MEHR NAZ CO OP HOUSING SCY . LTD ,MUMBAI vs. ITO WARD 25(2)(7), MUMBAI

The Ld. CIT(A) recorded that notices of hearing were issued on multiple occasions; however, the assessee either sought adjournments or failed to comply. In view of the same, the Ld. CIT(A) proceeded to dispose of the appeal based on material available on record.

Aggrieved by the order of CIT(A), the assessee is in appeal before us raising following grounds of appeal: Ground No.

During the course of hearing before us, the Ld. Authorised Representative (AR) submitted that the assessee did not receive the intimation issued under section 143(1) of the Act and, therefore, could not furnish any response or clarification at the relevant stage. It was further contended that the CPC erred in disallowing the assessee’s claim for deduction under section 80P amounting to Rs. 11,31,641/-, being interest income earned from co-operative banks, while processing the return under section Mehr-Naz Co-Op Housing Scy. Ltd 143(1) of the Act. The Ld. AR submitted that such disallowance does not fall within the permissible scope of adjustments contemplated under section 143(1) and, therefore, the action of the CPC is contrary to law. It was thus prayed that the adjustment made under section 143(1) be held as invalid and the claim of deduction under section 80P be allowed.

The Ld. Authorised Representative further invited our attention to the computation of income placed at page 1 of the paper book and submitted that the assessee has earned interest income from deposits maintained with co-operative banks, namely M.S.C. Bank, Shamrao Vithal Co-operative Bank and Saraswat Co-operative Bank. It was submitted that the interest income earned from such co-operative banks has been claimed as eligible for deduction under section 80P(2)(d) of the Act. The Ld. AR further pointed out that the interest income earned from Central Bank of India, being a nationalized bank, has not been claimed as deduction and the same has been duly offered to tax by the assessee.

Accordingly, it was contended that the claim of deduction under section 80P(2)(d) has been made only in respect of interest received from co-operative societies/co-operative banks and the computation of income clearly demonstrates that the assessee has correctly offered taxable interest, thereby substantiating the correctness of the claim. It was thus prayed that the disallowance made by the CPC and sustained by the Ld. CIT(A) be deleted.

In response, the Ld. AR submitted that the issue involves verification of the nature of interest income and eligibility of deduction under section 80P(2)(d), and therefore the matter may be restored to the file of the jurisdictional Assessing Officer for necessary verification and adjudication in accordance with law.

We have carefully considered the rival submissions and perused the material available on record including the intimation issued under section 143(1), the order of the Ld. CIT(A), and the documents placed in the paper book.

The primary issue arising for our consideration is whether the disallowance of deduction under section 80P(2)(d) amounting to Rs. 11,31,641/- made while processing the return under section 143(1) is sustainable.

At the outset, it is observed that the adjustment has been carried out by CPC while processing the return under section 143(1) without any detailed examination of facts. The assessee has specifically contended that no effective opportunity was available at the stage of processing under section 143(1) and further that the intimation itself was not received, resulting in Mehr-Naz Co-Op Housing Scy. Ltd non-compliance. It is further noticed that the Ld. CIT(A) has dismissed the appeal ex-parte on account of non-compliance by the assessee, without adjudicating the issue on merits in the light of evidences now placed before us. The record also indicates that the claim of deduction under section 80P(2)(d) depends upon verification of the nature of interest income, particularly whether such interest has been earned from co-operative societies/co- operative banks and whether any portion of the interest pertains to non-co-operative banks. From the computation of income placed on record, it is prima facie evident that the assessee has segregated interest income earned from co-operative banks and that earned from a nationalised bank, the latter having been offered to tax. However, these aspects require proper verification at the level of the Assessing Officer.

In our considered view, the issue involved is factual in nature and requires verification of primary evidences such as bank-wise break-up of interest income, nature of the entities from whom interest is earned, and the eligibility of deduction under section 80P(2)(d). Such verification could not have been carried out within the limited scope of processing under section 143(1).

Considering the entirety of facts and in the interest of justice, we deem it appropriate to restore the matter to the file of the jurisdictional Assessing Officer for de novo adjudication. The Assessing Officer shall examine the claim of deduction under section 80P(2)(d) afresh, after affording reasonable opportunity of being heard to the assessee and after verifying the relevant

Accordingly, the impugned order of the Ld. CIT(A) is set aside and the matter is restored to the file of the Assessing Officer for adjudication in accordance with law.

In the result, the appeal of the assessee is allowed for statistical purposes.