THE SANKESHWAR SOUHARD CREDIT SAHAKARI LIMITED,SANKESHWAR vs. THE PR. COMMISSIONER OF INCOME TAX, HUBLI

At the time of hearing, the Ld. AR submitted that the Pr. CIT has erred in considering the order passed by the AO is erroneous and prejudicial to the interest of the revenue, irrespective of the fact that the assessee has complied with the information and the notices through ITBA and the A.O. having verified and examined the facts has accepted the same. The Ld. AR submitted that the assessee has disclosed the interest income and deposits held with the co-operative banks and further the deduction of interest on deposits with the cooperative bank has to allowed u/sec 80P2(d) of the Act as the cooperative bank is treated as a cooperative society for eligibility of deduction u/s 80P(2)(d) of the Act. The AO having considered these facts, has applied his mind and made an enquiry on details filed and also complied with the scrutiny guidelines and accepted the returned income. Whereas the observations of the Pr. CIT in the revision order are in correct. Further the Ld. AR substantiated the submissions with factual paper book and judicial decisions and prayed for allowing the appeal.

Per Contra, the Ld. DR submitted that the AO has not considered the facts and overlooked the provisions of The Sankeshwar souhard credit sahakari Ltd.. section 80P2(d) of the Act and has not conducted enquiry and the Ld. DR relied on the order of the Pr.CIT.

We heard the rival submissions and perused the material 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 not prejudicial to the interest of the revenue. The contentions of the Ld. AR are that, the AO has considered the submissions, facts of interest income on deposits with the Cooperative banks and the eligibility of claim of deduction. The Ld. AR referred to the assessment order emphasizing that the AO has called for the details in respect of complete scrutiny under CASS to verify the issues of (i) Deduction from total income under chapterVIA.(ii)HighCreditors/Liabilities(iii)Investments/Adv ances/Loans and (iv) High interest expenditure/Finance costs. The assessee has also received notice u/s 142(1) of the Act dated 12-11-2021 from the AO placed at page 17 to 19 of the paper book, in particular the AO has called the details as per the annexure and particularly in point (1) deductions claimed under chapter VIA during the year and (2) investments and loans appearing in the balance sheet and the other details based on the financial statements. In compliance, the assessee has filed the details through ITBA portal with the submissions as called for in lieu of notice u/s 142(1) of the Act on 26-11-2022 and the e- proceedings response acknowledgements and details are The Sankeshwar souhard credit sahakari Ltd.. placed at page 9 to 16 of the paper book. Further the Ld.AR referred to the submissions in respect of investment with the other bank and society and interest income in the F.Y.2019-20 placed at page 23 & 24 of the paper book. The Ld. AR emphasized that the interest income derived by a co-operative society from its deposits with the co- operative bank would be entitled for deduction U/sec 80P (2)(d) of the Act. The Ld.AR highlighted that the asssesse has received interest on fixed deposits with the two co- operative banks and the Co-op bank is treated as a cooperative society for eligibility of deduction u/s 80P(2)(d) of the Act. The AO has considered these facts in the assessment proceedings and accepted the returned income and it cannot be disturbed. Further the Ld. AR submitted that the Pr. CIT has erred in set aside the order of the AO which does not satisfy the twin conditions of erroneous and prejudicial to the interest of the revenue. The Ld. AR also submitted that explanation (2) to Sec. 263 of the Act are to be considered only when the AO has not applied his mind and no the facts are verified and no enquiry was conducted. The Ld. AR contended that the assessee has complied with the statutory notices and filed reply online through ITBA.

The Assessing officer has dealt on the facts of the disputed issues in the proceedings but there are few observations in the assessment order. Further the Pr.CIT has erred in overlooking the fact that the assessee has The Sankeshwar souhard credit sahakari Ltd.. filed the written submissions on the disputed issue before the lower authorities and emphasized that AO having satisfied and has accepted the returned income and hence the action of the Pr. CIT is not acceptable. Whereas the AO has applied the mind and accepted the assessee’s submissions in the complete scrutiny in respect of interest income on deposits with the cooperative banks. We rely on the decision of the Honble High Court of Bombay in the case of M/S Grasim Industries Ltd Vs CIT (321 ITR 92) considered the law laid down by the Honble Supreme Court on the scope of the revisionary proceedings initiated under sec263 of the Act and the observations are read as under:

Considering the ratio of decisions of the Honble High courts, it is clear the Pr.CIT before holding the order of the A.O. is erroneous should conduct necessary inquiries. The Ld.AR submitted that the Pr.CIT has not considered the facts that the A.O has called for the information and the assessee has submitted the investments with the other banks and society and interest income in the F.Y.2019-20 in lieu of notice u/s 142(1) of the Act and hence there cannot be any non application of mind by the A.O. Whereas the observations of the Pr. CIT are not correct and further if any query is raised in the assessment proceedings and it was responded by the assessee, mere fact that it is not dealt with by the A.O. in the order cannot implied that there is no application of mind. We find that the A.O has considered one of the possible views based on the information and it is not necessary that the A.O should put all the discussions/observations in the assessment order, as per explanations (2) to sec 263 of the Act the authority has to invoke provisions only when there is no verification and enquiry conducted by the A.O. Whereas The Sankeshwar souhard credit sahakari Ltd.. the A.O has applied his mind and verified the facts. The Ld. AR referred to the submissions, financial statements, judicial decisions and explanations filed before the A.O. We find the Hon’ble High Court of Bombay in CIT Vs. Gabriel India Ltd.(203 ITR 108) has observed as under:

We Considering the overall facts, circumstances, ratio of the judicial decisions and the details submitted in the course of hearing are of the view that the if any query is raised in the assessment proceedings and it was responded by the assessee, mere fact that it is not dealt within by the A.O. in the order cannot implied that there is no application of mind and the A.O. has applied one of the possible view. Hence, the action of the Pr.CIT cannot be acceptable as the order passed by the A.O. does not satisfy The Sankeshwar souhard credit sahakari Ltd.. the twin conditions of erroneous and prejudicial to the interest of the revenue. Accordingly, we set aside the order of the Pr.CIT and allow the grounds of appeal