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TMI Blog2019 (7) TMI 657X X X X Extracts X X X X X X X X Extracts X X X X ..... t enquired into and no proper efforts were made to find out whether the assessee was eligible for deduction u/s. 80P(2). Without making any enquiry into these issues, the AO accepted the assessee s claim. The failure on the part of the AO to make necessary enquiry rendered the assessment order erroneous which also resulted in loss to the revenue. The CIT had observed in his order that it is to be decided by the AO after fresh examination . Hence, the order of the CIT cannot be held as erroneous. The CIT s approach was correct. - Decided against assessee. Grant of deduction u/s. 80P - HELD THAT:- In our opinion, the issue was considered by the Jurisdictional High Court in the case of Mavilayi Service Co-operative Bank Ltd. vs. CIT [ 2019 (3) TMI 1580 - KERALA HIGH COURT] wherein it was held that the Assessing Officer is not obliged to grant deduction by merely looking at the certificate of registration issued by the competent authority under the Co-operative Societies Act. Instead, he has to conduct an enquiry into the factual situation as to the activities of the assessee and arrive at a conclusion whether the benefits of section 80P can be extended or not. Accordingly, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ACIT vs. Citizen Co-operative Society Ltd. [ 2012 (9) TMI 756 - ITAT HYDERABAD] . Accordingly, we remit this issue to the file of the Assessing Officer with a direction to the assessee to furnish the identity of the depositors with PAN details before the AO and decide the issue in accordance with law. Thus, this ground of appeals of the assessee is partly allowed for statistical purposes. Disallowance of deduction u/s. 80P on addition of unexplained income u/s 68 - HELD THAT:- Merely because the assessee is running a business in which are found certain unexplained cash credits, it does not necessarily follow that such credits represent suppressed business receipts and there would be no error of law in regarding the unexplained cash credits as income of the assessee from some independent and unknown sources unless there are strong reasons for connecting the unexplained cash credits with known sources of income of the assessee, there would be no alternative to treating them as income from other sources. Reliance is also placed on the judgment of Supreme Court in the case of CIT vs. Deviprasad Viswanath Prasad [ 1968 (8) TMI 5 - SUPREME COURT] wherein it was held that whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ORDER Per CHANDRA POOJARI, AM: These appeals filed by the Revenue and the assessee are directed against the different orders of the CIT(A), Trivandrum and pertain to the assessment years 2013-14 2014-15. The assessee has also filed Cross Objection in C.O. No.10/ Coch/2019 and Stay petitions in S.P. Nos.43 06/Coch/2018 for the assessment years 2013-14 and 2014-15. 2. First we shall take up the appeal in ITA No. 141/Coch/2019 for the assessment year 2013-14. This appeal is directed against the order of the Pr. CIT, Trivandrum passed u/s. 263 of the Act vide order dated 24/03/2017. 2.1 The facts of the case are that original assessment was completed u/s. 143(3) of the Act. The assessee s income was assessed at ₹ 1,04,84,857/- against the nil income returned by the assessee. On examination of the records, the CIT(A) was of the opinion that the Assessing Officer has not made proper enquiry and there was a serious error in the order of the Assessing Officer which caused prejudice to the interest of the Revenue. In view of the same, he initiated revision proceedings u/s. 263 of the Act directing the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al decision in SLP in admitted case of Karakulam SCB Ltd. for the assessment year 2008-09 is to be borne in mind by the Assessing Officer at the time of giving effect to this order. Against this, the assessee is in appeal before us. 3. We have heard the rival submissions and perused the record. Section 263 of the Income-tax Act seeks to remove the prejudice caused to the revenue by the erroneous order passed by the Assessing Officer. It empowers the Commissioner to initiate suo moto proceedings either where the Assessing Officer takes a wrong decision without considering the materials available on record or he takes a decision without making an enquiry into the matters, where such inquiry was prima facie warranted. The Commissioner is well within his powers to treat an order as erroneous on the ground that the Assessing Officer should have made further inquiries before accepting the wrong claims made by the assessee. The Assessing Officer cannot remain passive in the face of a claim, which calls for further enquiry to know the genuineness of it. In other words, he must carry out investigation where the facts of the case so require and also decide the matter judiciou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h also resulted in loss to the revenue. The CIT had observed in his order that it is to be decided by the Assessing Officer after fresh examination . Hence, the order of the CIT cannot be held as erroneous. The CIT s approach was correct. Further, CIT had observed that no proper enquiry has been made that resulted in erroneous order and further it resulted in loss of revenue. Hence the Assessing Officer has to pass the order after hearing the assessee. Therefore, the CIT exercised his power conferred u/s. 263 of the Act in setting aside the assessment and remanded the case back to the file of the Assessing Officer to make enquiry into the issue and decide the same. As such, the CIT remitted the issue back to the file of the Assessing Officer for de novo consideration. 3.2 Being so, in our opinion, there is no infirmity in the order of the CIT and the same is confirmed. Accordingly, this ground of appeal of the assessee is dismissed. Thus, the appeal filed by the assessee in ITA No. 141/Coch/2017 is dismissed. I.T.A. No. 47/Coch/2019 : 2013-14 : Revenue Appeal 4. This appeal filed by the Revenue is directed against the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal members and indulging in banking business per se that it cannot claim the benefit of section 80P(2)(a)(i). ( vi) Whether on the facts and in the circumstances of the case, the order of CIT(A) is correct in not duly considering the following case laws ( a) Sabargantha Zilla Kharid Vechar Sangh Ltd. (203 ITR 1027) (SC) ( b) Perinthalmanna Service Co-operative Bank (363 ITR 68) (Kerala) ( c) CIT Vs Kerala State Co-operative Marketing Federation (234 ITR 201) (Ker.) 4. For these and other grounds that may be advanced at the time of hearing the order of the learned Commissioner of Income-tax(Appeals), Trivandrum on the above points may be set aside and that of the Assessing Officer restored. 5. The facts of the case are that the assessee is a Co-operative Society engaged in banking business and filed its return of income for AY 2013-14 declaring total income for the year at Rs. Nil after claiming deduction under section 80P of the I.T. Act. The Assessing Officer denied the deduction claimed by the assessee u/s. 80P of the Act for AY 2013-14 vide orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal of the Revenue is partly allowed for statistical purposes. 6. The next issue for the assessment year 2013-14 is with regard to deduction u/s. 80P(2)(a)(i) of the Act. This issue was allowed by the CIT(A) in the light of the order of the Tribunal in the case of Kizhathadiyoor Co-operative Bank Limited for AY 2009-10 in ITA No. 525/Coch/2014, order dated 20.07.2016 wherein it was held that the interest income earned from the investment in Treasury and Banks is part of the banking activity and therefore, the said income is eligible for deduction under section 80P(2)(a)(i) of the Act. 6.1 Against this, the Revenue is in appeal before us. The Ld. DR relied on the order of the Assessing Officer. 6.2 We have heard the rival submissions. With regard to the interest income earned by the assessee from other Banks and Treasury on which deduction u/s. 80P(2)(i)(a) of the Act is to be granted, there is no dispute that the assessee has made investments in the course of banking activities and such interest income was received on investments made with cooperative banks and other scheduled banks. The co-ordinate bench of the Tribunal in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted the issue in dispute to the file of the Assessing Officer for fresh consideration. 8.2 Regarding addition u/s. 68 of the Act, the facts of the case are that the assessee was asked to furnish the details of persons from whom deposits have been received. However, the assessee had not furnished the details of depositors. Therefore, the Assessing Officer treated the increase in deposits as unexplained credits u/s. 68 of the Act. 8.3 On appeal, the CIT(A), by placing reliance on the decision of the ITAT, Hyderabad in the case of Citizen Co-operative Society, 24 taxmann. com 347, held that the onus is on the assessee to prove the identity of the depositor and such onus can be discharged only by furnishing the proper proof of address and identity to the satisfaction of the Assessing Officer. In this case, the CIT(A) observed that the assessee had failed to furnish the details of depositors and therefore, had not proved the identity of the depositors. According to the CIT(A), the assessee had not discharged the onus cast on it to prove the identity of the depositors as required under the provisions of section 68 of the Act. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance of deduction u/s. 80P of the Act on addition of unexplained income under section 68 of the Act. 9.1 The facts of the case are that the Assessing Officer made addition u/s. 68 of the Act by holding that such amount does not fall under business profits. 9.2. On appeal, the CIT(A) denied deduction u/s. 80P of the Act on the unexplained income u/s. 68 of the Act by following the judgment of the Jurisdictional High Court in the case of Kerala Sponge Iron Ltd. (79 taxmann. com 350) wherein it was held that unexplained income assessed under section 68 of the Act cannot be treated as business income and consequently, no deduction u/s. 80P of the Act can be allowed for the unexplained income assessed u/s. 68 of the Act. 9.3 Against this, the assessee is in appeal before us. The Ld. AR submitted that the income assessed under section 68 of the Act is to be treated as business income and accordingly, deduction u/s. 80P is to be allowed. 9.4 We have heard the rival submissions and perused the record. The contention of the learned AR is misplaced. According to the AR, the additions made u/s. 68 of the Act are to be consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anation as to the nature and source of account is rejected by the Income-tax authorities, such authorities are entitled to treat the credit as income from business. The said decision cannot be interpreted to mean that in all cases such credits must be treated as income from business. Merely because the assessee is running a business in which are found certain unexplained cash credits, it does not necessarily follow that such credits represent suppressed business receipts and there would be no error of law in regarding the unexplained cash credits as income of the assessee from some independent and unknown sources unless there are strong reasons for connecting the unexplained cash credits with known sources of income of the assessee, there would be no alternative to treating them as income from other sources. 9.7 Reliance is also placed on the judgment of Supreme Court in the case of CIT vs. Deviprasad Viswanath Prasad (72 ITR 194) wherein it was held that when the assessee pleads that the impugned cash credits came out of suppressed profit, it is for him to prove that it is so. If these receipts are allowed by treating as business receipts, then the assessee will be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration as in the case of the assessee. The AO relied on the decision of Supreme Court in the case of Totgar s Co-operative Sales Society Ltd. vs. ITO (322 ITR 283) wherein it was held that the assessee being co-operative society is engaged in providing credit facilities to its members or marketing agricultural produce of its members, interest earned by it by investing surplus funds in short term deposits would fall under the head income from other sources taxable u/s. 56 of Act and it cannot be said to be attributable to the activity of the society and , the interest did not qualify for deduction u/s. 80P of the Act. The interest earned on fixed deposits with the co-operative bank cannot be considered as business income. 10.3 We have heard the rival submissions and perused the record. As discussed in paras 6.2 and 6.3, this issue is remitted to the file of the Assessing Officer on similar directions. 11. Ground No. 6 is with regard to provision for bad and doubtful debts. 11.1 The facts of the case are that the assessee claimed that they are eligible for deduction u/s. 36(1)(viia) for provision of bad and doubtful debts. This cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed. 12. The final ground of appeal stating that the order was not passed in time was dismissed by the CIT(A) since the order was rightly passed on 30/12/2016 which was within the stipulated time limit envisaged in section 153 of the Act. Accordingly, we do not find any infirmity in the order of the CIT(A) and the same is confirmed. Hence, this ground of appeal of the assessee is dismissed. Thus, the appeal of the assessee in ITA No. 93/Coch/2018 is partly allowed for statistical purposes. S.P. No. 43/Coch/2019 : 2012-13 S.P. 06/Coch/2018 : 2014-15 13. Since assessee s appeals in ITA No.563/Coch/2018 and ITA No. 93/Coch/2018 have been disposed off, the above Stay Petitions filed by the assessee are rendered infructuous and the same are dismissed as such. ITA No. 400/Coch/2018 : A.Y. 2014-15: Assessee s Appeal 14. The only ground in this appeal is with regard to levy of penalty u/s. 271B for non-filing of audit report by an accountant within the prescribed format. 14.1 The facts of the case are that the return for the year under consideration was belatedly filed on 20/0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment proceedings. According to the Ld. AR, as per proviso to Section 44AB, if a person is required by or under any other law to get his accounts audited, getting accounts audited under that law before specified date and furnishes by that date the report of such audit report and a further report by an accountant in the form prescribed would be enough to comply with the provisions of section 44AB. Audit was completed late. Only further report was not furnished. 271B speaks only about report of such audit and not about further report. The Ld. AR submitted that penalty u/s Section 271B is applicable for (1) failure to get accounts audited; or (2) failure to furnish report of such audit. The scope of Section 27IB cannot be expanded for non-compliance of Section 44AB. It was submitted that penalty u/s 271B cannot be imposed for not completing the audit or not furnishing the report in time. According to the Ld. AR, as per Section 44AA read with Rule 6F books of accounts to be maintained by different class of business are prescribed. Section 44AA and Rule 6F is silent about the books of accounts need to be maintained by the assessee. When books of accounts itself are not prescribed levy o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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