MAHARASHTRA RAJYA PATHYAPUSTAK MANDAL KARMACHARI SAHAKARI PAT SANSTHA MARYADIT,PUNE vs. PRINCIPAL COMMISSIONER OF INCOME TAX-2, PUNE, PUNE

This appeal preferred by the assessee emanates from the order of the ld. Principal Commissioner of Income Tax, Pune-2, dated 30-03-2023 for the Assessment Year 2018-19 as per the grounds of appeal appearing hereinafter. The grounds of appeal are as follows:

At the outset, the learned counsel for the assessee submitted that this matter is covered by the earlier decision on the same identical issue of the Pune Tribunal in for assessment year 2017-18, order dated 29.11.2022, wherein also it was the order passed u/s 263 read with issue of deduction u/s 80P(2)(a)(i) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) or 80P(2)(d) of the Act.

The learned DR conceded that the facts are absolutely identical and similar.

We observe that the Pune Tribunal in (supra) on examination of the facts held as follows: “3…. The appellant is a cooperative society formed under the Maharashtra Co- operative Societies Act, 1960. It is engaged in the business of accepting deposits from members and providing credit facilities to its members. The original Return of Income for the assessment year 2017-18 was filed on 18.10.2017 disclosing total income of Rs.3,11,740/-. Subsequently, the assessee revised the return of income declaring Rs.Nil income after claiming deduction of Rs.6,32,86,382/- under the provisions of section 80P of the Income Tax Act, 1961 („the Act‟). Against the said return of income, the assessment was completed by the Assessing Officer accepting the returned income vide order dated 19.11.2019 passed u/s 143(3) of the Act. 4. Subsequently, on examination of the assessment order, the ld. PCIT formed an opinion that failure the Assessing Officer to examine the taxability of interest earned on the investments made with the cooperative banks, as the same constitutes business income, rendered the assessment order erroneous. Accordingly, the ld. PCIT issued a show cause notice dated 08.03.2022 u/s 263 calling upon the appellant society to explain as to why the assessment order dated 19.11.2019 should not be treated as erroneous and prejudicial to the interests of the revenue. In response to the show cause notice, the appellant filed a detailed submission stating that the interest income earned by the cooperative bank on the investments made with the other cooperative bank is eligible for deduction under the provisions of section 80P(2)(a)(i) as well as under the provisions of section 80P(2)(d) placing reliance on the following decisions :

It is further submitted that the Assessing Officer had allowed the claim of exemption after due application of mind on the issue in appeal and, therefore, the Explanation 2 to section 263 cannot be invoked. However, the ld. PCIT on due consideration of explanation filed by the appellant held that the failure of the Assessing Officer to examine the issue rendered the assessment erroneous and prejudicial to the interests of the revenue. Accordingly, ld. PCIT set aside the assessment order with a direction to examine the assessee‟s claim of deduction u/s 80P(2)(a)(i) as well as interest of Rs.19,88,77,712/- u/s 80P(2)(d) after affording reasonable opportunity of being heard to the appellant.

The ld. AR submits that the issue of eligibility of income earned on the investment made with the cooperative bank was examined by the Co-ordinate Bench of this Tribunal in the case of M/s. Jan Kalyan Nagri Sahakari Pat. Limited Sanstha in for A.Y. 2014-15 order dated 26.08.2022. The ld. AR submits that the issue is covered in favour of the appellant. In support of this proposition, ld. AR relied on the following judicial precedents :- (i) Nashik Road Nagari Sahkari Patsanstha Limited vs. ITO (ITA No.1700/PUN/2017 dated 27.12.2021). (ii) Rena Sahakari Sakhar Karkhana Ltd. vs. Pr.CIT (ITA No.1249/PUN/2018 dated 07.01.2022). (iii) Shri Chandraprabhu Urban Co-operative Credit Society Ltd. vs. ITO (ITA No.61 & 62/PAN/2018 dated 10.05.2022).

Thus, it was contended that when the issue was stands covered and decided in favour of the assessee, then it cannot be said that the assessment order is erroneous as well as prejudicial to the interests of the revenue.

On the other hand, ld. CIT-DR placing reliance on the order of the ld. PCIT submits that failure of the Assessing Officer to examine the taxable income earned on the investments from cooperative bank rendered assessment order erroneous and prejudicial to the interests of the revenue. Therefore, he submits that the ld. PCIT was justified in exercising the power of revision u/s 263 of the Act.

We heard the rival submissions and perused the material on record. The issue in the present appeal relates to the validity of assumption of jurisdiction u/s 263 by the ld. PCIT. The Parliament had conferred the power of revision on the Commissioner of Income Tax u/s 263 of the Act in case the assessment order passed is erroneous and prejudicial to the interests of revenue. In order to invoke the power of revision, the above two conditions are required to be satisfied cumulatively. References in this regard can be made to the decision of the Hon‟ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT, 243 ITR 83 (SC) and in the case of CIT vs. Max India Ltd., 295 ITR 282 (SC). The error in the assessment order should be one that it is not debatable or plausible view. In a case where the Assessing Officer examined the claim, took one of the plausible views, the assessment order cannot be termed as an “erroneous”. In the present case, we find that admittedly the interest income was earned from the cooperative banks, the cooperative bank is also a specie of cooperative society, therefore, the interest income earned by the cooperative

In the result, the appeal of assessee is allowed.