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Income Tax Appellate Tribunal, JODHPUR BENCH, JODHPUR
Before: SHRI B. R. BASKARAN & Dr. S. SEETHALAKSHMI
O R D E R PER: B. R. BASKARAN, AM The assessee has filed this appeal challenging the revision order dated 26- 03-2022 passed by the ld. PCIT, Jodhpur-1, Jodhpur u/s 263 of the Income Tax Act, 1961 for the A.Y. 2017-18. The assessee is challenging the validity of the Revision Order passed by the ld. PCIT.
None appeared on behalf of the assessee. However, ld. Counsel for the assessee has moved an application seeking adjournment. On perusal of the record, the Bench took the view this appeal could be disposed of and accordingly, we proceed to dispose of the appeal ex-parte.
We heard the ld. DR and perused the record. The assessment of the year under consideration was completed by the AO u/s 143(3) of the Act on 20-08- 2019 in the hands of the assessee. The ld. PCIT, upon examination of the assessment record, noticed that the AO allowed deduction u/s 80P(2)(d) of the Act in respect of interest income of Rs.21.40 lacs received from the deposits kept with “Barmer Central Cooperative Bank Ltd”. The ld. PCIT took the view that deduction allowed u/s 80P(2)(d) of the Act is not correct and accordingly held that the assessment is rendered as erroneous and prejudicial to the interest of Revenue. Accordingly, the ld PCIT initiated revision proceeding u/s 263 of the Act.
Before the ld. PCIT, the assessee submitted that the deduction u/s 80P(2)(d) is allowed to a co-operative society in respect of interest income received from another co-operative society. The assessee submitted that “Barmer Central Cooperative Bank Ltd” is also a cooperative society which is registered under the Rajasthan Cooperative Societies Act, 1953. Accordingly, it was contended that interest income received from a Cooperative Bank, which is also a Cooperative Society, the said interest income has been rightly claimed as deduction u/s 80P(2)(d) of the Act. In this regard, the assessee placed its reliance on the decision rendered by ITAT Pune Bench in the case of Rena Sahakari Sakhar Karkhana Ltd. vs Pr. CIT (ITA No. 1249/PUN/2018. Accordingly, the assessee submitted that the AO has allowed the deduction u/s 80P(2)(d) taking a possible view. Accordingly, it contended that assessment order cannot be termed as erroneous.
The ld. PCIT did not accept the contention made by the assessee. The ld. PCIT observed that the deduction u/s 80P is denied to a Cooperative Bank u/s 80P(4) of the Act. Hence, the object of provisions of sec. 80P(4) will disable the eligibility to get deduction u/s 80P(2)(d) of the Act. Accordingly, the Ld PCIT held that the AO should have denied deduction u/s 80P(2)(d) of the Act to the assessee in respect of interest income earned by it from the Cooperative Bank. Accordingly, the ld. PCIT held that the impugned assessment order is rendered erroneous and prejudicial to the interests of revenue. Accordingly, he set aside the assessment order in respect of deduction allowed u/s 80P(2)(d) of the Act and restored the same to the file of the AO for examining it afresh, in the light of the discussions made by him in the impugned revision order. Now the assessee is aggrieved.
The scope of revision proceedings initiated under section 263 of the Act was examined by Hon'ble Bombay High Court, in the case of Grasim Industries Ltd. V CIT (321 ITR 92) by taking into account the law laid down by the Hon'ble Supreme Court. The relevant observations are extracted below:
“Section 263 of the Income-tax Act, 1961 empowers the Commissioner to call for and examine the record of any proceedings under the Act and, if he considers that any order passed therein, by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, to pass an order upon hearing the assessee and after an enquiry as is necessary, enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. The key words that are used by section 263 are that the order must be considered by the Commissioner to be “erroneous in so far as it is prejudicial to the interests of the Revenue”. This provision has been interpreted by the Supreme Court in several judgments to which it is now necessary to turn. In Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83, the Supreme Court held that the provision “cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer” and “it is only when an order is erroneous that the section will be attracted”. The Supreme Court held that an incorrect assumption of fact or an incorrect application of law, will satisfy the requirement of the order being erroneous. An order passed in violation of the principles of natural justice or without application of mind, would be an order falling in that category. The expression “prejudicial to the interests of the Revenue”, the Supreme Court held, it is of wide import and is not confined to a loss of tax. What is prejudicial to the interest of the Revenue is explained in the judgment of the Supreme Court (headnote) :
“The phrase ‘prejudicial to the interests of the Revenue’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law.” The principle which has been laid down in Malabar Industrial Co. Ltd. [2000] 243 ITR 83 (SC) has been followed and explained in a subsequent judgment of the Supreme Court in CIT v. Max India Ltd. [2007] 295 ITR 282.” The principles laid down by the courts are that the Learned CIT cannot invoke his powers of revision under section 263 if the Assessing Officer has conducted enquiries and applied his mind and has taken a possible view of the matter. If there was any enquiry and a possible view is taken, it would not give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. Possible view shall mean a issue, which is debatable and there could be more than one possible views. The consideration of the Commissioner as to whether an order is erroneous in so far it is prejudicial to the interests of Revenue must be based on materials on 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 start fishing and roving enquiries in matters or orders which are already concluded.
If we examine the facts of the present case, we notice that the issue considered by Ld CIT(A) is a debatable issue. We notice that the assessee had placed reliance on the decision rendered by Pune bench of ITAT in the case of Rena Sahakari Sakhar Karkhana Ltd (supra), wherein an identical issue of validity of revision order passed in the hands of the above said assessee u/s 263 of the Act directing the AO to disallow the deduction claimed u/s 80P(2)(d) of the Act was examined by the Tribunal. It was held as under:-
“8....We are of the considered view, that though the co-operative banks to the insertion of sub-section (4) to Sec. 80P would no more be entitled for claim of deduction under Se. 80P of the Act, but as a co-operative bank continues to be 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, therefore, the interest income derived by a co-operative society from its investments held with a co-operative bank would be entitled for claim of deduction under Sec. 80P(2)(d) of the Act.
9. In so far as the judicial pronouncements that have been relied upon by Ld A.R are concerned, we find that the issue that a co-operative society would be entitled for claim of deduction under Sec. 80P(2)(d) on the interest income derived from its investments held with a co-operative bank is covered in favour of the assessee in the following cases:- (i) M/s Solitaire CHS Ltd vs. PCIT dated 29.11.2019 (ITAT “G” Bench, Mumbai)
(ii) Majalgaon Sahakari Sakhar Karkhana Ltd vs. ACIT-3, Aurangabad, (ITAT Pune) (iii) Kaliandas Udyog Bhavan Premises Co-op Society Ltd vs. ITO, 21(2)(1), Mumbai.
Be that as it may, in our considered view, as the AO, while framing the assessment had taken a possible view, and allowed the assessee’s claim for deduction under Sec. 80P(2)(d) on the interest income earned on its investments/deposits with co-operative banks, therefore, the Pr. CIT was in error in exercising his revisional jurisdiction u/s 263 of the Act for dislodging the same. Accordingly, finding no jurisdiction on the part of the Pr. CIT, who in exercise of his powers under Sec. 263 if the Act, has dislodged the view that was taken by the AO as regards the eligibility of the assessee towards claim of deduction under Sec. 80P(2)(d), we set aside his order and restore the order passed by the AO under sec. 143(3), dated 07.03.2016.”
The issue before us is identical with the issue examined by Pune bench in the above said case. The assessee herein also is a co-operative society and it has received interest income from a co-operative bank, which is also a co-operative society. In a plethora of decisions, it has been held by the Tribunal that interest income earned by a co-operative society from a co-operative bank is eligible for deduction u/s 80P(2)(d) of the Act, meaning thereby, the AO has taken a possible view on the issue of allowing deduction u/s 80P(2)(d) of the Act to the assessee. The settled proposition of the law is that, merely because that the Ld PCIT has got a different view on this issue, the same would not entitle him to pass the impugned revision order dislodging the possible view taken by the AO. Accordingly, we are of the view that the impugned assesment order cannot be considered to be erroneous and prejudicial to the interests of revenue.
Accordingly, the Ld PCIT was not justified in passing the impugned revision order. Accordingly, we quash the same.
In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 16 /01/2023