2022 (7) TMI 494 - AT - Income Tax

Revision u/s 263 - deduction under section 80P(2)(a)(i)/80P(2)(d) on the FD made with various Co. op Bank Ltd. - HELD THAT - This tribunal in the case of Shree Keshav Co-operative Credit Society Limited. 2022 (7) TMI 79 - ITAT RAJKOT involving identical facts and circumstances has decided the issue in favour of the assessee. Before us, no material has been placed on record by the ld. DR to demonstrate that the decision of Tribunal as cited above has been set aside / stayed or overruled by the higher Judicial Authorities. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of the case referred above nor has placed any contrary binding decision in its support. We hold that there is no error in the assessment framed by the AO under section 143(3) of the Act causing prejudice to the interest of revenue. Thus, the revisional order passed by the PCIT is not sustainable and therefore we quash the same. Hence the ground of appeal of the assessee is allowed.

Issues:
- Assessment framed under section 143(3) of the Income Tax Act deemed erroneous by the Principal Commissioner of Income Tax.
- Eligibility of the assessee for deduction under section 80P(2)(a)(i)/80P(2)(d) of the Act for interest income from Cooperative Banks.
- Applicability of the judgment in the case of Shree Keshav Co-operative Credit Society Limited to the present case.
- Interpretation of the law regarding the correctness of the AO's order under section 263 of the Act.

Analysis:
1. Assessment Framed Under Section 143(3) Deemed Erroneous:
- The issue revolved around the correctness of the assessment framed under section 143(3) of the Income Tax Act. The Principal Commissioner of Income Tax found the assessment to be erroneous insofar as prejudicial to the interest of Revenue. However, the ITAT noted that the AO's decision was based on a possible view and not unsustainable in law. Citing judicial precedents, the ITAT concluded that the order of the AO cannot be deemed erroneous merely because the PCIT disagreed with it.

2. Deduction Under Section 80P(2)(a)(i)/80P(2)(d) of the Act:
- The dispute centered on the eligibility of the assessee for deduction under section 80P(2)(a)(i)/80P(2)(d) of the Act for interest income from Cooperative Banks. The PCIT contended that the interest income did not arise from financing activities, thus disallowing the deduction. However, the ITAT referred to a judgment by the Hon'ble Gujarat High Court favoring the assessee's interpretation of the law. The ITAT upheld the AO's decision, emphasizing that when two views are possible, and the AO's view is not unsustainable, invoking section 263 is unwarranted.

3. Applicability of Precedent Judgment:
- The ITAT considered the judgment in the case of Shree Keshav Co-operative Credit Society Limited, which involved similar facts and circumstances. The ITAT found that the judgment favored the assessee and applied the same reasoning to the present case, ultimately ruling in favor of the assessee based on the precedent set in the earlier case.

4. Interpretation of Law Under Section 263 of the Act:
- The ITAT delved into the interpretation of the law regarding the correctness of the AO's order under section 263 of the Act. It highlighted that the PCIT's disagreement with the AO's view does not automatically render the order erroneous. Quoting the Hon'ble Gujarat High Court, the ITAT emphasized that unless the AO's view is unsustainable in law, invoking section 263 is not justified. The ITAT scrutinized the facts, found no error in the AO's assessment, and consequently quashed the revisional order passed by the PCIT.

In conclusion, the ITAT allowed all four appeals filed by different assessees, emphasizing the importance of considering different views, judicial precedents, and the sustainability of the AO's decisions in determining the correctness of assessments under the Income Tax Act.

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