2022 (12) TMI 869 - AT - Income Tax

Revision u/s 263 by CIT - deduction of interest income has been claimed u/s. 80(P)(2)(d) - As per CIT cooperative bank is not cooperative society for claiming of deduction u/s 80P(2)(d) - interest on FDR received from Sikar Kendriya Sahakari Bank Limited has been claimed and the same was allowed by the AO, which is not allowable u/s.80(P)(2)(d) and PCIT found that it is factually apparent that the AO has not verified the issue while completing the assessment - HELD THAT - As the A.O while framing the assessment had taken a possible view, and revenue did not demonstrate the error remain on the part of the ld. AO. In fact, when the ld. AO has conducted the required enquiry and not violated any of the conditions mentioned for revision of order as required by Explanation 2of Section 263 order passed by the AO could not be deemed to be erroneous so as to be prejudicial to the interests of the revenue. As long as the action of the AO cannot be said to be lacking bonafides, his action in accepting an explanation of the assessee cannot be faulted merely because it could have been lawful to make mere detailed inquiries or because he did not write specific reasons of accepting the explanation. As for learned PCIT's observations regarding accepting the explanation without appropriate evidence , there is nothing to question the bonfides of the Assessing Officer or to elaborate as to what should have been 'appropriate' evidence. The fact remains that the specific issue raised, in the revision order was specifically looked into, detailed submissions were made and these submissions were duly accepted by the Assessing Officer. Merely because the AO did not write specific reasons for accepting the explanation of the assessee cannot be reason enough to invoke powers under section 263 , and non-mentioning of these reasons do not render the assessment order erroneous and prejudicial to the interest of the revenue . Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Initiation of revision proceedings under Section 263 of the Income Tax Act, 1961.
2. Eligibility of a cooperative bank as a cooperative society for claiming deduction under Section 80P(2)(d).
3. Non-consideration of judicial precedents by the PCIT.
4. Verification of the issue by the Assessing Officer (AO) during the assessment.

Issue-wise Detailed Analysis:

1. Initiation of Revision Proceedings under Section 263:
The appeal was filed by the assessee against the order of the Principal Commissioner of Income Tax (PCIT), Jaipur-1, who initiated revision proceedings under Section 263 of the Income Tax Act, 1961. The PCIT found the assessment order passed by the AO to be erroneous and prejudicial to the interest of the revenue, as the AO had allowed a deduction under Section 80P(2)(d) without proper verification. The PCIT argued that the AO's order was passed mechanically without application of mind, thus justifying the initiation of revision proceedings.

2. Eligibility of Cooperative Bank as a Cooperative Society for Deduction under Section 80P(2)(d):
The PCIT held that a cooperative bank is not a cooperative society for the purpose of claiming deduction under Section 80P(2)(d). The assessee had claimed a deduction of Rs. 51,29,967/- as interest income from FDR with Sikar Kendriya Sahakari Bank Limited, which the PCIT argued was not allowable under the said section. The PCIT's stance was that the interest received from cooperative banks, which are not cooperative societies, is taxable and not eligible for deduction under Section 80P(2)(d).

3. Non-Consideration of Judicial Precedents:
The assessee contended that the PCIT did not consider the decision of the Hon'ble Rajasthan High Court in the case of CIT vs. Rajasthan Rajya Sahakari Kray Vikraya Sangh Ltd., which held that a cooperative bank is a cooperative society eligible for deduction under Section 80P(2)(d). The assessee also relied on decisions of various High Courts and ITAT benches supporting their claim. The PCIT, however, did not take these judicial precedents into account while passing the revision order.

4. Verification of the Issue by the AO:
The assessee argued that the AO had verified the issue during the assessment proceedings, as evidenced by the notices issued and the detailed replies submitted by the assessee. The AO had allowed the deduction after examining the relevant documents. The ITAT found that the AO had indeed conducted a proper inquiry and had taken a plausible view based on the submissions and judicial precedents. The ITAT held that the AO's order could not be deemed erroneous merely because the PCIT disagreed with the AO's conclusion.

Conclusion:
The ITAT concluded that the AO had taken a plausible view and conducted the necessary inquiries during the assessment proceedings. The revision order passed by the PCIT under Section 263 was vacated, and the appeal of the assessee was allowed. The ITAT emphasized that an order cannot be subjected to revision under Section 263 simply because the PCIT disagrees with the AO's conclusion if the AO's view is supported by judicial precedents and proper inquiry. The ITAT also highlighted that the PCIT did not provide any specific errors or lack of inquiry by the AO to substantiate the claim that the AO's order was erroneous and prejudicial to the interest of the revenue.