Loading judgment…
Facts
The assessee, a credit co-operative society, claimed a deduction under Section 80P(2)(a)(i) for interest income earned on deposits. The Assessing Officer allowed the deduction. The Pr. CIT initiated proceedings under Section 263, holding the assessment order erroneous and prejudicial to revenue, and partly set aside the order.
Held
The Tribunal held that the Pr. CIT was not justified in exercising revisionary powers under Section 263. The issue of deduction for interest income earned by primary credit co-operative societies under Section 80P(2) is considered res integra, with consistent views from the Tribunal and High Court allowing such deductions. The Pr. CIT's action was deemed a futile exercise.
Key Issues
Whether the Pr. CIT's exercise of revisionary power under Section 263 was justified when the Assessing Officer had allowed a deduction based on consistent past practice and Tribunal rulings.
Sections Cited
263, 143(3), 144B, 80P(2)(a)(i), 80P(2)(d), 80P(4), 143(2), 142(1)
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI MANISH BORAD & SHRI VINAY BHAMORE
Assessment Year : 2020-21 Mamasaheb Khandge Nagri Vs. Pr. CIT, Pune-3. Sahakari Patsanstha Maryadit, Second Floor, Talegaon Dabhade Station Road, Tal- Maval, Pune- 410507. PAN : AACAM2666D Appellant Respondent Assessee by : Smt. Deepa Khare Revenue by : Shri Amol Khairnar Date of hearing : 12.11.2025 Date of pronouncement : 18.12.2025 आदेश / ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is directed against the order dated 13.03.2025 passed u/s 263 of the IT Act by Ld. Pr. CIT, Pune- 3 [‘Ld. PCIT’] for the assessment year 2020-21.
The appellant has raised the following grounds of appeal :-
1. Whether on the facts and in the circumstances of the case and in law, the Ld. Pr. Commissioner of Income Tax-3, Pune erred in 263 of the Act in order to substitute his subjective view in place of judicious view taken by the AO on the same set of facts and materials on records, for the deduction claimed u/s 80P(2)(d) of the Acton the interest income earned by the Society on the deposits of its surplus funds in a Co-operative Bank, by holding that the order passed u/s 143(3) r.w.s. 144B of the I. T. Act dated 30.09.2022 was erroneous in so far as it is prejudicial to the interest of the revenue and being unsustainable in law ? 2. Whether on the facts and in the circumstances of the case and in law, the Ld. Pr. Commissioner of Income Tax-3, Pune erred in assuming jurisdiction u/s 263 of the Act for directing the AO to deny the deduction claimed u/s 80P(2)(d) of the Acton the interest income earned by the Society on the deposits of its surplus funds in a Co-operative Bank, as allowed in the assessment order u/s 143(3) r.w.s. 144B of the I. T. Act dated 30.09.2022, passed after due inquiry and in-depth verification of the relevant provisions of the Act and the claim made by the Society duly calling for various details/documents from the assessee and therefore, the order u/s 263 of the Act passed by the Ld. Pr. Commissioner of Income Tax-3, Pune, being without jurisdiction, bad in law and deserves to be quashed? 3. Whether on the facts and in the circumstances of the case and in law, the Ld. Pr. Commissioner of Income Tax-3, Pune has grossly failed to appreciate in the right and proper perspectives that, the explanations substantiated with the cogent, credible and authentic evidences, documents, accounts, materials, etc. submitted during the course of assessment proceedings and more so, placed on the assessment records, for the claim of deduction u/s 80P(2)(d) of the Act, without appreciating the fact that the order u/s 143(3) r.w.s. 144B of the I. T. Act dated 30.09.2022 passed by the AO was neither prejudicial to the interest of the revenue nor an erroneous and hence, the order u/s 263 of the Act is liable to be quashed? 4. Without any prejudice to the above, on the facts and in the circumstances of the case and in law, the order of the learned Pr. Commissioner of Income Tax-3, Pune u/s 263 of the Act suffers from serious illegalities in as much as, according to the settled position of law and in consideration of the same set of facts in existence consistently allowing the deduction claimed u/s 80P(2)(d) of the Act by the AO and therefore, the order passed u/s 263 of the Act invoking clause (a)/(b) of the Explanation 2 of Section 263 of the Act patently in violation of "rule of 5. The Appellant craves leave to alter, amend, withdraw or substitute any ground or grounds or to add any new ground or grounds of appeal on or before the hearing.”
3. Facts of the case, in brief, are that the assessee is a credit co- operative society engaged in the activity of accepting deposits from its members and also providing credit facilities to them. The return of income for the period under consideration was furnished by the assessee on 27.02.2021 and an income of Rs.56,510 was disclosed after claiming deduction of Rs.1,00,07,284/- u/s 80P(2)(a)(i) of the IT Act. The case of the assessee was selected for scrutiny and notice u/s 143(2), 142(1) and show cause notice respectively were issued to the assessee. After considering the reply of the assessee with regard to interest income earned on its investments with co- operative banks claim of deduction of u/s 80P(2)(a)(i) of the IT Act was allowed and vide order dated 30.09.2022 assessment order u/s 143(3) r.w.s. 144B of the IT Act was passed and the returned income of Rs.56,510/- was accepted by the Assessing Officer.
4. Subsequently, on examination of the case record, Ld. PCIT found that the assessee has claimed deduction u/s 80P(2)(a)(i) of the IT Act with regard to interest income earned on its investments made with various banks including cooperative banks. Ld. PCIT was of the view that the assessee is not entitled to claim deduction either u/s 80P(2)(a)(i) of the IT Act or u/s 80P(2)(d) of the IT Act r.w.s. 80P(4) of the IT Act. Accordingly, Ld. PCIT vide order dated 13.03.2025 held that the assessment order dated 30.09.2022 is erroneous insofar as it is pre-judicial to the interests of the revenue, therefore the above assessment order was partly set-aside to the file of the Assessing Officer for the limited purpose of examining the above issues.
Being aggrieved with the above order passed by Ld. PCIT u/s 263 of the IT Act, the assessee is in appeal before this Tribunal.
Ld. AR appearing from the side of the assessee submitted before us that the order passed by Ld. PCIT u/s 263 of the IT Act is unjustified. Ld. AR submitted that that the issue of claiming deduction u/s 80P(2)(a)(i) and 80P(2)(d) of the IT Act with regard to interest income earned on its investments made with nationalized banks and cooperative banks in the hands of primary credit co- operative societies is no more res integra in the light of coordinate bench decisions passed in bunch of the cases of various co-operative 23.05.2023 in the lead case of wherein under identical facts proceedings initiated u/s 263 of the IT Act was held to be invalid. Accordingly, Ld. AR contended that primary credit societies engaged in accepting deposits and providing credit facilities to their members are entitled to claim deduction u/s 80P(2)(a)(i) and also u/s 80P(2)(d) of the IT Act. It was therefore requested by Ld. AR to set-aside the order passed by Ld. PCIT u/s 263 of the IT Act and further requested to confirm the order passed by the Assessing Officer.
Ld. DR appearing from the side of the Revenue relied on the order passed by Ld. PCIT and requested to confirm the same.
We have heard Ld. counsels from both the sides and perused the material available on record including coordinate bench decisions relied on by Ld. AR. In this regard, we find that Ld. PCIT was of the view that the assessment order dated 30.09.2022 passed by the Assessing Officer for assessment year 2020-21 is erroneous insofar as it is pre-judicial to the interest of the revenue since the assessee is not entitled to claim deduction u/s 80P(2)(a)(i) or u/s 80P(2)(d) of the IT Act, which was allowed by the Assessing Officer. In this regard, we find that Ld. AR relied on the combined Tribunal in the lead case of Ajinkaya Madhyamik Shikahak Sewak Sah. Patsanstha Marayadit vs. PCIT order passed in order dated 23.05.2023 wherein the coordinate bench of this Tribunal under identical facts has set-aside the proceedings initiated u/s 263 of the IT Act by observing as under :- “10. Even assuming for a moment, there is failure on the part of the Assessing Officer to examine the issue of taxability of interest earned on deposits made with co-operative banks or other banks, in our considered opinion, the power of revision cannot be exercised by ld. PCIT in view of the fact that even on remand to the Assessing Officer, the Assessing Officer is barred from taking a view against the assessee in view of the consistent view taken by this Tribunal that such interest income qualifies for deduction u/s 80P(2)(a)(i) of the Act. Thus, the act of revision by the ld. PCIT would be futile exercise and mere a useless formality. Therefore, we are of the considered opinion that the ld. PCIT was not justified in exercising the power of revision vested with him u/s 263 of the Act in the facts of the present case. Accordingly, the appeal filed by the assessee stands allowed.
In the result, the appeal filed by the assessee in for A.Y. 2018-19 stands allowed.”
Respectfully following the above decision passed by a coordinate bench of this Tribunal in the case of Ajinkaya Madhyamik Shikahak Sewak Sah. Patsanstha Marayadit vs. PCIT order passed in order dated 23.05.2023, we are of the considered opinion that the order passed by Ld. PCIT u/s 263 of the IT Act is not correct since coordinate benches of the Tribunal and also Hon’ble Jurisdictional High Court of Bombay are already of the view that the primary credit co-operative society is entitled to claim deduction u/s 80P(2) of the IT Act in the following cases :- (i) Rena Sahkari Sakhar Karkhana Ltd. order dated 07-01-2022. (ii) Sumitra Gramin Bigar Sheti Sahkari Pat Sanstha Maryadit Mahaveer Path order dated 04-11-2022. (iii) Annapurna Nagari Sahkari, Pathsanstha Maryadit Yawal Vs. Income Tax Officer, passed in order dated 24-03-2025 (iv) Principal Commissioner of Income-tax vs. Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd. [2023] 150 taxmann.com 173 (SC) (wherein the order passed by Hon’ble Jurisdictional High Court of Bombay was confirmed).
Accordingly, in the light of above decisions cited supra, we do not hesitate to set-aside the order passed by Ld. PCIT u/s 263 of the IT Act since the Assessing Officer is barred from taking a view against the assessee in view of the consistent view taken by this Tribunal that such interest income qualifies for deduction u/s 80P(2) of the IT Act. Thus, the act of revision by Ld. PCIT would be futile exercise. Therefore, we are of the considered opinion that Ld. PCIT was not justified in exercising the power of revision vested with him u/s 263 of the Act in the facts of the present case. Thus, the grounds of appeal raised by the assessee are allowed.