2022 (7) TMI 169 - AT - Income Tax

Revision u/s 263 - Deduction u/s 80P - As per CIT interest income was not arising from the activity of financing from the members, therefore, the assessee is not eligible for deduction for such interest income under the provisions of section 80P of the Act but the AO has allowed the same without the necessary verification and application of mind - HELD THAT - At the outset we note that this tribunal in the case of Shree Keshav Co-operative Credit Society Limited 2022 (7) TMI 79 - ITAT RAJKOT involving identical facts and circumstances has decided the issue in favour of the assessee as held that AO has taken one of the possible view for allowing the deduction to the assessee under the provisions of section 80P(2)(d)/80P(2)(a)(i)(a) of the Act. Where two view are possible on the issue and the AO has taken one of the possible view, but the PCIT do not agree with the view adopted by the AO, in such scenario, the order of the AO cannot be held erroneous. Before us, no material has been placed on record by the ld. DR to demonstrate that the decision of Tribunal as cited above has been set aside / stayed or overruled by the higher Judicial Authorities. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of the case referred above nor has placed any contrary binding decision in its support. - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of section 80P of the Income Tax Act for deduction eligibility.
2. Assessment order under section 143(3) deemed erroneous by the Principal CIT.
3. Applicability of judicial precedents in determining the correctness of the AO's order.

Issue 1: Interpretation of section 80P for deduction eligibility:
The appeal involved a dispute regarding the eligibility of the assessee for a deduction under section 80P of the Income Tax Act. The Principal CIT contended that the interest income claimed by the assessee did not qualify for the deduction as it was not generated from financing activities with members. The AO allowed the deduction without thorough verification, leading to the initiation of proceedings under section 263 by the Principal CIT. The tribunal referred to a similar case involving the Shree Keshav Co-operative Credit Society Limited and highlighted conflicting judgments from different High Courts. Notably, the Gujarat High Court favored the assessee's position regarding interest income from cooperative banks. The tribunal concluded that when two views are possible, and the AO has taken a plausible view, the order cannot be deemed erroneous unless unsustainable in law. Consequently, the tribunal upheld the AO's decision, quashing the revisional order by the Principal CIT.

Issue 2: Assessment order deemed erroneous by the Principal CIT:
The Principal CIT deemed the assessment order under section 143(3) as erroneous to the revenue's interest, leading to the initiation of proceedings under section 263. The assessee challenged this decision, citing the precedent set by the Shree Keshav Co-operative Credit Society Limited case. The tribunal analyzed the legal position, emphasizing that the AO's decision should not be considered erroneous if two plausible views exist unless the chosen view is legally unsustainable. Relying on the Gujarat High Court's judgment in a similar case, the tribunal found no error in the AO's assessment, leading to the allowance of the assessee's appeal.

Issue 3: Applicability of judicial precedents in determining correctness of AO's order:
The tribunal extensively discussed the relevance of judicial precedents in assessing the correctness of the AO's order. Citing the Gujarat High Court's judgment in a case involving the Mehsana District Co. Op. Milk Producers Union Ltd., the tribunal highlighted that the section 263 cannot be invoked for every mistake by the AO. It reiterated that if two views are possible, and the AO's view is reasonable, the order should not be considered erroneous. The tribunal emphasized the importance of legal sustainability in the chosen view. In light of the judicial precedents and legal principles, the tribunal concluded that the Principal CIT's revisional order was unsustainable, leading to the allowance of the assessee's appeal.

In conclusion, the Appellate Tribunal ITAT Rajkot, in a detailed analysis, addressed the issues related to the interpretation of section 80P, the assessment order's correctness, and the application of judicial precedents. The tribunal upheld the AO's decision, quashing the Principal CIT's revisional order, and allowed the appeals filed by the different assessee, emphasizing the importance of legal sustainability in assessing the correctness of the AO's order.