SHRI KESHORAIPATAN SAHKARI SUGAR MILLS LIMITED,KOTA vs. PCIT, UDAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh jkBkSM+ deys'k t;arHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 208/JP/2022 fu/kZkj.k o"kZ@Assessment Years : 2017-18 cuke Shri Keshoraipatan Sahkari Sugar PCIT, Vs. Mills Ltd., Kota Udaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AACAS 5985 K vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Mahendra Gargieya (Adv.) & Sh. Devang Gargieya (Adv.) jktLo dh vksj ls@ Revenue by : Sh. James Kurian (CIT) lquokbZ dh rkjh[k@ Date of Hearing : 28/02/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 20/03/2023 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, Udaipur [ Here in after referred as Ld. PCIT ] for the assessment year 2017-18 dated 27.03.2022 as per provision of section 263 of the Act, which in turn arises from the order passed by the ITO, Ward, Bundi passed under Section 143(3) of the Income tax Act, 1961 (in short 'the Act') dated 25.11.2019. this appeal on the following grounds;

“1. The ld. PCIT, Udaipur erred in law as well as on the fact of the case in taking the action u/s 263, which is bad in law without jurisdiction and being void ab- initio, the same may kindly be quashed.

3. The ld. Pr. CIT seriously erred in law as well as on the facts of the case in assuming jurisdiction u/s 263 of the Act by wrongly and incorrectly holding that the AO failed to examine and verify the deduction claimed u/s 80P(2)(d) and seriously erred in cancelling/ setting aside the subjected assessment order passed u/s 143(3) dated 25.11.2019, with a direction to the AO to examine the claimed deduction so by the assessee. The assumption of jurisdiction u/s 263 and the impugned direction, being contrary to the provisions of law and facts on record hence, the proceedings initiated u/s 263 of the Act and the impugned order dated 27.03.2022 deserves to be quashed.

3 Shri Keshoraipatan Sahkari Sugar Mills Ltd., Kota vs. PCIT 6. Rs. 3,02,09,525/-: The Ld.(CIT) erred in law as well as on the facts of the case in denying the benefit of deduction claimed u/s 80P(2)(d) of Rs. 3,02,09,525/- by considering the receipt of interest income from cooperative bank as not eligible. The denial to the deduction, being contrary to the provisions of the law and facts, the deduction as claimed may be allowed in full.

7. The appellant prays your honor indulgences to add, amend or alter of or any of the grounds of the appeal on or before the date of hearing.”

3. Succinctly, the fact as culled out from the records is that the return of income declaring Rs. Nil/- income was E-filed on 04/08/2017. The case of the assessee was selected for limited scrutiny through CASS to examine the issue “Deduction under chapter VIA”. Consequently, notice u/s 143(2) was issued on 25/11/2018 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 notices, the assessee filed written submission electronically. The assessment was completed as per provision of section 143(3) on declared income on 25.11.2019 where in the returned income was accepted.

4. On culmination of assessment proceeding the Principal Commissioner of Income tax, Udaipur [ here in after referred as “PCIT”] on examination of the assessment records observed that the assessee has claimed deduction of interest income of Rs. 30209525/- u/s. 80(P)(2)(d). cooperative Banks. On examination of assessment order, it is seen that the assessee did not carry out any business activities since so many years including the year under consideration and the source of income is only interest income from investments in saving account and FDRs from various banks. The ld. PCIT further observed that the assessee co-operative society received FDR interest income from the Kota Nagrik Sahakari Bank at Rs. 1,49,81,040/- and from the Bundi Central Co-operative Bank Ltd. at Rs. 1,51,84,959/- and saving bank interest of Rs. 43,526/- from both the cooperative banks. The assessee claimed deduction u/s. 80(P)(2)(d) on the interest income of Rs. 3,02,09,525/- which was allowed by the AO. On this issue it is stated that deduction u/s. 80(P)(2)(d) of the Act, is allowable on the interest income received from any other cooperative society and not on the interest income received from any other co-operative banks. As the said interest income was received from other than co-operative society hence provision of section 80(P)(2)(d) are not applicable in this case.

Consequently, deduction u/s. 80(P)(2)(d) of the Act is not allowable to the assessee. The PCIT based on these observation stated that the deduction of Rs. 3,02,09,525/- was required to be disallowed and added to the total income of the assessee and the ld. PCIT further stated that AO has not completed the assessment without conducting enquiry on the issue of the said deduction. In view of these facts ld. PCIT stated that the assessment order is erroneous and prejudicial to the interest of revenue and accordingly a show cause notice u/s. 263 of the Act was issued on 21.02.2022.

5. In response assessee filed a detailed reply in the proceeding u/s. 263 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:

“4. I have considered the facts of the case and the submission of the assessee.

The assessee cited decision of the Hon'ble Supreme Court in the case of Malabar Industrial Company Ltd. Vs CIT 243 ITR 83 (SC) stating that order cannot be revised by the Pr. CIT u/s 263 of the IT Act, 1961. The reply of the assessee is not acceptable because the Hon'ble Supreme Court 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 order passed without applying the principles of natural justice or without application of mind"

The order passed by the AO u/s 143(3) on 25.11.2019 is erroneous and prejudicial to the interest of the revenue in terms of the above Judgement of the Hon'ble Supreme Court, as the AO has allowed interest u/s 80P(2)(d) on the incorrect assumption of facts and incorrect application of law and without application of mind also.

The assessee also furnished copy of registration of cooperative banks under the Rajasthan co-operative societies Act, IV of 1953 and RBI certificate of doing banking business.

The reply of the assessee is considered on this issue but not acceptable because on the RBI has given certificate/license to the cooperative banks for doing banking business and on the basis of the registration under Rajasthan co- operative societies Act, IV of 1953 these cooperative banks cannot be treated as cooperative society.

In its reply the assessee has furnished that Bundi Central Co-Operative Bank is registered under section 12, sub-section 2, clause (a)/(b) of the Rajasthan Co-operative society Act IV of 1953.

As per part V of Banking Regulation Act 1949 Co-operative bank means a "state co-operative bank, a central co-operative bank and a primary co-operative bank and "Co-operative society means a society registered or deemed to have been registered under any Central Act for the time being in force relating to the multi-State co-operative societies, or any other Central or State law relating to co- operative societies for the time being in force

As per part V of Banking Regulation act, 1949 a co-operative bank is different from the cooperative society.

It is seen that during the year deduction of Rs.3.02.09,525/- u/s 80P was allowed to the assessee which was received by the assessee on interest on FDR maintained with the Co-operative banks and other scheduled banks.

The assessee has claimed that deduction on interest on FDR maintained with Cooperative bank is covered under section 80P(2)(d).

The assessee relied upon the decision of the ITAT, Jaipur in & 419/JP/2017 in which reference to the judgement of Hon'ble Karnataka High Court in the case of Pr. CIT Vs The Totagars Co-operative Sale Society (2017) 392 ITR 74, wherein it held that Co-operative Bank would be included in the words "co-operative society has been made. It is seen that the deduction u/s 80(P)(2)(d) has been claimed on "interest" received from Co-operative banks. The question for consideration is whether a With regard to the reliance on the Hon'ble Kamatak High Court Judgement in the case of Totagar's Cooperative Sales Society (2017) 392 ITR 74, it is pertinent to mention here that the relied upon judgment has been reviewed by the Hon'ble Karnatak High Court in the very same case in Appeal No 100066/2016 decided on 16.06.2017 and its earlier finding on the issue has been reversed. In its subsequent judgment the High court held that "the character or nature of income, namely interest on investments or deposits, did not change irrespective of the fact whether it was earned or received from a schedule bank or co-operative bank. Further, the amendment of section 194A(3)(v) excluding the co-operative banks from the definition of co-operative Society by Finance Act, 2015 and requiring them to deduct income tax at source u/s 194A also made the legislative intent clear that the co-operative banks were not that specie of genus co-operative society, which would be entitled to exemption or deduction under the special provisions of Chapter VIA in the form of section 80P. The person or body corporate from which such interest income was received would not change its character, viz. interest income not arising from its business operations, which made it ineligible for deduction u/s 80P. The income by way of interest earned by the assessee co-operative society on the investments made in the co- operative bank were not eligible for deductions u/s 80P(2)(d)."

Thus it is clear that for the purpose of section 80P(2)(d), the investment in Co-operative bank is not different from an investment made in a scheduled Bank. As the Co-operative bank is not in the nature of Co-operative society for the purpose of section 80P(2)(d), the interest received on FDRS maintained with the Co-Operative Bank cannot be treated as eligible for deduction u/s 80P(2)(d).

It is further stated that the co-operative societies accepted deposits of their members only and the societies advanced loans to their members only. whereas the Co-operative Bank accepted deposits and advanced loans to the general public also. This is the main difference between the cooperative society and the Co-operative Bank.

As per sub section 4 of section 80P of the IT Act, 1961, the provisions of section 80P 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. As per sub section 4 of section 80P, Co-Operative Bank is not The AO allowed deduction u/s 80P(2)(d) on the interest income received from Co-operative Banks.

The AO has thus erred in allowing the deduction u/s 80(P)(2)(d) on such interest income. Considering all the facts and circumstances of the case, the assessment order dated 25.11.2019 for A.Y. 2017-18 passed by the AO, allowing the deduction u/s 80P(2)(d) on the interest received from the Co-operative bank, is held to be erroneous in so far as it is prejudicial to the interests of the revenue for the purpose of section 263 of the I.T. Act. The order of the AO is, therefore, liable to revision under the explanation (2) clause (b) and clause (a) of section 263 of the Income Tax Act, 1961. Therefore, the assessment order on this issue is being set aside to be made afresh. Adequate opportunity of being heard should be allowed to the assessee before passing the fresh order.

The order of the AO is, accordingly, set aside on the issues as discussed above.”

“FACTS: The assessee had filed its return of income for A.Y. 2017-18 on 04.08.2017 declaring total income of Rs. Nil (Agriculture Income of Rs 4,45,910). Thereafter, the case of the assessee was selected for scrutiny through CASS to examine the issue “deduction under Chapter VI-A”. The A.O. completed the scrutiny assessment of the assessee u/s 143(3) of the I.T. Act, 1961 on 25.11.2019 by accepting returned income. Thereafter, assessment records for the A.Y. 2017-18 was called for by the Ld. CIT, examined and noticed that: - “The assessee co-operative society received FDR interest income from the Kota Nagrik Sahkari Bank at Rs.1,49,81,040/-and from the Bundi Central Co-operative Bank Ltd. at Rs.1,51,84,959/-& saving bank interest

9 Shri Keshoraipatan Sahkari Sugar Mills Ltd., Kota vs. PCIT of Rs. 43,526/-from both the cooperative banks. The assessee claimed deduction u/s 80P(2)(d) on the interest income of Rs.3,02,09,525/-which was allowed by the AO. On this issue it is stated that deduction u/s 80P(2)(d) of the Act, is allowable on the interest income received from any other cooperative society and not on the interest received from the Cooperative banks. As the said interest income was received from other than the cooperative society, hence Provisions of section 80P(2)(d) are not applicable in this case. Consequently, deduction u/s 80P(2)(d) of the I.T. Act of Rs.3,02,09,525/- is not allowable to the assessee. Hence the deduction of Rs.3,02,09,525/- was required to be disallowed and added to the total income of the assessee. However, such amount was not disallowed by the Assessing Officer. In view of above discussion, it is clear that the A.O. has not examined the issue of deduction u/s 80P(2)(d) of the I.T. Act, 1961 properly and completed the assessment in this case without conducting proper enquiry on the issue of the said deduction.” Show Cause Notice u/s 263 was issued on 21.02.2022. (PB 49-51) and duly replied by the assessee vide written submissions dated 26.02.2022 (PB 52-55), partly reproduced in para 3 of the impugned order. The ld. CIT however, not feeling satisfied, held the assessment order dated 25.11.2019 as erroneous and prejudicial to the interest of the revenue stating that (relevant extracts only): The reply of the assessee is considered on this issue but not accepted because on the RBI has given certificate/license to the cooperative banks for doing banking business and on the basis of the registration under Rajasthan Co-operative Societies Act, IV of 1953 these cooperative banks cannot be treated as cooperative society. x--------------x-------------------x--------------------------x------------------------x-------- ----------x As per part V of Banking Regulation act,1949 a co-operative bank is different from the cooperative society. It is seen that the deduction u/s 80(P)(2)(d) has been claimed on “interest” received from Co-operative banks. The question for consideration is whether a Co-operative bank is a Co-operative society, hence covered by section 80P (2)(d)? With regard to the reliance on the Hon’ble Karnataka High Court Judgement in the case of Totagar’s Cooperative Sales Society (2017) 392 ITR 74, it is pertinent to mention here that the relied upon judgment has been reviewed by the Hon’ble Karnatak High Court in the very same case in Appeal No 100066/2016 decided on 16.06.2017 and its earlier finding on the issue has been reversed. x--------------x-------------------x--------------------------x------------------------x-------- ----------x Thus, it is clear that for the purpose of section 80P(2)(d), the investment in Co-operative bank is not different from an investment made in a schedule bank. As the Co-operative bank is not in the nature of Co-operative society for the purpose of section 80P(2)(d), the interest received on FDRs

10 Shri Keshoraipatan Sahkari Sugar Mills Ltd., Kota vs. PCIT maintained with the Co-operative Bank cannot be treated as eligible for deduction u/s 80P(2)(d). It is further stated that the co-operative societies accepted deposits of their members only and the societies advanced loans to their members only whereas the Co-operative Bank accepted deposits and advanced loans to general public also. This is the main difference between the cooperative society and the cooperative Bank. As per section 4 of section 80P of the IT Act 1961, the provision of section 80P shall not apply in relation to any co-operative bank other than the primary agricultural credit society or a primary co-operative agricultural and rural development bank. As per sub section 4 of section 80P, Co- Operative Bank is not a co-operative society and the provisions of this section are not applied on it. The AO allowed deduction u/s 80P(2)(d) on the interest income received from Co-operative Banks. The AO has thus erred in allowing the deduction u/s 80P(2)(d) on such interest income.” The order of the AO is, accordingly, set aside on the issues as discussed above. Hence, this appeal. SUBMISSIONS: 1. Legal Position on S.263 – Judicial Guideline: Before proceeding, we may submit as regards the judicial guideline, in the light of which, the facts of this case are to be appreciated.

1.1 The pre-requisites to the exercise of jurisdiction by the Commissioner u/s 263, is that the order of the Assessing Officer is established to be erroneous in so far as it is prejudicial to the interest of the Revenue. The Commissioner has to be satisfied of twin conditions, namely (i) The order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If any one of them is absent i.e. if the assessment order is not erroneous but it is prejudicial to the Revenue, S.263 cannot be invoked. This provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous as also prejudicial to revenue’s interest, that the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase 'prejudicial to the interest of the revenue' has to be read in conjunction with an erroneous order passed by the AO. Every loss of Revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. For example, if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law. Kindly refer Malabar Industrial Co. Ltd. v/s CIT (2000) 243 ITR 83 (SC).

1.2 Also kindly refer CIT v/s Max India Ltd. (2007) 295 ITR 282 (SC) wherein it is held that: "The phrase "prejudicial to the interests of the Revenue" in S. 263 of the Income Tax Act, 1961, has to be read in conjunction with the expression "erroneous" order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when the Assessing Officer adopts one of two courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the Revenue, unless the view taken by the Assessing Officer is unsustainable in law."

1.3 In CIT v/s Ganpat Ram Bishnoi (2005) 198 CTR (Raj) 546 held that from the record of the proceedings, in the present case, no presumption can be drawn that the AO had not applied its mind to the various aspects of the matter. In such circumstances, without even prima facie laying foundation for holding that assessment order is erroneous and prejudicial to interest in any matter merely on suspicious ground that the AO was required to make an enquiry, cannot be held to satisfy the test of existing necessary condition for invoking jurisdiction u/s 263. Jurisdiction u/s 263 cannot be invoked for making short enquiries or to go into the process of assessment again and again merely on the basis that more enquiry ought to have been conducted to find something. 1.4 In CIT v/s Rajasthan Financial Corporation (1996) 134 CTR 145 (Raj) held that: “Once 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 Offer allowed the claim being satisfied with the explanation of assessee, the decision of the Assessing Officer cannot be held to be erroneous simply because in his order not make an elaborate discussion in that regard.”

1.5 Abdul Hamid vs. ITO [2020] 117 taxmann.com 986 (Gauhati - Trib.) it was held that only probability and likelihood to find error in assessment order is not permitted u/s 263. Ratio of these cases fully apply on the facts of the present case, in principle.

2. Due application of mind: 2.1 In the present case jurisdiction u/s 263 of the Act is assumed on the ground that while completing assessment proceedings the AO did not verify / examine the deduction claimed u/s 80P(2)(d) properly and wrongly allowed the same. However, the DCIT seriously erred in cancelling/setting aside the subjected Assessment Order passed u/s 143(3) dated 25.11.2019. The assumption of 2.1.1 At the outset it is wrong to say that the AO completed the assessment without proper verification and examination of the issue and incorrect and incomplete appreciation of facts and law in as much as the AO had made a detailed enquiry and examination to the extend required of books of account, other records, the binding judicial guideline etc. 2.1.2 The relevant para of the assessment order dated 25.11.2019 (P.B 6-7) showing that the AO has examined each any every documents submitted by assessee during scrutiny proceedings, is reproduced below: “Return declaring Nil income (Agriculture income of Rs.4,45,910/-) was filed online by the assessee samiti on 04.08.2017 vide acknowledgement No. 132729291040817, which was processed u/s 143(1). The case was selected for scrutiny through CASS (Computer Aided Scrutiny Selection); to examine the issue “Deduction under chapter VI-A”, hence notice u/s 143(2) was issued on 10.08.2018 which was duly served upon the assessee by e-mail as well as served through regd. AD post. Due to change of incumbent, a notice u/s 142(1) along with Query letter issued to the assessee on 02-11- 2019 along with questionnaire requiring the assessee to furnish required details/ documents on or before 11/11/2019 online through e-assessment proceedings. No compliance was made by the assessee samiti. Thereafter again notice under section 142(1) of the I.T. Act, 1961 was issued on 12.11.2019 for compliance on or before 18.11.2019. In compliance, the assessee samiti has furnished written submission online through e-assessment proceedings. In compliance to the said notice, assessee samiti has submitted written submission along with computation of total income, Bank Statements, Interest certificates, Statement of agriculture income etc. which were placed on record. Books of accounts, bank statements were examined on test check basis.

2.2 Further, a perusal of Assessment Order u/s 143(3) dated 25.11.2019 it is revealed that the AO after considering the facts and submission of the assessee filed against notice u/s 142(1) issued on 12.11.2019 w.r.t. Deduction under chapter VI-A accepted the return income declared by the assessee samiti. (PB 8- 32). The relevant para from the order dated 25.11.2019 is reproduced as under: Brief facts of the case are that the assessee samiti derived interest income and agriculture income during the year under consideration. In return assessee samiti has declared gross total income of Rs.30218447/- and claimed deduction under chapter VI-A at Rs.3,02,18,447/- [deduction under section 80P(2)(c) (ii) of Rs.8922/- + deduction under section 80P(2)(d) at Rs.30209525/-] after that total income shown at Nil. Case of the assessee samiti was selected for scrutiny to examine the claim of deduction under chapter VI-A. The issue on which case was selected for scrutiny was examined. After considering the facts and submission of the assessee, return income declared by the assessee samiti is accepted.”

2.3 Selection of the case under CASS: Moreover, the very fact of selection of the case under CASS on the ground of deduction claimed u/s 80P(2)(d) followed by the issuance of the notices u/s 143(2), 142(1) along with questionnaire to the assessee. The AO raised very specific and relevant queries/called for explanation and evidences asking various details w.r.t., to produce Cash Book, Bank Book etc., goes to fully establish that the AO was fully alive to the issue in hand from all angles, whether it is factual or legal aspect involved. In the response of the notices, the assessee filed complete documents w.r.t. queries raised along with production of Cash Book, Bank and Account books etc. which was required by the AO time to time through the A/R, and the same were duly verified and examined by the AO. Despite there being complete application of mind by the AO on the issues involved the ld. PCIT had wrongly set aside the assessment order dated 25.11.2019. Therefore, it was nothing but a case of change of opinion and suspicion, hence, assumption of jurisdiction u/s 263 is not permissible.

14 Shri Keshoraipatan Sahkari Sugar Mills Ltd., Kota vs. PCIT x--------------x-------------------x--------------------------x------------------------x-------- ----------x Further the Hon’ble Karnataka High Court in case of PCIT and Another vs. Totagars Co-operative Sale Society (2010) 392 ITR 0074 as relied upon by the Ld. AR of the assessee as held in para 7 to 11 as under: - x---------------x-------------------x----------------------------x---------------------------x-- -------------x 11. The learned counsel has relied on the case of The Totgars Co- operative Sale Society Ltd. Vs. Income Tax. Officer, (supra). However, the said case dealt with the interpretation, and the deduction, which would be applicable under Section 80P(2)(a)(i) of the I.T. Act. For, in the present case the interpretation that is required is of Section 80P(2)(d) of the I.T. Act and not Section 80P(2)(a)(i) of the I.T. Act. Therefore, the said judgment is inapplicable to the present case. Thus, neither of the two substantial questions of law canvassed by the learned counsel for the Revenue even arise in the present case.” x--------------x-------------------x--------------------------x------------------------x-------- ----------x Thus, the Hon’ble High Court has held that the Co-operative Bank is considered to a cooperative society for the purpose of section 80P(2)(d). Accordingly, in view of the decisions as cited (supra), we do not find any error or illegality in the orders of the Ld. CIT(A) to the extent of the allowing the claim of the assessee u/s 80P(2)(d) in respect of interest income from deposits/FDRs with the Co-operative Banks.”

In absence of further challenge, has attained finality.

3.2 Since the AO acted in accordance with the law as interpreted by the jurisdictional HC, ITAT which prevailed on the date of the passing assessment order and continued even when Sec.263 order was passed hence, no fault can be found in his action and in particular, proceeding u/s 263 cannot be invoked in such a case. Kindly refer CIT vs. G.M. Mittal Stainless Steel (P.) Ltd. [2003] 130 Taxman 67/263 ITR 255 (SC) (DPB 53-56) wherein it was held: “In the instant case, the Commissioner had not recorded any reason whatsoever for coming to the conclusion that the Assessing Officer was erroneous in deciding that the power subsidy was capital receipt. Given the fact that the decision of the jurisdictional High Court was operative at the material time, the Assessing Officer could not be said to have erred in law. The fact that the instant Court had subsequently reversed the decision of the High Court would not justify the action of the Commissioner in treating the Assessing Officer's decision as erroneous. The power of the Commissioner under section 263 must be exercised on the basis of the material that was available to him when he exercised the power. At that time, there was no dispute that the issue whether the power subsidy should be treated as capital receipt had been concluded against the revenue. The satisfaction of the Commissioner, therefore, was based on 15 Shri Keshoraipatan Sahkari Sugar Mills Ltd., Kota vs. PCIT no material, either legal or factual, which would have given him the jurisdiction to take action under section 263. [Para 5]”

Also relied CIT, LTU, Bangalore vs. Canara Bank [2021] 123 taxmann.com 207 (Karnataka).

4. On Merits: 4.1 In fact, the issue whether a cooperative bank can be considered as a “cooperative society” is no longer res integra. The source of interest/dividend income has to be a “cooperative society” which, is a wider term and is genus. A “cooperative society” can be of different nature, involving in different activities viz. cooperative purchase society, cooperative sales society, or cooperative bank etc. The cooperative bank thus, is a mere species of the genus and hence, would necessarily be covered by the word cooperative society.

4.2 Further, in Sec 2(19) of the Act, the term Cooperative Society has been defined as under: "co-operative society" means a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies”. The Act has not recognized Co-operative bank. The two banks are Cooperative Society registered under Rajasthan Co-operative Society Act, 1953 and getting benefit under Act also as a Co-operative Society.

4.3 There apart, even Sec 56(i)(ccv) of the Banking Regulations Act, 1949 defines a Primary Cooperative Society Bank as a Cooperative Society. Therefore, a Cooperative Society Bank is impliedly included in the word ‘Co- operative Society’. This view has been taken in the cases of:

4.4 Other supporting case laws on merit: i. The ITAT Raipur Bench in Gramin Sewa Sahakari Samiti Maryadit v. ITO [2022] 138 taxmann.com 476 (Raipur - Trib.) held that: “Co- operative bank falls within realm of definition of 'co-operative society' as contemplated in section 2(19); therefore, dividend income received by assessee co-operative society from a co-operative bank, would be eligible for deduction under section 80P(2)(d). Whether Commissioner (Appeals) had erred in confirming rejection of assessee's claim for deduction of dividend income under section 80P(2)(d)?

It is viewed that a Co-operative bank falls within the realm of the definition of Co- operative Society' as contemplated in section 2(19), therefore, the view taken by the lower authorities that dividend income received by the assessee from a Co-operative Bank, would not eligible for deduction under section 80P(2)(d) cannot be sustained. Thus, the view taken by the lower authorities is not agreeable and the disallowance of the assessee's claim for deduction under section 80P(2)(d) is vacated. Thus, this Ground of appeal is allowed in terms of the aforesaid observations. [Para 22] ii. Solitaire CHS Ltd. vs. Pr. CIT [IT Appeal No. 3155 (Mum.) of 2019, dated 29-11-2019]; (ITAT "G" Bench, Mumbai); iii. Kaliandas Udyog Bhavan Premises Co-Op. Society Ltd. v. ITO [2018] 94 taxmann.com 15 (ITAT Mumbai); and iv. Majalgaon Sahakari Sakhar Karkhana Ltd. v. Asstt. CIT [2019] 105 taxmann.com 100 (Pune - Trib.). v. DCIT-tax, Circle-6, Jaipur Vs. Jaipur Zila Dugdh Utpadak Sahakari Sangh Ltd. & 634/JP/2019 for AY 2011-12 & 2012-13

4.5 Thereapart, the other facts which influenced the Hon’ble Karnataka High Court in Totagar 395 ITR 611 [in para 23], based on which decision against assessee was taken, were that the assessee in that case deposited its surplus funds in the cooperative banks, which is not a fact in this case nor it is so alleged by the ld. PCIT (and rightly so because the assesse acted as investor only for whom the entire fund was to be put in the investment leaving no surplus or ideal fund at all). In the absence of a categorical finding on this factual aspect, which could be a jurisdictional fact, the ratio laid in the later decision of Totagar (supra) was wrongly held applicable by the ld. PCIT in the impugned order.

4.6 In any case, the law is well settled that, in case of conflicting judgement, the view favorable to the assessee must be accepted as held in the case of Vegetable Product 88 ITR 192 (SC). and K. Subramanian 156 ITR 11 (Bom.)

4.7 Rule of Consistency Obliged the AO: There is no dispute that not only in the subjected AY but since last several years including A.Y. 2013-2014, 2014-2015 when this controversy arose and was decided in favour assessee, in the later year from A.Y. 2015-2016 onwards till AY 2017-2018, the same facts and circumstances continued and the assessee had been making claim u/s 80P(2)(d) only on the subjected interest income yet however, the department never took a departure. All those assessments stood competed u/s 143(1) and were not disturbed u/s 147 and/or u/s 263 and hence had attained finality. This was because all the earlier Assessing Officer including the present one had been following the rule of consistency and therefore were correctly allowing the deduction so claimed, so also did the A.O. in the subjected year. Therefore, there was no scope of any error in such an action.

17 Shri Keshoraipatan Sahkari Sugar Mills Ltd., Kota vs. PCIT 5.1 Substitution of opinion, not Permissible-Possible view taken by the AO: Thus, the AO certainly did form an opinion by taking a conscious possible decision in view of the facts available on record, investigated by him and the available juridical guideline particularly those binding upon him. It is only after considering all the relevant aspects, relevant facts and the binding decisions more particularly, the ITAT order in assessee’s own case for AY 13-14 & 14-15, the AO allowed the deduction claimed u/s 80P(2)(d) of the Act. However, in the impugned order, the ld. PCIT imposed his opinion, which shows that it is a case of substitution of opinion. The later decision of Karnataka High Court was wrongly relied upon in the context of Sec 263 when the AO was bound by the Rajasthan High court decision in Rajasthan sahakari (Supra) and of ITAT Jaipur (supra). Notably, both the decisions remained unchallenged hence attained finality. Moreover, the majority of the High Courts and Tribunals have taken a favorable view whereas, Totagar 395 ITR 611 later judgement appears to be single High Court decision. Thus, the AO has taken a possible view and if a legally possible view has been taken by the AO, the CIT cannot invoke revisionary powers. 5.2 Supporting case laws on non-applicability of sec 263 in the context of sec 80P(2)(d): There are various decisions holding that where the AO has taken a possible view taking in mind the decision of both side; Sec 263 cannot be invoked.

5.2.1 Held in the cases of Bardoli Vibhag Gram Vikas Co.Op. Credit Society Ltd. Vs. PCIT-2, Surat [2021] 127 taxmann.com 334 (Surat-Trib.) (21.05.2021) (DPB 47-52)

5.2.2 Recently the Hon’ble ITAT Pune Bench 'B' in Rena Sahakari Sakhar Karkhana Ltd. v. PCIT [2022] 138 taxmann.com 532 (Pune - Trib.) (07.01.2022) (DPB 42-46) has also quashed the order passed u/s 263 on similar controversy involved relating to allowability of deduction u/s 80P(2)(d) by holding that the AO while framing the assessment has taken a possible view and allowed assessee's claim by holding that: “Section 80P, read with section 263, of the Income-tax Act, 1961 - Deductions - Income of co-operative societies (Interest income) - Assessment year 2013-14 - Assessee was a co-operative society - During year, it claimed deduction under section 80P(2)(d) in respect of an interest income earned on FDs kept by it with a co-operative bank - Assessing Officer allowed same - However, Pr. CIT invoked revision jurisdiction on ground that for claiming deduction under section 80P(2)(d), interest income should be received from co- operative society and not from co-operative bank which was commercial in nature - Accordingly, he passed a revision order denying benefits of deduction to assessee - Whether since co-operative bank from which assessee received interest income was registered as co-operative society under Co-operative Societies Act, 1912, interest income received from it was eligible for deductions under section 80P(2)(d) - Held, yes - Whether further, since Assessing Officer while framing assessment had taken a possible view and allowed assessee's claim for deduction under section 80P(2)(d) on interest income earned on its 18 Shri Keshoraipatan Sahkari Sugar Mills Ltd., Kota vs. PCIT deposits with a co-operative bank, Pr. CIT was in error in exercising his revisional jurisdiction under section 263 for dislodging same - Held, yes [Paras 8 to 10] [In favour of assessee]”

5.2.3 Covered Matter: Pertinently, the very issue of invoking Sec 263 in the context of the deduction allowed u/s 80P(2)(d) w.r.t interest received from Cooperative Bank, has also been decided by this honorable bench Rajasthan Cooperative Dairy Federation Ltd. Vs. PCIT, Jaipur-2 AY 2015-16 vide order dated 09.11.2021 (DPB 57-69) wherein also, the ld. PCIT relying upon later Totagar decision dated 16.06.2017 in 395 ITR 611 (Karn), held the Assessment Order erroneous (Para10). The Hon’ble ITAT however, in para 12 quashed the order u/s 263 relying upon Jaipur Zila Dugdh Utpadak and earlier Totagar 392 ITR 74 (Karn), held that the AO has taken one of the possible views hence, his order is not erroneous.

6. Rule of Consistency to be maintained: The Rule of Consistency mandatorily requires that in absence of any material change in the facts and circumstances, the earlier decision rendered by the ITAT in the case of the same assessee must be followed. Kindly refer para-38 of Godrej & Boyce Manufacturing Co. Ltd. v/s DCIT & Anr. (2017) (2017) 394 ITR 449/295 CTR 121(SC) wherein held that: "----While it is true that the principle of res judicata would not apply to assessment proceedings under the Act, the need for consistency and certainty and existence of strong and compelling reasons for a departure from a settled position has to be spelt out which conspicuously is absent in the present case. In this regard we may remind ourselves of what has been observed by this Court in Radhasoami Satsang vs. Commissioner of Income-Tax[6]. "We are aware of the fact that strictly speaking res judicata does not apply to income tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year." The earlier decision in the case of Radhswami Satsang vs CIT (1992) 193 ITR 321 (SC) at Pg-329 has been relied upon. In the instant case apart from the decision in assessee’s own case in earlier year, decisions in other cases involving similar controversies, and particularly RCDF in the context of Sec. 263 have been cited and there is no dispute that the facts and the controversy involved therein, are identical with those cases hence, there is no reason why those decisions should not be applied in this case.

7. The cases cited by the revenue based on peculiar facts, not available in the instant case and particular none of them is rendered in the context of Sec.263 hence, not applicable.

19 Shri Keshoraipatan Sahkari Sugar Mills Ltd., Kota vs. PCIT In view of the above legal and factual position, the proposed action u/s 263 is completely beyond the S. 263 and therefore, the impugned order deserves to be quashed.”

Relying on the above written submission and paper book so filed by the ld. AR of the assessee, he has 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:

“Brief facts of the case are that the assessee samiti derived interest income and agriculture income during the year under consideration. In return assessee samiti has declared gross total income of Rs.30218447/- and claimed deduction under chapter VI-A at Rs.3,02,18,447/- [deduction under section 80P(2)(c) (ii) of Rs.8922/- + deduction under section 80P(2)(d) at Rs.30209525/-] after that total income shown at Nil. Case of the assessee samiti was selected for scrutiny to examine the claim of deduction under chapter VI-A. The issue on which case was selected for scrutiny was examined. After considering the facts and submission of the assessee, return income declared by the assessee samiti is accepted.”

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 ITAT in assessee’s own case for A. Y. 2013-14 wherein the deduction of 80(P)(2)(d) is considered as allowable. The ld. AR of the assessee further submitted that the section of 20 Shri Keshoraipatan Sahkari Sugar Mills Ltd., Kota vs. PCIT the case was under CASS for verify specific issue of deduction under chapter VIA wherein the ld. AO has called for the details, applied his mind and given categorically finding in the assessment order the order cannot be considered as subject to revision u/s. 263 of the Act. To drive home to this contention the ld. AR of the assessee relied upon the various judgments as submitted in the written submission. Relying on that judicial precedent the ld. AR of the assessee submitted that 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.

21 Shri Keshoraipatan Sahkari Sugar Mills Ltd., Kota vs. PCIT • Krishnarajapet Taluk Agri Pro Co-op Marketing Society Ltd. vs. Principal Commissioner of Income-tax [2022] 137 taxmann.com 121 (Bangalore-Trib.)

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 revision u/s. 263 of the Act and has thus, justified the order of the ld. PCIT.

Thus, we are of the considered view that he ld. AO has taken a plausible view which is based on decision relied upon by the ld. AR of the assessee is one of the plausible views and we see that there is no lack of enquiry on the part of Ld. AO and we find that he has applied his mind and allowed the claim to the assessee.

There is no defect found from the enquiry that has been conducted by the ld. AO. He collected the information based on upon which he has allowed the claim to assessee and has verified the point raised in the limited scrutiny.

The decision and contentions raised by ld. DR contradictory so as to allowability of deduction and thus based on the decision of vegetable products the view which is favourable to the assessee shall be taken and the ld. AO has based on that set of facts taken a plausible view and completed the assessment. The ld. PCIT did not find any specific error or default of AO and thus we see no reasons in interfering the view that has already been taken. 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. 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

25 Shri Keshoraipatan Sahkari Sugar Mills Ltd., Kota vs. PCIT 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.

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,—

26 Shri Keshoraipatan Sahkari Sugar Mills Ltd., Kota vs. PCIT (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 (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 20/03/2023. Sd/- Sd/- ¼ lanhi xkslkbZ ½ ¼ jkBkSM deys’k t;arHkkbZ ½ (Sandeep Gosain) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 20/03/2023 *Ganesh Kumar आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Shri Keshoraipatan Sahkari Sugar Mills Ltd., Kota 2. izR;FkhZ@ The Respondent- PCIT, Udaipur 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 208/JP/2022) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत