2022 (12) TMI 439 - AT - Income Tax

Revision u/s 263 - exemption u/s 80P(2)(a)(i) - HELD THAT - Parliament had conferred the power of revision on the Commissioner of Income Tax u/s 263 in case the assessment order passed is erroneous and prejudicial to the interests of revenue. In order to invoke the power of revision, the above two conditions are required to be satisfied cumulatively. References in this regard can be made to the decision of the Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd. 2000 (2) TMI 10 - SUPREME COURT and in the case of CIT vs. Max India Ltd. 2007 (11) TMI 12 - SUPREME COURT - The error in the assessment order should be one that it is not debatable or plausible view. In a case where the AO examined the claim took one of the plausible views, the assessment order cannot be termed as an erroneous . In the present case, we find that admittedly the interest income was earned from the cooperative banks, the cooperative bank is also a specie of cooperative society, therefore, the interest income earned by the cooperative society from the cooperative banks qualifies for deduction u/s 80(P)(2)(d) - Such interest also qualifies for exemption u/s 80P(2)(a)(i) as held by the Co-ordinate Bench of Pune Tribunal in the case of Nashik Road Nagari Sahkari Patsanstha Limited 2021 (12) TMI 1259 - ITAT PUNE Thus, we find that the issue which is subject matter of revision is covered in favour of the assessee by judicial precedents. Therefore, it cannot be said that the assessment order is erroneous or prejudicial to the interests of the revenue. Therefore, we are of the considered opinion that the order of revision passed by the ld. PCIT u/s 263 of the Act cannot be sustained in the eyes of law. Hence, the grounds of appeal raised by the assessee stand allowed.

Summary

Issues:
Jurisdiction under section 263 of the Income Tax Act, 1961 for assessment year 2017-18.

Analysis:
The appeal was against the order of the Principal Commissioner of Income Tax-4, Pune, under section 263 of the Income Tax Act, 1961. The appellant challenged the assumption of jurisdiction under section 263 by the Principal Commissioner. The appellant contended that the assessment order was not erroneous or prejudicial to the revenue's interests. The facts revealed that the appellant, a cooperative society, filed its return of income for the assessment year 2017-18, claiming deductions under section 80P of the Act. The Assessing Officer accepted the returned income. However, the Principal Commissioner found the assessment order erroneous due to the failure to examine the taxability of interest earned on investments made with cooperative banks.

The Principal Commissioner issued a show cause notice under section 263, questioning the assessment order. The appellant argued that the interest income from cooperative banks qualified for deductions under sections 80P(2)(a)(i) and 80P(2)(d). The Principal Commissioner set aside the assessment order, directing a fresh examination of the deductions claimed. The appellant appealed, arguing that the issue was already decided in their favor by judicial precedents. The appellant cited various cases supporting their position.

During the appeal hearing, the appellant's representative highlighted judicial precedents favoring the appellant's position on the eligibility of income earned from cooperative banks for deductions. The Commissioner-DR supported the Principal Commissioner's order, claiming the assessment order was indeed erroneous. The Tribunal analyzed the issue and found that the interest income from cooperative banks qualified for deductions under section 80P(2)(a)(i) and 80P(2)(d). The Tribunal referred to a Co-ordinate Bench decision supporting the appellant's position.

Ultimately, the Tribunal concluded that the assessment order was not erroneous or prejudicial to the revenue's interests. Citing judicial precedents and the specific nature of the income earned by the appellant, the Tribunal allowed the appeal, stating that the Principal Commissioner's revision order under section 263 could not be sustained. Consequently, the grounds of appeal raised by the appellant were allowed, and the appeal was granted in favor of the assessee.

In conclusion, the Tribunal found in favor of the appellant, holding that the assessment order was not erroneous or prejudicial to the revenue's interests. The Tribunal emphasized the eligibility of the appellant's income from cooperative banks for deductions under relevant sections of the Income Tax Act, supported by judicial precedents and a Co-ordinate Bench decision.