2021 (3) TMI 256 - AT - Income Tax

Revision u/s 263 - claim of deduction u/s 80(P)(2)(d) - HELD THAT - The matter is covered in favour of the assessee in its own case for AY 2014-15 by the decision of the Coordinate Bench 2019 (11) TMI 690 - ITAT JAIPUR wherein the Tribunal has allowed the appeal of the assessee on the issue of claim u/s 80P(2)(d) of the Act. The fact that the decision of the Tribunal has not been accepted by the Revenue and further appeal has been preferred before the Hon ble Rajasthan High Court cannot be a basis to hold that the order so passed by the AO allowing such deduction is erroneous in so far as prejudicial to the interest of Revenue and therefore, the findings of the ld Pr.CIT to this extent are set-aside. Claim of various provisions , the assessee has submitted that these relates to liabilities which have crystallized during the year though the payment have been made in the subsequent financial year and thus are allowable business expense. The assessee has also furnished a chart with remarks showing analysis of specific provisions for outstanding liability as on 31.03.2012 and date of subsequent payment. The reason why the same was not found acceptable to ld Pr CIT was that due to non-availability of proper ledgers and other requisite details on assessment record, the same cannot be verified and even the AO has not verified the issue whether the business liabilities regarding these provisions were actually raised and ascertained during the year under consideration or not. There is nothing on record that these details have been called for and examined by the AO during the assessment proceedings and are available on record as so contended by the ld AR and in absence of such examination and relevant material on record, the assessment order passed by the AO is rightly considered as erroneous in so far as it is prejudicial to the interest of the Revenue and the findings of the ld PCIT are upheld in this regard. Provision of bonus - Assessee has submitted that the same has already been considered disallowed in its computation of income in terms of section 43B of the Act and which has been accepted by the AO while completing the assessment proceedings. We have gone through the computation of income available and find the contention so advanced by the assessee as correct as an amount of ₹ 13,00,000/- towards bonus has been suo-moto disallowed by the assessee while computing its income under the head business income . Therefore, the order so passed by the AO accepting the suo-moto disallowance of such provision for bonus cannot by any stretch of imagination be held to be erroneous and prejudicial in nature and hence, the findings of the ld CIT to this extent are set-aside. The order so passed by the ld Pr.CIT is hereby modified to exclude the examination of matter relating to claim of deduction u/s 80(P)(2)(d) and provision of bonus and is sustained to the extent of examination of allowability of various provisions as per law after providing reasonable opportunity to the assessee. Appeal of the assessee is partly allowed.

Issues Involved:
1. Legality of initiation of proceedings under Section 263 of the Income Tax Act, 1961.
2. Treatment of specific provisions against liability as general provisions/contingent liability.
3. Denial of claim under Section 80(P)(2)(d).
4. Applicability of Section 80(P)(4) to the society.
5. Disallowance of bonus payment under Section 43B.

Detailed Analysis:

1. Legality of Initiation of Proceedings under Section 263 of the Income Tax Act, 1961:
The assessee challenged the initiation of proceedings under Section 263, arguing it was "bad in law and void ab initio." The Principal Commissioner of Income Tax (Pr. CIT) issued a show-cause notice under Section 263, stating that the assessment orders were "erroneous and prejudicial to the revenue." The Tribunal examined whether the assessment order passed by the Assessing Officer (AO) was indeed erroneous and prejudicial to the interest of the Revenue.

2. Treatment of Specific Provisions Against Liability:
The Pr. CIT observed that the assessee adopted the mercantile system of accounting but claimed various provisions which were not allowable under the Income Tax Act. These included audit fees, cess, repairs and maintenance, leave encashment, milk DCS, packing material, and TA & other with BOB. The assessee argued that these were "specific provisions" based on the mercantile system and were allowable as business expenses under Section 37(1) of the Act. The Tribunal found that while these details were mentioned in the tax audit report, there was no evidence that the AO examined these during the assessment proceedings. Therefore, the assessment order was considered erroneous and prejudicial to the interest of the Revenue on this ground.

3. Denial of Claim under Section 80(P)(2)(d):
The assessee claimed a deduction under Section 80(P)(2)(d) for interest received from a Co-operative Bank. The Pr. CIT held that the interest was not allowable under Section 80P(2)(d) read with Section 80P(4). The Tribunal noted that this issue was already decided in favor of the assessee in its own case for AY 2014-15 by the Coordinate Bench, which allowed the deduction. The fact that the Revenue did not accept the Tribunal's order and appealed to the High Court did not make the AO's order erroneous or prejudicial to the Revenue. Thus, the Tribunal set aside the Pr. CIT's findings on this issue.

4. Applicability of Section 80(P)(4) to the Society:
The Pr. CIT argued that the provisions of Section 80P(4) applied, which excludes co-operative banks from claiming deductions under Section 80P. However, the Tribunal found that Ajmer Central Cooperative Bank Ltd is a co-operative society, and the interest on FDRs placed with it was eligible for deduction under Section 80(P)(2)(d). The Tribunal held that the AO's order allowing the deduction was not erroneous.

5. Disallowance of Bonus Payment under Section 43B:
The Pr. CIT noted that the assessee claimed a provision for bonus which was paid after the due date of filing the return, making it disallowable under Section 43B. The assessee contended that this amount was already disallowed in its computation of income. The Tribunal verified the computation and found that the assessee had indeed disallowed the bonus amount suo-moto. Hence, the AO's order was not erroneous or prejudicial in this regard.

Conclusion:
The Tribunal modified the Pr. CIT's order to exclude the examination of the claim under Section 80(P)(2)(d) and the provision for bonus. The examination of the allowability of various provisions was sustained, and the matter was remanded to the AO for fresh examination. The appeal of the assessee was partly allowed.

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