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Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;djvihy la-@ITA No.194/JP/2022
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;djvihy la-@ITA No.194/JP/2022 fu/kZkj.ko"kZ@Assessment Years :2017-18 cuke Shri Madhopur KrayaVikraya Sahkari PCIT-2 Samiti Limited, Vs. Jaipur 3, Near Railway Station Shri Madhopur Sikar LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAJAS 8075 K vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Sh. Vedant Agarwal (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: 15/11/2022 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-1 [ 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 ACIT, Sikar passed under Section 143(3) of the Income tax Act, 1961 (in short 'the Act') dated 25.11.2019.
2. The assessee has taken following groundsin this appeal; 2 Sh. MahopurKrayaVikrayaSahkari Samiti vs. PCIT-2 Jaipur “1. On the facts and circumstances of the case and in law also LD PCIT Jaipur-2 grossly erred in initiating revision proceedings u/s 263 of the Income Tax Act, 1961 as order passed by the assessing officer was not erroneous.
2. On the facts and circumstances of the case LD PCIT Jaipur-2. Jaipur grossly erred in holding that cooperative bank is not cooperative society for claiming of deduction u/s 80P(2)(d), whereas various High Court and ITAT Benches have already decided that Cooperative bank is also a cooperative society.
3. On the facts and circumstances of the case, LD PCIT Jaipur-2, Jaipur grossly erred in not considering the decision of Hon'ble Rajasthan High Court in the case of CIT V/S Rajasthan Rajya Sahakari Kray Vikraya Sangh Ltd dated 01-09-2016 in DB IT No 139/2002,20.24 & 27/2004. In this case Hon'ble Rajasthan High Court held that Jaipur Central Cooperative Bank is a cooperative society registered under cooperative society Act and is eligible for deduction under section 80P(2)(d) of the Act.
4. On the facts and circumstances of the case. LD PCIT Jaipur-2, Jaipur grossly erred in holding that A.O. has not verified the issue while completing assessment. From the assessment record it is clear and verifiable that assessing officer allowed the deduction under section 80P(2)(d) after verifying all the documents regarding claim of deduction U/s 80P(2)(d).”
The fact as culled out from the records is that the assessee has e- filed its return of income on 26.10.2017 declaring total income amounting to Rs. 17,54,030/- for the assessment year under consideration. The return filed by the assessee was processed u/s 143(1) of the Income Tax Act, 1961. Further, case of the assessee was selected for Limited Scrutiny under CASS, and a Notice u/s 143(2) of the Income Tax Act, 1961 dated 09.08.2018 issued to the assessee by ITO, Ward-Neem Ka Thana online through ITBA and duly served upon the assessee by e-mail.
The assessee, a co-operative society, was engaged in marketing of agricultural products to its members and declared total income of Rs. 17,54,030/- and also claimed Rs. 55,01,990/- under Chapter-VIA under consideration.
On culmination of the assessment proceeding, the PCIT-2, Jaipur has called for and examined the case record. The PCIT found that the case was selected for limited scrutiny through CASS and completed at assessed income at Rs. 17,54,030/-. On examination of the assessment record, it is observed that the deduction of interest income of Rs. 51,29,967/- has been claimed u/s. 80(P)(2)(d). The interest of Rs. 51,29,967/- on FDR received from Sikar Kendriya Sahakari Bank Limited has been claimed and the same was allowed by the AO, which is not allowable u/s.80(P)(2)(d) of the Act. The PCIT found that it is factually apparent that the AO has not verified the issue while completing the assessment. In view of this position, it appears that the assessment order passed u/s. 143(3) of the Act, passed on 25.11.2019 is erroneous in so far as it is prejudicial to the interest of the revenue as the interest of the revenue regarding the non-application of the law on the grant of deduction u/s. 80(P)(2)(d) and as the assessment order was passed mechanically without application of mind for the reason mentioned in the notice issued. During the examination of records of the society it was noticed that assessee co-operative society had received interest of Rs. society. Therefore, the deduction claimed u/s. 80(P)(2)(d) of Rs. 51,29,967/- was wrongly allowed. The assessee has not submitted any details of interest earned from the Sikar KendriyaShakari Bank Limited or any other bank. Therefore, the facts of the society could not be verified in absence of proper documents which have not been filed during the assessment proceedings. This has resulted in order being erroneous and prejudicial to the interest of revenue. During the proceeding u/s. 263 the assessee claimed that the interest received is from the co-operative society, copy of the registration certificate was placed on record. The ld. PCIT observed that any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society is exempt. However, the assessee cooperative society has received interest from banks who are not themselves cooperative societies, therefore, the interest received is taxable and deduction u/s. 80(P)(2)(d) is not available to the assessee. Finally, the ld. PCIT has taken a final view which 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 conformity with the law.
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 25.12.2019 is erroneous and prejudicial to the interest of the revenue.
12. I have gone through the assessment order and case records and submission filed by the assesse, 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 conformity with the law. In reaching such conclusion, I am aided by the following judicial rulings:
1. The Hon'ble Supreme Court in the case of Malabar Industrial Limited V/S CIT243ITR 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".
In case of TTK LIG Ltd., v/s. ACIT(Mad) 51 DTR 228it has been held that Order would be erroneous if it is based on an incorrect assumption of facts or an incorrect application of law or nonapplication of mind or based on no or insufficient materials 3. Delhi High Court in Gee Vee Enterprises v. AdditionalCommissioner of Income-tax (1975) 99 ITR 375, has observed that “The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the fact of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word "erroneous" in section 263 emerges out of this context. It is because it is incumbent on the Income tax Officer to further investigate the facts stated in the return when circumstances should make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct.”
Madras High Court in the case of Seshasayee Paper & Boards Ltd. [2000] 242 ITR 490 (Mad.)has held that the powers of the Commissioner are very wide in exercising the powers of revision u/s 263. It is no doubt true that for making a valid order u/s 263, it is essential for the Commissioner to record an express finding that the order sought to be revised was erroneous as well as prejudicial to the interest of the revenue. However, there is nothing in section 263 to show that the Commissioner should in all cases record his final conclusion on the points in controversy before him. The legislative intent to bring the amendment was to make clear the provisions of Explanation to section 263 and to reduce the litigations in this regard which is well supported in view of the clear words used in clause (a) of the Explanation 2 to section 263(1) wherein it is mentioned that the order passed by the AO shall be deemed to be erroneous in so far as it is prejudicial to the interest of revenue, if in the opinion of the PCIT the order is passed without making inquiries or verification which should have been made. If the order is passed without application of mind, such order will fall under the category of erroneous order.”
Accordingly, by virtue of powers conferred on the undersigned under the provisions of section 263 of the Income Tax Act 1961, I hold that the order under Section 143 (3) of the IT Act dated 25.12.2019 for AY 2017-18 passed by the Assessing Officer is erroneous in so far as it prejudicial to the interest of revenue as the said order has been passed by the Assessing Officer in a routine and perfunctory manner without examining the issue of deduction u/s 80P(2)(d) of the Act. The order has thus resulted in wrong deduction of income to the assesse. The order of the Assessing Officer is therefore liable to revision under the clause (a), (b) & (c) of Explanation (2) to section 263 of the Income Tax Act. Hence, the assessment order is set aside as discussed above on the issue of deduction allowed u/s 80P(2)(d) of the Act.”
Aggrieved, from the said order of the PCIT, assessee has preferred this appeal on the grounds raised here in above. The ld. AR of the assessee submitted a detailed paper book and the same is extracted here in below:-
S. No. Particulars Page No. 1 Copy of notice dated 10-10-2019 & 19-11-2019 1-4 issued under section 142(1) of the Act 2 Copy of reply filed with ACIT, Circle Sikar dated 11-11-2019. 5-6 3 Copy of Assessment order passed u/s 143(3) dated 7-8 25-11 2019. 5 Copy of certificate issued by the Sikar Kendriya Sahakari 9-9 Bank Ltd. 6 Copy of certificate of registration of Sikar Kendriya Sahakari 10-10 Bank Ltd under the provision of Rajasthan Cooperative Society Act. 7 Copy of interest certificate issued by the Sikar Kendriya 11-11 Sahakari Bank Ltd. 8 Copy of reply filed with PCIT-2 Jaipur dated 28-02-2022. 12-14 9 Copy of decision of Hon'ble ITAT Jaipur Bench in the 15-26 case of Shahpura Gram Seva Sahakari Samiti Ltd, Shahpura V/S ITO dated 15-10-2020 in ITA No. 767/JP/2019. 10 Copy of decision of Hon’ble Rajasthan High Court in the 27-38 case of CIT vs. Rajasthan Rajya Sahakari Kray Vikraya Sangh Ltd. dated 01.09.2016 in DB IT No. 139/2002, 20,24 & 27/2004.
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 been taken up in the assessment proceeding vide notice dated 10.10.2019 and 19.11.2019. The same was replied by the assessee vide their letter dated 11.11.2019, the content of the reply is extracted here in below:
“ 1. Justification on applicability of provision of section 80P:- Sir, we are submitting herewith the computation of total income for the year under consideration for your kind perusal. The assessee has claimed deduction under chapter VIA as follows:- 80P (2)(d) Rs. 54,51,990/- 80P (2)(c)(ii) Rs. 50,000/- Sir, assessee has declared interest received from co-operative bank of Rs. 51,57,590/- and dividend from co operative societies Rs. 2,94,400/-. First one i.e. interest received from co-operative bank are exempt u/s 80P)2)(d) of the Income Tax Act, Certificate of Sikar Kendriya Sahkari Bank Ltd. in respect of interest received on FDR and copy of bank account for interest on saving bank account are submitted herewith for your kind perusal & verification. Likewise assessee has also received dividend of Rs. 2,94,400/- from co- operative society, copy of dividend account is submitted herewith. Copy of audited balance sheet & profit & loss a/c are also submitted in support of our submission. Sir, deduction of Rs. 50,000/- is covered u/s 80P(2)(c) (ii), which allow is general deduction of Rs. 50,000/-. Therefore we humbly submit that kindly accept the deduction claimed by the assessee.”
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 8 Sh. MahopurKrayaVikrayaSahkari Samiti vs. PCIT-2 Jaipur the Act. The ld. AR of the assessee also serviced the decision of the jurisdictional high court 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 this tribunal in the case of Shahpura Gram Seva Shakari Samiti Ltd. also 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.
Per contra, the ld DR is heard who has relied on the findings of the PCIT and has submitted the compilation of case law vide his submission dated 05.09.2022 the same is reiterated here in below • M/s Krishnarajapet Taluk Agri Pro Co-op Marketing Society Ltd., Mandya v. Pr. CIT Bang/2021 AY 2015-16. • Totgars, Co-operative Sale Society Ltd. vs. ITO (2010) 188 taxman 282(2010) (Hon'ble Supreme Court) • Pr.CIT v. Tatogars Co-operative Sale Society (2017)83 taxmann.com 140 (HC, Karnataka) • State Bank of India v CIT (2016) taxmann.com 64 ( HC , Gujarat) • Malabar Industrial Co. Ltd. vs. CIT (2000) 109 Taxman 66 (SC) • CIT vs. Balarpur Industries Ltd. (2017) 85 taxmann.com 10 (Bombay 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.
We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of applicable legal position and decisions relied upon. We find that there was specific questionswhich was raised and that too, two times by the assessing officer and detailed reply submitted by the assessee during the assessment proceedings. Yet, learned PCIThas subjected the assessment order to revision proceedings on the short ground that the Assessing Officer passed the assessment order "mechanically without application of mind" and concluded that "during the course of assessment proceedings AO have not verified the claim of deduction u/s. 80(P)(2)(d)”.
Everything thus hinges on whether assessee's submission being accepted can be faulted with, whether the assessee ought to have produced the appropriate evidence and whether non-recording of the reasons for accepting explanation will render the order erroneous and prejudicial to the interest of the revenue. In fact, there is a specific query and reference of the deduction claimed by the assessee is also founded place in the assessment order. Thus, we are of the considered view that upon by the ld. AR of the assessee is one of the plausible view and we see that there is no lack of enquiry on the part of Ld. AO.
Thus, ld.AO has examined that issue as it is evident form the submission made in the form of paper book filed by the assessee. As the case was for this limited purpose the same has been examined and verified by the ld. AO as it emerges from the findings of the AO. The ld. Pr. CIT evidently did not place on record any apparent error on the part of the AO so as to substantiate that order passed by the ld. AO is prejudicial to the interest of revenue. He only mentioned that the AO has not applied his mind to the issue in proper manner. He has not pin pointed any of the enquiry which is required to be made is not made by the ld. AO. and he has to examine the issue on merits. There is no further defect found from the record from the material that has been collected by the ld. AO to verify the point raised in the limited scrutiny.
The decision and contentions raised by ld. DR are all related to the fact that the ld. AO either has not examined the issue and the related enquiry on the issue apparently not done or not done to the extent it was required to be examined based on the facts. Since, in this case ld. AO has clearly conducted the enquiry and revenue did not pin point the error on the part of the assessing officer the order passed after due application of mind cannot be subjected to proceeding u/s. 263 of the Act. The ITAT Mumbai bench in the Mrs. Khatiza S. Oomerbhoy addressed this issue elaborately after referring to number of cases on revisionary powers vested in the Commissioner of Income-tax under section 263 of the Act and summed up the fundamental principles emerging from several cases as under-
(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 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.
Be that as it may, in our considered view, as the A.O while framing the assessment had taken a possible view, and revenue did not demonstrate the error remain on the part of the ld. AO. In fact, when the ld. AO has conducted the required enquiry and not violated any of the conditions mentioned for revision of order as required by Explanation 2of Section 263 of the Act, the order passed by the Assessing Officer could not be deemed to be erroneous so as to be prejudicial to the interests of the revenue.
For this it is relevant to extract the Explanation 2 of section 263 which the ld. DR has heavily relied upon:
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; 13 Sh. MahopurKrayaVikrayaSahkari Samiti vs. PCIT-2 Jaipur (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 (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.
Clearly, therefore, as long as the action of the Assessing Officer cannot be said to be lacking bonafides, his action in accepting an explanation of the assessee cannot be faulted merely because it could have been lawful to make mere detailed inquiries or because he did not write specific reasons of accepting the explanation. As for learned PCIT's observations regarding accepting the explanation "without appropriate evidence", there is nothing to question the bonfides of the Assessing Officer or to elaborate as to what should have been 'appropriate' evidence. The fact remains that the specific issue raised, in the revision order was specifically looked into, detailed submissions were made and these submissions were duly accepted by the Assessing Officer. Merely because the Assessing Officer did not write specific reasons for accepting the explanation of the assessee cannot be reason enough to invoke powers under section 263, and non-mentioning of these reasons do not render the assessment order "erroneous and prejudicial to the interest of the revenue". the case we vacate the impugned revision order. The assessee gets the relief accordingly.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 15/11/2022 Sd/- Sd/- ¼Mk0 ,l- lhrky{eh ½ ¼jkBksM deys'k t;UrHkkbZ½ (Rathod Kamlesh Jayantbhai) (Dr. S. Seethalakshmi) U;kf;dlnL;@Judicial Member ys[kklnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 15/11/2022 *Ganesh Kumar आदेश की प्रतिलिपिअग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Shri Madhopur KrayaVikrayaSahkari Samiti, Shrimadhopur 2. izR;FkhZ@ The Respondent- PCIT-2, Jaipur vk;djvk;qDr@ The ld CIT 3. vk;dj vk;qDr¼vihy½@The ld CIT(A) 4. विभागीय प्रतिनिधि] आयकरअपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. 6. xkMZQkbZy@ Guard File (ITA No. 194/JP/2022) vkns'kkuqlkj@ By order,
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