M/S. THE STATE BANK EMPLOYEE'S CO-OPERATIVE CREDIT SOCIETY LIMITED,BANGALORE vs. PRINCIPAL COMMISSIONER OF INCOME TAX, BANGALORE

The assessee is a society registered under Karnataka Societies Act. The Membership of the society is for the staff of State Bank of Mysore and outsiders are not eligible to become members, and the amount collected by the society is utilized for the benefit of the employees. The assesse filed the Return of Income on 9.10.2014 with total income Rs NIL after claiming deduction u/sec80P of the Act. Subsequently, the case was selected for scrutiny under CASS and Notice under Section 143(2) and 142(1) of the Act along with questionnaire were issued. In 3 & 1204/Bang/2019 compliance, the learned Authorized Representative appeared from time to time and submitted the details and the return of Income was accepted. Subsequently, Revision Notice under Section 263 of the Act was issued, that no enquiry was conducted in respect of details submitted by the assessee in the assessment proceedings and the Assessing Officer has failed to examine the allowability of deduction under Section 80P of the Act. The assessee has filed reply with details supporting the claim of deduction u/sec80P of the Act and objections on 11.2.2019 referred at page 3 to 11 of the revision order, and filed written submissions. The contentions of the assessee, that an enquiry conducted by the Assessing Officer and accepted claim under Section 80P of the Act and relied on judicial decisions. Whereas Pr CIT has set aside the order of Assessing Officer and directed the Assessing Officer to make fresh examination of claim of deduction u/sec80P of the Act and to make enquiry into the nature of income earned by the assessee attributable to the providing credit facilities to members of the society and passed revision order underSec263 of the Act on 26.03.2019. Aggrieved by the order Pr CIT, the assessee has filed an appeal with the Tribunal.

The learned Authorized Representative’s contentions are that the PriCIT has ignored the deduction under Section 80P of the Act, which was examined in the course of assessment proceedings. The Assessing Officer has made enquiries and for earlier assessment years the exemption was granted. Therefore, the order 4 & 1204/Bang/2019 passed u/sec143 (3)of the Act is not erroneous nor prejudicial to the interest of revenue and prayed for quashing the orders of the PrCIT. Contra, the learned Departmental Representative supported the order of PrCIT and filed written submissions and relied on judicial decisions, that when no enquiry was conducted by the AO, as per provisions of Section 263 of the Act, the order is subjected to Revision and the PrCIT has only directed for fresh examination.

We heard the rival contentions and perused the material on record. Prima facie, the disputed issue is with respect to satisfaction of twin conditions for Revision under Section 263 of the Act being erroneous and prejudicial to the interest of revenue. The learned Authorized Representative has emphasized that the order passed by the Prin. CIT is bad in law as it does not satisfy the twin conditions, and emphasized that the assessee is entitled for exemption under Section 80P of the Act and in the scrutiny proceedings, the Assessing Officer has conducted enquiries in respect of income and claims. We on perusal of the assessment order, find that the Assessing Officer has issued Notice under Section 142(1) of the Act along with questionnaire, But there are no findings or observations of the Assessing Officer that he has conducted enquiries in respect of income and claims made by the assessee. In the course of hearing, the Bench wanted the LdAR to furnish details filed in response to notice under Section 142(1) of the Act and questionnaire, the learned Authorized Representative could not 5 ITA Nos.1203 & 1204/Bang/2019 substantiate with material evidences filed in the Assessment proceedings. The fact remains that the order passed by the Assessing Officer prima facie, is without conduct of Enquiry. We found the co-ordinate bench of this Tribunal in Smt. Malini Subramanian Vs Prin. CIT in ITA No.935/Bang/2016 Dt.27.09.2019 observed at Para 6, which is read as under : “ 6. The Hon’ble Supreme Court has held that the existence of twin conditions, viz., the assessment order should be erroneous and it should be prejudicial to the interests of revenue, should be shown in the revision order passed u/s 263 of the Act. The Hon’ble Apex Court has further held that non-application of mind on the part of the Income-tax Officer would make the assessment order erroneous. In the instant case, we notice that the assessing officer did not conduct any enquiry at all with regard to the claim of “Good Will” made by the assessee. The Ld A.R also could not demonstrate that the AO did conduct enquiry and has taken a possible view.”

Similarly, the co-ordinate bench of this Tribunal in the case of Mysore Minerals Limited Vs. CIT (ITA No.464/Bang/2014 Dt.25.01.2019 observed at page 9 para 13 read as under : “ 13. We have given a careful consideration to the rival submissions. At the outset we agree with the submissions made by the ld DR that in the present case, the CIT has not exercised jurisdiction u/s 263 of the Act on the ground of ‘no enquiry’ made by the AO or ‘lack of enquiry’ made by the AO. The CIT has held that conclusions drawn by the AO in allowing expenditure set out in the show cause u/s 263 of the Act ought not to have been allowed as deduction. We, therefore, hold that the jurisdiction u/s 263 of the Act was validly invoked by the CIT.”