SHRI. BILURU GURUBASAVA SAHAKARI PATTINA SANGH NIYAMIT,BAGALKOT vs. INCOME TAX OFFICER, WARD-1, BAGALKOT

5. That the learned assessing officer erred in law and on facts in not allowing expenditure incurred for earning the interest income from the investments. 3. Further, the assessee has raised following grounds of appeal in AY 2022-23:

1. 1. That the order of the learned Commissioner of Income Tax (Appeals), in so far it is prejudicial to the interests of the appellant, is bad and erroneous in law and against the facts and circumstances of the case.

2. That the learned assessing lower authorities erred in law and on facts in not allowing the deduction of Rs.5,67,10,444/- claimed u/s. 80P(2)(a)(i) on the ground that the interest income earned is not attributable to the business activities of the appellant specified in section 80P(2)(a)(i) of the Act.

3. That the learned assessing officer erred in law and on facts in not allowing the interest income of Rs.5,67,10,444/- as deduction u/s 80P(2)(a)(i) of the Act even though the investmentswere made out of surplus fund and attributable to the business activity of the appellant.

4. That the learned assessing officer erred in law and on facts in not allowing the deduction of Rs.7,57,88,895/- claimed u/s 80P(2)(a)(i) on the ground that the income is earned from surplus funds investing in Nationalised and Private Banks.

& 418/Bang/2025 Shri BiluruGurubasavaSahakari Pattina Sanha Niyamit, Bagalkot Page 3 of 17 5. That the learned assessing officer erred in law and on facts in not allowing expenditure incurred for earning the interest income from the investments.

4.1 The AO noticed that the assessee had made investments to the tune of Rs. 1,65,71,76,603/- as at 31/03/2020 and earned interest income of Rs.7,57,88,895/- on such investments with various commercial Banks/Co-operative Banks/Industries/ Developers and claimed the entire interest income as deduction u/s 80P(2)(a)(i) of the Act. The AO was of the opinion that the deduction u/s 80P(2)(a) of the Act is available only to the income which is attributable to the business operation of the assessee co-operative society i.e. providing credit facilities to its members. Further AO held that depositing/investing funds in a co-operative bank/ commercial bank/ other financial institutions is not a part of the business of providing credit facilities to its members. Further such an interest income is not the ‘operational income’ of the assessee society from providing credit facilities to its members. Consequently, the AO held that the interest income has to be treated as “income from other sources” not eligible for deduction u/s 80P of the Act. Accordingly, the AO concluded the assessment proceedings by treating the entire interest income earned amounting to Rs.7,57,88,895/- from co-operative bank/ & 418/Bang/2025 Shri BiluruGurubasavaSahakari Pattina Sanha Niyamit, Bagalkot Page 4 of 17 commercial bank/ other financial institutions as “Income from other sources” and assessed on a total income of Rs. 1,66,59,578/-.

8. Before us, the ld. A.R. of the assessee reiterated the submissions made before the lower authorities and vehemently submitted that interest income of Rs. 7,57,88,895/- earned from deposits held with Co-operative and commercial banks/ other financial institutions are made out of the funds contributed by members for the purpose of carrying on business which were not required immediately. It was also submitted by the ld. A.R. of the assessee that interest income earned from investments made was operational income attributable to business, which is deductible u/s 80P(2)(a)(i) of the Act. In the alternative, the ld. A.R. of the assessee also prayed that deduction u/s 80P(2)(d) of the Act may be allowed on the interest income earned from Co-operative banks in as much as co-operative banks are nothing but a co-operative society that possesses a license from RBI. Without prejudice, the & 418/Bang/2025 Shri BiluruGurubasavaSahakari Pattina Sanha Niyamit, Bagalkot Page 5 of 17 assessee claimed that they are entitled for the benefit of deduction to such portion of interest from Co-operative banks/other banks in respect of mandatory maintenance of Statutory deposits/fluid resources as bound under the Karnataka Co-operative Society Act and only the balance of net interest over and above, the mandatory SLR is liable to be charged u/s 56 of the Act after allowing the deduction u/s 57 of the Act.

9.3 Further the ld. CIT(A)/NFAC, heavily relied upon the decision of the Apex Court in the case of Totagar Sales Society Vs. ITO (2010) 322 ITR 283 and contended that the interest earned out of surplus funds kept by co-operative societies with banks are not eligible for deduction u/s 80P(2)(d) of the Act and the same are taxable as Income from Other sources u/s 56 of the Act. When we look at the decision of Hon’ble Supreme Court in case of Totgars Co-operative Sale Society's case (Supra), relied by the Ld.DR, Hon’ble Supreme Court was dealing with a case where the assessee therein, apart from providing credit facilities to the members, was also in the business of marketing of agricultural produce grown by its members. The sale consideration received from marketing agricultural produce of its members was retained in many cases. The said retained amount payable to & 418/Bang/2025 Shri BiluruGurubasavaSahakari Pattina Sanha Niyamit, Bagalkot Page 7 of 17 its members from whom produce was bought, was invested in a short-term deposit/security. Such amount retained by the assessee therein was a liability and it was shown in the balance sheet on the liability side. Therefore, to that extent, such interest income cannot be said to be attributable either to the activity mentioned in Section 80P(2)(a)(i) of the Act or under Section 80P(2)(a)(iii) of the Act. On these facts Hon’ble Supreme Court held the assessing officer was right in taxing the interest income indicated above under Section 56 as income from other sources of the Act.Hon’ble Supreme Court, also clarified that, they are confining the said judgment to the facts of that case alone.

9.4 Further the adjudication by the Hon’ble Supreme Court in case of Totgars Co-operative Sale Society Ltd. vs. ITO(supra) was in context of Sec. 80P(2)(a)(i), and not on the entitlement of a cooperative society towards deduction under Sec.80P(2)(d) on the interest income on the investments/deposits parked with a cooperative bank. Therefore, reliance was placed by the Ld. CIT(A)/NFAC on the decision of Hon’ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. vs. ITO (supra) is distinguishable on facts.

9.5 Now we will consider the secondargument raised by the AR of the assessee by contending that the assessee is entitled for the deduction under section 80P(2)(a)(i) of the act to such portion of the interest from co-operative banks in respect of mandatorily maintenance of fluid resources as compared under the assessee’s governing statute and only the balance of interest over and above the mandatory SLR was liable to be charged under section 56 of the Act.

9.6 We note that the primary issue in dispute pertains to the eligibility of deduction u/s 80P(2)(a)(i) of the Act/80P(2)(d) of the Act in respect of interest income earned from deposit made with co-operative banks and district co- operative banks/Scheduled banks. The crux of the matter is whether such interest income is to be considered as “business income” eligible for deduction u/s 80P(2)(a)(i) of the Act or 80P(2)(d) of the Act or to be classified as “income from other sources” and taxed accordingly.

9.7 We also take a note of the fact that the certaindeposits(FDs) in question as contended by the AR of the assessee was not voluntarily made by the assessee society for investment purposes but were instead statutorily mandated by the & 418/Bang/2025 Shri BiluruGurubasavaSahakari Pattina Sanha Niyamit, Bagalkot Page 8 of 17 Karnataka State Co-operative Society Act, 1959/ Karnataka SouhardaSahakari Act,1997. As per section 57(2) of the Karnataka State Co-operative Society Act, 1959, a co-operative society shall, out of its net profit in any year transfer an amount not being less than twenty-five per cent of the profits to the reserve fund. Further as per Rule 28 of the Karnataka Co-operative Societies Rules, 1960, every Co-operative Society accepting deposits and granting cash credits shall maintain fluid resources in such form and according to such standards as may be fixed by the Registrar, from time to time, by general or special order. As per section 58 of the Karnataka State Co-operative Society Act, 1959, such reserve funds must be mandatorily invested in specified institutions including co-operative banks. We find that this statutory requirement imposes a legal obligation on the assessee society to maintain such deposits thereby restricting its ability to freely use or withdraw these funds for its business operations without prior approval from the Registrar of Co-operative Societies. We also take note of the fact that if the Statutory funds are not invested in the prescribed fund, the business of the assessee may get hampered/affected due to the violation of these statutory provisions.

9.8 Given this statutory compulsion, we find that interest income is attributable to the profits and gains of business and therefore, the interest income derived from the statutory deposits made with the banks are entitled for deductions u/s 80P(2)(a)(i) of the Act. In holding so, we also draw our support and guidance from the judgment of the Hon’ble Supreme Court reported in 113 ITR 84 in the case of Cambay Electrical Supply Industrial Co. Ltd. Vs. CIT which has considered the term “attributable” and held as follows:

"As regards the aspect emerging from the expression "attributable to" occurring in the phrase "profits and gains attributable to the business" of the specific industry (here generation and distribution of society) on which the learned Solicitor-General relied, it will be pertinent to observe that the legislature has deliberately used the expression "attributable to" and not the expression "derived from". It cannot be disputed that the expression "attributable to" is certainly wider in import than the expression "derived from" been used, it could have with some force been contented that a balance charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity. In this connection, it may be pointed out that whenever the legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor General, it has used the expression "derived & 418/Bang/2025 Shri BiluruGurubasavaSahakari Pattina Sanha Niyamit, Bagalkot Page 9 of 17 from", as for instance, in Section 80J. In our view, since the expression of wider import, namely "attributable to" has been used, the legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity"

9.9 Further, we also draw support and guidance from the judgment of Hon’ble Supreme Court in the case of CIT Vs. Karnataka State Co-operative Apex Bank reported in 251 ITR 194 wherein it was held as under:

“There is no doubt, and it is not disputed, that the assessee co- operative bank is required to place a part of its funds with the State Bank or the Reserve Bank of India to enable it to carry on its banking business. This being so, any income derived from funds so placed arises from the business carried on by it and the assessee has not, by reason of section 80P(2)(a)(i), to pay income tax thereon. The placement of such funds being imperative for the purpose of carrying on the banking business, the income derived there from would be income from the assessee’s business. We are unable to take the view that found favour with the Bench that decided the case of M.P. Co- operative Ltd. (supra) that only income derived from circulating or working capital would fall within section 80P(2)(a)(i). There is nothing in the phraseology of that provision which makes it applicable only to income derived from working or circulating capital.” 9.10 Further, the Apex Court in the case of Mehsana District Central Co- operative Bank Ltd. v. Income-tax Officer Reported in (SC) :(2001) 251 ITR 522 had again reiterated by relying on its own judgment delivered in the case of Karnataka State Co-operative Apex Bank’s case (supra) as under-

“Insofar as the interest income upon statutory reserves is concerned, the question must be answered in favour of the assessee, in the light of the judgment delivered by us in Karnataka State Co-operative Apex Bank’s case (supra).”

In view of the above principles laid down by Hon’ble Supreme Court if the income is attributable to the profits & gains of business of the society, then the assessee society is entitled for deduction u/s 80P(2)(a)(i) of the Act.

9.11 Further, In the case of ClT Vs Nawanshahar Central Cooperative Bank Ltd. [2007] 160TAXMAN 48(SC), the Apex Court held that the investments made by a banking concern are part of the business of banking. Therefore, the income arising from such investments is attributable to the business of banking falling under the head "Profits and Gains of Business and Profession". Even & 418/Bang/2025 Shri BiluruGurubasavaSahakari Pattina Sanha Niyamit, Bagalkot Page 10 of 17 though the abovementioned decision was in the context of co-operative societies /Banks claiming deduction under section 80P (2)(a)(i) of the Act, the principle is equally applicable to all banks/commercial banks, to which Banking Regulation Act, 1949 as per the CBDT Circular No. 18/2015 dated 02/11/2015.

9.12 TheHon’ble High Court of Karnataka in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. v. Income-tax officer Ward-V, Tumkur reported in [2015] 230 Taxman 309 had also held as under- “7. The word 'attributable' used in the said section is of great importance. The Apex Court had an occasion to consider the meaning of the word 'attributable' as supposed to derive from its use in various other provisions of the statute in the case of Cambay Electric Supply Industrial Co. Ltd. v.CIT [1978] 113 ITR 84 (SC) as under:

'As regards the aspect emerging from the expression "attributable to" occurring in the phrase "profits and gains attributable to the business of the specified industry (here generation and distribution of electricity) on which the learned Solicitor-General relied, it will be pertinent to observe that the legislature, has deliberately used the expression "attributable to" and not the expression "derived from". It cannot be disputed that the expression "attributable to" is certainly wider in import than the expression "derived from". Had the expression "derived from" been used, it could have with some force been contended that a balancing charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity. In this connection, it may be pointed out that whenever the legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor- General, it has used the expression ''derived from", as, for instance, in section-80J. In our view, since the expression of wider import, namely, "attributable to'', has been used, the legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity.'

9.13 However, we are also conscious to the fact that the details of quantum of amount necessary to be deposited to comply with the Karnataka Co- operative Society Act/Karnataka SouhardaSahakari Act is not provided by the assessee to the AO. Therefore, we, in the interest of justice and fair play are inclined to set aside this issue to the file of AO with a direction to compute the required quantum of amounts needs to be deposited as per the statutory requirement and allow the claim of the deduction u/s 80P(2)(a)(i) of the Act of the corresponding interest income irrespective of the fact that the investment were made by the co-operative society in co-operative Banks or scheduled banks.

9.14 Furthermore, without prejudice to the above findings, we are also inclined to consider the argument/contention of theRevenue. In the event that the AO found that any amount of investment over and above the mandatory statutory limits, the AO may consider the claim of deduction u/s 80P(2)(d) of the I.T. Act and accordingly, we direct the A.O. to verify whether interest / dividend is received by the assessee out of investments made with Cooperative Societies. If the assessee earns interest / dividend income out of investments with co-operative society, the same is entitled to deduction u/s 80P(2)(d) of the I.T. Act.

9.15 The Revenue also in the grounds of appeal profoundly relied upon the decision of Hon'ble High Court of Karnataka in the case ofTotgars Cooperative Sale Society [2017] 83 taxmann.com 140/395 ITR 611 (Karnataka) which held that theintention of legislature is clear that Co-operative banks are not specie of genus cooperative society, whichwould entitle to exemption or deduction under the Special Provisions of chapter VIA in the form of section80P of the Act.

9.15.1 We are of the considered opinion that the Hon’ble Supreme Court in the case of Kerala State co-operative agricultural and rural development bank Ltd. KSCARDB v. the Assessing Officer, Trivandrum and Ors. Reported in (2023) 458 ITR 384 analyzed, whether the assessee therein could be treated as a “co-operative Bank” within the meaning of sec. 80P(4) of the Act. The Hon’ble Supreme Court considered the above issue in case of an assessee who is a state level Agricultural and Rural Development Bank, governed as a cooperative & 418/Bang/2025 Shri BiluruGurubasavaSahakari Pattina Sanha Niyamit, Bagalkot Page 12 of 17 society, under the relevant state cooperative societies Act, and was engaged in providing credit facilities to its members who were cooperative societies only. On facts, the assessee therein claimed deduction under Section 80P (2)(a)(i) of the Act. The Ld.AO disallowed the deduction under Section 80P(2)(a)(i) holding that the appellant/assessee is neither a primary agricultural credit society nor a primary co-operative agricultural and rural development bank. The Ld.AO therein held that the appellant/assessee is a "co-operative bank" and thus, was hit by the provisions of Section 80(P)(4) and was not entitled to the benefit of Section 80(P)(2) of the Act. This was upheld by the Ld.CIT(A) and the Tribunal. The decision of the Tribunal was confirmed by Hon’ble Kerala High Court.

9.15.2 The Apex Court analyzed the legal framework, relevant provisions under the co-operative societies Act, NABARD Act, provisions of sec. 80P under the Income Tax Act, 1961, RBI Act, the Banking Regulation Act and the various judicial precedents on similar issues. The observations of Hon’ble Supreme Court in Paras 14.3 and 15.8 are relevant that read as under: - “14.3. While analysing Section 80P of the Act in depth, the following points were noted by this Court: i) Firstly, the marginal note to Section 80P which reads “Deduction in respect of income of co-operative societies” is significant as it indicates the general “drift” of the provision. ii) Secondly, for purposes of eligibility for deduction, the assessee must be a “co-operative society”. iii) Thirdly, the gross total income must include income that is referred to in sub-section (2). iv) Fourthly, sub-clause (2)(a)(i) speaks of a co-operative society being “engaged in”, inter alia, carrying on the business of banking or providing credit facilities to its members. v) Fifthly, the burden is on the assessee to show, by adducing facts, that it is entitled to claim the deduction under Section 80P. vi) Sixthly, the expression “providing credit facilities to its members” does not necessarily mean agricultural credit alone. It was highlighted that the distinction between eligibility for deduction and attributability of amount of profits and gains to an activity is a real one. Since profits and gains from credit facilities given to non-members cannot be said to be attributable to the activity of providing credit facilities to its members, such amount cannot be deducted.

& 418/Bang/2025 Shri BiluruGurubasavaSahakari Pattina Sanha Niyamit, Bagalkot Page 13 of 17 vii) Seventhly, under Section 80P(1)(c), the co-operative societies must be registered either under Co-operative Societies Act, 1912, or a State Act and may be engaged in activities which may be termed as residuary activities i.e. activities not covered by sub-clauses (a) and (b), either independently of or in addition to those activities, then profits and gains attributable to such activity are also liable to be deducted, but subject to the cap specified in sub-clause (c). viii) Eighthly, sub-clause (d) states that where interest or dividend income is derived by a co-operative society from investments with other co- operative societies, the whole of such income is eligible for deduction, the object of the provision being furtherance of the co-operative movement as a whole.

----------- 15.8. Since the words ‘bank’ and ‘banking company’ are not defined in the NABARD Act, 1981, the definition in sub-clause (i) of clause (a) of Section 56 of the BR Act, 1949 has to be relied upon. It states that a cooperative society in the context of a co-operative bank is in relation to or as a banking company. Thus, co- operative bank shall be construed as references to a banking company and when the definition of banking company in clause (c) of Section 5 of the BR Act, 1949 is seen, it means any company which transacts the business of banking in India and as already noted banking business is defined in clause (b) of Section 5 to mean the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise. Thus, it is only when a co-operative society is conducting banking business in terms of the definition referred to above that it becomes a co- operative bank and in such a case, Section 22 of the BR Act, 1949 would apply wherein it would require a licence to run a co-operative bank. In other words, if a co-operative society is not conducting the business of banking as defined in clause (b) of Section 5 of the BR Act, 1949, it would not be a co-operative bank and not so within the meanings of a state co-operative bank, a central co- operative bank or a primary co-operative bank in terms of Section 56(c)(i)(cci). Whereas a co-operative bank is in the nature of a banking company which transacts the business of banking as defined in clause (b) of Section 5 of the BR Act, 1949. But if a cooperative society does not transact the business of banking as defined in clause (b) of Section 5 of the BR Act, 1949, it would not be a cooperative bank. Then the definitions under the NABARD Act, 1981 would not apply. If a co-operative society is not a co-operative bank, then such an entity would be entitled to deduction but on the other hand, if it is a co-operative bank within the meaning of Section 56 of BR Act, 1949 read with the provisions of NABARD Act, 1981 then it would not be entitled to the benefit of deduction under sub-section (4) of Section 80P of the Act.”

9.15.3 In any event Hon’ble Supreme Court in the decision has elaborately analyzed the requirement of a cooperative bank that could fall within the exception of section 80P(4) of the Act. Based on such principle analyzed by Hon’ble Supreme Court and respectfully following the view taken by the Hon'ble Karnataka High Court in the case of PCIT &Anr. Vs. Totagars Cooperative Sale Society & 418/Bang/2025 Shri BiluruGurubasavaSahakari Pattina Sanha Niyamit, Bagalkot Page 14 of 17 reported in (2017) 392 ITR 74 and the Hon’ble Gujarat High Court in the case of State Bank Of India Vs. CIT reported in (2016) 389 ITR 578, we are also of the considered opinion that interest earned on any amount of investment over and above the required statutory limitsfrom such commercial/cooperative banks that fall within the definition of “banking company’ as per section 2(c), Section 5(b) and holds license under section 22 of the Banking regulation Act 1949, such interest are to be considered under the head ‘income from other sources’ as held by the jurisdictional High Court of Karnataka in the case of Pr. CIT v. Totagars Co- operative Sale Society reported in(2017) 395 ITR 611.

9.16 Insofar as AR of the assessee’s claim that if interest income is tobe assessed as income from other sources, necessarily, the cost of fund and related administrative expenses in respect of earning such interest income should be allowedas deduction u/s 57 of the I.T.Act, 1961. We find an identical issuewas considered by the Hon’ble jurisdictional High Court in thecase of Totagars Co- operative Sales Society Ltd. v. ITOreported in [2015] 58 Taxmann.com 35 (Karnataka) (judgmentdated 25.03.2015). The relevant findings of the Hon’ble HighCourt, read as follows: - “11. Having heard the learned counsel for the parties and perusing the records and in the light of the finding recorded by The Hon’ble Supreme Court that the interest income earned by the appellant falls within the category of “other income” what falls for consideration is to answer the question as to whether the Tribunal was right in law in holding that the income by way of interest was chargeable to tax under Section 56 of the Income Tax Act without allowing deduction in respect of proportionate costs incurred as permissible under Section 57.

13. Accordingly, we answer the question of law and hold that the Tribunal was not right in coming to the conclusion that the interest earned by the appellant is an income from other sources without allowing deduction in respect of the proportionate costs, administrative expenses incurred in respect of such deposits.”

9.17 The assessee has not raised the plea before the Income tax Authorities that it has to be given deduction u/s 57 of theAct, in respect of expenditure for earning the interestincome. However, in spite of such plea not being raised beforethe lower authorities, we are of the view that since thefundamental principle under Income-tax Act being that only the net income has to be taxed (i.e., gross receipt minus allowableexpenditure), this plea of the assessee has to be necessarilyentertained, especially in the light of the judgment of theHon’ble jurisdictional High Court in the case of Totagars SaleCo-operative Society Limited v. ITO (supra). Accordingly, the issue of deduction u/s 57 ofthe I.T. Act is restored to the file of the A.O. The A.O. isdirected to examine whether assessee has incurred anyexpenditure for earning interest income, which is assessedunder the head `income from other sources. If so, the sameshall be allowed as deduction u/s 57 of the Act. Theassessee is directed to co-operate with the revenue andfurnish all the necessary details/records/evidence.

9.18 In view of the above discussions/observations, we are inclined to remit the issue back to the file of AO for determining/computing the Business Income, Income from other sources, eligible deduction u/s 80P of the Act with the following Observations- i) The Interest received exclusively from the credit facilities provided to its members will be treated as operating Profit of the Co-operative society & eligible for deduction u/s 80P(2)(a)(i) of the Act. ii) Further, the Interest income earned out of the Statutory deposits/maintain fluid resources are attributable to the business activity of the co-operative society & hence also eligible for deduction u/s 80P(2)(a)(i) of the Act irrespective of the fact that the interest is earned from the co-operative bank and/or scheduled bank. iii) For an amount of interest earned on investment over and above the required statutory limitsfrom such scheduled/cooperative banks that fall within the definition of “banking company’ as per section 2(c), Section 5(b) and holds license under section 22 of the Banking regulation Act 1949, such interest are to be considered under the head ‘income from other & 418/Bang/2025 Shri BiluruGurubasavaSahakari Pattina Sanha Niyamit, Bagalkot Page 16 of 17 sources’& the deduction under section 80P(2)(d) is not available on such Interest on investment. However the cost of fund and related administrative expenses in respect of earning such interest income should also be allowed as deduction u/s 57 of the Act. iv) In respect of any income by way of interest or dividends derived by the co- operative society from its investments with any other co-operative society, the whole of such income is eligible for deduction u/s 80P(2)(d) of the Act. v) In respect of interest earned on investment out of the surplus fund/idle funds over and above as required statutorily can not be said to be attributable to the business of the assessee & therefore deduction u/s 80P(2)(a)(i) can not be allowed on such interest income.

Needless to say, a reasonable opportunity of being heard must be granted to the assessee. The assessee is also directed to submit all the relevant details as well as the breakups as per our observation above.”

10.1 Since, the facts in the present case are identical to those in Gayatri Pattina Souharda Sahakari Sangha Niyamitha (Supra), therefore we consider it appropriate to remand the matter to the AO for fresh adjudication in accordance with the directions/ observations therein at Para 9.18 above. Needless to say, a reasonable opportunity of being heard must be granted to the assessee. It is ordered accordingly.