THE RAMPUR RURAL COOP. BANK LTD.,LUDHIANA vs. PR. CIT-1, LUDHIANA

That the Ld. PCIT has failed to appreciate the fact that the assessment as framed by the Assessing Officer vide order dated 26.11.2019, was after considering various replies as filed during the course of assessment proceedings and after complete application of mind by the AO on the issues, raised by the Ld. PCIT in the notice u/s 263, 3. That the Ld. PCIT has failed to appreciate that the interest income from the FDR and from other sources and the rental income is also liable to be considered for the purpose of deduction u/s 80P of the Income Tax Act 1964 and on that, the Assessing Officer having taken possible view and, thus, the same could not have been revised u/s 263.

Briefly the facts of the case are that the assessee is a cooperative society and it filed its return of income under section 139(1) declaring income of Rs 1,22,980/- after claiming deduction under Section 80P amounting to Rs. 71,91,654/-. The case of the assessee was selected for limited scrutiny through CASS and one of the reasons for selection was to verify claim of large deduction under Chapter VIA. During the course of assessment proceedings, the notices were issued calling for the necessary information and documentation and taking into account the submissions of the assessee, the assessment was completed under section 143(3) vide order dt. 26/11/2019 accepting the claim of deduction under Section 80P and the returned income was thus accepted.

The assessment records were subsequently, called for and examined by the Ld. Pr. CIT and it was held that the assessment order was erroneous in so far as prejudicial to the interest of the Revenue and a show cause u/s 263 was issued to the assessee as to why the assessment order so passed should not be set-aside. In response, the asssesse society filed its submissions which were considered by the ld PCIT but not found acceptable and the assessment order was set aside to the file of the AO with a direction to pass a fresh assessment order in accordance with law in respect of matters discussed in the impugned order after giving due opportunity to the assessee.

Against the said findings and the directions of the Ld. Pr. CIT, the assessee is in appeal before us.

During the course of hearing, the ld AR submitted that the assessee is engaged in the business of trading of goods. The goods are sold to the members of the co-operative society on credit. The assessee is engaged in the said business since long and has been filing the return of income for the said business since many years. The case of the assessee was selected for limited scrutiny on the issues of "deductions under chapter VIA" and "Investment/advances/loans". During the assessment proceedings, multiple questionnaires were issued wherein, relevant details were asked. In this regard, it was submitted that a questionnaire u/s 142(1) of the Act dated 25.02.2019 was issued to the assessee. In response to the said notice, the assessee filed a detailed reply dated 19.03.2019. Thereafter, the assessee filed another reply to the said notice vide its letter dated 16.04.2019. In the said reply, in point 4, the assessee has duly justified its claim of deduction u/s 80P of the Act. Thereafter, another detailed questionnaire u/s 142(1) of the Act dated 29.03.2019 has been issued to the assessee, wherein, a specific inquiry w.r.t. the deduction under Chapter VI-A was raised. The assessee has filed a specific detailed reply dated 14.11.2019 for its justification for claiming deduction u/s 80P of the Act. In the said reply, the assessee has duly explained the justification for claiming deduction u/s 80P of the Act. It was submitted that the assessee thus filed detailed replies against the said questionnaires and the Ld. AO after considering all the replies of the assessee and after due verification of facts and circumstances of the case of the assessee passed the assessment order u/s 143(3) of the Act dated 26.11.2019. It was accordingly submitted that the AO has applied his independent mind while concluding the assessment and only then, the claim of deduction under Section 80P and the returned income of the assessee has been accepted.

It was submitted that the proceedings u/s 263 of the Act have therefore been initiated merely on the basis of difference of opinion and a mere difference of opinion cannot be taken as a ground to hold the order passed by the AO as erroneous and prejudicial to the revenue. Reliance in this regard has been was placed on various authorities wherein, it has been held that the action of ld PCIT u/s 263 of the Act is bad in law where the Ld. AO has applied his mind during the course of assessment proceedings and has taken a possible view in the matter.

It was further submitted that there is a proper and due application of mind by the AO and the same is evident from the assessment order itself where at para 3, the AO has recorded his findings as under:

It was further submitted that clause (b) of explanation 1 to section 263 of the Act duly explains the meaning of "Record", wherein, it has been clearly mentioned that all records relating to any proceeding under this Act available at the time of examination by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. In this regard, it was submitted that the assessee society has duly filed a detailed reply to the audit objection vide letter dated 25.05.2021. The copy of the same is placed in the paper book at page no. 53-56. Consequently, the said reply of the assessee dated 25.05.2021 forms part of the record. It was submitted that the issue as mentioned in the Show Cause Notice dated 09.02.2022 has been already answered by the assessee in the said reply dated 25.05.2021 as against the audit objection. In the said reply the assessee has distinguished the facts of the case of the assessee as against the judgment of Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society vs. ITO (2010) 188 taxman 282 and has duly explained as to how the case of the assessee is different from that of the above said judgment.

On the merits of the case, it was further submitted that the assessee is a cooperative society which is registered under The Co-operative Societies Act. The main business of the assessee is to provide facility of selling goods on credit to its members. It was submitted that the nature of business of assessee is not of providing credit facilities in the nature of banking. The assessee has deposited these funds to meet any emergent needs of the members of the society. In other words, this amount has been parked in banks to provide loan/ goods on credit to members only. It is pertinent to mention here that the assessee is a cooperative society and not a cooperative bank. The same is evident from the copy of the registration certificate issued by the