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Facts
The assessee, Chotanagpur Catholic Mission Cooperative Credit Society, claimed deduction under Section 80P of the Income Tax Act for the Assessment Year 2017-2018, which was allowed in the original assessment under Section 143(3). The Pr.CIT subsequently invoked revisionary powers under Section 263, contending that the society's primary objective was not lending but accepting deposits, and there was excess transfer to reserve funds, thereby setting aside the original assessment order. The assessee challenged the Pr.CIT's order before the Income Tax Appellate Tribunal.
Held
The Tribunal held that the Pr.CIT's order under Section 263 was unsustainable as it failed to demonstrate how the AO's order was erroneous and prejudicial to the revenue, or how the assessee's case was affected by Supreme Court decisions. The AO had consciously considered and allowed the Section 80P deduction, and this position was consistently maintained in past and subsequent assessment years. The Tribunal concluded that the Pr.CIT's action amounted to substituting his opinion for that of the AO and accordingly quashed the Section 263 order.
Key Issues
Whether the Pr.CIT's revisionary order under Section 263 was valid, and whether the cooperative society was eligible for deduction under Section 80P, including for interest income from deposits with other banks, when the AO had consciously allowed it in the original assessment and in prior years.
Sections Cited
Section 263, Section 143(3), Section 80P, Section 80P(2), Section 80P(2)(a)(i), Section 142(1), Section 156, Section 10(35)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RANCHI BENCH, RANCHI
Before: SHRI GEORGE MATHAN, JM & SHRI RATNESH NANDAN SAHAY, AM
(निि ारण वर्ा / Assessment Year :2017-2018) Chotanagpur Catholic Mission Vs. Pr.CIT, Ranchi Cooperative Credit Society, Dr. Camil Bulke Path, Purulia Rd., Ranchi-834001, Jharkhand स्थायी लेखा सं./PAN No. : AAAAC 0144 Q (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) निर्ाारिती की ओर से /Assessee by : Shri P.S.Paul, CA राजस्व की ओर से /Revenue by : Shri Rajib Jain, CIT-DR सुनवाई की तारीख / Date of Hearing : 07/10/2025 घोषणा की तारीख/Date of Pronouncement : 07/10/2025 आदेश / O R D E R Per Bench : This is an appeal filed by the assessee against the order passed by the ld. Pr.CIT, Ranchi, dated 30.03.2022 for the assessment year 2017- 2018.
It was submitted by the ld. AR that the assessee is a cooperative society, which is carrying on business of banking and providing credit facilities to its members. It was the submission that the original assessment order u/s.143(3) of the Act came to be passed on 09.12.2019, wherein the AO had considered the issue of deduction u/s.80P of the Act and all the documents and provisions of Section 80P of the Act have been considered. It was the submission that the ld. Pr.CIT has invoked his powers u/s.263 of the Act and has issued a show cause notice to the assessee to which the assessee had also replied. It was the submission that the ld. Pr.CIT did not accept the contention of the assessee and on the ground that the total deposits from the members far exceeded to the loan given to the members, took a stand that the primary objective of the assessee is not to give loans to its members except deposits of the same, do not come within the ambit of the provisions of Section 80P of the Act. Ld. Pr.CIT further went on to hold that there is excess transfer to the reserve funds and, therefore, the assessee was not being run as per bye-laws. He, consequently, set aside the assessment order passed u/s.143(3) of the Act dated 09.12.2019 with the direction to pass a fresh assessment order after enquiry and verification. It was the submission that in the earlier assessment years and the subsequent assessment years the assessee has been granted the benefit of deduction u/s.80P of the Act. Ld. AR drew our attention to various assessment orders for the earlier assessment years as also for the assessment year 2012-2013, wherein the assessment order has been passed on 18.03.2024, wherein the assessee has been granted the benefit of deduction u/s.80P of the Act. It was the submission that the grounds raised
by the ld. Pr.CIT do not come within the purview of the provisions of Section 80P of the Act. It was the prayer that the order of the ld. Pr.CIT is liable to be quashed.
3. In reply, ld. CIT-DR submitted that in view of the decisions of the Hon’ble Supreme Court in the case of Totgars Cooperative Sales Society, reported 322 ITR 283 (SC) and in the case of Secunderabad Club, reported in 153 taxmann.com 441 (SC), the order of the ld. Pr.CIT is liable to be upheld. It was the submission that the assessee was not entitled to benefit of deduction u/s.80P of the Act.
4. We have considered the rival submissions. It must be mentioned here that the appeal is against the order passed u/s.263 of the Act by the ld. Pr.CIT, Ranchi. The ld. Pr.CIT, Ranchi has not brought out any findings in regard to the assessee’s case being hit by the decision of the Hon’ble Supreme Court in the case of Totgars Cooperative Sales Society, referred to supra and in the case of Secunderabad Club, referred to supra. This is also not an issue which has been raised by the AO in any of the earlier assessment years nor in the subsequent assessment years. The issue raised by the ld. Pr.CIT in his order u/s.263 of the Act are only two folds, one is that the primary objective of the assessee is not to give loan but to accept deposits and secondly the society was not being run as per bye- laws. A perusal of the assessment order dated 09.12.2019 shows that the assessment order is passed u/s.143(3) of the Act. Number of hearings have been taken place. Documents have been furnished online as well as heard copies. The AO has considered the fact that the assessee society has 74,394 members. The AO also recognized that the objective of the assessee society is to provide credit facilities to its members. The AO has examined the issue of the cash deposited during the demonetization period and has made a disallowance on that issue. The fact that the members of the society have not taken loan from the society cannot be held to be against the assessee, insofar as the assessee can give loans only when a requisition for loan is made. Similarly, it is not the case of the ld. Pr.CIT that the funds have been misappropriated or it has been deposited or utilized in any manner in violation of the bye-laws. His ground is that the total undisputed profits for the year were distributed in the funds as decided in the Aam Sabha. The accounts of the assessee are audited. The scrutiny assessment of the assessee has also been done. The details have been called for. Details have been examined and the AO has taken a conscious decision in respect of the allowance of the claim of deduction u/s.80P of the Act. The reply submitted by the assessee to the notice issued u/s.142(1) of the Act reads as follows :- To, Date: 23.10.2019 Place:- Ranchi The Income Tax Officer, Ward-1(4), Ranchi. Re:- P.A.N.:- AAAAC-0144-Q of Chotanagpur Catholic Mission Co- operative Credit Society Sub:- Notice u/s 142(1) of Income Tax Act, 1961 for the A.Y. 2017- 18. In response to your notice ITBA/AST/F/142(1)/2019- 20/1018601266(1), I am submitting the following:-
1.
In response to your query about huge cash deposit during the demonetization period, I would like to inform you that there were approximately 77,394 (Seventy Seven Thousand Three Hundred Ninety Four) Ann-1 members in the society during the FY 2016-17. List of societies members is produced for your kind verification. Kindly give us time so that the details can be produced if your honour requires. It is a Co-operative society providing banking facilities to its members and it is authorized/licensed by the Reserve Bank of India. There is no complaint from the Reserve Bank of India. During the demonetization period about all the members who were having the demonetized currency came and deposited the same in the branches of the society and those cash were duly deposited in the accounts of the society with the public sector banks.
2. WITHOUT Prejudice to above I would like to inform to that it is a banking cooperative society proving banking facilities to its members and claiming exemption u/s 80 P(2). This has been accepted in the past by Honorable Income Tax Appellate Tribunal, Ranchi Bench, the LD. Commissioner of Income Tax (Appeals) and the Income Tax Officers.
Enclosed Sec 80P (2) from Income Tax Act, 1961. Ann-2 3. Computation of Total Income for the A.Y. 2017-18 is enclosed. Ann-3 4. The copy of UCO Bank Main Road-5/B-5213 is enclosed. Ann-4.
The copy of UCO Bank Simdega -S/B-267 is enclosed. Ann-5.
There is no Account of the society with IDBI bank.
Details of Mutual Funds investments is enclosed. Ann-6.
Dividends earned from mutual funds are exempt u/s 10(35).
Details of cash deposit during the demonetized period and year i.e. F.Y. 2015-16 and for the F.Y. 2015-16 are enclosed. Ann-7.
Details of outstanding Liabilities for the A.Y. 2017-18 is as follows:- a. Audit Fee Payable to The Registrar of Co-operative Societies- 1,50,000/- b. Federation Levy 8,76,065/- c. P.S.Paul & Co. 30,090/- Total 10,56,155/-
Since it is a banking co-operative society so provision has to be created for Reserve Fund, Development Fund and Bad Debts Fund. a. 55% of the profit after tax is transferred to Development Fund. b. 35% of the profit after tax is transferred to Reserve Fund. c. 10% of the profit after tax is transferred to Bad Debts Fund.
No fixed assets were acquired during the year. 13. The details of loan and advances, members deposit, purpose of loan and salary and TA circle wise is produced. Ann-8. 14. Details of Salary and TA is enclosed. Ann-9 & 10. 15. Details of Legal fees:- a. Paid to Advocate - 18,650/- b. P.S. Paul & Co. - 11,500/-(TDS Deducted -Rs. 3,550/-) Total - 30,150/- 16. Previous balance includes Rs. 14,01,898/- being the balance written off of branch / circle Nanesera and Rs. 1/- of Punjab National Bank. 17. The details of interest income is clearly mentioned in the profit & loss account of the FY 2016-17.
18. The cash book, ledgers, Journal, circle register and societies members register are produced for your kind verification.
Assessment order for the A.Y. 2013-14 passed by LD. ITO-1(1) is enclosed. Ann-11.
Assessment order for the A.Y. 2014-15 passed by LD. ITO-1(4) is enclosed. Ann-12. Hope this will serve the purpose. Kindly let me know if any additional information or documents will be required to complete the assessment. Thanking you, Yours Faithfully Sd/- CA Prithiraj Paul AUTHORISED REPRESENTATIVE 5. The said reply shows that the issue of deduction u/s.80P of the Act has also been verified as also the issue of reserve funds, development funds and bad debts funds. Thus, clearly though the assessment order does not speak of the issues which have been considered by the AO, the replies filed by the assessee does talk of the issue of deduction u/s.80P of the Act verified by the AO. This along with the fact that for the assessment year 2022-2023 the assessment order has been passed u/s.143(3) of the Act accepting the assessee’s claim for deduction u/s.80P of the Act clearly comes to show that the reasons mentioned by the ld. Pr.CIT for the purpose of reassessment is only for the purpose of imposing his opinion over that of the AO which is not permissible u/s.80P of the Act. It would also be worthwhile to extract from the assessment order for the assessment year 2022-2023, the reasons as have been mentioned by the assessee before the AO for the purpose of claiming deduction u/s.80P of the Act. The said reasons are from pages 5 to 12 of the assessment order, which reads as follows :-
6. This being so, as the issue raised by the ld. Pr.CIT is an issue which has already been considered by the AO in the original assessment as also on the ground that in the subsequent years where the assessment order has been passed after the order u/s.263 of the Act, the AO has granted the assessee the benefit of deduction u/s.80P of the Act, we are of view that the order passed u/s.263 of the Act by the ld. Pr.CIT, Ranchi is liable to be quashed and we do so.
In the result, appeal of the assessee stands allowed. Order dictated and pronounced in the open court on 07/10/2025.