2022 (8) TMI 17 - AT - Income Tax

Revision u/s 263 by CIT - deduction u/s 80P(2) - whether interest earned on deposits with banks is eligible for deduction u/s 80P(2)(a)(i)? - HELD THAT - In the year under consideration, it is noted that the facts under consideration are pari-materia with that of A.Y 2012-13 where there is no surplus from the activity of providing premises on hire and assessee has reported a loss of Rs 105,899/- under the mandap keeper s head and which has been reduced from income in respect of which deduction has been claimed u/s 80P(2)(a)(i) of the Act and in effect, no deduction has been claimed in respect of such activity of providing premises on hire. It is an admitted and undisputed fact that the AO has considered the aforesaid decision of the ld CIT(A) for A.Y 2012-13 while allowing the claim of deduction u/s 80P(2)(a)(i) of the Act as apparent from the findings of the ld PCIT in the impugned order. PCIT has however held that in two Coordinate Bench decisions which have been relied upon by the ld CIT(A) in A.Y 2012-13, the Coordinate Benches have not correctly appreciated the decision of the Hon ble Supreme Court in case of Totjars Co-operative Sales Society Ltd vs ITO (supra) and reasoning so adopted by the Coordinate Benches are not acceptable to him. It is therefore a case where the Coordinate Benches have taken a view in the matter taking into consideration the decision of the Hon ble Supreme Court and which has been followed in case of the assessee by the ld CIT(A) in assessee s own case for A.Y 2012-13 and for the year under consideration, the AO follows the same however, the ld PCIT on identical set of facts reaches a different conclusion on appreciating the same set of decisions/authorities on the subject. AO has taken a plausible view in the matter and it may be that the ld PCIT holds a different point of view, thus, a view taken by the AO, being a plausible view taken by a quasi-judicial authority cannot be held as erroneous in nature unless it is unsustainable in eyes of law. Appeal of assessee allowed.

Issues Involved:
1. Legality of the order passed by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act.
2. Examination of the deduction under Section 80P(2)(a)(i) on interest from Fixed Deposit Receipts (FDR) received from banks.
3. Applicability of the Supreme Court decision in Totgars Cooperative Sale Society Ltd. vs. ITO.
4. Jurisdiction of PCIT under Section 263 when an issue has been considered and decided by the Commissioner of Income Tax (Appeals) [CIT(A)] in a previous assessment year.
5. Whether the assessment order passed by the Assessing Officer (AO) is erroneous and prejudicial to the interest of the revenue.

Detailed Analysis:

1. Legality of the Order Passed by the PCIT under Section 263:
The assessee contended that the order passed by the PCIT under Section 263 was illegal and should be quashed. The PCIT had issued a notice under Section 263 stating that the AO had erroneously allowed a deduction under Section 80P(2)(a)(i) without proper verification. The Tribunal examined whether the PCIT had the jurisdiction to pass such an order, especially when the issue had been previously decided by the CIT(A) for an earlier assessment year.

2. Examination of the Deduction under Section 80P(2)(a)(i):
The AO had allowed the deduction claimed by the assessee under Section 80P(2)(a)(i) based on the CIT(A)'s order for the assessment year 2012-13. The PCIT argued that the AO failed to make appropriate inquiries or verifications regarding the interest income from FDRs, which should be taxable under Section 56 as "income from other sources" and not eligible for deduction under Section 80P(2)(a)(i).

3. Applicability of the Supreme Court Decision in Totgars Cooperative Sale Society Ltd. vs. ITO:
The PCIT relied on the Supreme Court's decision in Totgars Cooperative Sale Society Ltd. vs. ITO, which held that interest income on surplus funds invested in short-term deposits and securities is taxable under Section 56. The assessee argued that this decision was not applicable to their case and had been distinguished by the CIT(A) and various ITAT benches.

4. Jurisdiction of PCIT under Section 263:
The Tribunal examined whether the PCIT could assume jurisdiction under Section 263 for the assessment year 2015-16 when the issue of deduction under Section 80P(2)(a)(i) had already been considered and decided by the CIT(A) for the assessment year 2012-13. The explanation to Section 263(1) was discussed, which extends the powers of the PCIT to matters not considered and decided in an appeal.

5. Whether the AO's Order is Erroneous and Prejudicial to the Interest of the Revenue:
The Tribunal considered whether the AO's order, which followed the CIT(A)'s decision for the assessment year 2012-13, could be deemed erroneous and prejudicial to the revenue. It was noted that the AO had made necessary verifications and followed judicial precedents. The Tribunal also discussed the principle that where two views are possible, and the AO has taken one plausible view, the assessment order cannot be treated as erroneous or prejudicial to the revenue.

Conclusion:
The Tribunal concluded that the AO had made necessary verifications and followed the CIT(A)'s decision for the assessment year 2012-13. The PCIT's assumption of jurisdiction under Section 263 was not justified, as the AO's order was not erroneous or prejudicial to the interest of the revenue. The Tribunal set aside the PCIT's order and allowed the appeal of the assessee.

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