2022 (3) TMI 71 - AT - Income Tax

Revision u/s 263 by CIT - Deduction u/s 80P - HELD THAT - The entire details called for during the assessment proceedings were submitted by the assessee at the time of assessment under Section 143(3) of the Act and the AO was very well aware that section 80P claim was reflected in the details of the assessee. The assessee vide letter dated 22.05.2017 submitted the details regarding deduction under Section 80P of the Act which was claimed in the return of income which included in the interest income from Mehsana Urban Co-operative Bank. PCIT has issued the show cause notice under Section 263 on 14.02.2020 on the very same issue which was verified by the Assessing Officer in Section 143(3) proceedings itself. Once the issue verified by the Assessing Officer and the jurisdictional Court has allowed the said claim related to interest income earned from Co-operative Bank, the PCIT cannot exercise Section 263 - A.R. aptly relied upon the decision of State Bank of India 2016 (7) TMI 516 - GUJARAT HIGH COURT - PCIT cannot invoke provisions of section 263 - Decided in favour of assessee.

Summary

Issues:
1. Revision under Section 263 of the Income Tax Act regarding interest income from Co-operative Banks.

Analysis:
The appeal was filed against the order passed by the Principal Commissioner of Income Tax (PCIT), Gandhinagar, Ahmedabad for the Assessment Year 2015-16. The assessee, a Co-operative Society providing credit facilities, filed its return of income declaring total income. The assessment under section 143(3) was finalized, making an addition on account of undisclosed commission and interest income. The PCIT issued a show cause notice under Section 263 for revision of the assessment order as interest income from a Co-operative Bank was allowed, but the PCIT set aside the assessment order and directed the Assessing Officer to reframe it denovo.

The main contention was that the PCIT ignored that the interest issue was already before the Assessing Officer during the original assessment proceedings. The assessee argued that since the issue was considered during the initial assessment under Section 143(3), there was no need for revision under Section 263. The PCIT's order was challenged in appeal.

After hearing both parties and examining the facts, it was noted that all details regarding the interest income and Section 80P claim were submitted during the original assessment proceedings. The Assessing Officer was aware of the section 80P claim made by the assessee. The PCIT's show cause notice under Section 263 was based on the same issue already verified during the initial assessment. Referring to relevant case law, it was concluded that once the Assessing Officer had verified the issue and relevant court decisions supported the claim related to interest income from Co-operative Banks, the PCIT could not invoke Section 263. The decision of the Hon'ble Karnataka High Court in Totgars Co-operative Sales Society case was crucial in determining that the PCIT's action was not sustainable under Section 263. Therefore, the appeal of the assessee was allowed, and the original assessment order stood.

In conclusion, the Tribunal held that the PCIT's decision to set aside the assessment order under Section 263 was incorrect as the issue of interest income from Co-operative Banks was already considered during the initial assessment proceedings under Section 143(3). The PCIT's attempt to revise the order was deemed unwarranted based on the facts and legal precedents cited, leading to the allowance of the assessee's appeal.