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2022 (9) TMI 153 - AT - Income TaxRevision u/s 263 - excess deduction claimed u/s 80P(2)(c)(ii) - As per CIT assessee had been wrongly allowed claim of deduction of interest income earned from the deposits/FDRs in bank as per section 80P(2)(d) of the Act, noting that bank from which interest income was earned did not qualify as cooperative bank for the purpose of being eligible to claim deduction - HELD THAT - Order of the ld.Pr.CIT is liable to be set aside also for the reasons that though the assessee had canvassed that his claim of deduction under section 80P(2) qualified under sub-clause (d) thereof, the ld.Pr.CIT chose to dwell on the issue of its allowability under clause (a)(i) of section 80P(2) finding it to be not allowable under the said clause and as a consequence holding the assessment order to be erroneous for allowing the claim of the assessee and did not apply his mind at all, to the claim being alternatively allowable under sub-clause (d) of section 80P(2). Since the assessee had demonstrated his claim being allowed alternatively under another clause of section 80P(2), the ld.Pr.CIT ought to have dealt with this claim of the assessee before arriving at a finding of error in the assessment order holding the claim of deduction u/s 80P of the Act as being incorrectly allowed by the AO. It is only after dealing with this alternative claim and finding it to be incorrect that it could be said that the allowance of deduction of interest income had resulted in prejudice to the Revenue, which condition also needs to be satisfied alongwith finding the assessment order erroneous for exercising revisionary jurisdiction u/s 263 of the Act. In the circumstance that the assesses claim is found allowable under section 80P(2)(d) of the Act, the allowance of deduction u/s 80P(2)(a)(i) of the Act by the AO cannot be said to be to the prejudice of the Revenue since in any case the assesses claim of deduction was allowable. Having not so dealt with alternative claim of the assessee, there could not be said to be any finding of the error causing prejudice to the Revenue in the order of the AO and for this reason also the order passed by the ld.Pr.CIT needs to be aside. Thus we hold that the order passed under section 263 of the Act is not accordance with law. The same is hereby set aside, and order of the AO is restored. Appeal of assessee allowed.
Issues Involved:
1. Legality of the initiation of revisionary proceedings under section 263. 2. Validity of the assessment order being found erroneous based on a different premise than initially stated. 3. Whether the Pr.CIT provided adequate opportunity for the assessee to be heard. 4. Consideration of the assessee's alternative claim for deduction under section 80P(2)(d). Issue-wise Detailed Analysis: 1. Legality of the initiation of revisionary proceedings under section 263: The assessee challenged the initiation of revisionary proceedings under section 263 by the Pr.CIT, arguing that the assessment order was not erroneous or prejudicial to the interest of the revenue. The Pr.CIT initiated the proceedings on the premise that the assessee wrongly claimed a deduction of interest income under section 80P(2)(d), while the assessee contended that the claim was made under section 80P(2)(a)(i). The Tribunal noted that the initiation of proceedings under section 263 was based on the incorrect premise regarding the section under which the deduction was claimed. 2. Validity of the assessment order being found erroneous based on a different premise than initially stated: The Tribunal observed that while the revisionary proceedings were initiated on the premise of non-allowability of the deduction under section 80P(2)(d), the Pr.CIT ultimately held the assessment order erroneous on the premise of non-allowability under section 80P(2)(a)(i). This change of track was not communicated to the assessee, which rendered the order invalid. The Tribunal cited the case of PCIT vs. Universal Music India Ltd., where it was held that an order passed under section 263 without confronting the assessee with the issue on which the assessment order was found erroneous is not sustainable in law. 3. Whether the Pr.CIT provided adequate opportunity for the assessee to be heard: The Tribunal found that the Pr.CIT did not provide an adequate opportunity for the assessee to be heard on the specific ground on which the assessment order was ultimately found erroneous. The Tribunal emphasized that the principles of natural justice were violated as the assessee was not given a chance to rebut the facts and analysis used by the Pr.CIT to arrive at his decision. The Tribunal referred to the Supreme Court's decision in Commissioner of Income Tax, Mumbai v Amitabh Bachchan, which mandates that the assessee must be heard before the Commissioner takes a decision under section 263. 4. Consideration of the assessee's alternative claim for deduction under section 80P(2)(d): The Tribunal noted that the Pr.CIT failed to consider the assessee's alternative claim that the interest income qualified for deduction under section 80P(2)(d). The assessee had cited several judicial precedents supporting the claim that interest income from cooperative banks qualifies for deduction under section 80P(2)(d). The Tribunal held that the Pr.CIT should have addressed this alternative claim before concluding that the assessment order was erroneous and prejudicial to the interest of the revenue. The Tribunal concluded that without addressing this alternative claim, the Pr.CIT could not establish that the assessment order was prejudicial to the revenue. Conclusion: The Tribunal set aside the order passed under section 263, restoring the original assessment order. The Tribunal held that the Pr.CIT's order was not in accordance with law due to the violation of principles of natural justice and the failure to consider the alternative claim for deduction under section 80P(2)(d). The appeal of the assessee was allowed.
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