Income Tax Act, 1961, Section 263

Revision under section 263--Erroneous and prejudicial order--Issue regarding allowability of deduction under section 80P in respect of interest from co-operative bank

Conclusion: Where at the time of passing of assessment order by AO, the issue related to claim of deduction under section 80P(2)(d) by credit co-operative societies was very well governed by High Court in the case of The Surat Vankar Sahakari Sangh Ltd. v. Asst. CIT (2016) 72 taxmann.com 169 (Gujarat) : 2016 TaxPub(DT) 3733 (Guj-HC) and such deduction was rightly claimed by assessee at that juncture; assessment order passed by AO could not be said to be erroneous and prejudicial to the interest of Revenue.

PCIT held the assessment order as erroneous and prejudicial to the interest of Revenue alleging that AO erred in allowing assessee’s claim of deduction under section 80P(2)(a)(i)/80P(2)(d) in respect of interest received from co-operative bank. Assessee submitted that Tribunal in its own case for subsequent assessment year, quashed the revisionary order on the very same issue of claiming deduction under section 80P)(2)(a)(i)/80P(2)(d). Held: At the time of passing of assessment order by AO, the issue related to claim of deduction under section 80P(2)(d) by credit co-operative societies, was very well governed by High Court in the case of The Surat Vankar Sahakari Sangh Ltd. v. Asst. CIT (2016) 72 taxmann.com 169 (Gujarat) : 2016 TaxPub(DT) 3733 (Guj-HC) and such deduction was rightly claimed by assessee at that juncture. Current invocation of section 263 did not fulfill the criteria of assessment being erroneous or prejudicial to the interest of Revenue with the second view, which is not allowable under section 263 and its revisional powers. Further, assessee’s case was governed by order of Tribunal in its own case for subsequent assessment year, wherein the order under section 263 was quashed. Hence, revision order under section 263 was set aside.

Decision: In assessee's favour

Relied: The Surat Vankar Sahakari Sangh Ltd. v. Asst. CIT (2016) 72 taxmann.com 169 (Gujarat) : 2016 TaxPub(DT) 3733 (Guj-HC), TIFS Credit Co-operative Society Ltd. v. The Pr. CIT 2023 TaxPub(DT) 5237 (Rkt-Trib)

IN THE ITAT RAJKOT BENCH

SUCHITRA KAMBLE, J.M. & WASEEM AHMED, A.M.

TIFS Credit Co-operative Society Ltd. v. Pr. CIT

ITA No. 180/RJT/2022

17 January, 2024

Assessee by: Darshak Thakkar, AR

Revenue by: Ritesh Parmar, CIT(DR)

ORDER

Suchitra Kamble, J.M.

This appeal is filed by the Assessee against the order dated 23-2-2022 passed by the Principal Commissioner of Income Tax, Rajkot-1 for the assessment year 2017-18.

2. The Assessee has raised the following grounds of appeal:-

“1. That on the facts and circumstances of the case and in law, the order passed by the Principal Commissioner of Income Tax Rajkot-1 (PCIT), under section 263 of the Income Tax Act, 1961 (‘the Act’) setting aside the assessment framed under section 143(3) of the Act as erroneous and prejudicial to the interest of the Revenue is without jurisdiction, bad in law and void ab-initio.

2. That on the facts and circumstances of the case and in law, the Principal Commissioner erred in holding that the assessment order is erroneous and prejudicial to interest of revenue on the issue of taxability of income from interest on fixed deposits under the head Income from Other Source and thereby not allowing the deduction claimed under section 80P of the Income Tax Act, 1961.

3. That on the facts and circumstances of the case and in law, the Principal Commissioner erred in setting aside the aforesaid issue even after recording prima facie finding on the merits of the issue in favour of the appellant.

4. That on the facts and circumstances of the case and in law, the Principal Commissioner failed to point out any error in the order of the assessing officer in assessing income from interest on fixed deposits, which is sine que non for initiation of proceedings under section 263 of the Act.

5. Without prejudice, that the Principal Commissioner erred on facts and in law in setting aside the assessment order to be redone afresh and not merely setting aside the aforesaid issue of taxability of income from interest on fixed deposits.”

3. The Return of income for assessment year 2017-18 was filed by the assessee on 22-5-2017 declaring total income of Rs. Nil after claiming deduction of Rs. 27,97,39. The assessment was completed under section 143(3) of the Income Tax Act, 1961 on 27-11-2019 determining total income at Rs. Nil. The Principal Commissioner observed that the Mandali/Co-operative Society shown total interest income at Rs. 1,01,01,971 including interest on Fixed Deposit received from the Co-operative Bank in the P&L account and claimed deduction under section 80P(2)(a)(i)/80P(2)(d) of the Act on entire profit earned during the year under consideration. The Mandali/ Society had surplus funds which were not required for carrying on the business activities of the Mandali. After issuing the show cause notice under section 263 of the Act on 17-1-2022, the Principal Commissioner passed preliminary order under section 263 of the Act thereby directing the Assessing Officer to make fresh assessment.

4. Being aggrieved by the order under section 263 of the Act, the assessee is before us.

5. The learned Authorised Representative submitted that for assessment year 2018-19 in assessee’s own case in ITA No.115/RJT/2023, the Tribunal vide order dated 23-8-2023 quashed the revisionary order and allowed the appeal of the assessee on the very same issue of claiming deduction under section 80P)(2)(a)(i)/80P(2)(d) of the Act. Therefore, the learned Authorised Representative submitted that the matter is covered in favour of the assessee.

6. The learned Departmental Representative relied upon the order of the Principal Commissioner passed under section 263 of the Act and relied upon his submissions dated 8-12-2023 which is taken on record.

7. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that at the time of passing/completing the Assessment Oder under section 143(3) of the Act, the issue related to 80P(2)(d) claimed by Credit Co-operative Societies was very well governed by the Hon’ble Gujarat High Court in the case of Surat Vankar Sahkari Sangh Limited, (2016) 72 taxmann.com 169 (Gujarat) : 2016 TaxPub(DT) 3733 (Guj-HC) and this issue was rightly claimed by the assessee at that juncture. Current invocation of Section 263 of the Act does not fulfil the criteria of assessment being erroneous or prejudicial to the interest of Revenue with the second view which is not allowable under section 263 of the Act and its revisional powers. Hence, as held in earlier assessment years, wherein the order under section 263 of the Act has been quashed in assessee’s own case, the present assessment year will also be governed by the same contentions of the learned Departmental Representative taken in submissions dated 8-12-2023, will not be applicable in toto as the assessee’s case is governed by its own order for subsequent assessment year.

8. In the result, appeal of the assessee is allowed.

Order pronounced in the open Court on this 17-1-2024.