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Facts
The assessee, a cooperative society, filed a NIL return claiming deduction u/s 80P. The AO completed the assessment u/s 143(3) r.w.s 144B after making an addition of interest income u/s 56. The Pr.CIT initiated revision proceedings u/s 263, holding the AO's order erroneous and prejudicial for not verifying if the number of associate members exceeded 15% of total membership, which impacts the 80P deduction. The Pr.CIT set aside the AO's order, prompting the assessee to appeal to the ITAT.
Held
The Tribunal found no merit in the assessee's appeal, noting that the AO had failed to adequately examine or verify the facts regarding associate members exceeding 15% of total membership, which was crucial for the deduction claimed under Section 80P. The Tribunal upheld the Pr.CIT's order to set aside the AO's assessment. Consequently, the matter was directed back to the Assessing Officer for fresh adjudication on merits, with adequate opportunity provided to the assessee.
Key Issues
Whether the Pr.CIT's revision order u/s 263 was justified due to the AO's failure to verify the percentage of associate members, thereby making the assessment order erroneous and prejudicial to the revenue's interest concerning the deduction claimed u/s 80P.
Sections Cited
Section 263, Section 80P, Section 143(2), Section 142(1), Section 56, Section 143(3), Section 144B
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Income Tax Appellate Tribunal, PANAJI BENCH
Before: SHRI PAVAN KUMAR GADALE & SHRI G D PADMAHSHALI
Assessee by Shri.Pramod Vaidya.AR Revenue by Shri.Captain Pradeep Arya CIT-DR सुनवाई की तारीख/Date of Hearing 11.08.2025 घोषणा की तारीख/Date of Pronouncement 25.08.2025 ORDER
PER PAVAN KUMAR GADALE JM:
The assessee has filed the appeal against the order of the Pr. Commissioner of Income Tax (Pr.CIT) Hubli passed u/s 263 of the Act. The assesse has raised the grounds of appeal
challenging the revision order passed by the Pr.CIT set aside the order passed by the assessing officer.
2. The brief facts of the case are that, the assessee is a cooperative society registered under the Karnataka Co- Operative Societies Act 1959. The assessee has filed the The Jamboti Multipurpose Cooperative Society Limited. . return of income for the A.Y 2018-19 on 04.10.2018 with total income of Rs.NIL. And the said return of income filed is found defective by the revenue authorities. Subsequently, the assesse has filed the return of income on30.03.2019 disclosing a total income of Rs.Nil/- after claiming deduction of Rs.25,59,276/- u/sec 80P of the Act. Further the case was selected for limited scrutiny under E-assessesment scheme-2019 on the issue-deduction from total income Under Chapter VA.And notice u/sec 143(2) and u/sec 142(1) of the Act are issued calling for details in respect of claims and the information supporting the return of income filed. The assesse has filed the details on 16.12.2020 & 29.01.2021 and the Assessing Officer (A.O) has dealt on the submissions/details at Para 3.6 of the order and further show cause notice was issued and the assessee has filed the reply dated 14.04.2021 on the disputed issues of the interest income from cooperative banks/scheduled banks and commercial banks. Whereas the A.O was not satisfied with the explanations and dealt on the provisions and judicial decisions made addition of Rs.3,99,869/- interest income u/sec56 of the Act and assessed the total income of Rs.3,99,870/- and passed the order u/sec143(3)r.w.s144B of the Act dated 19.04.2021.
Subsequently, the Pr. CIT on perusal of the records and information found that the order passed by the AO under section 143(3) r.w.s 144B of the Act is erroneous and prejudicial to the interest of the revenue and issued The Jamboti Multipurpose Cooperative Society Limited. . revision notice U/sec 263 of the Act. The Pr.CIT is of the view that the number of associate members of the assessee society continued to be more than 15% of the total membership of the society for the relevant period and the assessee has violated the provisions of section 18(1) of the Karnataka Cooperative Societies (Amendment)Act 2014. In compliance to the notice u/sec263 of the Act dated 09.02.2023, the assessee has the details and explanations through ITBA Portal.. Whereas the Pr.CIT was not satisfied with the explanations and submissions and is of the opinion that the order passed by the AO is erroneous and prejudicial to the interest of the revenue, and accordingly issued directions to the AO and set-aside the order 143(3) r.w.s 143B of the Act and has passed order u/s 263 of the Act dated 07.03.2023. Aggrieved by the order of the Pr.CIT, the assessee has filed an appeal before the Hon’ble Tribunal.
At the time of hearing, the Ld.AR submitted that the Pr.CIT has erred in set aside the order u/sec 143(3) r.w.144B of the Act, which does not satisfy the twin conditions of erroneous and prejudicial to the interest of the revenue. The Ld.AR submitted that the explanation 2 to sec 263 of the Act ought to be considered only when the AO has not applied his mind, the facts are to be verified and no enquiry is conducted. Whereas, the A.O has verified the facts, bylaws, details of regular members, associate and nominal members and made disallowance of The Jamboti Multipurpose Cooperative Society Limited. . deduction u/sec80P to the extent of Rs.3,99,869/-. The Ld.AR substantiated the submissions relying on judicial decisions and factual paper book and prayed for allowing the appeal. Per Contra, the Ld.DR supported the order of the Pr. CIT and made submissions that the assessing officer has not verified /examined the fact that the number of associate members of the assessee society continued to be more than 15% of the total membership of the society for the relevant period and violated the provisions.
We heard the rival submissions and perused the material available on record. The Ld.AR envisaged that the order passed by the Pr.CIT is bad in law as the order revised under revision proceedings passed by the Pr. CIT is not erroneous and prejudicial to the interest of the revenue. The contentions of the Ld.AR are that the number of associate members of the assessee society continued to be more than 15% of the total membership of the society for the relevant period cannot be accepted as violation under the income tax Act. The Ld.DR submissions are that the Pr.CIT has dealt on the facts and information which proves that the Assessing Officer has not applied his mind and not made enquiries on the disputed issue. We find the A.O has called for the list of all the members of the society during the relevant period and there is no examination and verification of the facts or findings by the A.O on the issue of associate members exceeding 15% of total membership in the assessment proceedings. Accordingly, the matter needs to be verified and reasons for claim should be The Jamboti Multipurpose Cooperative Society Limited. . justified and the assessing officer shall adjudicate a fresh on merits on the disputed issue and shall provide adequate opportunity of hearing to the assessee and the assessee should also cooperate in submitting the information. Accordingly, we do not find merits in the appeal filed by the assessee and is dismissed.
In the result, the appeal filed by the assesse is dismissed. Order pronounced in the open court on 25.08.2025.