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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 ..... sessment was completed u/s. 143(3) of the Act. The assessee's income was assessed at Rs. 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 Assessing Officer to frame the assessment order afresh in the following manner: A. Compute profit and gains of business and profession in accordance with provisions of Chapter IV-D including verification of the following: i. ensuring that the proof and identity of persons to whom interest payable is debited is established before granting deduction u/s. 80P of the Act. ii. making necessary disallowance of provisions and reserves and other ineligible similar sums. iii. disallowance of sums including sums paid in cash in violation of section 40A(3), including interest, rent, salary and other business expense where payment in cash exceeding Rs. 20,000 and not covered by Rule 6DD. iv. disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot 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 judiciously on the basis of materials collected by him as also those produced by the assessee before him. The Assessing Officer was statutorily required to make the assessment under Section 143(3) after scrutiny and not in a summary manner as contemplated by Sub-section (1) of Section 143. The Assessing Officer is therefore, required to act fairly while accepting or rejecting the claim of the assessee in cases of scrutiny assessments. The Assessing Officer should protect the interests of the revenue and to see that no one dodged the revenue and escaped without paying the legitimate tax. The Assessing Officer is not expected to put blinkers on his eyes and mechanically accept what the assessee claims before him. It is his duty to ascertain the truth of the facts stated and the genuineness of the claims made in the return. The order passed by the Assessing Officer becomes erroneous when an enquiry has not been made before accepting the genuineness of the claim which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see 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 CIT(A), Trivandrum dated 07/11/2018 for the assessment year 2013-14. The assessee has also filed Cross objection in C.O. No. 10/Coch/2019. 4.1 The Revenue has raised the following grounds of appeal: 1) The Learned Commissioner of Income tax (Appeals), Trivandrum erred in concluding that "the appellant is eligible for deduction under section. 80P(2)(a)(i) of the Act on the business income." 2) It is respectfully submitted that the respondent is essentially, a co-operative Bank and not merely a primary agricultural credit society and hence the allowance of deduction u/s. 80P to the respondent assessee while computing the total income was irregular in nature and also against law. 3) The present appeal involves substantial question of law: (i) Whether on the facts and in the circumstances of the case, the order of CIT(A) deleting the additions made during the completion of assessment as per the provisions of Income Tax Act, considering the provisions of section 80P(4) is correct? (ii) Whether on the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objectives of the primary agricultural credit society. 5.1. On appeal, the CIT(A) held that the issue of eligibility of Primary Agricultural Credit Society to claim deduction u/s. 80P was covered in favour of the assessee by the judgment of the High Court of Kerala in the case of Chirakkal Service Cooperative Bank Ltd. vs. CIT in 384 ITR 490. The CIT(A) also relied on the decision of the ITAT, Cochin Bench in the case of Kararikanam Service Co-operative Bank Ltd. for AY 2009-10 in ITA No.293/Coch/2013 dated 14th October, 2016. Following the above judgments, as the assessee is a registered Primary Agricultural Credit Cooperative Society, the CIT(A) held that the assessee is eligible for deduction u/s. 80P of the Act. 5.2 Against this, the Revenue is in appeal before us. The Ld. DR relied on the order of the Assessing Officer. 5.3 We have heard the rival submissions and perused the record. In our opinion, the issue was considered by the Jurisdictional High Court in the case of Mavilayi Service Co-operative Bank Ltd. vs. CIT reported in ITA No.97/2018 dated 19.03.2019 wherein it was held that the Assessing Officer is not obliged to grant deduction by merely looking at the certi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of the co-ordinate bench, we hold that the CIT(A) is justified in holding that interest income received by the assessee should be assessed as "income from business". 6.3 As regards grant of deduction u/s. 80P(2)(i)(a) of the Act, the Assessing Officer shall follow the law laid down by the Larger Bench of the Jurisdictional High Court in the case of Mavilayi Service Co-operative Bank Ltd. vs. CIT cited supra and examine the actual activities of the assessee so as to grant deduction u/s. 80P(2)(i)(a) of the Act. Accordingly, we remit this issue to the file of the Assessing Officer for fresh consideration in accordance with the above direction. Thus, this ground of appeal of the Revenue is partly allowed for statistical purposes for both the assessment years. Thus, the appeal filed by the Revenue in ITA No. 47/Coch/2019 is partly allowed for statistical purposes. C.O. No. 10/Coch/2019 7. Since the Revenue's appeal has been remitted to the Assessing Officer for fresh consideration, the Cross Objection filed by the assessee is rendered as infructous and the same is dismissed as such. Thus, the Cross Objection filed by the assessee in C.O. No. 10/Coch/2019 is dismissed. ITA N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any sum is found credited in the books of the assessee maintained in any previous year and no explanation is offered by the assessee for the nature and source thereof, the sum so credited may be charged to income tax as the income of the assessee in that previous year. According to the provisions of section 68, what is required by the assessee is: a) identity of depositors. b) Source and genuineness of such credits is to be explained. In the present case, the explanation of the assessee is that the deposits were received from the members of the Society/customers. It was submitted that the deposits were collected in the normal course of assessee's business and duly filled application of each deposit is available with the assessee. In our opinion, it is the duty of the assessee to prove the identity of the depositors to the satisfaction of the Assessing Officer. It is seen that the assessee has not furnished the details of names and addresses and PAN Nos. of the concerned depositors. In our opinion, the assessee has to fulfil the above requirements. However, we make it clear that the assessee, being a Co-operative Society, need not prove the creditworthiness and genuineness o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts business receipts. In the present case, it relates to granting of deduction with regard to profit/grain derived from business and unless it is proved that it is from business, deduction u/s. 80P cannot be granted. The contention of the assessee is not acceptable in view of the clear provisions of section 80P of the Act and the impugned additions cannot be said to be business receipts. This is because the source of income is income from other sources and the Department does not have to locate any particular source of income. It is pertinent to place reliance on the judgment of jurisdictional High Court in the case of G.M. Chenna Basappa vs. CIT (34 ITR 576) (AP) wherein it was held that addition on account of unexplained cash credits which is altogether is from an unknown source and they are legally sustainable additions. 9.5 The Hon'ble Supreme Court also held in the case of CIT vs. Orissa Corporation Pvt. Ltd. (159 ITR 78) held that although section 68 provides that the previous year for which the books of account are maintained may be taken as the previous year for assessing the cash credit, it does not further provide that cash credit should necessarily be deemed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee relating to this issue in its appeal. Hence, this ground of the assessee is dismissed. Thus, the appeals of the assessee in I.T.A. No. 563/Coch/2018 and 93/Coch/2018 are partly allowed for statistical purposes. 10. In ITA No.93/Coch/2018 for the assessment year 2014-15, the assessee has also raised the following grounds of appeal: 5. The AO has erred in classifying the interest income received from deposits as income from other sources and denying deduction of proportionate expenses incurred to earn the interest income. 6. The AO ought to have seen that in case the appellant is classified as a cooperative bank, expense u/s. 36(1)(viia) had to be allowed. 7. The assessment order was served on 03/01/2017 resulting in time barred assessment. 10.1. Ground No. 5 is with regard to treatment of interest income received from deposits as income from other sources and denying deduction of proportionate expenses incurred to earn the interest income. 10.2 The facts of the case are that the AO brought to tax a sum of Rs. 20,68,89,029/- rejecting the claim of deduction made u/s. 80P(2) of the Act while treating the same as income from other sources. According to the AO the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein it was held that claim of deduction/provision not made in the return can be entertained by the AO only if such claim is made through a revised return and not otherwise. This being the position of law as per the decision of the Supreme Court, the Assessing Officer held that the claim made by the assessee was unsustainable and devoid of merit. Therefore, the AO held that the assessee is not entitled for any deduction u/s. 36(1)(viia) of the Act. 11.2 On appeal, the CIT(A) observed that if the expenditure disallowed is related to the business activity against which Chapter VI-A deduction has been claimed, the deduction is to be allowed on the enhanced profit. He observed that exemption u/s. 80P(2)(a)(i) is available to the assessee on this part of disallowance made on account of provision for bad and doubtful debts and accordingly deleted the disallowance made to that extent. 11.3 Against this, the assessee is in appeal before us. 11.4 The Ld. DR relied on the order of the CIT(A). 11.5. We have heard the rival submissions and perused the record. Admittedly, the CIT(A) gave a finding that exemption u/s. 80P(2)(a)(i) is available to the assessee on the part of disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecified date and furnish the audit report by that date to the Assessing Officer. Further, according to the CIT(A), sec. 271B provides for imposition of penalty if any person fails without reasonable cause to get his accounts audited within stipulated time. 14.3 Against this, the assessee is in appeal before us. The Ld. AR submitted that the audit of the Society is done as per the provisions of Kerala Co-operative Societies Act, 1969. The Society does not have any power in appointing auditor under the said Act or getting his accounts audited in time. The Ld. AR submitted that the delay in completion of audit was not because of any default on the part of the assessee Society. The ld. AR relied on the judgment of the High Court of Uttarakhand in the case of CIT vs. Iqbalpur Cooperative Cane Development Union Ltd. (356 ITR 343) wherein it was held that delay in submitting the audit report in such a situation is a reasonable cause for the purpose of section 273B and penalty under section 271B shall not be imposed. 14.4 According to the Ld. AR, the Tax Audit Report is required to be submitted if it is called for by the Income Tax Officer during the Assessment proceedings as explaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s accounts audited, getting the account audited under that law before the specified date and furnished by that date, the report of such audit report would be constituted as sufficient compliance of section 44AB of the Act. In the present case, the assessee is required to get its accounts audited under Co-operative Societies Act ad it has to file the return of income on 20/03/2015 as per second proviso to section 44AB of the Act which reads as follows: "in case of persons whose accounts are required to be audited under any other law, getting accounts audited under such law is enough to comply with the provisions of section 44AB." As seen from the assessment order in para 3, the assessee furnished documents such as Annual Report of the Financial year 2013-14 depicting the audited financial statements, copy of receipts and distribution statement etc. The audit report by the accountant in the prescribed format was not produced before the Assessing Officer. In our opinion, non production of audit report in the prescribed format can be a reason for levying penalty u/s. 271B of the Act. Thus, this is a fit case for levying penalty u/s. 271B of the Act as the assessee has not given ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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