2023 (2) TMI 917 - AT - Income Tax

Revision u/s 263 - As per CIT AO's allowance of deduction u/s 80P was incorrect - HELD THAT - As decided in own case 2022 (12) TMI 355 - ITAT PUNE we find that the issue which is subject matter of revision is covered in favour of the assessee by judicial precedents. 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:
1. Jurisdiction of PCIT under section 263 of the Income Tax Act.
2. Validity of the assessment order regarding deduction under section 80P.

Jurisdiction of PCIT under section 263:
The appeal questioned the jurisdiction of the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act, alleging that the assessing officer's order was not erroneous or prejudicial to revenue. The PCIT initiated action under section 263 based on the failure of the assessing officer to examine the taxability of interest earned on investments with cooperative banks. The appellant argued that the interest income from cooperative banks qualifies for deduction under sections 80P(2)(a)(i) and 80P(2)(d) of the Act. The PCIT set aside the assessment order, directing a re-examination of the deduction claim. However, the appellant contended that the issue was covered by previous tribunal decisions in their favor, rendering the assessment order not erroneous or prejudicial to revenue. The tribunal referred to judicial precedents supporting the appellant's position and held that the PCIT's revision order lacked legal merit due to the issue being settled in favor of the appellant by judicial precedents.

Validity of the assessment order regarding deduction under section 80P:
The crux of the matter revolved around the validity of the assessment order concerning the deduction under section 80P of the Income Tax Act. The appellant, a cooperative society, had claimed a deduction under section 80P, which was initially accepted by the assessing officer. However, the PCIT found the assessing officer's failure to examine the taxability of interest earned on investments from cooperative banks as an error, leading to the initiation of revision proceedings under section 263. The appellant argued that the interest income qualified for deduction under sections 80P(2)(a)(i) and 80P(2)(d) based on judicial precedents. The tribunal, after considering the precedents and the nature of income earned from cooperative banks, concluded that the assessment order was not erroneous or prejudicial to revenue. Therefore, the tribunal allowed the appeal, holding that the PCIT's revision order lacked legal basis, and upheld the validity of the original assessment order regarding the deduction under section 80P.

This detailed analysis of the legal judgment outlines the issues of jurisdiction under section 263 and the validity of the assessment order regarding the deduction under section 80P. The tribunal's decision was based on the interpretation of relevant legal provisions, judicial precedents, and the nature of income earned by the appellant from cooperative banks.