PRINCIPAL COMMISSIONER OF INCOME TAX VADODARA vs. BHARUCH DISTRICT CO OP MILK PRODUCERS UNION LTD

The present appeal under section 260A of the Income Tax Act, 1961arise out of order dated 31.08.2021 passed by the Income Tax Appellate Tribunal, 'C' Bench, Ahmedabad, in Income TAx Appeal No. 370 of 2020 in respect of Assessment Year 2014-

Noticing the facts, the respondent assessee- Bharuch District Cooperative Milk Producers Union Ltd. filed return of income on 20.11.2014 declaring total incomeat Rs. Nil. The assessee claimed deduction of Rs. 98,69,895/- under section 80P(2) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). The case of the assessee was taken in scrutiny assessment under section 143(3) of the Act. The said assessment was completed on 29.12.2017. Therein the total income was assessed at Rs. 4,08,470/-.

1 Thereafter, the Principal Commissioner of Income Tax, issued show-cause notice under section 263 of the Act on 19.03.2020. It was on the ground that the Assessing officer had failed to carry out inquiries in respect of claim of deduction under section 80P(2) (d) of the Act.

2 The notice inter alia mentioned thus, "

On scrutiny of Balance Sheet, Profit and Loss account and Computation of income. revealed that the assessee had offered income of Rs.NIL after claiming deduction u/s.80P(2) amounting to Rs. 98.69,895/- which included Rs.84,99,892/- as fixed deposit interest earned from The Bharuch District Central Co- operative Bank Ltd and the same was allowed during the assessment. As per section 80P(2)(d) it was required to be disallowed by the AO but by not doing so it resulted in under assessment of Rs.84.99,892/-. Therefore, the order passed u/s. 143(3) of the Act is both erroneous and prejudicial to the interests of revenue."

3 The assessee replied to the said show-cause notice, relied on the definition of "Co-operative Society" under section 2(19) of the Co-operative Societies Act, 1912, to inter alia submit that co- operative society can be of different nature can can be involved in different activities and that the cooperative society bank is species of cooperative society. It was submitted that the deduction under section 80P(2)(d) of the Act was rightly claimed.

4 Ultimately, the Principal Commissioner of Income TAx, Vadodara, recorded that it was a fit case to take in revision under section 263 of the Act, the Assessing Officer was directed to examine the issue. The assessee preferred appeal, which culimated into the impugned order.

Following questions is proposed by the appellant claiming to be arisen as substantial question of law, Whether in the facts and circumstances of the case, learned ITAT has erred in law and on facts in quashing the order under section 263 of the Income Tax Act, 1961, after erroneously observing that the Assessing Officer has verified the claim of deduction under section 80P and considered the submission and documentary evidence produced by the assessee, though the assessee's claim of deduction under section 80P(2) regarding interest income received on deposits with the Bharuch District Central Cooperative Bank Ltd. is not tenable under section 80P(2)(a)(i) or section 80P(2)(d), but the Assessing officer has allowed the same without making inquiries or verification making his assessment order erroneous and prejudicial to the interest of revenue as per clause (1) of Explanation 2 to Section 263(1)?

1 It was submitted by learned advocate for the appellant assailing the order of the Tribunal and highlighting the question proposed as above, inter alia that the assessee's claim of deduction under section 80P(2) regarding interest income received on deposits with the Bharuch District Central Cooperative Bank Ltd. is not tenable, yet the Assessing Officer allowed the same. Therefore, the powers were rightly exercised under section 263(1).

While allowing the appeal of the assessee, the Tribunal observed that the case was subjected to scrutiny assessment under section 143(3) of the Act, which was finalised on 29.12.2017 and it was the view taken that the allowance permitted in respect of interest was prejudicial to the interest of revenue. It was however observed that upon considering the notice under section 142(1) dated 10.10.2017 and issued in course of the proceedings under section 143(3) and the questionnaire enclosed, it asked the assessee as per the questionnaire 15 to furnish the details in respect of claim of deduction under section 80P of the Act. The assessee had made detailed submission on 18.12.2017 and explained that it was not the first order of claiming deduction. Assessee pointed out that similar claims of deduction under section 80(2)(d) of the Act were allowed by the revenue in the earlier year also.

1 Section 80P(2)(d) of the Act is in respect of the income received by interest or dividend derived by the cooperative society. The Tribunal noted that assesse had pointed out during original assessment that its claim for deduction was allowed by the Commissioner of Income Tax in respect of the Assessment Year 2011-12 to 2013-14 and that the same was accepted by the Revenue. The Tribunal considered the detailed submission of the assessee in that regard. The Tribunal accepted the submission that Cooperative Bank means a Cooperative Society having primary object or principal business of which the transaction is of banking business. The deduction was available under Section 80P of the Act in respect of interest earned by investment in such cooperative society.

2 The Tribunal referred to various decisions of Gujarat High Court and other High Courts. The Tribunal concluded, by allowing the appeal by recording the findings as under, "Looking to the above facts and submission of the assessee, it is demonstrated that the Assessing Officer has categorically made specific verification on the impugned issue of claim of deduction u/s. 80P of the Act which was the basis for an action under section 263 of the Act. The Assessing Officer has considered the submission and documentary evidences produced by the assessee during the course of assessment proceedings. In the light of the facts and findings as elaborated supra in this order, we consider that order passed under section 263 of the Act is not sustainable in law, therefore, order passed u/s. 263 is quashed."

This Court is in agreement with the reasons supplied by the Tribunal. The findings could be said to be properly recorded and tenable in law. No question of law much less substantial question of law arise in this appeal.

Appeal is therefore dismissed. (N.V.ANJARIA, J) (BHARGAV D. KARIA, J) BIJOY B. PILLAI