2024 (2) TMI 331 - AT - Income Tax

Revision u/s 263 - deduction u/s 80P(2)(d) in respect of interest income earned from deposit in Co-operative Bank - CIT was of the view that interest income is required to be disallowed by the AO and added back to the total income of the assessee which was not done by the AO at the time of assessment - HELD THAT - We note that in the recent decision this tribunal in case of Pr. CIT vs. Bhopal Dugdh Sangh Sahakari Maryadit 2024 (2) TMI 243 - ITAT INDORE held that assessee society who has earned an amount from its investment of surplus fund with cooperative banks is entitled for deduction under section 80P(2)(d) of the Act. Resultantly, the Ld. CIT(A) has erred in upholding the denial of deduction by the AO to the assessee under section 80P(2)(d) - Assessee is eligible for deduction u/s 80P(2)(d) in respect of FDR interest received from Cooperative Bank. Thus we find that the Pr. CIT has no jurisdiction to invoke the provisions of section 263 when the AO has taken a possible view on this issue. Hence, the impugned order of the Pr. CIT passed u/s 263 is set aside. Appeal of the assesse is allowed.

Summary

Issues Involved:
1. Invocation of Section 263 of the Income-Tax Act, 1961.
2. Eligibility for deduction under Section 80P(2)(d) of the Income-Tax Act, 1961.
3. Jurisdiction of the Principal Commissioner of Income Tax (Pr. CIT).

Summary:

1. Invocation of Section 263 of the Income-Tax Act, 1961:
The appellant argued that the Pr. CIT erred in invoking Section 263 without considering that the original Assessment Order passed under Section 143(3) was neither erroneous nor prejudicial to the interest of the Revenue. The Pr. CIT issued a show cause notice under Section 263, questioning the deduction claimed under Section 80P(2)(d) for interest income from deposits in Co-operative Banks. The Pr. CIT opined that the interest earned from Co-operative Banks is not eligible for this deduction and directed the Assessing Officer (AO) to re-examine the issue.

2. Eligibility for deduction under Section 80P(2)(d) of the Income-Tax Act, 1961:
The appellant contended that the interest income from deposits with Co-operative Banks is eligible for deduction under Section 80P(2)(d). The AO had previously allowed this deduction after conducting a specific inquiry and considering the appellant's explanation and documentary evidence. The Tribunal cited various decisions, including those from the Pune and Indore Benches, which held that interest income from Co-operative Banks qualifies for deduction under Section 80P(2)(d).

3. Jurisdiction of the Principal Commissioner of Income Tax (Pr. CIT):
The Tribunal noted that the AO had conducted a thorough inquiry into the eligibility for the deduction under Section 80P(2)(d) and had taken a possible view supported by judicial precedents. Therefore, the Pr. CIT's invocation of Section 263 was deemed unjustified. The Tribunal referenced multiple decisions, including those from the High Courts of Karnataka and Gujarat, which supported the appellant's claim for deduction on interest income from Co-operative Banks.

Conclusion:
The Tribunal concluded that the Pr. CIT had no jurisdiction to invoke Section 263 as the AO had already taken a possible view on the issue. Consequently, the Tribunal set aside the Pr. CIT's order and allowed the appeal in favor of the appellant. The order was pronounced in the open court on 30.01.2024.