2022 (12) TMI 355 - AT - Income Tax

Revision u/s 263 - Deduction u/s 80P - eligibility of income earned on the investment made with the cooperative bank - HELD THAT - In the present case, we find that admittedly the interest income was earned from the cooperative banks, the cooperative bank is also a specie of cooperative society, therefore, the interest income earned by the cooperative society from the cooperative banks qualifies for deduction u/s 80(P)(2)(d) - Such interest also qualifies for exemption u/s 80P(2)(a)(i) as held by in the case of Nashik Road Nagari Sahkari Patsanstha Limited 2021 (12) TMI 1259 - ITAT PUNE . We find that the issue which is subject matter of revision is covered in favour of the assessee by judicial precedents. Therefore, it cannot be said that the assessment order is erroneous or prejudicial to the interests of the revenue. Therefore, we are of the considered opinion that the order of revision passed by the ld. PCIT u/s 263 of the Act cannot be sustained in the eyes of law. Hence, the grounds of appeal raised by the assessee stand allowed.

Summary

Issues:
Jurisdiction under section 263 of the Income Tax Act, 1961 for assessment year 2017-18.

Analysis:
The appellant, a cooperative society, filed an appeal against the order of the Principal Commissioner of Income Tax-4, Pune, challenging the assumption of jurisdiction under section 263 of the IT Act. The appellant contended that the assessment order passed under section 143(3) was not erroneous or prejudicial to the revenue's interest. The issue revolved around the eligibility of income earned on investments made with cooperative banks for deduction under sections 80P(2)(a)(i) and 80P(2)(d) of the Act.

The Principal Commissioner issued a show cause notice under section 263, questioning the Assessing Officer's failure to examine the taxability of interest earned on investments with cooperative banks. The appellant argued that the interest income qualified for deduction under sections 80P(2)(a)(i) and 80P(2)(d), citing relevant judicial precedents. Despite the appellant's submissions, the Principal Commissioner held the assessment erroneous and set it aside for fresh adjudication on the deduction claim.

During the appeal, the appellant relied on judicial precedents supporting the eligibility of interest income for exemption under section 80P(2)(a)(i) and 80P(2)(d). The appellant contended that since the issue was previously decided in favor of the assessee, the assessment order could not be deemed erroneous or prejudicial to revenue interests. On the contrary, the CIT-DR supported the Principal Commissioner's decision, emphasizing the failure to examine taxable income from cooperative bank investments.

The Tribunal analyzed the jurisdiction under section 263, emphasizing that both error and prejudice to revenue must be present for revision. Referring to relevant Supreme Court decisions, the Tribunal noted that when the Assessing Officer's view is plausible, the assessment order cannot be labeled as erroneous. In this case, the interest income earned from cooperative banks was held eligible for deduction under sections 80P(2)(a)(i) and 80P(2)(d) based on judicial precedents. Consequently, the Tribunal concluded that the Principal Commissioner's revision order was unsustainable in law, and the grounds of appeal raised by the assessee were allowed.

In conclusion, the Tribunal allowed the appeal, holding that the Principal Commissioner's revision order under section 263 was not valid, as the issue regarding the deduction claim was supported by judicial precedents, rendering the assessment order non-erroneous and non-prejudicial to revenue interests.