2023 (3) TMI 980 - AT - Income Tax

Revision u/s 263 by CIT - Allowability of Deduction u/s 80P - whether action of the assessing officer in allowing the claim of the assessee us/s. 80(P)(2)(d) is found faulted with, whether the assessee ought to have produced the appropriate evidence and whether non-recording of the reasons for accepting explanation will render the order erroneous and prejudicial to the interest of the revenue? - HELD THAT - AO has examined that issue as it is evident from the finding recorded in the assessment order. As the case was for this limited purpose the same has been examined and verified by the ld. AO as it emerges from the findings of the AO. CIT evidently did not place on record any apparent error on the part of the AO to substantiate that order passed by the ld. AO is prejudicial to the interest of revenue. She only mentioned that the AO allowed deduction u/s. 80(P)(2)(d) on the interest income received from co-operative bank and thus AO erred in allowing the deduction u/s. 80(P)(2)(d) on such interest income. She has not pin pointed any of the enquiry which is required to be made is not made by the ld. AO the fact from where the ld. PCIT drawing interference is already on record and based on that information the ld. AO drawn a plausible view on the matter. There is no defect found from the enquiry that has been conducted by the ld. AO. He collected the information based on upon which he has allowed the claim to assessee and has verified the point raised in the limited scrutiny. PCIT did not find any specific error or default of AO and thus we see no reasons in interfering the view that has already been taken. Since, in this case ld. AO has clearly conducted the enquiry and revenue did not pin point the error on the part of the assessing officer the order passed after due application of mind cannot be subjected to proceeding u/s. 263 of the Act. A.O while framing the assessment had taken a plausible view of the matter of while allowing the claim of the assessee, and revenue did not demonstrate the error remain on the part of the ld. AO. The fact remains that the specific issue mentioned and has been examined and the contention of the assessee accepted by the Assessing Officer. Merely because the Assessing Officer did not write specific reasons for accepting the explanation of the assessee cannot be reason enough to invoke powers under section 263, and non-mentioning of these reasons do not render the assessment order erroneous and prejudicial to the interest of the revenue . Assessee appeal allowed.

Issues Involved:

1. Jurisdiction under Section 263 of the Income Tax Act.
2. Erroneous and prejudicial to the interest of revenue.
3. Deduction under Section 80P(2)(d) of the Income Tax Act.
4. Interpretation of Cooperative Bank versus Cooperative Society.

Summary:

1. Jurisdiction under Section 263 of the Income Tax Act:

The appellant contested the Principal Commissioner of Income Tax (PCIT)'s jurisdiction under Section 263, arguing that the PCIT erred in law and fact by assuming jurisdiction without recording a specific and categorical finding that the assessment order was erroneous and prejudicial to the interest of revenue. The Tribunal noted that the case was selected for limited scrutiny to examine the issue of deduction under Chapter VIA, and the Assessing Officer (AO) had issued notices and completed the assessment after examining the records and submissions.

2. Erroneous and prejudicial to the interest of revenue:

The PCIT observed that the AO allowed a deduction of Rs. 3,02,09,525/- under Section 80P(2)(d) on interest income received from cooperative banks, which should not have been allowed as the interest was not from a cooperative society. The Tribunal found that the AO had made detailed inquiries, examined the records, and applied his mind before allowing the deduction, thus taking a plausible view. The Tribunal highlighted that merely because the AO did not write specific reasons for accepting the explanation of the assessee, it cannot be a reason to invoke powers under Section 263.

3. Deduction under Section 80P(2)(d) of the Income Tax Act:

The assessee claimed deduction under Section 80P(2)(d) on interest income from cooperative banks, which the AO allowed. The PCIT argued that the deduction was not allowable as the interest was received from cooperative banks and not from a cooperative society. The Tribunal referred to various judicial precedents, including the ITAT's decision in the assessee's own case for earlier years, which allowed such deductions. The Tribunal concluded that the AO's decision was based on a plausible view supported by judicial precedents and thus was not erroneous.

4. Interpretation of Cooperative Bank versus Cooperative Society:

The PCIT argued that cooperative banks are different from cooperative societies and thus interest income from cooperative banks is not eligible for deduction under Section 80P(2)(d). The Tribunal noted that various judicial decisions, including those of the Karnataka High Court and ITAT, have held that cooperative banks can be considered as cooperative societies for the purpose of Section 80P(2)(d). The Tribunal emphasized that the AO's view was in line with these judicial precedents.

Conclusion:

The Tribunal held that the AO had taken a plausible view after due inquiry and application of mind, and the order was not erroneous or prejudicial to the interest of revenue. Therefore, the invocation of Section 263 by the PCIT was not justified, and the appeal of the assessee was allowed. The Tribunal vacated the revision order under Section 263 and did not address the merits of the case as it was not under adjudication.

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