JANATA GRAHAK MADHYAWARTI SAHKARI SANGH MARYADIT,PUNE vs. PCIT-4, PUNE, PUNE
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Income Tax Appellate Tribunal, PUNE BENCHES “A” :: PUNE
Before: SHRI SATBEER SINGH GODARA & DR. DIPAK P. RIPOTE
आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This is an appeal filed by the assessee against the order of ld.Principal Commissioner of Income Tax-4, Pune under section 263 of the Act dated 28.03.2022. The grounds of appeal raised by the assessee are as under : “1. The learned PCIT-4, Pune erred in law and on facts in assuming jurisdiction u/s 263 of the ITA, 1961 on the analogy that the order passed u/s 143(3) of the ITA, 1961 dated 14/11/2019 was erroneous and prejudicial to the interest of the revenue.
ITA No.1273/PUN/2023 Janata Grahak Madhyawarti Sahkari Sangh Maryadit [A]
The learned PCIT-4, Pune erred in law and on facts in not appreciating the fact that all the details / information relating deduction u/s 80P(2)(d) claimed w.r.t interest income weresubmitted during the scrutiny proceeding u/s 143(3) of the ITA, 1961 and were duly verifiedby the learned AO. As such the order u/s 143(3) of the ITA, 1961 is neither erroneous norprejudicial to the interest of the revenue. 3. The learned PCIT-4, Pune erred in law and on facts in not appreciating that various courts have held that deduction u/s 80P(2)(a) and 80P(2)(d) of the ITA, 1961 are eligible on interest income earned from fixed deposits with co-operative bank, as the same is incidental to the activity of appellant. 5. The learned PCIT-4, Pune erred in law and on facts in not appreciating that Supreme Court in the case of The Mavilayi Service Co-Operative Bank Ltd. & ORS. Vs. Commissioner ofIncome Tax - (2021) 431ITR 1 (SC) has held that interest earned by a Co-operative Societyfrom a Co-operative bank is entitled for deduction u/s. 80P(2)(d) of ITA, 1961. 6. The learned PCIT-4, Pune erred in law and on facts in not appreciating that various courts have held that deduction u/s 80P(2)(d) of the ITA, 1961 is eligible on interest income earned from fixed deposits with co-operative bank. 7. The learned PCIT-4, Pune erred in law and on facts in not appreciating that deduction u/s 80P(2)(a) and 80P(2)d) has been allowed to appellant since past many years and therebyviolating the principle of consistency / res judicata as so held by Apex Court in Radhasoami Satsang vs CIT [1992] 60 Taxman 248 (SC) 8. Appellant craves leave to add / amend / modify / delete all / any of the grounds of appeal.” 2. Submission of ld.AR : 1. Appellant is a Consumer Co-operative Society, registered under Co-operative Societies Act formed in the year 1975. Since last 48 year, appellant runs a departmental store and carried out activities of trading in consumer goods namely Grocery, stationery, sugar, dry-fruit, kitchenware, textiles. Appellant purchases goods from wholesale market and sells them in retail market.
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Appellant has filed its return of income for AY 2017-18 on 15/10/2017 by declaring total income of Rs 2,95,20,410 and by claiming deduction u/s 80P of the ITA, 1961 of Rs 5,91,63,718.
Scrutiny Proceedings u/s 143(3) of the ITA, 1961
Appellant was subject to scrutiny proceedings u/s 143(3) of the ITA, 1961 for AY 2017-18. A brief event chart w.r.t scrutiny proceedings is as follows:
Date Event 17/08/2018 Notice u/s 143(2) of the ITA, 1961 issued by learned AO (ACIT, Circle 12, Pune) thereby intimating that return has been selected for scrutiny proceedings 26/07/2019 Notice u/s 142(1) of the ITA, 1961 issued by learned AO thereby seeking following information and documents:
- Note on business activities - Ledger accounts, confirmation of shareholders - Details w.r.t to unsecured loans/deposits - Details w.r.t provisions - Justification w.r.t huge deduction claimed under chapter VIA - Any various other details
03/08/2019 In response to the notice dated 26/07/2019, appellant sought adjournment as the Tax Consultant was preoccupied with Income Tax Return filing and Tax Audits
20/08/2019 Notice u/s 142(1) of the ITA, 1961 issued by learned AO which was verbatim same as that of notice dated 26/07/20190
25/09/2019 In response to the notice dated 20/08/2019 appellant submitted the requisite information and documents along with justification w.r.t huge deduction under chapter VIA that it has claimed deduction u/s 80P amounting to Rs 5,91,63,718 along with certificates from banks
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04/10/2019 Notice u/s 142(1) of the ITA, 1961 issued by learned AO thereby seeking following information and documents: List of members of the society, deposits from members of society - Justification w.r.t claim of depreciation along with invoices of assets Details of outstanding sundry creditors Supporting documents w.r.t deduction claimed under chapter VIA
09/10/2019 In response to notice dated 04/10/2019, appellant submitted requisite documents and information along with a detailed listing of co-op banks from whom interest is received w.r.t which deduction u/s 80P is claimed by the appellant. Appellant also submitted copies of interest certificates received from banks 22/10/2019 Show Cause Notice issued by learned AO by proposing a addition of Rs 5,91,63,718 w.r.t deduction claimed u/s 80P of the ITA, 1961 with following: Whole of interest received from Co-op banks which is not from operational activities, constitutes as income from other sources Relied on the judgment of Totgars' Co-operative Sale Society Ltd vs ITO[{322 ITR 283 (SC)] in support of contention Appellant received interest from Co-op Bank and not from Co-op Societies. Only interest from Co-op Societies covered u/s 80P Violation of Principle of Mutuality 06/11/2019 In response to the Show Cause Notice, appellant submitted following: Deposit kept in the Co-op banks are out of operational activities of the appellant, hence eligible of deduction u/s 80P(2)(d) Difference in the nature of activities carried out by appellant and Totgars' Co-operative Sale Society Ltd, hence distinguishable Co-op Banks are registered under Co-op Society Act, as such covered u/s 2(19) of the ITA, 1961 No any violation of Principle of Mutuality the interest received from the deposit is utilized for the objects of the Society, which is nothing but the benefit of members 14/11/2019 Assessment order u/s 143(3) passed by the learned AO thereby accepting the total income of the appellant without drawing any adverse inference w.r.t deduction u/s 80P(2)(d)
Submission of ld.DR : 3. The ld.DR relied on the order of the ld.Pr.CIT.
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Findings and analysis: 4. The ld.Authorised Representative(ld.AR) of the assessee submitted that his case is covered by the decision in his own case in ITA No.573/PN/2013 dated 27.11.2013 wherein ITAT has held as under : “2. At the outset of hearing, learned Authorized Representative pointed out that this issue is covered in favour of assessee by the decision of ITAT, Pune B Bench in ITA No.1047/PN/2012 in the case of ACIT Vs. M/s. Bajaj Auto Ltd. Employees Co-op. Credit Society Ltd., wherein the Tribunal has decided the issue in favour of the assessee by observing as under:
“4. We have heard the Ld. DR. None was present for the assessee. We have also perused the order of the authorities below. In our opinion so far as the amount of interest received on the deposit with Aurangabad District Central Co-operative Bank is concerned the Assessing Officer has not properly appreciated the provisions of law. Sec. 80P(2)(d) reads as under:
80P(1): Where, in the case of an assessee being a cooperative 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 sums specified in subsection (2), in computing the total income of the assessee.
80P(2): The sums referred to in sub-section (1) shall be the following, namely: (a) ……….. (b) ……….. (c) ………..
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2(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;
Sub-sec. (4) of Sec. SOP has withdrawn the deduction to the co operative bank other than primary agricultural credit society or a primary co-operative agricultural and rural development bank w.e.f. the A.Y. 2007-08. The said provision is applicable to the Aurangabad District Central Co-operative Bank (ADCCB) in which the assessee society has kept deposit. The withdrawal of deduction by insertion of Sub-section (4) of Sec. SOP does not change "status" of Aurangabad District Central Co-operative Bank "as a co-operative society which is contemplated in Sec. 80P(1) of the Act. We, therefore, hold that the interest received on the deposit with the Aurangabad District Central Co operative Bank by the assessee on the deposits are squarely covered u/s. 80P(l)(d) and the interest received on deposit kept with the Aurangabad District Central Cooperative Bank is an allowable deduction. So far as the finding of the Ld. CIT(A) that the provisions of Sec. 80P(2)(a)(i), in our opinion the decision of the Hon'ble Supreme Court in the case of Totagars Cooperative Vs. ITO (supra) is against the assessee as interest received on deposits with Aurangabad District Central Co- operative Bank cannot be said to be the income derived from providing credit facilities to its members. We, accordingly, answer the ground taken by the revenue. But, finally we have confirmed order of Ld. CIT(A) giving relief to the assessee u/s. 80P(2)(d).”
2.1 Facts being similar, so following the same reasoning, the assessee is entitled to deduction u/s.80P(2)(d). In view of above, assessee is eligible for claiming deduction u/s.80P(2)(d) of I.T Act,
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which is available for income earned from business and not from other sources as rightly held by CIT(A). We uphold the same.
In the result, appeal filed by revenue is dismissed.”
Learned Pr.CIT observed in the order under section 263 of the Act that assessee has received interest income of Rs.5,80,64,686/- and assessee had claimed deduction under section 80P of the Act. Ld.Pr.CIT in the order under section 263 had held that Assessing Officer failed to examine assessee’s eligibility with respect to interest received from Co-operative Banks for deduction under section 80P(2)(d).
5.1 In this case, assessment order under section 143(3) of the Act was passed by AO on 14.11.2019 accepting the Returned Income, and allowing claim of deduction of Rs.5,91,63,718/- under section 80P of the Act. During the assessment proceedings, the Assessing Officer vide notice dated 25.09.2019 had asked assessee to submit details of deduction claimed under Chapter-VIA along with documentary evidence. The assessee vide letter dated 17.10.2019 filed a details of interest received from Co-operative Banks totaling to Rs.5,91,63,718/-. In the said submission assessee also mentioned that assessee had
ITA No.1273/PUN/2023 Janata Grahak Madhyawarti Sahkari Sangh Maryadit [A]
claimed deduction under section 80P(2)(d) of the Act for the interest of Rs.5,91,63,718/- following a decision of ITAT Pune in assessee’s own case for A.Y.2009-10, wherein the ITAT has allowed deduction under section 80P(2)(d) on identical facts. Thus, it is observed that the AO after considering the submission of the assessee allowed the deduction under section 80P(2)(d) of the Act, following the ITAT order in the case of assessee in ITA No.573/PUN/2013 for A.Y.2009-10. The AO is duty bound to follow the ITAT’s Order of earlier years in assessee’s own case when facts are same. The Hon'ble Supreme Court has held in the case of Union of India Vs. Kamlakshi Finance Corporation, AIR 1992 SC 711 that the Assistant Collector has to follow orders of the Higher Appellate Authority. In the case of Kamlakshi Finance Corporation, Assistant Collector was the Assessing Officer. Thus, law laid by the Hon'ble Supreme Court is that the Assessing Officer has to follow orders of Higher Appellate Authority. Therefore, the assessment order cannot be held as erroneous or prejudicial to the interest of the Revenue.
5.2 The Hon’ble Supreme Court in the case of CIT Vs. Amitabh Bachchan, 384 ITR 200(SC) observed as under :
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“21. There can be no doubt that so long as the view taken by the Assessing Officer is a possible view the same ought not to be interfered with by the Commissioner under Section 263 of the Act merely on the ground that there is another possible view of the matter. Permitting exercise of revisional power in a situation where two views are possible would really amount to conferring some kind of an appellate power in the revisional authority. This is a course of action that must be desisted from.”
5.3 The Hon’ble Madras High Court in the case of CIT v/s Mepco Industries Ltd. 294 ITR 121 (Madras) held as under : Quote, “8. Therefore, on the facts of the case, when two views are possible and it is not the case of the Revenue that the view taken by the Assessing Officer is not permissible in law, the CIT is not justified in invoking the jurisdiction under section 263 of the Act. ” Unquote.
5.4 The Hon’ble Bombay High Court in the case of CIT Vs. Future Corporate Resources Ltd in IT Appeal No.1275 of 2017 vide order dated September 29, 2021 held as under : Quote ,“ 7. In the order of PCIT it is stated "in paragraph 4.3 of the assessment order, the Assessing Officer has recorded that from the details submitted by the assessee and the explanation given by him, it was observed that assessee had regular business connection with the company in which investment had been made and also there was business income to the assessee from the same. Therefore, interest expense debited by the assessee has not been considered for the calculation of disallowance under section 14A because the same has been incurred for the purpose of business."
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The PCIT therefore agrees that the Assessing Officer has recorded from the details submitted by respondent and the explanation given by respondent that the assessee had regular business connection with the company in which investment has been made and also there was a business income to the assessee from the same. He notes that the Assessing Officer, therefore did not consider the calculation of disallowance under section 14A the interest expense debited by the assessee because the same has been incurred for the purpose of business. The PCIT though was unhappy with the view of the Assessing Officer, the PCIT himself does not say why it should have been considered for the calculation of disallowance under section 14A. Even if one assumes that he has, after reading of the order expressed his views, but still the position is two views therefore were possible. Therefore, if one of the two possible views was taken by the Assessing Officer, the PCIT could not have exercised his powers under section 263 of the Act. 8. ” Unquote .
5.5 Thus, the principal of the law emanating from the above decision of the Hon’ble Supreme Court, the Hon’ble Madras High Court, the Hon’ble Bombay High Court is that when two views are legally possible and AO adopts one view the Assessment Order cannot be said to be erroneous for the CIT to invoke jurisdiction under section 263 of the Act.
In this case, though ld.Pr.CIT may be of the view that assessee was not eligible for deduction under section 80P(2)(d) of the Act, however, the AO had allowed the deduction after
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considering assessee’s submission and following the ITAT Order in assessee’s own case for earlier year. Therefore, the assessment order is not erroneous and prejudicial to the interest of the Revenue for the ld.Pr.CIT to invoke provisions of section 263 of the Act. Accordingly, grounds of appeal raised by the assessee are allowed.
In the result, appeal of the assessee is allowed. Order pronounced in the open Court on 25th January, 2024.
Sd/- Sd/- (S.S.GODARA) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; �दनांक / Dated : 25th January, 2023/ SGR* आदेशक��ितिलिपअ�ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, “ए”ब�च, पुणे / DR, ITAT, “A” Bench, Pune. गाड�फ़ाइल / Guard File. 6.
आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.
