claim the deductions. VI. With respect to income for the year under consideration and the claim of refund during the year, kindly submit the below specified details: 1. Furnish computation of income for the relevant AY. 2. Provide a brief note on the nature of business activities carried out by you during the year under consideration. 3. F....
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....e on objectives of the entity. 6. Bifurcation of income earned under different heads. 7. The details of other deductions claimed, if any. 8. Justification of how interest income earned from a banking company is eligible for deduction u/s 80P of the Act. IX. With respect to Income for the year under consideration and the claim of refund during the year, kindly submit the below specified details: 1. Furnish computation of income for the relevant AY. 2. Provide a brief note on the nature of business activities carried out by you during the year under consideration. 3. Provide a comparison of sales/turnover, gross profit, net profit, GP ratio, NP ratio for the year under consideration and previous two years. 4. Provide details of changes made by you in the revised return, if applicable in comparison to the original ITR filed for the year under consideration explaining the reason of doing the same along with supporting documents. 5. Provide a comparison of income reported, deductions/exemptions/rebate claimed, current year/carried forward loss set-off/adjusted, advance tax paid, self-assessment tax paid, TD....
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....communication from Income-Tax Department and submit your response accordingly. 15. In query No. VIII of the questionnaire, the Assessing Officer has specifically asked the assessee to submit (i) the specified details/note on the nature of the business activities carried out by the assessee during the year as well as during the last 3 years (ii) details of computation of total income (iii) calculation of amount of deduction and note on allowability of deduction u/s 80P of the Act (iv) reply whether the assessee falls under the category of cooperative bank or was constituted under part V of the Banking Regulations Act, 1994 (v) detailed note on objection of the assessee (vi) bifurcation of income earned under different heads (vii) details of other deductions claimed, if any and (viii) justification of interest income earned from banking company is eligible for deduction u/s 80P of the Act. The assessee filed the reply dated 04/01/2021 which is reproduced at page Nos. 27 to 31 of the paper book and the relevant part of the reply to query No.(viii) is as under: 10) Note on deduction u/s 80P of the Act claimed by the assessee: Section 80P of the Act states as under:....
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....ereby not eligible to claim deduction u/s 80P of the Act: 23) With the insertion of sub-section (4) by the Finance Act, 2006, which is in the nature of a proviso to the aforesaid provision, it is made clear that such a deduction shall not be admissible to a co-operative bank. However, if it is a primary agriculture credit society or a primary co-operative agriculture and rural development bank, the deduction would still be provided. Thus, co-operative banks are now specifically excluded from the ambit of Section 80P of the Act. 24) Undoubtedly, if one has to go by the aforesaid definition of co-operative bank, the appellant does not get covered thereby. It is also a matter of common knowledge that in order to do the business of a co-operative bank, it is imperative to have a licence from the Reserve Bank of India, which the appellant does not possess. Not only this, as noticed above, the Reserve Bank of India has itself clarified that the business of the appellant does not amount to that of a co-operative bank. The appellant, therefore, would not come within the mischief of sub-section (4) of Section 80P. As your goodself can observe from the above that t....
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.... in the below given format. Deposits for the A.Y. regular members and nominal members Deposit type Total Deposit Share Holders members Share Holders members Nominal members Nominal members Amount Numbers Amount Numbers Amount Total You are requested to furnish the details called for within the due dates specified in this notice in order to enable the assessing officer in finalization of the assessment proceedings expeditiously. Please note that the failure to respond to Statutory notices may lead to initiation of penalty proceedings as per the provisions of section 272A (1)(d) of the Income Tax Act, 1961. 17. In this show cause notice, the Assessing Officer has asked the assessee to furnish further reply on certain points which are specified as to furnish (i) statements showing the total number of members state-wise in the last 5 financial years including the break up of regular members and nominal members from A.Y 2016-17 to 2020-21 (ii) provide details of deposits in respect of regular and nominal members from A.Y 2016-17....
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....) Share Holder members (Regular Members) Nominal members Nominal members Amount Numbers Amount Numbers Amount Fixed Deposit 3,23,58,44,217 8,175 2,90,70,72,118 57,454 32,87,72,099 Akshaya Deposit 4,77,61,48,613 9,149 4,32,07,50,382 40,433 45,53,98,231 Recurring Deposit 31.57,48,903 3,020 22,56,21,665 18,110 9,01,27,238 Total 8,32,77,41,733 20,344 7,45,34,44,165 1,16,027 87,42,97,568 Details of Deposits for the A.Y. 2017-18 Deposit type Total Deposit Share Holder members (Regular Members) Share Holder members (Regular Members) Nominal members Nominal members Amount Numbers Amount Numbers Amount Fixed Deposit 3,07,22,33,002 8,725 3,07,22,33,002 58,934 - Akshaya Deposit 5,06,79,08,460 10,791 5,06,79,08,460 40,712 - Recurring Deposit 31,74,57,155 6,549 31.74,57,155 16,581 - Total 8,45,75,98,617 26,065 8,45,75,98,617 1,16,227 - Details of Deposits for the A.Y. 2018-19 Deposit type Total Deposit Share Holder members (Regular Members) ....
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....he business model and started the business activity only with the regular members/shareholders. It is pertinent to note that for the A.Y 2009-10, the claim of the assessee u/s 80P of the Act was disallowed by Assessing Officer which also confirmed by the Hon'ble Supreme Court on the ground that the assessee is doing the business not only with its members but to outsiders as well which is the nominal members and therefore, this business activity of the assessee was found to be against the Cooperative Societies Act and consequently the Hon'ble Supreme Court upheld the disallowance of deduction u/s 80P by the Assessing Officer. For the year under consideration, the Assessing Officer has specifically conducted the inquiry about the status of the membership of the assessee and business activities of the assessee with its members with comparative details of earlier years. Once the assessee has not carried out any business other than the regular members, then the income generated by the assessee from the credit/banking facility provided to the members is eligible for deduction u/s 80P(1) of the Act. From all these details as reproduced above in the shape of show cause notice & que....
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....ssee. The Hon'ble jurisdictional High Court in the case of Spectra Shares & Scrips (P) Ltd vs. CIT (354 ITR 35) has held in para 59 of the judgment as under: "59. The contention of the counsel for Revenue that the assessee had not raised any submission before the respondent as to the justification for high frequency of transactions in March, 2006 on account of the provisions of the Finance Bill, 2006 is not tenable because the respondent, in his show cause notice dated 20.01.2010 or revised show cause notice dated 21.02.2011 did not indicate that he is going to focus on that period. Consequently, the assessee had no opportunity to highlight this fact in his replies to the respondent. The fact remains that this contention was not only raised in the written submissions before the Tribunal but also argued before it, but it did not deal with it. The contention of the Revenue that the Assessing Officer had not applied his mind to the material on record cannot be accepted because the respondent in his order dated 31.03.2011 specifically records a finding at Para 5.1 that there is application of mind by the Assessing Officer. The Revenue cannot raise a plea which is not conta....
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....ause the order does not contain reasons as to why he accepted that the assessee is a trading company, his order does not become susceptible for revision. The Assessing Officer while making an assessment had examined the accounts, made inquiries, applied his mind to the facts and circumstances of the case and determined the income of the assessee. Therefore, it is not open to the Commissioner, on the ground that a different view is possible, to reopen the assessment on the ground that the Assessing Officer did not make an elaborate discussion in that regard. 35. Admittedly, the assessee had given full details of these transactions in its letter/reply dated 29.08.2008 to the Assessing Officers letter dated 04.08.2008, giving details of dates of acquisition of the shares in question and dates of sale of shares. As such this material was available before the Assessing Officer. In its reply dt. 09-03-2011 to the revised show cause notice issued by the respondent also, the appellant had enclosed the list of transactions in relation to the scrips of M/s. Amara Raja Battery, M/s. Reliance Industries, M/s. Gujarat NRE Coke and M/s. Andhra Sugars Limited contending that having purch....
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.... would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/ question. 17. This distinction must be kept in mind by the CIT while exercising jurisdiction under Section 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged "inadequate investigation", it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/ inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneo....
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.... and finding that the Assessing Officer had examined the said aspect and accepted the respondent's computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is "erroneous". The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits, or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the second set of cases, CIT cannot direct the Assessing Office....
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....vidence to show that the income of the assessee from doing business with its Members is eligible deduction u/s 80P of the Act, then in the absence of any concluding finding by the Principal CIT that the claim of the assessee for deduction u/s 80P is impermissible under law, the order of the Assessing Officer allowing the said claim cannot be held as erroneous and hence, the impugned order of the Principal CIT is set aside. 23. In the result, appeal filed by the assessee is allowed. Order pronounced in the Open Court on 30th July 2025. ============= Document 1 2. Details of opportunities given: Type of notice/communication Date of INCO notice/communication|compliance Date of given Response the assessee received/not received of response if Date of received (Full/part/adjou Response 143(2) 29/06/2021 14/07/2021 |not received - 142(1) 01/12/2021 16/12/2021 received 04/01/2022|part 142(1) 16/08/2022 22/08/2022 received 20/08/2022 full Type of notice/communication Date of INCO notice/communication|compliance Date of given Response the assessee received/not received of response if Date of (Full/part/adjou Re....
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....¶à¥à¤¯à¤•à¤¤à¤¾ है: In connection with the assessment for the assessment year 2020-21, you are required to: ) 22/08/2022 03:15 PM को या उससे पहले अनà¥à¤²à¤—à¥à¤¨à¤• के अनà¥à¤¸à¤¾à¤° मांगे गठखातों और दसà¥à¤¤à¤¾à¤µà¥‡à¤œà¥‹à¤‚ को पà¥à¤°à¤¸à¥à¤¤à¥à¤¤ करें, अथवा a) Produce, or cause to be produced, the accounts and documents called for as per annexure on or before 22/08/2022 03:15 PM or () अनà¥à¤²à¤—à¥à¤¨à¤• के अनà¥à¤¸à¤¾à¤° और उसमें निरà¥à¤¦à¤¿à¤·à¥à¤Ÿ बिंदà¥à¤“ं या मामलों पर मांगी गई जानकारी जो कà....