TaxTMI 
TaxTMI 
2026 (2) TMI 142
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.... Income Tax Act, 1961 (hereinafter referred to as 'the Act'). The return was processed u/s 143(1) of the Act. Subsequently the return was selected for scrutiny under CASS under the 'limited scrutiny' category for examination of the following issues: i) Investments / Advances / Loans ii) Deduction from total income under Chapter VI-A 4. The Assessing Officer completed the assessment u/s 143(3) r.w.s. 144B of the Act on 23.09.2022 determining the total income of the assessee at Rs. 14,95,729/- after disallowing deduction claimed u/s 80P of the Act to that extent. 5. Subsequently the Ld. PCIT examined the record and noted that the assessee had made substantial investments / deposits with other banks including co-operative banks and has admittedly earned interest income on such investments / deposits to the tune of Rs. 1,66,30,919/-. He observed that during the course of assessment proceedings, on a query raised by the Assessing Officer on the admissibility of deduction u/s 80P of the Act in respect of interest received on deposits / investments kept with the co-operative and other banks, the assessee had stated that the profit to the extent of Rs. 37,03,189/- w....
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....ues and to pass a fresh assessment order in the light of enquiries made: i) The A.O shall examine the eligibility of deduction available to the assessee u/s.80P(2)(a) of the Act in the light of decision of the Hon'ble Supreme Court in the case of Totgars Co-operative Sales Society Ltd. Vs. ITO, (SC) (322 ITR 283)(2010) ii) The A.O shall also examine whether the interest income received by the assessee is related to its core business or is a residual income which is required to be taxed under the head "Other Sources". iii) The AO shall examine whether the assessee is ineligible for deduction u/s 80P in view of specific provision of section 80P(2)(d) r.w.s. section 80P (4) of the Act. 7. Aggrieved with such order of the Ld. PCIT, the assessee is in appeal before the Tribunal by raising the following grounds: 1. Whether on the facts and in the circumstances of the case and in law, the Ld. Pr. Commissioner of Income Tax-3, Pune erred in assuming jurisdiction u/s 263 of the Act in order to substitute his subjective view in place of judicious view taken by the Assessing Officer on the same set of facts and materials on records, for the deduction....
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....a)/(b) of the Explanation 2 of Section 263 of the Act patently in violation of "rule of consistency" is bad in law, without jurisdiction, arbitrary, invalid and hence, liable to be quashed? 5. The Appellant craves leave to alter, amend, withdraw or substitute any ground or grounds or to add any new ground or grounds of appeal. 8. The Ld. Counsel for the assessee at the outset submitted that the case of assessee society was selected for scrutiny under CASS and the Assessing Officer during the course of assessment proceedings had called for various details in response to which the assessee has duly submitted the details. The Assessing Officer after considering the submissions of the assessee has disallowed the deduction u/s 80P of the Act to the extent of Rs. 14,95,730/- out of total deduction claimed u/s 80P of the Act of Rs. 51,98,919/-. Referring to the copy of assessment order, the Ld. Counsel for the assessee drew the attention of the Bench to the observations of the Assessing Officer at para 9 which read as under: "9. Hence a show cause notice dated 24.03.2022 issued asking why the deduction claimed u/s 80P of the Act should not be disallowed and added to t....
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....argument submitted that the Assessing Officer during the course of assessment proceedings while examining the claim of deduction u/s 80P of the Act has called for various details which were submitted by the assessee. After considering the issue and due examination of the details submitted by the assessee the Assessing Officer after due application of mind has taken a plausible view to disallow the deduction u/s 80P of the Act to the extent of net interest income. 11. Relying on the following decisions he submitted that when the Assessing Officer has taken a plausible view on an issue, the Ld.PCIT cannot assume jurisdiction u/s 263 of the Act to revise the said order on the same grounds as it would amount to change of opinion: i) CIT v. Chawla Trunk House, (1983) 139 ITR ii) CIT v. Kanda Rice Mills (1989) 178 ITR 464 iii) Baljees v. ACIT, (2004) 85 TTJ (Chd.) 543 iv) Malabar Industrial Company Ltd. v. CIT (2000) 243 ITR 83 v) Amrik Singh v. Income Tax Officer, (2003) 127 taxman (Trib.) 87 vi) Smt. Neena Khullar, Samrala v. The CIT-II, Ludhiana, in ITA No. 443/Chandi/2012 dated 24.09.2012 vii) CIT v. Anil Kumar Sharma ....
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.... 2) Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit Vs. ITO (ITA No.604/PN/2014) 3) ITO Vs. Sureshdada Jain Nagari Sahakari Pat Sanstha (ITA No.589/PN/2016) dated 28.11.2018 4) Dhanshree Multistate Credit Co-operative Society Ltd. VS. ITO (ITA No.1250/PUN/2018) dated 01.03.2019 5) ITO Vs. Niphad Nagari Sahakari Pat Sanstha Ltd. (ITA No. 1336/PUN/2011) dated 31.07.2013. 6) Sugarcane Producers Vividh Karyakari Sah. Society Ltd. Vs. ITO (ITA No. 2537/PUN/2017) dated 26.10.2018. 7) Chandraprabhu Gramin Bigar Sheti Sahakari Pat Sanstha Maryadit Vs. ITO (ITA No. 1352/PN/2016) dated 29.07.2016 8) Hon'ble Gujarat High Court in case of Surat Vankar Sahakari Sngangh Ltd. - 72 taxmann.com 169 9) Rajkot ITAT in case of M/s. Surendranagar District Cooperative Milk Producers Union Ltd. vs. DCIT-111 taxmann.com 69 10) Hon'ble Karnataka High Court in case of PCIT vs. Totagars Co-operative Sale Society-78 taxmann.com 169 11) Gurumauli Nagari Sahkari Pat Sanstha vs. PCIT order dated 13.01.2022 (Pune Trib.). 12) Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITO 230 Taxman 309 (Kar-HC)....
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....e Ld. PCIT was of the opinion that when the assessee had earned interest income of Rs. 1,66,30,919/- on its investments with other banks / cooperative societies during the year, therefore, the Assessing Officer should have considered the entire interest income of Rs. 1,66,30,919/- as 'Income from other sources' and re-worked the deduction admissible u/s 80P of the Act in the light of the decision of Hon'ble Supreme Court in the case of Totgars Co-operative Sales Society Ltd. Vs. ITO (supra). According to him the Assessing Officer has not conducted any enquiry to determine whether the interest income earned by the assessee is related to its core business or its residual income which is required to be taxed under the head 'Income from other sources'. Since the Assessing Officer in the instant case has not conducted any enquiry, therefore, the Ld. PCIT set aside the assessment to the file of the Assessing Officer with certain directions. 18. It is the submission of the Ld. Counsel for the assessee that the Assessing Officer, during the course of assessment proceedings, has made proper enquiries before disallowing the claim of deduction u/s 80P of the Act to the extent of Rs. 14,95,....
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....100066/2016 & Connected cases dated 16-06-2017, the Hon'ble Court has discussed the provisions of Section 80P as a whole and held that it is the character and nature of Income which determines its taxability or exemption from taxability and the income which is clearly held to be not exempt and not deductible under Section 80P(2)(a) of the Act by the Hon'ble Supreme Court in the case of respondent assessee, cannot be contrarily held as exempted and deductible merely because the depository bank, with whom the investments were made by the respondent assessee happens to be a co-operative bank. The income by way of interest earned by deposit or investment of Idle or surplus funds does not change its character irrespective of the fact whether such income of interest is earned from a schedule bank or a co-operative bank and thus, clause(d) of Section 80P(2) of the Act would not apply in the facts and circumstances of the present case. The person or body corporate from which such interest income is received will not change its character, viz. Interest income not arising from its business operations, which made it ineligible. I find that the issues are squarely covered by the Hon....