JHUNJHUNU KARYA VIKRYA SAHAKARI SAMITI LIMITED,,JHUNJHUNU vs. PRINCIPAL COMMISSIONER OF INCOME TAX, JAIPUR-2

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 150/JP/2022 fu/kZkj.k o"kZ@Assessment Years : 2017-18 cuke Jhunjhunu Karya Vikrya Sahakari Principal Commissioner of Vs. Samiti Limited Income Tax-2, 1 JJN KVSS Limited, Station Road Jaipur Jhunjhunu LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAAAJ 0647 F vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Sidharth Ranka (Adv.) jktLo dh vksj ls@ Revenue by : Sh. Sanjay Dhariwal (CIT) lquokbZ dh rkjh[k@ Date of Hearing : 19/10/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 15/12/2022 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM

This appeal is filed by the assessee aggrieved from the order of the Pr. Commissioner of Income Tax, Jaipur-2 [ Here in after referred as Ld. PCIT ] for the assessment year 2017-18 dated 29.03.2022 as per provision of section 263 of the Act, which in turn arises from the order passed by the ITO, Ward-01, Jhunjhunu passed under Section 143(3) of the Income tax Act, 1961 (in short 'the Act') dated 11.12.2019. this appeal on the following grounds; “1. That on the facts and in the circumstances of the case, the ld. Principal Commissioner of Income-tax-II, Jaipur grossly erred in passing an order u/s 263 of the Income-tax and in holding that the assessment made by the ld. Assessing Officer vide order dated 11.12.2019 for the assessment year 2017-18 is found to be erroneous in so far as it is prejudicial to the interest of the revenue.

3. The appellant craves leave to add, alter, modify or amend any ground on or before the date of hearing.”

Consequently notice u/s 143(2) was issued on 09/08/2018 and served upon the assessee. Further notice u/s 142(1) along with questionnaire was also issued and duly served upon the assessee. In compliance to the statutory assessment was completed as per provision of section 143(3) on declared income on 11.12.2019 where in the returned income was accepted.

This interest was received from Jhunjjhunu Kendriya Sahakari Bank Limited and the same was allowed by the ld. AO. The ld. PCIT noted that the ld. AO has not verified the issue of allowability of deduction u/s. 80(P)(2)(d) while passing the order u/s. 143(3) of the act and the order is erroneous in so far as it is prejudicial to the interest of revenue. On account of this observation the ld. PCIT has issued a show cause notice u/s. 263 dated 19.02.2022 asking the assessee to explain as to why the assessment order passed by the Assistant Commissioner of Income tax, Sikar may not be revised and may not be treated as erroneous and prejudicial to the interest of revenue regarding the non-application of the law on the grant of deduction u/s. 80(P)(2)(d). of the Act which is discussed in the order of the ld. PCIT and the same is not repeated to avoid duplication. After examination of the submission of the assessee the ld. PCIT set a side the order of the ld. AO. The relevant finding of the ld. PCIT is reiterated here in below:

10. I have gone through the assessment order and case records and submission filed by the assessee, in the facts and circumstances of the case I find that the powers of revision are inherent and PCIT/CIT can use these powers if it notices that any order passed by the AO is not in following conformity with the law. In reaching such conclusion, I am aided by the following rulings:- The Hon'ble Supreme Court in the case of Malabar Industrial Limited V/S CIT2431TR has held that An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind.

11. From the above facts and circumstances of the case and having regard to the material available on record, the Assessing Officer failed to consider/apply his mind to the information available on record with regard to the deduction allowed to the cooperative society u/s 80P(2)(d) of the Act. This in turn has resulted in passing of an erroneous order by the Assessing Officer in the case due to non- application of mind to relevant material, reflecting non appreciation of facts and an incorrect application of mind to law which is prejudicial to the interest of the revenue. Thus, the order passed u/s 143(3) on 11.12.2019 is erroneous and prejudicial to the interest of the revenue.

marched this appeal on the grounds as raised here in above. The ld. AR appearing on behalf of the assessee has placed their written submission to support the grounds raised, which is extracted in below; As per directions of the Hon’ble Bench, written submissions on behalf of the assessee appellant are as under:

1 The Assessee Appellant – Society is a Co-operative Society registered under the Rajasthan Cooperative Societies Act, 1965 and is engaged in the business of marketing of the agricultural produce grown by its members and purchase of agricultural implements, seeds or other articles intended for agricultural for the purpose of supplying to its members. During the year under consideration, it earned interest on FDR kept with M/s. Jhunjhunu Kendriya Sahkari Bank Ltd. 2 The ld. Assessing Officer has raised queries during the course of assessment proceedings including with regards to interest earned by the assessee appellant and deduction u/s. 80P of the Act claimed by the assessee appellant and the same was duly responded by the assessee appellant.

3 Being satisfied the ld. Assessing Officer passed assessment order u/s. 143(3) of the Act dated 11.12.2019 and accepted the returned income.

4 Thereafter the ld. PCIT, Jaipur-2 issued notice u/s. 263 of the Act dated 19.02.2022 whereby it was proposed that benefit of deduction u/s. 80P(2)(d) has wrongly been granted by the Assessing Officer on the interest earned by the assessee appellant from M/s. Jhunjhunu Kendriya Sahkari Bank Ltd. 5 Detailed reply dated 28.02.2022 thereto was filed by the assessee appellant objecting to issuance of notice u/s. 263 of the Act.

6 Ignoring the submissions of the assessee appellant, the ld. PCIT passed an order dated 29.03.2022.

7 For ready reference, extracts of relevant provisions of Section 80P is reproduced hereunder:

80P Deduction in respect of income of Co-operative Societies

(1) Where, in the case of an assessee being a co-operative society, the gross total income includes any; income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sum specified in sub-section (2), in computing the total income of the assessee.

(2) The sums referred to in sub-section (1) shall be the following, namely: (a) In the case of a co-operative society engaged in – (i) …………. (ii) …………. (iii) the marketing of agricultural produce grown by its members, or] (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members (v) …………. (vi) …………. (vii) …………. the whole of the amount of profits and gains of business attributable to any one or more of such activities

(d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income; (4) The provisions of this section shall not apply in relation to any co- operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank.

Explanation. For the purposes of this sub-section,- (a) "co-operative bank" and "primary agricultural credit society" shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949); (b) "primary co-operative agricultural and rural development bank" means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities.]

8. Finance Ministers Budget Speech while introducing sub-section 80P(4) of the Act is as follows: Cooperative Banks, like any other bank, are lending institutions and should pay tax on their profits. Primary Agricultural Credit Societies (PACS) and Primary Cooperative Agricultural and Rural Development Banks (PCARDB) stand on a special footing and will

7 Jhunjhunu Kraya Vikraya Sahakari Samiti Limited, Jhunjhunu vs. PCIT, Jaipur-2 continue to be exempt from tax under section 80P of the Income Tax Act. However, I propose to exclude all other cooperative banks from the scope of that section."

9 CBDT Circular dated 28.12.2006 containing explanatory notes on provisions contained in the Finance Act, 2006, reads as follows: 22.2. The cooperative banks are functioning at par with other commercial banks, which do not enjoy any tax benefit. Therefore, section 80P has been amended and a new subsection (4) has been inserted to provide that the provisions of the said section shall not apply in relation to any cooperative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. The expressions 'co-operative bank', 'primary agricultural credit society' and 'primary co- operative agricultural and rural development bank' have also been defined to lend clarity to them.

10 The Co-operative Bank pursuant to the insertion of Sub-section (4) of Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, however, the interest income derived by a co-operative society from its investments held with a co-operative bank, would continue to be entitled for claim of deduction under Sec.80P(2)(d) of the Act since a Co- operative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 or under any other law for the time being enforced in any state for the registration of co-operative societies.

10. The assessee society fulfills all the conditions stated u/s. 80P of the Act, i.e.:

� The assessee is a cooperative society duly registered with the Registrar Cooperative Societies under the Rajasthan Cooperative Societies Act. It is undisputed position.

� Gross total income of the assessee society includes the income referred to in section 80P(2)(a)(iii), 80P(2)(a)(iv) & 80P(2)(d) of the Act.

� The assessee society is engaged in carrying on the business as per its objects and such income is allowable as a deduction u/s. 80P(2)(a)(iii) & 80P(2)(a)(iv) of the Act.

� The assessee society has earned interest from Jhunjhunu Kendriya Sahkari Bank Ltd. which is a Registered Cooperative Society and such interest is allowable as a deduction u/s. 80P(2)(d) of the Act.

8 Jhunjhunu Kraya Vikraya Sahakari Samiti Limited, Jhunjhunu vs. PCIT, Jaipur-2 11. Similar nature of income was earned by the assessee society in the past years and assessment orders were passed u/s. 143(3) of the Act for the a.y. 2012-2013 & for the a.y. 2013-2014 and no adverse view taken by the ld. Assessing Officer or even by the Ld. CIT u/s. 263 or u/s. 148 of the Act.

12. That it is trite that the exercise of power u/s. 263 of the Act is ousted in case of a debatable issue. An assessment order can be termed as erroneous and prejudicial to the interest of the Revenue, if the Assessing Officer has taken a view which is not legally tenable. Per contra, if two views are available on a particular issue and the AO adopts one of such views, the case goes outside the purview of revisional power exercisable by the Pr.CIT u/s.263 of the Act. Proceedings u/s. 263 cannot be sustained where the ld. CIT holds a view which was different from that of the Assessing Officer. Section 263 of the Act does not visualize a case of substitution of the judgment of the Revisional Commissioner for that of AO unless the decision of the AO is found to be erroneous. Minal Nayan Shah v. PCIT 2019 (10) TMI 730 ITAT Ahmedabad.

12.1 The language used by the legislature in section 263 is to the effect that the CIT may interfere in revision, if he considers that the order passed by the Assessing Officer is erroneous insofar as it is prejudicial to the interest of the revenue. It is quite clear that two conditions must coexist in order to give jurisdiction to the CIT to interfere in revision. The order of the Assessing Officer in question must not only be erroneous but also it must be prejudicial to the interest of the revenue. In other words, merely because the assessment order is erroneous, the CIT cannot interfere. Again, merely because the order of the Assessing Officer is prejudicial to the interest of the revenue, then that is not enough to confer jurisdiction on the CIT to interfere in revision. The CIT cannot assume jurisdiction u/s 263, if the two conditions prescribed under the provisions of Act, viz. (i) the order is erroneous; and (ii) the same is also prejudicial to the interest of the revenue is not satisfied. Each and every erroneous order cannot be the subject matter of revision because the second requirement also must be fulfilled. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation, a lesser tax than what was just, has been imposed.

12.2 The phrase "prejudicial to the interest of the revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue has a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. For example, when an Assessing Officer adopted one of the courses permissible in law and it has resulted in loss of 9 Jhunjhunu Kraya Vikraya Sahakari Samiti Limited, Jhunjhunu vs. PCIT, Jaipur-2 revenue or where two views are possible and the Assessing Officer has taken one view with which the CIT did not agree with, it cannot be treated as an erroneous order prejudicial to the interest of the revenue because the view taken by the Assessing Officer is unsustainable in law.

12.3 In the instant case, Explanation 2(a) to section 263 is not applicable as the assessment order is not passed by without making inquiries or verification granting any relief without verification. Nor the said provision has been relied upon in the impugned Show Cause Notice and thus deserves to be ignored. On the contrary, the ld. AO has raised queries and the assessee has replied to the same.

12.4 In the instant case, Explanation 2(b) to section 263 is not applicable as the assessment order is not passed by granting any relief without verification. Nor the said provision has been relied upon in the impugned Show Cause Notice and thus deserves to be ignored.

12.5 In the instant case, Explanation 2(c) to section 263 is not applicable as the assessment order is not contrary to any order, direction or instruction issued by the Board under section 119. Nor the said provision has been relied upon in the impugned Show Cause Notice and thus deserves to be ignored.

12.6 In the instant case, Explanation 2(d) to section 263 is not applicable as the show cause notice has not referred to any judgment of the Hon’ble jurisdictional High Court or of the Hon’ble Supreme Court. Nor the said provision has been relied upon in the impugned Show Cause Notice and thus deserves to be ignored.

13 We wish to refer and rely upon following authorities which have under identical factual backdrop have held that initiation of proceedings u/s. 263 of the Act is bad in law and have even otherwise held that benefit of deduction u/s. 80P(2)(d) ought to be given to the assessee societies wherein interest is earned from cooperative banks:

SNo. Tribunal Particulars Paper Book Remarks Exercise of section 263 read with section 80P(2)(d) & 80P(4) of the Act Rajasthan Cooperative 1. Jaipur Bench Index-II, Dairy Federation Ltd. v. PB 01-13, PCIT {ITA: 23/JP/2021 dated 09.11.2021) Relevant PB 9

Palsana Gram Sewa 2 Jaipur Bench Index-II, Sahkari Samiti Ltd. v. PB 14-54, PCIT {2021 (12) TMI 635 dated 02.11.2021} Relevant PB 43 Ajmer Zila Dugdh 3 Jaipur Bench Index-I, Utpadak Sahkari Sangh PB 26-40, Ltd. v. PCIT {2021 (3) TMI 256 dated 01.03.2021} Relevant PB 27 4 Jaipur Bench Ajmer Zila Dugdh Index-I, Utpadak Sahkari Sangh PB 74-83, Ltd. v. PCIT {2019 (11) TMI 690 dated Relevant PB 74-83 28.08.2019} 5 Ahmedabad Laxmi Bachat Sharafi Index-II, Amendment Bench Sahkari Mandali Ltd. v. made by PB 62-75, ITO {2022 (9) TMI 153 Finance Act, dated 31.08.2022} 2006 referred Relevant PB 70 6 Rajkot Bench Galaxy Credit Index-II, Cooperative Society Ltd. PB 76-79, v. PCIT {2022 (7) TMI 494 dated 08.07.2022} Relevant PB 77 7 Pune Bench Dr. Jagadale Mama Index-II, Amendment Hospital Employees Coop made by PB 95-100, Credit Society Ltd. v. Finance Act, PCIT {2022 (9) TMI 30 2006 referred Relevant PB 99 dated 29.08.2022} 8 Pune Bench Shri Sharad Gramin Bigar Index-I, Amendment Sheti Sahakari made by PB 84-88, Pathasanstha Ltd. v. Finance Act, PCIT {2022 (8) TMI 1020 2006 referred Relevant PB 86-88 dated 22.08.2022} Shri Madhi Surali Vibhag 9 Surat Bench Index-I, Nagrikshakari Dhiran PB 116-120, Mandali Ltd. v. ACIT {2021 (10) TMI 861 dated Relevant PB 116-120

15.09.2021} Vishakhapatnam Krishna District Milk 10 Index-I, Bench Producer Mutually Aided PB 121-131, Co-operative Union Limited v. ACIT {2021 (3) Relevant PB 125 TMI 1108 dated 24.03.2021} 13.1 We wish to refer and rely upon following authorities which have under identical factual backdrop have held that benefit of deduction u/s. 80P(2)(d) ought to be given to the assessee societies wherein interest is earned from cooperative banks:

SNo. Tribunal Particulars Paper Book Remarks Section 80P(2)(d) & 80P(4) of the Act read with section 143(3) of the Act 1. Jaipur Jaipur Zila Dugdh Utpadak Index-I, Bench Sahkari Sangh Ltd. v. DCIT PB 41-58, {2020 (3) TMI 631 dated 04.03.2020} Relevant PB 44- 45 2 Jaipur Shahpura Gram Seva Index-I, Bench Sahkari Samiti Ltd. v. ITO PB 59-64, {2020 (10) TMI 715 dated 15.10.2020} Relevant PB 60- 64 3 Jaipur Jaipur Zila Dugdh Utpadak Index-I, Bench Sahkari Sangh Ltd. v. ACIT PB 65-73, {2019 (9) TMI 1338 dated 30.09.2019} Relevant PB 72 4 Madras NLC Indcoserve v. ITO Index-I, Amendment made Bench {2022 (6) TMI 936 dated by Finance Act, PB 89-97, 08.06.2022} 2006 referred Relevant PB 97 5 Raipur Gramin Seva Sahakari Index-I, Amendment made Bench Samiti Maryadit v. ITO by Finance Act, PB 98-110, {2022 (8) TMI 597 dated

Relevant PB 04.08.2022} 2006 also referred 100-104 6 Mumbai Mumbai Kolsa Kamgar Index-I, Bench Sahakari Society v. ITO PB 111-115, {2022 (8) TMI 568 dated 28.07.2022} Relevant PB 111-115 7 Bangalore Kanakshree House Index-I, Bench Building Co-operative PB 132-142, Society {2022 (1) TMI 1187 dated 17.11.2021} Relevant PB 132-133 8 Delhi ITO v. The Jwala Index-II, Bench Cooperative Urban Thrift PB 55-57, and Credit Society Ltd. {2022 (6) TMI 74 dated Relevant PB 57 31.05.2022} 9 Surat ACIT v. Sachin Udyog Index-II, Bench Nagar Sahkari Mandli Ltd. PB 58-61, {2022 (10) TMI 257 dated 06.10.2022} Relevant PB 61 Mumbai Avanti Niketan Cooperative Amendment made 10 Index-II, Bench Housing Society Ltd. v. by Finance Act, PB 80-87, CIT(A) {2022 (10) TMI 401 2006 also referred dated 06.10.2022} Relevant PB 80 Mumbai Tulsiani Chambers Amendment made 11 Index-II, Bench Premises Cooperative by Finance Act, PB 88-94, Society Ltd. v. ITO {2022 2006 also referred (5) TMI 548 dated Relevant PB 90- 18.04.2022} 93 12 Panaji Belgaum Coal & Coke Index-II, Amendment made Bench Consumer Cooperative by Finance Act, PB 101-106, Association Ltd. v. ITO 2006 also referred {2022 (4) TMI 395 dated Relevant PB 104 06.04.2022} 13.2 We wish to refer and rely upon following authorities which have under identical factual backdrop have held that benefit of deduction u/s. 80P(2)(d) ought to be given to the assessee societies wherein interest is earned from cooperative banks:

SNo. Court Particulars Paper Book Remarks

Section 80P(2)(d) & 80P(4) of the Act read with section 143(3) of the Act 1 Rajasthan CIT v. Rajasthan Rajya Index-II, Sahakari Kray Vikray High Court PB 107-115 Sangh Ltd {2016 (9) TMI 1385 dated 01.09.2016} 2 Rajasthan PCIT v. Kekri Sahakari Index-II, High Court Bhumi Vikas Bank Ltd PB 116-125 {2016 (12) TMI 1649 dated 08.12.2016} 3 Rajasthan PCIT v. Kekri Sahakari Index-II, High Court Bhumi Vikas Bank Ltd PB 126-134 {2018 (11) TMI 571 dated 08.08.2017} 4 Kerala High PCIT v. Peroorkada Index-II, 12.2 Section 80P Court Service Co-operative deals with Co- PB 135-146 Bank Ltd {2021 (2) TMI operative Societies' computation of 1084 dated 01.11.2021} income. As already noted, it has four sections and several sub-sections and clauses. The Parliament has considered the various situations in which the exigible income and the deductable income of the assessee is considered while computing the income of the assessee. For getting deduction, in our considered view, the assessee must also establish that the interest income earned by the assessee is from a Co-operative Society. As a matter of fact, in the case on hand, there is no dispute that it is not from a Co-operative Society registered under Kerala Co- operative Societies Act. The interest income earned from District Co-operative Bank/State Co- operative Bank, in the facts and circumstances of the case, do come within Section 80P(2)(d). Therefore, the income constitutes income from other sources and the only eligible deduction is covered by Section 80P(2)(d) viz. Interest or dividend derived by the assessee from its investments with any other Co-operative Society. The source of interest income is from Bank and Treasury, interest income received from Treasury be included in the computation of total income of the assessee. In other words, interest earned from Treasury is inadmissible for deduction and interest income from Co- operative Societies registered under the Kerala Co-operative Societies Act are eligible for deduction. The contra consideration of Commissioner of Income Tax (Appeals) and the Tribunal is incorrect and liable to be modified as stated above. Hence, it is held that the interest income earned by the assessee does not come within the ambit of Section 80P(2)(a)(i) and permissible deduction of interest income is limited to Co-operative Societies/Banks registered under Kerala Co-operative Societies Act under clause (d) of the Act and effect order on the above lines is made by the Assessing Officer. The questions are accordingly answered.

Bombay High PCIT v. Annasaheb Patil ITAT order setting 5 Index-II, Court Mathadi Kamgar Sahkari aside the exercise of PB 147-149 Patpedhi Maryadit Ltd section 263 read with {2020 (1) TMI 1041 section 80P(2)(d) & dated 09.01.2020} 80P(4) of the Act upheld. Gujarat High The Surat Vankar 8. Section 80P(2)(d) of 6 Index-II, Court Sahakari Sangh Ltd. v. the Act allows whole PB 150-156 PCIT {2016 (7) TMI 1217 deduction of an dated 12.07.2016} income by way of interest or dividends derived by the co- operative society from its investment with any other co-operative society. This provision does not make any distinction in regard to source of the investment because this Section envisages deduction in respect of any income derived by the co-operative society from any investment with a co- operative society. It is immaterial whether any interest paid to the cooperative society exceeds the interest received from the bank on investments. The Revenue is not required to look to the nature of the investment whether it was from its surplus funds or otherwise. The Act does not speak of any adjustment as sought to be made out by learned counsel for the Revenue. The provision does not indicate any such adjustment in regard to interest derived from the co-operative society from its investment in any other co-operative society. Therefore, we do not agree with the argument advanced by learned counsel for the Revenue. In our opinion, the learned Tribunal was right in law in allowing deduction under Section 80P(2)(d) of the Incometax Act, 1961. in respect of interest of RS. 4,00,919 on account of interest received from Nawanshaln Central Co-operative Bank without adjusting the interest paid to the hank. Therefore, the reference is answered against the Revenue in the affirmative and in favour of the assessee.”

14 The ld. D/R during the course of hearing has also relied upon various authorities and the same are distinguishable and are not applicable and in this regard, we wish to submit as under:

SNo. Title Remarks • During the relevant assessment years in 01 The Totgars Cooperative Sale Society Ltd. (Supreme question, it had surplus funds which the Court) assessee(s) invested in short-term deposits with the Banks and in Government securities. On such investments, interests accrued to the assessee(s). Assessee(s) provides credit facilities to its members and also markets the agricultural produce of its members. Whether such interest income would qualify for deduction as business income under Section 80P(2)(a)(i) of the Income Tax Act, 1961 – held that - Therefore, to that extent, such interest income cannot be said to be attributable either to the activity mentioned in Section 80P(2)(a)(i) of the Act or in Section 80P(2)(a)(iii) of the Act. • Interest was earned from Banks and Government Securities not from Cooperative Banks • Deduction u/s. Section 80P(2)(d) was neither an issue nor was it deliberated nor was it considered. • The issue was as to whether the interest on surplus funds is eligible for deduction u/s. 80P(2)(a)(i) of the Act or is it assessable to tax under the head other sources. It was not the question as to whether the assessee a cooperative society engaged in the business of providing credit facilities to its members is entitled for deduction u/s. 80P(2)(d) of the Act on the interest income from cooperative Banks or cooperative societies. • Hon'ble High Court of Bombay in the case of K. 02 The Totgars Cooperative Sale Society Ltd. (Karnataka Subramanian and Anr. v. Siemens India Ltd. High Court) (1985) 156 ITR 11 (Bom) has held: where there is a conflict between the decisions of non- jurisdictional High Courts, then a view which is in favour of the assessee is to be preferred as against that taken against him. • Hon’ble Apex Court in the case of The Mavilayi

Service Co-operative Bank Ltd. & Ors Versus Commissioner of Income Tax Calicut & Anr {Civil Appeal Nos. 7343-7350 of 2019 decided on 12th January 2021} held that Section 80P of the IT Act, being a benevolent provision enacted by Parliament to encourage and promote the credit of the co-operative sector in general must be read liberally and reasonably, and if there is ambiguity, in favour of the Assessee. • Hon’ble Karnataka High Court rendered in the case of PCIT Vs. Totagars Co-operative Sale Society (2017) 392 ITR 74 has clearly held that the issue whether a Co-operative Bank is considered to be a Co-operative Society is no longer res integra. The Co- operative Bank which is a species of the genus would necessarily be covered by the word "Co- operative Society". • Various judgment passed by the Tribunals which have been relied upon by the assessee appellant have considered the same and have distinguished / held it to be non-jurisdictional High Court, hence, inapplicable. • The Co-operative Bank pursuant to the insertion of Sub-section (4) of Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, however, as a co-operative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being enforced in any state for the registration of co-operative societies, therefore, the interest income derived by a co-operative society from its investments held with a co- operative bank, would be entitled for claim of deduction under Sec.80P(2)(d) of the Act. • Was dealing with situation wherein the appellant 03 State Bank of India (Gujarat High Court) cooperative society had invested in FDR with State Bank of India and not with a cooperative bank, hence, not applicable. • On the contrary, the observations at para 14 are in favour of the assessee appellant, which are as under: 14. Thus, in the light of the principles enunciated by the Supreme Court in Totgars Co-operative Sale Society (supra), in case of a society engaged in providing credit facilities to its members, income from investments made in banks does not fall within any of the categories mentioned in section 80P(2)(a) of the Act. However, section 80P(2)(d) of the Act specifically exempts interest earned from funds invested in co-operative societies. Therefore, to the extent of the interest earned from investments made by it with any co-operative society, a co-operative society is entitled to deduction of the whole of such income under section 80P(2)(d) of the Act. However, interest earned from investments made in any bank, not being a co-operative society, is not deductible under section 80P(2)(d) of the Act. • On the contrary, the observations at para 16 are in favour of the assessee appellant, which are as under: 16. ……………………………………………. If the appellant wants to avail of the benefit of deduction of such interest income, it is always open for it to deposit the surplus funds with a co-operative bank and avail of deduction under section 80P(2)(d) of the Act. • Based on the order passed by the jurisdictional 04 Krishnarajapet Taluk Agri Pro Coop Marketing Society High Court in the Totagars, which is not the (Bangalore ITAT) case in instant matter as it pertains to non- jurisdictional High Court. • Contrary views of Bangalore Bench itself, wherein relief has been granted to the assessee appellant. • Pertaining to initiation of proceedings u/s. 148 of 05 Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd. the Act on the premise of Change of Opinion. • Proceedings u/s. 148 were initiated within a (Gujarat High Court) period of 4 years. • The assessee had failed to disclose ‘fully and 21 Jhunjhunu Kraya Vikraya Sahakari Samiti Limited, Jhunjhunu vs. PCIT, Jaipur-2 truly’ all material facts necessary for assessment. • On merits various authorities in favour of the assessee including Gujarat High Court itself not considered nor cited.

In light of above, the impugned proceedings-initiated u/s. 263 of the Act are illegal, bad-in- law and it thus deserves to be set-aside and quashed.”

Relying on the above paper book the ld. AR of the assessee submitted that the case of the assessee was selected for limited scrutiny. The ld. AO on the very issue as raised by the ld. PCIT has already taken a plausible view and the same is clearly portrayed in the assessment order. The relevant finding of the ld. AO is reiterated here in below:

2. The assessee is a Co-operative society registered under the Rajasthan Co- operative Societies Act, 1965 and engaged in the marketing of the agriculture produce grown by its member and purchase of agricultural implements, seeds or other articles intended for agriculture for the purpose of supplying them to its members. During the year under consideration the assessee co-operative society has claimed deduction u/s 80P(2)(d) and 80P(2)(a)(iii)(iv).

Based on the above arguments the ld. AR of the assessee submitted that the ld. AO has already based on the submission of the assessee has taken a view which is plausible view the same is not subjected to proceeding u/s. 263 and he has strongly opposed the action u/s. 263 of the Act. The ld. AR of the assessee also serviced the decision of the jurisdictional high court wherein the court has considered the allowability of the deduction u/s. 80(P)(2)(d) and he also serviced the decision of the coordinate bench of considered the issue and thus, based on this precedent the view taken by the ld. AO is plausible view and the same cannot be a subject of proceeding u/s. 263 of the Act.

S. No. Description of the case Page No. 1 ITAT ‘A’ Bench, Bangalore AY 2015- 1-13 16 M/s Krishnarajapet Taluk Agri Pro Co-op Marketing Society Ltd., Mandya v. Pr. Commissioner of Income-tax, Mysore 2 [2010] 188 Taxman 282 (SC) Supreme Court of India Totgars, 14-26 Co-operative Sale Society Ltd. v. ITO, Karnataka 3 [2017] 83 taxmann.com 140 (Karnataka) High Court of 27-54 Karnataka Principle Commissioner of Income-tax, Hubbali v. Totagars Co-operative Sale Society 4 [2016] 72 taxmann.com 64 (Gujarat) High Court of Gujarat 55-90 State Bank of India v. Commissioner of Income-tax Based on the above recent development in the law and decision of the various high court the ld. DR submitted that the order of the ld. AO is subject matter of 263 and has thus, justified the order of the ld. PCIT.

(i) The CIT must record satisfaction that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 of the Act cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the Assessing Officer has adopted one of the courses permissible under law or where two views are possible and the Assessing Officer has taken one view with which the does not agree. If cannot be treated as an erroneous order, unless the view taken by the Assessing Officer is unsustainable under law (vi) If while making the assessment, the Assessing Officer examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the Commissioner of Income-tax, while exercising his power under section 263 of the Act is not permitted to substitute his estimate of income in place of the income estimated by the Assessing Officer. (vii) The Assessing Officer exercises quasi-judicial power vested in his and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the Commissioner of Income-tax does not fee stratified with the conclusion. (viii) The Commissioner of Income-tax, before exercising his jurisdiction

26 Jhunjhunu Kraya Vikraya Sahakari Samiti Limited, Jhunjhunu vs. PCIT, Jaipur-2 under section 263 of the Act must have material on record to arrive at a satisfaction and (ix) If the Assessing Officer has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the Assessing Officer allows the claim on being satisfied with the explanation of the assessee, the decision of the Assessing Officer cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard.

Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,— (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or 27 Jhunjhunu Kraya Vikraya Sahakari Samiti Limited, Jhunjhunu vs. PCIT, Jaipur-2 (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.

In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 15/12/2022. Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 15/12/2022 *Ganesh Kumar आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Jhunjhunu Karya Vikrya Sahakari Samiti Limited, Jhunjhunu izR;FkhZ@ The Respondent- Pr. CIT, Jaipur-2, Jaipur 2. 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत xkMZ QkbZy@ Guard File (ITA No. 150/JP/2022) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत