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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI B. R. BASKARAN, AM & MS. KAVITHA RAJAGOPAL, JM
This appeal has been filed by the assessee, challenging the order of the learned Principal Commissioner of Income Tax-1, Thane (‘ld.PCIT’ for short) passed u/s.263 of the Income Tax Act, 1961 (‘the Act'), relevant to the Assessment Year (‘A.Y.’ for short) 2017-18.
2. The solitary issue involved in this appeal is challenging the jurisdiction of the ld. PCIT for invoking the provision of section 263 of the Act on the ground that the assessment order passed by the A.O. is erroneous and prejudicial to the interest of the Revenue.
(A.Y. 2017-18) Adhar Nagri Sahakari Patpedhi Maryadit vs. Pr. CIT 3. The brief facts of the case are that the assessee is a co-operative society registered under the Maharashtra Co-operative Societies Act, 1960 and are carrying out the activities like accepting deposits from members and lending advances to them as well as reinvesting money. The assessee filed its return of income dated 25.10.2017, declaring total income at Nil. The assessee’s case was selected for complete scrutiny and the assessment order dated 24.12.2019 was passed u/s. 143(3) in which the Assessing Officer (A.O. for short) has accepted the return of income declared by the assessee. The ld. PCIT invoked the provision of section 263 on the ground that the assessment order is prejudicial and erroneous to the interest of the Revenue and set aside the assessment order with the direction to examine the applicability of the provision of section 69A of the Act r.w.s. 115BBE on the cash deposits made by the assessee, amounting to Rs.2,02,05,729/-, to examine the applicability of the provisions of section 80P(2)(d) of the Act and u/s.269SS of the Act amounting to Rs.59,93,369/- and also to verify the applicability of the deduction u/s. 80P of the Act on ‘other income’ amounting to Rs.11,24,334/-.
4. The assessee is in appeal before us, challenging the order of the ld. PCIT passed u/s. 263 of the Act.
From the facts of the case, it is observed that the assessee has deposited cash during the demonetization period from 09.01.2016 to 30.12.2016 in various banks, aggregating to Rs.2,02,05,729/-. It is observed that the A.O. during the assessment proceeding had issued notice u/s. 142(1) of the Act dated 09.09.2019, seeking for the following details:
(A.Y. 2017-18) Adhar Nagri Sahakari Patpedhi Maryadit vs. Pr. CIT 1. Detailed note on the nature of business activities undertaken by you.
List of all bank accounts maintained by you in F.Y. 2016-17. Copy of Bank statement of all bank accounts maintained in your name for the year under consideration.
Copy of Return of Income, Balance Sheet, P/L Account and Audit Report for A.Y. 2015- 16, 2016-17 & 2017-18.
Copy of computation of income for the year under consideration.
5. Please furnish the details of deduction claimed by you under chapter VI-A of the IT Act, 1961 alongwith documentary evidences.
6. Please furnish the details of all loan receipts and loan repayment i.e mode of receipt/repayment (Cash/cheques/ECS etc.), name and address of the loan creditor. Also submit the details of interest received/paid during the year on such loans/advances.
7. Please furnish the details of gifts received, in cash or kind, during the year along with name and address of the parties from such gifts have been received.
8. Please furnish the details of investments made in shares/derivatives/other investments during the year under consideration, details of income earned on such investments along with supporting documents and evidences like global report etc.
Please furnish party-wise details of expenses appearing in Profit & Loss Account in excess of Rs.2,00,000 each along with full name and address of the party, nature of service received/rendered and complete transaction wise TDS details in following format Name & address Nature of service Total purchases Cheque no. date TDS details of the party received/rendered 1 2 3 4 5 Please furnish sample copy of bills/vouchers, challan, copy of relevant bank statement evidencing the payment.
10. Furnish the copy of TDS returns filled during the year along with details of TDS made and paid into Govt. Account and explain the reason for non-payment of TDS into Govt. account, if any.
The ld. PCIT has held that the A.O. has not made proper verification as to the cash deposits during the demonetization period for which the assessee is said to have not furnished the documentary evidence in support of its claim. The ld. PCIT also stated that the A.O. has failed to call for the complete details of cash deposits (old and legal notes) from the banks and has also failed to make a comparative analysis of deposits of earlier year and subsequent year from the respective banks and also from the assessee. Further to this, the ld. PCIT has stated that the assessee has shown interest income of Rs.97,93,581/- out of normal banking business of providing credit facility to its members and interest income of Rs.59,93,368/- from investments made with various co-operative banks. The ld. PCIT held that the assessee is not entitled to deduction u/s. 80P(2)(d) and 80P(2)(ia)
(A.Y. 2017-18) Adhar Nagri Sahakari Patpedhi Maryadit vs. Pr. CIT of the Act, as the said interest income is received from deposits made with other than the Co-operative Societies and, hence, was not allowable u/s. 80P(2)(d) of the Act. The ld. PCIT relied on the decision of the Hon'ble Supreme Court in the case of Totgar Co-op.
Sale Society vs. ITO, Karnataka [2010] 322 ITR 283 (SC) for the proposition that the interest received from other than the co-operative societies are not entitled to deduction u/s. 80P(2)(d) of the Act. The ld. PCIT held that the assessee does not qualify for deduction u/s. 80P for various credits such as other income of Rs.55,152/-, penal interest of Rs.3,71,060/-, notice fees of Rs.1,52,450/-, processing fees of Rs.5,45,672/- and held that the total of Rs.11,24,334/- has to be taxed u/s. 56 of the Act as ‘ income from other sources’ in the hands of the assessee which was not considered by the A.O.
On the above said grounds, the ld. PCIT invoked his jurisdiction u/s. 263 of the Act and set aside the assessment order dated 24.12.2009 to the A.O. for verification and consideration of these issues. The assessee is in appeal before us challenging the order of the ld. PCIT.
The ld. AR for the assessee contended that the A.O. had verified all the details, pertaining to the issues raised by the ld. PCIT during the assessment proceeding for which the assessee has also submitted the detailed submissions along with all the documentary evidence to substantiate the claim of the assessee. The ld. AR brought our attention to page nos. 38 & 39 of the paper book as reply to item no. 5 of 142(2) notice.
The ld. AR stated that the details given by the assessee pertains to the bifurcation and proportionate working of the cash deposits made during the demonetization to the assessee society. The ld. AR relied on page nos. 47 & 48 for the queries raised by the (A.Y. 2017-18) Adhar Nagri Sahakari Patpedhi Maryadit vs. Pr. CIT A.O. pertaining to section 80P(2)(d) deduction. The ld. AR relied on the decision of the Hon’ble Delhi High Court in the case of Pr.CIT vs. Brahma Centre Development Pvt Ltd (in & 118/2021, vide order dated 05.07.2021) which differentiated lack of enquiry and deficiency in enquiry in context with the provision of section 263 of the I.T. Act. The ld. AR relied on a catena of decisions in support of the assessee’s claim.
The ld. DR , on the other hand, controverted the same and contended that the A.O. has not verified and enquired into the issue specified by the ld. PCIT thereby making the assessment order prejudicial and erroneous to the interest of the Revenue. The ld. DR relied on the decision of the Hon'ble Supreme Court in the case of Totgar Co-op. Sale Society (supra) for the proposition that the interest received from the co-operative banks are not eligible for deduction u/s. 80P. The ld. DR relied on the order of the ld. PCIT.
Having heard the rival submissions and perused the materials on record, it is observed that the assessee has made cash deposits during the demonetization period from 09.01.2016 to 30.12.2016 in various banks for which the A.O. vide notice dated 09.09.2019 u/s. 142(1) has sought for details along with the details of deduction claimed by the assessee under Chapter VIA of the Act, the loan receipts and loan repayments made by the assessee along with the interest received and paid. The A.O. has also called for the other details, which pertains to the issues raised by the ld. PCIT. It is also observed that the assessee in response to the notice issued by the A.O. has furnished the documentary evidences along with the balance sheet, profit and loss account, and computation of income and acknowledgment of the return of income, filed by the assessee for the impugned year. This fact has also not been controverted by the Revenue.
(A.Y. 2017-18) Adhar Nagri Sahakari Patpedhi Maryadit vs. Pr. CIT The moot question here is whether the assessment order dated 24.12.2019 passed u/s. 143(3) of the A.O. is erroneous and prejudicial to the interest of the Revenue.
From the above facts, it is observed that the ld. PCIT has alleged that the A.O. has not called for complete details of cash deposits made by the assessee during the demonetization period and that the A.O. has failed to call for details of cash deposits of earlier year and subsequent year for a comparative analysis from the respective banks by issuing notice u/s. 133(6) of the Act. From this, the ld. PCIT observed that the impugned amount of Rs.2,02,05,729/- should have been added as ‘unexplained income’ of the assessee by the A.O. in the assessment order. The ld. PCIT has also stated that the IAP has raised objection for the assessee’s interest income of Rs.97,93,581/- out of normal banking business of providing credit facilities to its members and interest income of Rs.59,93,368/- from investments made with co-operative banks. The ld. PCIT held that since the interest income of Rs.53,93,368/- was received from deposits made with other than the co-operative societies, the assessee was not entitled to deduction u/s. 80P(2)(d) and 80P(2)(a)(i) of the Act and that the A.O. ought not to have allowed the same u/s. 80P(2)(d) of the Act. The ld. PCIT as well as the IAP is said to have relied on the decision of the Hon'ble Supreme Court in the case of Totgar Co-op. Sale Society (supra).
The ld. PCIT further stated that the ld. CIT(Audit), Pune vide its letter dated 17.02.2022, pertaining to the said issue of deduction did not withdraw the objection raised by it in allowing the impugned deduction by not considering the reply of A.O.’s that various bench of the Tribunal have distinguished the case of the Totgar Co-op. Sale Society (supra) and has allowed the said deduction on the ground that the Co-operative Banks par
(A.Y. 2017-18) Adhar Nagri Sahakari Patpedhi Maryadit vs. Pr. CIT takes character of credit co-operative society and, hence, interest received from the same are allowable u/s. 80P(2)(d) of the Act. The ld. PCIT relied on the decision of the CIT(Audit), Pune which held that the impugned interest income would be taxable u/s. 56 of the Act under the head ‘other income’ and not under the head ‘profit and gains of business’ as such interest income being surplus funds cannot be said to be attributable to the activities of the society. The ld. PCIT held that in view of the audit objection raised by the IAP as well as the direction received from CCIT, Pune, the assessment order passed by the A.O. u/s. 143(3) of the Act dated 24.12.2019 is held to be erroneous insofar as it is prejudicial to the interest of the Revenue. The assessee, on the other hand, had controverted the same by stating that for the issue pertaining to the cash deposits from the demonetization period, from 09.01.2016 to 13.12.2016, the assessee has specified that the out of the alleged six bank accounts mentioned by the PCIT, four accounts with Vasai Janata Sahakari Bank Ltd. does not belong to the assessee, except for two accounts viz.
SVC Co-operative Bank Ltd. and Saraswat Co-operative Bank Ltd. belonging to the assessee. It is also specified that the assessee has given confirmation from Vasai Janta Sahakari Bank Ltd. stating that the other four accounts does not belong to the assessee.
The assessee has also stated that during the assessment proceedings, the assessee has furnished the details of the depositors along with their PAN and has also uploaded the said data as ‘Cash Transaction 2016’ in the income tax website. The assessee contended that the source of SBN’s deposits was explained along with the details of members and their PAN during the assessment proceeding. The assessee is also said to have furnished copy of cash book during the impugned period along with date-wise details of SBN’s with list of accountholders from whom SBN’s were received was also enclosed. The (A.Y. 2017-18) Adhar Nagri Sahakari Patpedhi Maryadit vs. Pr. CIT assessee has also submitted the details of interest on loans and advances or facilities viz.
CC/OD to its members along with the details of processing fee, penal interest on delayed payment of installment, recovery of loans along with the loan recovery charges, etc. were explained in detail by the assessee. The assessee contended that the impugned incomes are attributable to providing credit facilities to its members and, therefore, the assessee was eligible for deduction u/s. 80P of the Act.
From the above facts, we find that the A.O. has sought for details pertaining to all the issues raised by the ld. PCIT during the assessment proceedings and has also received adequate reply from the assessee by way of written submission and documentary evidences to substantiate the assessee’s claim, pertaining to these issues. So from this, we can infer that there was no lack of enquiry pertaining to the issues raised. While considering the fact that whether there was inadequacy in conducting the enquiry by the A.O. was to be looked into in view of the propositions laid by the various courts. The assessee has relied on the decision of the Hon’ble Delhi High Court in the case of Brahma Centre Development Pvt Ltd. (supra), wherein it was held that the inadequacy in conducting the enquiry by the A.O. cannot be the reason for the ld. PCIT to invoke the provision of section 263 of the Act.
From the facts of the case, it is observed that the A.O. has enquired into the details of the cash deposits during demonetization period and there is no infirmity in the conclusion arrived at by the A.O. For the issue pertaining to the deduction u/s. 80P to the assessee for which the assessee has also furnished sufficient evidences in support of its claim, we are of the view that as there are divergent views in relation to interest received
(A.Y. 2017-18) Adhar Nagri Sahakari Patpedhi Maryadit vs. Pr. CIT from the deposits made in co-operative banks, the A.O. is said to have taken one of the view possible and has allowed the impugned deduction.
From this, we are of the considered view that the A.O. has considered the submissions of the assessee and has taken one of the plausible view and passed the assessment order. We find no latches and mistakes committed by the A.O. while passing assessment order. In view of the decision by Hon'ble Apex Court in Malabar Industrial Co. Ltd.(supra) merely because two plausible views are available and the A.O. has taken one view, the jurisdiction u/s. 263 of the Act cannot be exercised and we thereby hold that exercise of power u/s. 263 of the Act was not in accordance with the law.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 06.01.2023