2018 (9) TMI 618 - AT - Income Tax

Revision u/s 263 - deduction u/s 80P(2)(a)(i) against interest income earned by the assessee - no inquiry OR lack of inquiry or inadequate inquiry - Held that - The justification of claiming deduction against bank interest has neither been adduced / substantiated by the assessee nor being examined / verified by the AO. Nothing on record suggests any application of mind on the issue by Ld. AO. This being the case, we find no force in the submissions of Ld. AR that the issue was examined by Ld. AO with due application of mind and the deduction was allowed after due deliberations. The aforesaid factual matrix lead us to conclude that the case falls under the category of no inquiry rather than lack of inquiry or inadequate inquiry as contended by Ld. AR. In such a case, the reliance placed by Ld. AR on various judicial pronouncements could not help the assessee, in any manner. Therefore, the order being clearly erroneous as well as prejudicial to the interest of the revenue justifies invocation of jurisdiction u/s 263. - Decided against assessee.

Summary

Issues:
Invoking revisional jurisdiction u/s 263 by CIT, Mumbai for AY 2010-11.
Eligibility of the assessee for deduction u/s 80P(2)(a)(i) of the Income Tax Act.
Validity of the assessment order passed by the AO and subsequent revision by CIT.

Analysis:
1. The appeal contested the invocation of revisional jurisdiction u/s 263 by the CIT, Mumbai for AY 2010-11. The assessee argued that the original assessment order was passed after due consideration of all details, and the revision was unjustified. The CIT was criticized for not appreciating the AO's conclusion and for setting aside the assessment order without demonstrating any error prejudicial to revenue. The grounds of appeal were duly rectified, and the appeal proceeded on merits.

2. The assessee, a cooperative society providing credit facilities, was assessed u/s 143(3) by the AO, accepting a 'Nil' income after applying exemption u/s 80P. However, the CIT initiated revision u/s 263, contending that the deduction u/s 80P(2)(a)(i) was wrongly allowed. The assessee defended its position, citing judicial precedents, but the CIT found the AO's order erroneous and prejudicial to revenue, setting it aside for fresh assessment.

3. During the appeal, the AR argued that the deduction u/s 80P(2) was rightfully allowed by the AO, and the revision was unwarranted. The CITDR contended that the AO failed to inquire into the deduction's eligibility, justifying the revision. Typographical errors in the order were noted, but they were deemed clerical and did not impact the case's merits.

4. The Tribunal found that the AO did not discuss the eligibility of the deduction against interest income u/s 80P(2) during assessment, indicating a lack of inquiry. The AR's reliance on judicial pronouncements was deemed irrelevant due to the absence of examination by the AO. The order was considered erroneous and prejudicial to revenue, justifying the CIT's revision under section 263.

5. The AR's argument on the eligibility of the deduction based on judicial precedents was not considered, as the issue was not addressed by the AO. The Tribunal refrained from delving into the merits at that stage, advising the assessee to pursue the matter further if desired. Ultimately, the appeal was dismissed, upholding the CIT's decision to revise the assessment order.

This comprehensive analysis covers the issues of revising the assessment under section 263, the eligibility of the assessee for deduction u/s 80P(2)(a)(i), and the validity of the assessment order, providing a detailed breakdown of the legal judgment.