THE NASIK MERCHANTS CO-OP BANK LIMITED, NASHIK,NASHIK vs. ITO, WARD-16(2), HYDERABAD, HYDERABAD

PER ANIL CHATURVEDI, AM :

Assessee is a Co-operative Bank, who electronically filed its return of income for A.Y. 2005-06 on 30.10.2005. The case was taken up for scrutiny and thereafter, assessment was framed u/s 2 143(3) of the Act and the loss was assessed at Rs.6,62,326/-.

Subsequently, the assessment was re-opened by issuing notice

u/s 148 of the Act dt.04.01.2010 and which was served on the assessee. Thereafter, the case was taken up for scrutiny and assessment was framed u/s 143(3) r.w.s 147 of the Act vide order

dt.21.12.2010 and the total taxable income was determined at Rs.4,33,598/-. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who vide order dt.01.02.2017 (in appeal

No.0239/10-11/ITO, Wd.16(2)/CIT(A)-4/Hyd/16-17) enhanced

the income of the assessee. Aggrieved by the order of Ld.CIT(A),

assessee is now in appeal and has raised the following grounds :

“1. On the facts and circumstances of the case and in law the Ld.CIT(A) erred in making the enhancement to the income assessed by the Assessing Officer on account of new source of income. It is most humbly submitted that the CIT(A) has exceeded the powers conferred under Section 250 of the Income Tax Act, 1961, and therefore entire action is bad in law.

Without prejudice to the above ground following grounds are on merit.

assessee has raised two grounds but both the grounds are inter-

connected. Hence, both the grounds are considered together.

was re-opened for the reason that the amount of Rs.10,95,924/-

was found debited to the Profit and Loss account under the head

3 ‘Provisions’ and which was claimed as deduction and was allowed

in the assessment originally framed u/s 143(3) of the Act. AO

was of the view that the aforesaid Provision was not allowable as deduction and accordingly, the case was re-opened by issuing

notice u/s 148 of the Act. Thereafter, in the assessment framed

u/s 143(3) r.w.s. 147 of the Act, the amount of Rs.10,95,924/-

was disallowed. Before AO, it was submitted that after making

addition on account of disallowance of Provision, the gross total

income turns out to be positive and therefore the assessee be allowed deduction u/s 80P of the Act. It was also submitted that deduction was not claimed in the return of income as the income

returned by the assessee was a loss. The claim of deduction u/s 80P of the Act was denied by AO. Before Ld.CIT(A), a prayer was made for allowing the deduction u/s 80P of the Act. Ld.A.R.

submitted that Ld.CIT(A) directed the AO to grant deduction u/s 80P of the Act to the extent of Rs.4,33,598/- but however

Ld.CIT(A) noted that assessee had earned interest from non-

members which according to him should have been taxed under ‘income from other sources’ and on such interest deduction u/s 80P of the Act was not allowable. Ld.CIT(A) after considering the submissions of the assessee and after relying on the decision of Hon’ble Apex Court in the case of Bangalore Club Vs. CIT

reported in (2013) 350 ITR 509 enhanced the income and directed the AO to add Rs.11,19,673/- under the head ‘income

from other sources’. Aggrieved by the order of enhancement,

assessee is now in appeal.

4

as his power of enhancement is restricted only to the income

which was the subject matter of consideration for the purposes of assessment by the AO. Ld.A.R. submitted that under the provisions of Sec.251(1)(a) of the Act. Ld.CIT(A) has power to enhance, revise or cancel the assessment but has no power to make addition by searching a new source of income, which was neither discussed in the assessment order nor mentioned in the return filed by the assessee. He further submitted Ld.CIT(A) has gone beyond his jurisdiction in enhancing the assessment. He

further submitted that whenever the question of taxability of income from a new source and which has not been considered

by the AO is concerned, the jurisdiction to deal with the same

can be dealt with u/s 147/148 and u/s 263 of the Act provided Tribunal in the case of M/s Vijay Builders Vs. ITO (ITA

No.863/PUN/2016 order dt.25.02.2015) and in the case of Ram

Infrastructure Ltd. Vs. JCIT (ITA No.746/PUN/2013 order

dt.30.12.2016) after relying on the aforesaid decisions of Hon’ble

Apex Court and Hon’ble Delhi High Court has held that Ld.CIT(A)

5 has no power to enhance the income of the assessee by introducing a new source of income. On the merits of addition,

with respect to the interest earned from other members, he

submitted that all investments whether out of surplus funds or otherwise made by the Co-operative Society which form part of the business of the Bank is attributable to the business of banking carried out by it and qualifies for deduction u/s 80P of the Act and for this proposition, he relied on the decision of Hon’ble Gujarat High Court in the case of CIT Vs. Baroda Peoples

Co-operative Bank Ltd., reported in (2006) 280 ITR 282. He also placed reliance on the decisions of Pune Tribunal in the case of Rajmata Urban Co-op No.479/PUN/2010 order dt.28.10.2010) and the case of ACIT Vs.

The Rayat Sevak Co-operative Bank Ltd., (ITA

No.1960/PUN/2013 order dt.27.10.2014). He also placed on record the copy of the above decisions. He therefore submitted

that firstly Ld.CIT(A) was not justifying in enhancing the income

and secondly even on merits, assessee is eligible for deduction

u/s 80P of the Act.

of enhancement. He further submitted that there is a link

between enhancement of income and deduction u/s 80P of the Act. He further placed reliance on the decision of Hon’ble Apex

Court in the case of Citizen Co-operative Society Ltd., Vs. ACIT in Civil Appeal No.10245 of 2017 judgment dt.08.08.2017

6

by the Ld.D.R. on the decision of Hon’ble Apex Court in the case

of Citizen Co-operative Society Ltd., Vs. ACIT (supra) is mis-

placed as the issue was different before Hon’ble Apex Court. He enhanced income, denial of deduction u/s 80P of the Act. It is an undisputed fact that while deciding the appeal, Ld.CIT(A) has enhanced the income of the assessee by Rs.11,19,673/-. It is also a fact that the issue on which the Ld.CIT(A) had enhanced

the income was not considered by AO and was therefore not a subject matter of appeal before Ld.CIT(A). I find that identical

issue about enhancement of income arose before the Co-ordinate

Bench of the Tribunal of Pune in the case of M/s. Vijay Builders

Vs. ITO (in ITA No.863/PUN/2013 dt.25.02.2015). The Co-

ordinate Bench of the Tribunal after considering the decision of Hon’ble Apex Court in the case of CIT Vs. Shapoorji Pallonji the issue in favour of the assessee by holding as under :

7 “14.1 Even otherwise also we are of the considered opinion that the Ld.CIT(A) was not justified in enhancing the income of the assessee by Rs.25 lakhs. The Hon’ble Supreme Court in the case of CIT Vs. Shapoorji Pallonji Mistry (Supra) has held that it would not be open to the AAC to introduce into assessment new sources, as his power of enhancement is restricted only to income which was subject matter of consideration for purposes of assessment. The Hon’ble Supreme Court in the case of Rai Bahadur Hardutroy Motilal Chamaria (Supra) has held that the power of enhancement of AAC is restricted to subject matter of assessment or in assessment order. We find that following the above decisions the Hon’ble Delhi High Court in the case of Sardarilal and Company (Supra) has held that whenever question of taxability of income from a new source of income is concerned which has not been considered by the AO, jurisdiction to deal with same in appropriate cases may be dealt with u/s.147/148 and section 263 if requisite conditions are satisfied. It is inconceivable that in presence of such specific provisions a similar power is available to the first appellate authority. The Hon’ble Delhi High Court in the case of Union Tyres (Supra) has also held similar view and held that it is not open to the appellate commissioner to introduce in assessment a new source of income and assessment has to be confined to those items of income which was subject matter of original assessment. The relevant observations of Hon’ble Delhi High Court at para Nos. 11 to 13 of the order reads as under :

XXXXX

XXXX

decision in its support nor has pointed out any distinguishing

feature in the facts of the present case and to the case of M/s. to the present case. I therefore, following the decision of Co-

8 ordinate Bench of the Tribunal in the case of M/s. Vijay Builders

Vs. ITO (supra) and following the same reasoning hold that Ld.CIT(A) was not justified in enhancing the income of the assessee and accordingly set aside the order of Ld.CIT(A) on this issue. Since the enhancement itself has been set aside, I find the issue of deduction u/s 80P of the Act on the enhancement of income to be academic. I accordingly set aside the order of Ld.CIT(A) and direct the AO to delete the addition. Thus, the ground of the assessee is allowed.

Order pronounced on 22nd day of October, 2018. (ANIL CHATURVEDI) लेखा सद"य / ACCOUNTANT MEMBER

पुणे Pune; "दनांक Dated : 22nd October, 2018. Yamini

आदेश क" ""त"ल"प अ"े"षत/Copy of the Order forwarded to :

आदेशानुसार/ BY ORDER

//// व"र"ठ "नजी स"चव / Sr. Private Secretary आयकर अपील"य अ"धकरण ,पुणे / ITAT, Pune.