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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI RAVISH SOOD & SHRI JAMLAPPA D BATTULL
आयकर अपीलीय न्यायाधिकरण, नागपुर न्यायपीठ, नागपुर में। IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR (Through Virtual Court at Raipur) BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI JAMLAPPA D BATTULL, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No. 222/NAG/2018 आयकर धनिाारण वर्ा / Assessment Year : 2013-2014 Dr Panjabrao Deshmukh Krishi Vidyapeeth Karmchari Sahakari Path Sanstha Akola. (Maharashtra) PAN : AAAAD 3455 D . . . . . . . अपीलार्थी / Appellant बनाम / V/s. Pr Commissioner of Income Tax-1, Aayakar Bhavan, Nagpur – 440 001 (Mh) . . . . . . . प्रत्यर्थी / Respondent }kjk / Appearances Assessee by : Shri P.K. Dewani Revenue by : Shri Pradeep Headoo सुनवाई की तारीख / Date of conclusive Hearing : 15/02/2022 घोषणा की तारीख / Date of Pronouncement : 28/04/2022 आदेश / ORDER PER JAMLAPPA D BATTULL, AM; Against the revisionary order of Principal Commissioner of Income Tax-1, Nagpur [for short “PCIT”] dt. 31/03/2018 passed u/s 263 of the Income- tax Act, 1961 [for short “the Act”], which in turn dived out of regular assessment order dt. 10/08/2015 passed u/s 143(3) of the Act by the Income Tax Officer-Ward-1, Akola [for shot “AO”], the appellant assessee filed this appeal before Income Tax Appellate Tribunal [for short “the Tribunal”] u/s 253.
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Dr Panjabrao Deshmukh Krishi Vidyapeeth Karmchari Sahakari Path Sanstha ITA No. : 222/NAG/2018, PAN : AAAAD3455D, & AY : 2013-2014 2. The issue in the present controversy is, as to whether the order passed by the assessing officer u/s 143(3) can be said to be erroneous and prejudicial to the interest of the revenue within the preview of section 263 of the Act.
It is essential to reproduce the ground of appeal before we proceed for adjudicate thereon on facts; “1. The order passed by learned PR. CIT-I Nagpur u/s 263 of I.T. Act 1961 is illegal, invalid and bad in law.
The order passed by learned Pr. CIT-I Nagpur is without giving reasonable opportunity of being heard and thus is bad in law.
The order passed by A.O. u/s 143(3) of I.T. Act 1961 was after due enquiries and after obtaining complete required details in respect to claim of assessee u/s 80P of I.T. Act 1961 and thus learned Pr. CIT-I, Nagpur erred in holding that order of A.O. is erroneous and prejudicial to the interest of revenue.
The learned Pr. CIT-I, Nagpur erred in setting aside order to the A.O. by invoking provisions of section 263 for no valid justification.
Any other ground that shall be prayed at the time of hearing.” (Emphasis Supplied)
Before hauling the facts out of the case, at the outset, it is brought to the notice of the bench that, the present appeal is delayed by eighty four (84) days, and the learned counsel for the assessee [for short “AR”] adverting to an affidavit filed by the employee of the counsel and a ITAT-Nagpur Page 2 of 12
Dr Panjabrao Deshmukh Krishi Vidyapeeth Karmchari Sahakari Path Sanstha ITA No. : 222/NAG/2018, PAN : AAAAD3455D, & AY : 2013-2014 separate affidavit of society following the principle of “actori incumbit probation” placed on record, submitted that, as against the revisionary order the appeal before this Tribunal should have been filed with a period of 60 days of communication, whereas it has been filed with a delay of eighty four (84) days. The delay in filing the appeal primary was on account of misplace of documents by the employee of the counsel, when it was handed over for filing appeal to the office of the counsel. By an affidavit the employee of the counsel deposed that, the delay was caused due to his genuine and bonafide mistake. The society also reiterated the facts in its affidavit and prayed for condonation. Finding the reasonability and sufficiency in the submission of the appellant substantiating & explaining each day delay and no-objection from the learned departmental representative [for short “DR”] when confronted, the bench ad idem, in the light of celebrated decision of Hon’ble Apex Court in “Collector Land Acquisition Vs MST Katiji and Others” reported at 167 ITR 5 (SC) and Hon’ble Karnataka High Court in “CIT Vs ISRO Satellite Centre” reported at 263 ITR 549 (Kar) and Hon’ble Bombay High Court in “CIT Vs Velingkar Brothers” reported at 289 ITR 382 (Bom), condones the delay.
Concisely stated the facts of the case are; 5.1 The assessee is a registered employee Credit Co-operative society formed and registered under the provisions of Maharashtra State Co-Operative Societies Act, 1960 and engaged in the business of providing credit facilities to exclusively its members who are the employee of Dr Panjabrao Deshmukh Krushi Vidyapeeth. For the assessment year [for short “AY”] 2013-2014 the assessee society filed ITAT-Nagpur Page 3 of 12
Dr Panjabrao Deshmukh Krishi Vidyapeeth Karmchari Sahakari Path Sanstha ITA No. : 222/NAG/2018, PAN : AAAAD3455D, & AY : 2013-2014 its return of income [for short “ROI/ITR”] on 30/09/2013 declaring total income of ₹NIL and same was initially summarily processed u/s 143(1) of the Act on 23/03/2015. The return was then selected for complete scrutiny under CASS by issue of statutory notice u/s 143(2) dt. 01/09/2014 and the regular assessment u/s 143(3) finally completed accepting the returned income as NIL after allowing the claim of deduction u/s 80P for sum of ₹1,47,51,032/-.
5.2 The Ld. PCIT after culmination of the assessment proceedings, called for the records of assessment and perusing the same, opposing with the action of assessing officer, invoked the revisionary powers vested in him by virtue of section 263(1) and holding the order of Ld. AO as erroneous insofar as it was prejudicial to the interest of the revenue on the ground that the claim of deduction u/s 80P(2)(a)(i) was allowed without inquiry & verifying, for the reason that, the assessee society has enrolled 681 nominal members beside regular members.
5.3 In response to SCN issued u/s 263 of the Act, no representation was made, and the absence of reply was taken as no objection of the assessee, consequently the Ld. PCIT set aside the 143(3) order of assessment holding it as erroneous insofar as prejudicial to the interest of the revenue and directed the Ld AO to pass a fresh order after due inquiry into transactions entered by the appellant society with its members vis-à-vis non-members.
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Dr Panjabrao Deshmukh Krishi Vidyapeeth Karmchari Sahakari Path Sanstha ITA No. : 222/NAG/2018, PAN : AAAAD3455D, & AY : 2013-2014 5.4 Pending such direction before the Ld. AO, the appellant co- operative society assailed the revisionary action of Ld. PCIT before this Tribunal on the premise that, the subject matter under revision was duly considered while carrying out the regular assessment in the light of prevailing judicial precedents and hence the action of the Ld. PCIT is alleged contra legem.
After hearing to the rival contentions of both the parties; perused material placed on records and duly considered the facts of the case in the light of settled legal position and the case laws relied upon by the appellant assessee as well the respondent revenue.
prout patet per recordum, that; 7.1 During the course of regular assessment proceedings, the appellant society on a specific query raised by the Ld. AO, laid a detailed submissions inter alia copy of return filed, statement of income showcasing its entitlement for the claim made u/s 80P of the Act, copy of audit reports, and the copies of audited financial statements duly accompanied therewith the requisite explanation in reply to the questionnaire raised by the Ld AO. Insofar as the allowability of claim u/s 80P(2)(a)(i) is concern, there were specific queries raised by the Ld. AO vis-à-vis replied by the appellant, and considering material placed on records, checks were carried out and after due inquiry into the entitlement, the Ld. AO allowed the deduction accepting the claim of the assessee, categorically holding that;
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Dr Panjabrao Deshmukh Krishi Vidyapeeth Karmchari Sahakari Path Sanstha ITA No. : 222/NAG/2018, PAN : AAAAD3455D, & AY : 2013-2014 “6. After perusal, it is seen that the assessee is engaged in only facility of providing financial accommodation to its members. The assessee society fulfils the requirement and hence, it is categorized as Co- operative society. As per the provisions of Section 80P(4), the deduction is not allowed to the Co-operative banks. Int his case, the assessee is co-operative society as discussed above, hence in view of these facts, the deduction u/s 80P(2)(a)(i) is allowed .” (Emphasis Supplied)
7.2 As far as the revisionary proceeding is concern, it emerges from the show cause notice [for short “SCN”] dt. 29/03/2018 issued u/s 263 of the Act, stating to have served on the even date calling upon the appellant by 30/03/2018 to show case as to why in the absence of inquiry the deduction u/s 80P should not be denied. The assessee could not make any representation for the paucity of time of mere ONE DAY allowed, in the event the Ld. PCIT considering the assessment records inter alia, the By-Laws of the appellant society, concluded that, the Ld. AO failed to verify as to whether the interest income is entirely derived from loans and advances given to resident ordinary members or whether it comprises of interest earned from loans and advances given to nominal members, consequently by an order dt. 31/03/2018 set aside the order with a direction to re-examine the matter and to pass appropriate order after according due hearing to the assessee society following the principle of natural justice.
During the course of hearing before the bench, the counsel for the appellant [for short “AR”] adverting to SCN submitted at the outset that, the order of the Ld. PCIT suffers from the violation of principle of natural
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justice and on this count alone, the order should be quashed. Further, adverting to the written submission made during the course of original assessment proceedings it is contended that, Ld. PCIT did not agree with the conclusion reached by the Ld. AO and provisions of section 263 does not empower him to take action on same facts to arrive at the varying conclusion that the order passed by his sub-ordinate is erroneous and prejudicial to the interests of the Revenue, since the same material were there on record and the said material was considered by the Ld. AO and a particular view was taken, the mere fact that a different view can be taken, should not be the basis for an action under section 263 of the Act and it cannot be held to be justified. Au contraire, the departmental representative [for short “DR”] supported the orders of Ld. PCIT.
To before riding the horse, it will be apt to first reproduce the provision of section 263 in verbatim as it stood and applicable to the AY under consideration; 9.1 263. Revision of orders prejudicial to revenue – (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the [Assessing] Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. [Explanation.—For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,—
(2) . . . . . . . (Emphasis Supplied)
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Dr Panjabrao Deshmukh Krishi Vidyapeeth Karmchari Sahakari Path Sanstha ITA No. : 222/NAG/2018, PAN : AAAAD3455D, & AY : 2013-2014 9.2 A plain reading of this provision makes it clear that, the precondition to exercise revisionary jurisdiction by the PCIT/CIT suo moto under it, is that the order of AO must be erroneous insofar as it is prejudicial to the interests of the revenue is concern. Consequently, the provision mandates the satisfaction of existence of twofold conditions before invocation and these explicitly are; (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 two is absent or unsatisfied, that is where the order of the assessing officer is erroneous but is not prejudicial to the revenue or where order is not erroneous but is prejudicial to the revenue, then the recourse to Section 263(1) of the Act fails. Albeit the foresaid twin satisfaction drawn from the assessment records may trigger the revisionary jurisdiction, yet such shall not automatically empower the revisionary tax authorities to conclude the revision proceedings without obeying additional dual riders such as; (i) making or causing to be made such enquiry as necessary and (ii) according an opportunity of being heard to the assessee following the principle of natural justice.
9.3 In the light of provision of law, it is of paramount importance to note that, an incorrect assumption of facts or an incorrect application of law or passing an order without application of mind or without applying the principle of natural justice, shall discretely be sufficient to hold the order being erroneous. Albeit the term prejudicial to the interests of the revenue is not at all defined in the Act, but is
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Dr Panjabrao Deshmukh Krishi Vidyapeeth Karmchari Sahakari Path Sanstha ITA No. : 222/NAG/2018, PAN : AAAAD3455D, & AY : 2013-2014 needs to be understood in its ordinary meaning and it is of wide import and is not confined to mere loss to ex-chequer.
9.4 In the light of ration laid down by Hon’ble Supreme Court of India on the subject matter, we have the audacity to summarise the inferential but harmonious analysis of revisionary provision laid in section 263 of the Act, into a five steps “Queen Principle”, falling out of which the assuming revisionary jurisdiction u/s 263 shall be contra legem, and these steps are; (1) There must be an explicit query from the adjudicating tax authority as regards to any claim made including information supplied in the return of income filed or to be filed, and (2) There must be direct, clear and an unreserved submission from the assessee in reply to aforesaid query, and (3) The submission must be followed by detailed inquiry (and not mere enquiry) by the tax authorities into assessee’s eligibility of claim, basis of claim and compliance of pre as well post conditions as may be attached to the claim under scrutiny, and (4) There should be even-handed application of mind by the adjudicating authority in reaching out the allowability or dis-allowability of claim under consideration, (5) And finally, the adjudication must ensure the correct application of law as regards to aforesaid following principle of natural justice.
9.5 In the instant case, during the course of assessment proceedings, explicit queries were raised and unreserved submissions were matured before the Ld AO, consequent to which inquiries into entitlement having regards to nature of banking
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Dr Panjabrao Deshmukh Krishi Vidyapeeth Karmchari Sahakari Path Sanstha ITA No. : 222/NAG/2018, PAN : AAAAD3455D, & AY : 2013-2014 business and members was conducted and thereupon in the light of supportive material, drawing even-handed conclusions, assessment allowing the deduction u/s 80P of the was carried out, leaving no air in the inquiry before assessment.
9.6 In this context, it shall be appropriate to quote that, in “CIT Vs Sunbeam Auto Ltd.” 89 Taxman 436, the Hon'ble High Court of Delhi, while adjudicating a similar issue drew distinction between lack of enquiry and inadequate enquiry and accordingly, observed as under; "As noted above, the submission of learned counsel for the revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order, which apparently does not give any reasons while allowing the entire expenditure as Revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessing order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and inadequate inquiry". If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter." (Emphasis Supplied)
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Dr Panjabrao Deshmukh Krishi Vidyapeeth Karmchari Sahakari Path Sanstha ITA No. : 222/NAG/2018, PAN : AAAAD3455D, & AY : 2013-2014 9.7 Moreover, we are not neglectful to the fact that, Ld. PCIT splintering the principle of natural justice called upon the appellant to refute the revisionary action without according sufficient time. If the order is passed by the authority without providing the reasonable opportunity of being heard to the person affected by it adversely will be invalid and must be set aside as held by the Hon’ble Apex Court in the cases of “Harbans Lal Vs Commissioner of Central Excise”. The reasonable opportunity of hearing which is also well known as 'fair hearing' is an important ingredient of the audi alteram partem rule, and this condition may be complied by the authority by providing written or oral hearing which is the discretion of the authority, unless the statue under which action being taken provides otherwise.
9.8 Considering the facts of the case extenso, we concede with the contention of the Ld. AR that, in support of appellant claim as expounded hereinbefore at para 6, there was indeed unvarying and indistinguishable material placed before both these tax authorities during the course of regular assessment vis-à-vis revisionary proceeding, which in turn demonstrates that, the Ld. AO considering the same submission of the assessee carried out inquiry with respect to eligibility of claim, basis of claim and compliance relating thereto(if any) and then finalized the assessment taking one of the plausible view in the light of settled legal position in allowing the deduction u/s 80P, this evidently concludes that the adjudication squarely fell within aforementioned “Queen Principle”. Whereas under revisionary proceedings Ld. PCIT yet again conducted an inquiry into the claim of ITAT-Nagpur Page 11 of 12
Dr Panjabrao Deshmukh Krishi Vidyapeeth Karmchari Sahakari Path Sanstha ITA No. : 222/NAG/2018, PAN : AAAAD3455D, & AY : 2013-2014 the appellant based on the like material and sitting on the same fence displaced with the views of Ld. AO and directed for modification of assessment which is ostensibly impermissible under a law following the ration laid in down by Hon’ble Jurisdictional High Court in “CIT Vs Gabriel India Ltd.” reported in 203 ITR 108 (Bom) and the Hon’ble Apex Court in “Malabar Industrial Co Ltd. Vs CIT” reported in 243 ITR 83. Ergo, in the above context, we find the order of Ld PCIT is unsustainable in law, consequently, quash the revisionary order passed u/s 263 and restore the order of assessment passed u/s 143(3).
Resultantly, the appeal of the appellant is allowed. in above terms. Order pronounced on this Thursday, 28th day of April, 2022.
-S/d- -S/d- RAVISH SOOD JAMLAPPA D BATTULL JUDICIAL MEMBER ACCOUNTANT MEMBER रायपुर / RAIPUR ; दिनाांक / Dated : 28th April, 2022 आदेश की प्रधिधलधप अग्रेधर्ि / Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant. 2. प्रत्यर्थी / The Respondent. 3. The CIT, Nagpur (C.G) 4. The Pr. CIT, Nagpur (C.G) 5. दवभागीय प्रदतदनदि, आयकर अपीलीय न्यायादिकरण, नागपुर बेंच, नागपुर / DR, ITAT, Nagpur Bench, Nagpur. 6. गार्डफ़ाइल / Guard File. आिेशानुसार / BY ORDER, // True Copy // दनजीसदचव / Private Secretary आयकर अपीलीय न्यायादिकरण, नागपुर बेंच, नागपुर / ITAT, Nagpur
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