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Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: SHRI NARENDRA PRASAD SINHA
(�नधा�रण वष� / Assessment Year : 2017-18) बनाम/ Balasinor Vikas Co.Op. The Principal Credit Society Ltd. Commissioner of Income Vs. Rajpuri Darwaja, Opp. Tax Masjit, Balasinor - Vadodara-1, Baroda - 388255, Gujarat 390007 �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAAAB4748H (Appellant) .. (Respondent) अपीलाथ� ओर से /Appellant by : Shri Mehul K. Patel, Advocate ��यथ� क� ओर से/Respondent by Shri Sudhendu Das, CIT. DR : Date of Hearing 02/09/2024 01/10/2024 Date of Pronouncement O R D E R
PER SHRI NARENDRA PRASAD SINHA, AM:
This appeal is filed by the assessee against the order of the Principle Commissioner of Income Tax, PCIT, Vadodara-1 (in short ‘the PCIT’), dated 22.03.2024 passed under Section 263 of the Income Tax Act, 1961 (in short ‘the Act’) for the Assessment Year (A.Y.) 2017-18.
The brief facts of the case are that the assessee had filed his return of income for A.Y. 2017-18 on 18.10.2017 declaring Nil income. The original assessment was completed u/s.143(3) of the Act on 16.12.2019 at total income of Rs.15,50,868/-. Thereafter, the AO had initiated proceeding u/s.147 of the Act on the ground that the interest earned by the assessee on FD/Savings bank with co-operative banks amounting to Rs.31,39,316/- was not eligible for deduction u/s 80P(2)(d) of the Act and was liable to be assessed as ‘income from other source’. The AO had passed re- assessment order u/s. 147 r.w.s. 144B of the Act on 30.03.2022 on the income of Rs.15,50,864/- as per the original assessment order u/s. 143(3) of the Act dated 16.12.2019. In essence, no addition was made by the AO in the course of re-assessment proceeding. Thereafter, the ld. PCIT had called for the case records and held that the order u/s.147 of the Act dated 30.03.2022 was erroneous and prejudicial to the interest of Revenue for the reason that interest of Rs.31,39,316/- derived from other Co-operative Banks was not liable for deduction u/s. 80P(2)(d) of the Act and the AO had failed to make the addition. Accordingly, the Ld. PCIT had passed the impugned order directing to AO to make a fresh assessment and to make the disallowance u/s. 80P(2)(d) of the Act.
Aggrieved with the order of the PCIT, the assessee is in appeal before us.
The following grounds of appeal have been taken in this appeal:
(1) That on facts, and in law, the learned PCIT has grievously erred in exercising jurisdiction u/s 263 of the Act and further, the order passed u/s 263 is time-barred and void ab-initio. (2) That the learned PCIT has grievously erred in law, and on facts, in holding that the appellant is not entitled to claim deduction u/s 80P (2) (d) of the Act of Rs. 31,39,316/- in respect of dividend/ interest received from Co-operative Bank.
5. Shri Mehul K. Patel, Ld. AR appearing for the assessee submitted that the Ld. PCIT was not correct in holding that re- assessment order u/s.147 of the Act dated 30.03.2022 was erroneous and prejudicial to the interest of revenue. He has drawn our attention to the finding as recorded by the AO in the said order and submitted that the AO had given a categorical finding that the case was reopened on change of opinion and there was no failure on the part of the assessee to fully and truly disclose any material facts. The AO had, therefore, dropped the reopening proceedings and accepted the assessed income of Rs.15,50,864/- as per the original order u/s. 143(3) of the Act dated 16.12.2019. The Ld. AR contended that when the reopening proceeding was dropped by the AO on the ground of wrong assumption of jurisdiction, in essence, no re-assessment order was passed and, therefore, there cannot be any question of such order being erroneous and prejudicial to the interest of the revenue. According to the Ld. AR, if there was any mistake, it was in the original order u/s 143(3) of the Act dated 16.12.2019 and the time limit provided u/s.263 of the Act to revise that order had already lapsed. The Ld. AR also relied upon the decision of ITAT Delhi Bench in the case of Smt. Daya Rani vs. Pr.CIT in , dated 20.02.2024, wherein identical fact was involved and the Tribunal had held that the assumption of jurisdiction by the PCIT u/s.263 of the Act was not correct.
Per contra, Shri Sudhendu Das, the Ld. CIT. DR supported the order of the Ld. PCIT.
We have carefully considered the rival submissions. The undisputed facts are that the original assessment in this case was completed u/s.143(3) on 16.12.2019. The case was reopened by the AO for the reason that the deduction allowed u/s. 80P(2)(d) of the Act in respect of interest earned on FD/Savings Banks with other Co-operative Banks was not correct and income to that extent had escaped assessment. Thus, it was acknowledged in the reopening that the mistake in wrong allowance of deduction u/s 80P(2)(d) of the Act was in the original assessment order. In the course of re-assessment proceedings, the AO had made enquiry in respect of this interest income. It transpired that the interest was earned from The Kaira District Central Cooperative Bank Ltd. The AO had made enquiry from the said bank by issue of notice u/s.133(6) of the Act, in response to which, it was clarified that The Kaira District Central Cooperative Bank Ltd. was a Co- operative Society registered under the Cooperative Societies Act, 1912. On the basis of this enquiry, the AO had given a finding in the reassessment order that since the Cooperative Bank was also a Cooperative Society, the interest earned out of deposits made by the assessee with this Cooperative Society was allowable as deduction u/s.80P(2)(d) of the Act. The AO had also referred to the decision of the Jurisdictional High Court in the case of CIT vs. Sabarkantha District Co-Operative Milk Producers Union in Tax Appeal No.473 of 2014, dated 16.06.2014 and recorded his finding in the re-assessment order as under:
6.1. Duly following the above decision of the jurisdictional High Court and other decisions cited by assessee, it is concluded that there is no omission on the part of the assessee or the assessing officer vide Order dated 16/12/2019 passed u/s 143(3) allowing 80p(2) (d) deduction, therefore no action u/s 147 can be taken on this issue. Further, the same issue was already examined during the course of regular assessment and reopening on mere change of opinion is not in consonance with the decisions of jurisdictional high court and the Apex Court which are cited by assessee. The reason formed in violation of the above cannot be used to pass an Assessment order against the assessee and therefore the assessed income is accepted as given below.
It is evident from the above that the AO had categorically recorded that there was no omission on the part of the assessee or the AO in the original order u/s. 143(3) of the Act dated 16.12.2019 in allowing deduction u/s. 80P(2)(d) of the Act and, therefore, the action u/s. 147 of the Act was wrongly initiated. The AO had further recorded that this issue was also examined during the course of original assessment and that the reopening was based on mere change of opinion. In essence, the AO had dropped the reopened assessment proceeding and the income as determined in the original assessment u/s.143(3) of the Act was reiterated. Thus, when the re-assessment proceeding u/s.147 of the Act was dropped by the AO on the ground of change of opinion and also holding that the deduction u/s. 80P(2)(d) of the Act was correctly allowed in the original assessment, no order u/s.147 of the Act could have been legally passed. Therefore, the question of the order u/s.147 of the Act dated 30.03.2022 being erroneous and prejudicial to the interest of the revenue doesn’t arise, as the AO in essence had not passed any re-assessment order but had merely dropped the proceeding. The mistake of wrong allowance of deduction u/s.80P(2)(d) of the Act, if any, was in the original assessment order u/s. 143(3) of the Act dated 16.12.2019 as acknowledged in the reason for reopening, and only that order could have been subject to revision u/s.263 of the Act. However, as a time limit to revise the original order u/s. 143(3) of the Act had also expired, the Ld. PCIT could not have passed any order u/s.263 of the Act in respect of the original assessment order as well.
It is found that identical issue was involved in the case of Smt. Daya Rani (supra) relied upon by the assessee. In that case also, no addition was made in the re-assessment proceedings in respect of the issues, on which the case was reopened. It was held that in the absence of any such addition the very basis of formation of belief had vanished and the AO could not have framed any re-assessment per se. Further, when the re-assessment order passed by the AO was not sustainable in the eye of law, any revision order u/s.263 of the Act of such unsustainable order was also not correct in the eyes of law.
In view of the above facts and the judicial precedent, we have no hesitation to hold that the Ld. PCIT had erred in assumption of jurisdiction u/s.263 of the Act in respect of re- assessment order u/s.147 of the Act dated 30.03.2022, when the reopening proceeding was dropped by the AO. Therefore, the revision order passed u/s. 263 of the Act by the Ld. PCIT is quashed and the Ground No.1 taken by the assessee is allowed.
Since, the legal ground taken by the assessee has been allowed, we do not deem it necessary to adjudicate the other grounds as taken.
In the result, the appeal filed by the assessee is allowed. This Order pronounced on 01/10/2024