M/S THE BAINS COOPERATIVE AND CREDIT SOCIETY, LIMITED,HOSHIARPUR vs. DEPUTY COMMISSIONER OF INCOME TAX HOSHIARPUR CIRCLE, HOSHIARPUR

That Learned Commissioner of Income Tax, Jalandhar-I(‘Ld. CIT’) has grossly erred in holding that assessment order passed by the Assessing Officer (‘AO’) was erroneous and prejudicial to the interest of revenue.

That proceedings u/s. 263 of the Act were initiated by Pr. Commissioner of Income Tax-1 by holding that assessee has indulged in banking business and as such not entitled to deduction claimed u/s 80P(2) of the Act. Order u/s 263 of the Act has been passed by holding that order passed by the Assessing Officer is erroneous and prejudicial to interest of revenue since activities of the appellant are in violation of the cooperative society Act and the principle of mutuality is missing in the case. Initiating proceedings on one issue and passing order on an another issue for which no show cause notice has been issued, makes the order illegal and bad in law.

That order passed u/s 263 of the Act by Pr. Commissioner of Income Tax-1 holding order passed by the Assessing Officer to be erroneous and prejudicial to interest of revenue since interest on funds with HDFC Bank is not exempt u/s. 80P(2) of the Act is illegal and bad in law since there was no such show cause notice to the assessee.

That various written submissions filed during proceedings u/s 263 of the Act and various case laws relied upon by the assessee have been ignored and brushed aside arbitrarily, which makes the order passed u/s 263 of the Act illegal and bad in law.

That the order of the Learned Commissioner of Income Tax, Jalandhar- I(‘Ld. CIT’) u/s 263 is arbitrary, unjust, is based on assumptions & presumptions since no error existed or prejudice was caused to revenue, therefore, the order of the Learned Commissioner of Income Tax, Jalandhar- I(‘Ld. CIT’) passed u/s 263 of the Act deserves to be quashed.

That on the facts & circumstances of the case, Learned Commissioner of Income Tax, Jalandhar-I(‘Ld. CIT’) has grossly erred in setting aside the assessment framed with the directions to pass fresh order after considering all aspects of the matter and after carrying out proper enquiries. Non issuance of specific directions for assessment to be framed clearly proves that it is a case of only change of opinion and the assessment framed is neither erroneous nor prejudicial to the interest of the revenue.

That the Appellant requests for leave to add or amend the grounds of appeal before the appeal is heard or disposed off.”

That appellant is a cooperative society registered under the Punjab State Cooperative Societies Act, 1861. That appellant filed return declaring gross total income at Rs. 69,77,375/- and claimed deduction u/s 80P of Rs. 67,69,095/- and therefore net taxable income was shown to be Rs. 2,08,280/-. That case was picked up for complete scrutiny under CASS One of the reasons for selection of case in scrutiny was verification of large deduction claimed under chapter- VIA of the Act. As per the return of income the assessee had claimed deduction u/s 80P(2) of the Act at Rs. 67,69,095/-.

That in the notice u/s 142(1) of the Act issued on 17.11.2015, the assessee was asked, vide question no. 17 to justify its claim for deduction u/s 80P of the Act or to show cause as to why the deduction u/s 80P should not be disallowed in view of findings in the assessee’s case as per the assessment framed for the A.Y. 2013-14. 3. That assessee in response to the notice u/s 142(1) of the Act filed following submissions: i) That the society was not doing any banking activities but was a cooperative society helping and providing credit facilities to its members, encouraging thrift and working only for members as per the cooperative rules, and its activities were not covered under the Banking Regulation Act, 1949 since it was not dealing with the public; ii) That every year being an independent year, findings of the preceding year could not be applied without verification of facts; iii) That there were 565 regular members, 366 nominal members and only 52 non-members of the society during the year as against findings by the A.O. in the A.Y. 2013-14 that there were 500 odd non- members of the society, which was incorrect since the figure of non- members included ‘nominal members’ also iv) That amount of deposit specified in the balance/books of account against the head ‘non-member’ included deposits from nominal members also v) That no amount was advanced as loan to any of the non- members which could have affected nature of its activities for taxability of income.