2024 (2) TMI 1168 - AT - Income Tax

Revision u/s 263 - Deduction u/s 80P(2)(d) - PCIT held that the assessee has earned interest income on the FDRs maintained with Co-op. Bank which was not eligible for deduction u/s 80P(2)(d) - HELD THAT - We note that there is no reference to interest received from Coop Bank. At the time of hearing, the AR before us duly demonstrated that the impugned amount of interest was received from the members only and not from the Co-operative Bank. The argument was also not controverted by the DR on behalf of the revenue. Even on perusal of the order of PCIT who after pointing out difference in the amount of interest as discussed above, has reached to the conclusion that such difference represents the interest from the cooperative bank but what we find is this that such conclusion of the PCIT was not based on any material. Therefore, we hold that the PCIT has concluded the assessment order as erroneous in so far prejudicial to the interest of revenue on wrong assumptions of facts and therefore, his PCIT order u/s 263 of the Act is not sustainable. Accordingly, we quash the order passed by the PCIT u/s 263 of the Act. Hence, the ground of appeal of the assessee is allowed.

Summary

Issues Involved:
The judgment involves the assessment orders passed under Section 263 of the Income Tax Act, 1961 for the Assessment Year 2018-19. The main issue raised is the correctness of the assessment order passed by the Ld. Principal Commissioner of Income Tax-1, Rajkot regarding the eligibility of deduction u/s 80P(2)(d) of the Act on interest income.

Issue 1 - Eligibility of Deduction u/s 80P(2)(d) on Interest Income:
The Ld. PCIT held that the interest income earned on Fixed Deposit Receipts (FDRs) with a Co-op. Bank was not eligible for deduction u/s 80P(2)(d) of the Act. The Ld. PCIT set aside the assessment order and directed the Assessing Officer to pass a fresh order denying the deduction on the interest income of Rs. 25,419. The assessee contended that the interest received was penal interest from delayed payments by members, eligible for deduction u/s 80(P)(2)(a)(i) of the Act. The Tribunal found that the interest was not received from the Co-op Bank but from members, concluding that the Ld. PCIT's decision was based on wrong assumptions of facts. The Tribunal quashed the order under section 263 of the Act, allowing the appeal of the assessee.

Issue 2 - Consistency in Decision for Similar Cases:
The judgment also addressed another appeal by a different assessee for the same Assessment Year 2018-19. The issue raised in this case was identical to the first case. The Tribunal decided that the findings in the first case applied to the second case as well. The appeal of the second assessee was allowed based on the decision made in the first case, ensuring consistency in the application of the law to similar cases.

Conclusion:
In conclusion, the Tribunal allowed both appeals filed by different assessees, emphasizing the importance of correct interpretation and application of tax laws to ensure fair treatment and consistency in similar cases. The judgment highlighted the need for thorough examination of facts and adherence to legal provisions to prevent erroneous decisions that could be prejudicial to the interests of the revenue.