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2022 (8) TMI 29 - AT - Income TaxRevision u/s 263 - Deduction under section 80P disallowed - HELD THAT - As in this case, it is observed from the assessment order that the AO had called for details regarding deduction u/s 80P of the Act. After verification of the said details, the AO came to the conclusion that the interest earned by the assessee from Axis bank was not eligible for deduction u/s 80P and accordingly he disallowed it. This exercise of the AO of disallowing the interest earned from Axis Bank explains that he had called for the details and applied his mind to decide eligibility of the income for deduction u/s 80P. The Ld.Pr.CIT in the revision order has not pointed out any specific income which the AO has failed to verify. Therefore, on the facts of the case, we are of the opinion that the assessment order is not erroneous. The assessee is a Cooperative Credit Society and it claimed deduction u/s 80P which has been allowed by the AO after verification. Hence the order u/s.263 is not sustainable. Hence, grounds of appeal raised by assessee are allowed.
Issues Involved:
1. Jurisdiction of the Pr. Commissioner of Income Tax (Pr.CIT) in passing the order. 2. Erroneous and prejudicial nature of the original assessment order under section 143(3). 3. Eligibility of interest income from deposits with cooperative banks for deduction under section 80P of the Income Tax Act, 1961. 4. Validity of the Pr.CIT's order under section 263 setting aside the assessment order. Detailed Analysis of the Judgment: 1. Jurisdiction of the Pr. Commissioner of Income Tax (Pr.CIT) in passing the order: The Assessee contended that the Pr.CIT's order was without jurisdiction and bad in law. The Tribunal examined whether the Pr.CIT had the authority to invoke section 263 of the Income Tax Act, which allows revision of orders that are erroneous and prejudicial to the interest of the revenue. The Tribunal concluded that the Pr.CIT did have jurisdiction to issue the notice and pass the order under section 263, provided the assessment order was indeed erroneous and prejudicial to the revenue. 2. Erroneous and prejudicial nature of the original assessment order under section 143(3): The Tribunal analyzed whether the original assessment order passed by the Assessing Officer (AO) was erroneous and prejudicial to the interest of the revenue. The AO had disallowed Rs.7,856/- of interest income earned from Axis Bank, deeming it ineligible for deduction under section 80P. The Pr.CIT argued that the AO failed to disallow interest income of Rs.36,37,967/- earned from cooperative banks, which was also not eligible for deduction under section 80P(2)(a) or 80P(2)(d). The Tribunal found that the AO had called for details and verified the eligibility of the deduction under section 80P, thereby applying his mind to the issue. The Tribunal cited the Bombay High Court's decision in CIT vs Chandan Magraj Parmar, emphasizing that an order cannot be termed erroneous merely because it lacks detailed reasoning if the AO had made necessary inquiries. 3. Eligibility of interest income from deposits with cooperative banks for deduction under section 80P of the Income Tax Act, 1961: The Tribunal referred to multiple case laws, including the Hon'ble Karnataka High Court's decision in The Totagars Co-Operative Sale Society and the Pune ITAT's decision in Sant Motiram Maharaj Sahakari Pat Sanstha Ltd vs ITO. It was noted that interest income from cooperative banks could be eligible for deduction under section 80P(2)(a)(i) if it is attributable to the business of providing credit facilities to members. The Tribunal found that the assessee's interest income from cooperative banks was indeed attributable to its business operations and thus eligible for deduction under section 80P(2)(a)(i). 4. Validity of the Pr.CIT's order under section 263 setting aside the assessment order: The Tribunal evaluated the Pr.CIT's order which set aside the original assessment order and directed a fresh assessment. It was observed that the AO had already verified the details and allowed the deduction under section 80P after due consideration. The Tribunal held that the Pr.CIT's order was not sustainable as it did not point out any specific income that the AO failed to verify. The Tribunal concluded that the original assessment order was not erroneous and, therefore, the Pr.CIT could not assume jurisdiction under section 263. The Tribunal allowed the appeal of the assessee, setting aside the Pr.CIT's order. Conclusion: The Tribunal allowed the appeal of the Assessee, holding that the original assessment order was not erroneous and the Pr.CIT's order under section 263 was not sustainable. The interest income from cooperative banks was deemed eligible for deduction under section 80P(2)(a)(i) as it was attributable to the business of providing credit facilities to members. The Tribunal emphasized that the AO had made necessary inquiries and applied his mind, and thus, the Pr.CIT could not revise the order merely because it lacked detailed reasoning.
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