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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, JM & DR. A.L.SAINI, AM
IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A.L.SAINI, AM आयकरअपीलसं./ITA No.151/SRT/2019 (िनधा�रणवष� / Assessment Year: (2014-15) (Virtual Court Hearing) M/s Althan Bhatar Urban Co-Op. Vs. Principal Commissioner of Income Tax, Surat-1, 123, 1st Floor, Aayakar Credit Society Ltd., Shop No. 5, Anand Apartment Nr. Jariwala Stores, Bhavan, Majura Gate, Surat-395001 Bhatar Road, Surat-395001 �थायीलेखासं./जीआइआरसं./PAN/GIR No.: AAAAA 7721 R (Appellant ) (Respondent)
Assessee by : Shri Mehul K. Patel, Advocate Respondent by : Shri H.P. Meena, CIT-DR
सुनवाईकीतारीख/Date of Hearing : 12/01/2022 घोषणाकीतारीख/Date of Pronouncement : 31/03/2022 आदेश / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: By way of this appeal, assessee has challenged the correctness of the order dated 10.01.2019 passed by the Learned Principal Commissioner of Income Tax, Surat-1[‘Ld.PCIT’ for short], pertaining to assessment year 2014-15, under section 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
Grounds of appeal raised by the assessee are as follows: “(1) That on facts, and in law, the learned CIT has grievously erred in assuming jurisdiction u/s 263 of the Act. (2) That on facts, and in law, the proceedings u/s 263 are void as the original assessment order was passed u/s 143(3) of the Act after due inquiry and application of mind / and is not erroneous and prejudicial to the interest of the Revenue. (3) That on fact, and in law, the learned CIT has grievously erred in holding that the deduction of Rs.16,15,315/- u/s 80P(2)(d) of the Act is required to be disallowed.”
ITA No.151/SRT/2019 A.Y.14-15 Althan Bhatar Urban Co-Op Credit Society Ltd.
The facts of the case which can be stated quite shortly are as follows: The assessee before us is an urban Co-op. Credit Society engaged in the business of banking and providing credit facilities to the members of society. The assessee filed its return of income on 29.11.2014, declaring total income at Rs. ‘Nil’ after claiming deduction u/s 80P of the Act. Scrutiny assessment u/s 143(3) of the Act was finalized on 29.11.2016, accepting the returned income shown by the assessee.
Later on, Learned Principal Commissioner of Income Tax, exercised his jurisdiction, under section 263 of the Income Tax Act. The ld PCIT, on perusal of scrutiny records, noticed that assessee had offered income at Rs.Nil in its return of income after claiming deduction u/s 80P(2)(d) amounting to Rs.21,45,225/- which include Rs.16,15,315/- interest earned from bank. The ld PCIT noted that during finalization of the scrutiny proceedings, same was allowed by the assessing officer, however, as per section 80P(2)(d) of the Act; the same was not allowable and it was required to be disallowed. Therefore, ld PCIT issued a show cause notice to the assessee to explain the transaction.
In response to the show cause notice, assessee has submitted its reply before Ld. PCIT. In its reply, the assessee stated that assessee is eligible for deduction under section 80P(2)(d) for interest income earned from Co-operative Bank.
However, Ld. PCIT rejected the contention of the assessee and held that as per section 80P(2)(d) of the Act, the deduction claimed by the assessee was not allowable and it was required to be disallowed which was not done in the assessment proceedings. Thus there was an underassessment of income of the assessee by Rs.16,15,315/-, therefore assessment order passed u/s 143(3) of the Act on 29.11.2016 in assessee`s case is considered erroneous and prejudicial to the interest of the Revenue. Therefore, ld PCIT directed the assessing officer to re- compute and determine the correct total income of the assessee after making disallowance of such wrong claim.
ITA No.151/SRT/2019 A.Y.14-15 Althan Bhatar Urban Co-Op Credit Society Ltd.
Aggrieved by the order of Ld. PCIT, the assessee is in appeal before us.
Before us Ld. Authorized Representative (AR) for the assessee submitted that first of all, the assessee did not claim deduction u/s 80P(2)(d) of the Act in respect of disputed amount of Rs.16,15,315/-, therefore, the jurisdiction exercised by ld PCIT u/s 263 of the Act, is itself bad in law. Apart from this, Ld. AR submitted that during the assessment proceedings, the AO has raised query in respect of interest u/s 80P(2)(d) and assessee submitted its reply vide letter dated 22.09.2016, therefore, AO has examined this issue during the course of assessment proceedings. The ld Counsel further pleads that assessee has never claimed the deduction in respect of interest received from co-operative bank to the tune of Rs.16,15,315/-. Hence, the order passed u/s 143(3) of the Act by AO is neither erroneous nor prejudicial to the interest of Revenue.
On the other hand, Ld. CIT-DR for the Revenue vehemently submits that interest received from co-operative bank does not qualify for deduction under section 80P(2)(d) of the Act. Therefore, Ld. PCIT was right in exercising his jurisdiction u/s 263 of the Act.
We have heard both the parties and perused the materials available on record and the case law cited by the parties. We note that assessee has not claimed the deduction in respect of interest received from co-operative bank to the tune of Rs.16,15,315/-. The Ld. AR has invited our attention towards paper book page nos. 1 to 3 of assessee`s paper book and explained before the Bench, at the time of hearing that assessee has never claimed the deduction in respect of interest received from co-operative bank to the tune of Rs.16,15,315/-. Hence, based on this factual position, we are of the view that order passed by the assessing officer should not be erroneous.
Apart from this, assuming assessee has claimed deduction in respect of interest received from co-operative bank, in that situation, we are of the view that u/s 80P(2)(d) of the Act interest received from co-operative bank are allowable
ITA No.151/SRT/2019 A.Y.14-15 Althan Bhatar Urban Co-Op Credit Society Ltd.
deduction, that is, the deduction is available in respect of interest received from co-operative bank for that reliance can be placed on the order of this co-ordinate Bench, in the case of Bardoli Vibhag GramVikas Co.Op. Credit Society Ltd. vs. Principal Commissioner of income Tax-2,Surat in ITA No. 283/SRT/2019 dated 12.05.2021, wherein the co-ordinate bench held as follows: “9. On merit of the case the learned AR for the assessee submits that the assessee earned interest from its investment in cooperative bank. The cooperative banks are primarily a cooperative society, as has been held by various benches of Tribunal. Cooperative societies interest income from deposit with the cooperative bank is eligible for claim of deduction under section 80P(2)(d). The learned AR of the assessee further submits he has also furnished his written submission and the same may be considered in support of his various other submissions. In support of his submission the learned AR of the assessee relied upon the following decisions: Surat Vankar Sahkari Sangh Vs ACIT [2016] 72 taxmann.com 169 (Gujarat), CIT Vs Sabarkantha District Co-operative Milk Producers Union ( Tax Appeal No. 473 of 2014 dated 16/06/2014, Merwanjee Cama Park Co-operative Housing Society Vs ITA in ITA No. 6139/Mum/2014, Kanilndass Udyog Bhawan Premises Co-operative Society Ltd Vs ITO [2018) taxmann.com 15 (Mumbai Trib), Veer Cooprative Groupm Housing Society Vs ITO [2018] 67 ITR (trib) ITAT (Del), PCIT Vs Totgars Co-operative Sales Society ltd. [2017] 78 taxmann.com 169(Knt), Totgars Cooperative Sales Society ltd Vs ITO [2010] 188 Taxman 282 (SC), The Uttar Gujarat Uma Co-operative Society Vs ITO (ITA No. 1670 &1671/Ahd/2018 dated 28/02/2019, Menasi Seemeya group Gramagala Seva Sahakari Sangh Niyamitha Venalli Vs CIT (ITA No. 609 & 610/ BNG/2014 dated 06/02/2015, Solitaire CGHS Vs PCIT (ITA No. 3155/Mum/2019), Sasme Co-op Society Vs PCIT (ITA No. 185/SRT/2020 dated 03.03.2021). 10. On the other hand the learned CIT-DR for the revenue supported the order of learned PCIT. The learned DR further submits that the order passed by assessing officer is not only erroneous but it is prejudicial to the interest of revenue as well.
ITA No.151/SRT/2019 A.Y.14-15 Althan Bhatar Urban Co-Op Credit Society Ltd.
The assessing officer simply allowed the deduction under section 80P(2)(d) without discussing the issue in details and the nature of interest earned by assessee on deposit with cooperative banks. The order is not in accordance with the decision of Hon'ble Karnataka High Court Totagars cooperative sales society (second Totagars case) (supra). Thus, the order passed by in allowing deduction under section 80P(2)(d) assessing officer is certainly prejudicial to the interest of revenue. The twin conditions of section 263 that assessment order is erroneous and insofar as prejudicial to the interest of revenue, clearly available in this case. The learned CIT prayed for upholding the order passed by learned PCIT by dismissing the appeal filed by the assessee. 11. We have considered the rival submission of both the parties. We have also deliberated on the written submission filed by learned AR of the assessee and various case laws relied by him during his submission. We have also gone through the various documentary evidences filed in the form of paper book (PB) by learned AR of the assessee. We have noted that during the assessment the Assessing Officer vide notice under section 143(2)/142(1) of the Act dated 31.08.2015 and 13.04.2016. The assessee filed its reply through its CA (AR) and furnished required details and after examining the issue allowed the deductions under section 80P(2)(d) as discussed in para 4 of the assessment order. The Assessing Officer passed assessment order on 18.10.2016. 12. The ld. PCIT before passing under section 263 of the Act, identified the issue regarding the claim of deduction under section 80P(2)(d) in its show cause notice dated 06.03.2019. The assessee in its reply dated 7.03.2019 clearly explained that the issue was examined by Assessing Officer and that the assessment order is not erroneous. The assessee also explained that similar disallowances /issues was subject matter in the appeal filed by the revenue before Tribunal in A.Y. 2009-10, 2010-11 and 2012-13 and the assessee was allowed similar deductions. 13.The Hon'ble Jurisdictional High Court in Aryan Arcade Ltd., vs PCIT (2019) 412 ITR 277 (Gujarat) held that merely because Commissioner held a different belief that would not permit him to take the order in revision, it if further held that when Assessing Officer made full enquiry, he made up his mind, the notice of revision is not valid. (emphasis added by us). Further, Hon'ble Madras High Court in CIT Vs Mepco Industries Ltd., (2007) 207 CTR 462 (Madras) held that when two views are possible on an issue and it is not the case of the Commissioner that the view taken by Assessing Officer is not permissible in law, Commissioner cannot invoke his jurisdiction under section 263 of the Act. (emphasis added by us) 14.As we have noted above the assessing officer has made enquiries on the allowability of deduction under section 80(P)(2)(d) and passed the assessment order, thus, the Assessing Officer has taken a reasonable and possible view which cannot be held as erroneous. 15.The Hon'ble Karnataka High Court in PCIT Vs. Totagars Co-operative Sales Society [2017] 78 taxman.com 169 (Karnataka) held that for the purpose of section 80P(2)(d) a Co-operative Bank should be considered by a Co-operative Society and interest earned by Co-operative Society from Co-operative Bank
ITA No.151/SRT/2019 A.Y.14-15 Althan Bhatar Urban Co-Op Credit Society Ltd.
would necessarily be deductible under section 80P(1) of the Act. Further, the Hon'ble Jurisdictional High Court in Surat Vankar Sahakari Sangh Ltd., vs. ACIT [2016] 72 taxmann.com 169 (Guj) held that assessee co-operative society is eligible for deduction under section 80P(2)(d) in respect of gross interest received from co-operative bank without adjusting interest paid to said bank. 16.The Co-ordinate Bench of Rajkot Tribunal in Surendarnagar District Co- operative Milk Producer Union Ltd., vs. DCIT [2019] 111 taxmann.com 69 (Rajkot Tribunal) also held the assessee co-operative society could not claim benefit under section 80P(2)(d) in respect of interest earned by it from deposits made with nationalized/private banks, however, the said benefit was available in respect of interest earned and on deposits made with co-operative bank. Thus, in view of the aforesaid legal discussion we are of the considered view that order passed by Assessing Officer is not erroneous, though it may be prejudicial to the interest of the Revenue. Therefore, the twin conditions that orders is erroneous and so far as prejudicial to the interest of revenue, as prescribed under section 263 is not fulfilled in the present case. 17.Moreover, we have seen that in assessee’s own case for A.Y. 2009-10, 2010-11 and 2012-13, the similar disallowance under section 80P(2)(d) was made by the assessing officer while passing assessment order under section 143(3), however, on appeal before Ld. CIT(A) , the disallowances were deleted and the order of the Ld. CIT(A) in all years were confirmed. 18.The ld. DR for the revenue relied on the case law in PCIT Vs. Totagars Co- operative Sales Society (second case)/(supra), wherein the Hon'ble Karnataka High Court held that interest earned by a Co-operative Society from surplus deposits kept with Co-operative bank, is not eligible for deduction under section 80P(2)(d). Considering the legal position that when there are conflicting decisions of non-jurisdictional High Courts, on similar issue, the decision of Jurisdictional High Court is having binding precedent. Thus, keeping in view of the decision Hon'ble Jurisdictional High Court in Surat Vankar Sahakari Sangh Ltd., vs. ACIT (supra) wherein the assessee-co-operative society is held eligible for deduction under section 80P(2)(d) in respect of gross interest received from co-operative bank without adjusting interest paid to said bank, we conclude that the order passed by assessing officer is not erroneous. Hence, the grounds of appeal raised by assessee are allowed.” 12. Having gone through the order of Co-ordinate Bench (supra), we note that on the identical issue, Ld. PCIT had exercised his jurisdiction u/s 263 of the Act and the Co-ordinate Bench in the case of Bardoli Vibhag GramVikas Co.Op. Credit Society Ltd. (supra) has quashed the order passed by Ld. PCIT u/s 263 of the Act. We see no reason to take any other view than the view so taken by the Co-ordinate Bench in the case of Bardoli Vibhag Gram Vikas Co-operative Credit Society Ltd. (supra), therefore respectively following the binding precedent we quash the order passed by Ld. PCIT u/s 263 of the Act. We order accordingly. Page | 6
ITA No.151/SRT/2019 A.Y.14-15 Althan Bhatar Urban Co-Op Credit Society Ltd.
In the result, appeal of the assessee is allowed.
Order pronounced on 31/03/2022 by placing the result on the notice board.
Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat/िदनांक/ Date: 31/03/2022 Dkp Outsourcing Sr.P.S./*SS Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr.CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat