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TMI Blog2021 (12) TMI 635X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO has not examined the issue of deduction u/s 80P(2)(d). When he has issued the notice u/s 263 on 25.03.2021 and sought the reply on the very next day i.e on dt.26.03.2021, despite being very short span of time assessee filed the detailed reply and after receiving reply the ld. Pr. CIT has passed the order on 31.03.2021 straight way without confronting the issue or asking any query, question explanation on the issue. PT.CIT failed to do so and summarily reach to the conclusion that the order was prejudicial to the interest of revenue. Such a view taken by the PT.CIT is not well founded in the law or by various Hon'ble courts. Pr.CIT can assume jurisdiction if there has been lack of enquiry. In the instant case, the enquiry has been made admittedly on the issue of reopening, though the enquiry may not be sufficient in the opinion of the ld Pr. CIT. A.O. has made enquiry on the issue of reopening and not supposed to examination of the issue which is not the subject matter of reasons recorded, however sufficiency of enquiry can be depending upon from person to person. The AO cannot remain passive in the face of a return which is apparently in order but calls fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on the allegations that: (a). The assessee Co-operative Society had received interest of ₹ 14,05,465/- from FDRs with Co-operative banks which are not Co-operative Society, therefore the deduction of ₹ 1,08,464/- claimed u/s 80P(2)(d) is not allowable. Which are contrary to the facts and such a finding being perverse, the impugned action is bad in law without jurisdiction and being void ab initio, the impugned order u/s 263 may kindly be quashed. 4. The appellant prays your honors indulgence to add, amend or alter all or any of the grounds of the appeal on or before the date of hearing. 5. The brief facts of the case are that the assessee is a Co-operative society registered under the Rajasthan Co-operative society Act, 1965 and derived income mainly from trading of fertilizers, seeds, pesticides, Pashu aahhar etc. to its members and providing loan facilities to its members. The Assessing Officer issued notice u/s 148 of the Act on 30.03.2017 on the basis of information from DDIT (System) on the reasons that on perusal of the ATS data, it is noticed that the assessee has deposited cash of ₹ 50,55,800/- in the Bank account maintained in PNB, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dt. 30.06.2017. 6. Thereafter the ld. Pr. CIT has issued the notice u/s 263 on dt. 25.03.2021 by alleging that the order passed by the AO is found to be erroneous as it is prejudicial to the interest of the revenue on the issue vide notice dt. 25.03.2021(PB22-23). In this notice the ld. Pr. CIT has alleged that: Deduction of interest income of ₹ 1,08,464/- has been claimed u/s 80P(2)(d). Besides, interest of ₹ 14,05,446/- on FDR received from Sikar Central Co-operative Bank, PNB, RGB and SBI has been claimed and the same was allowed by the AO, which is not allowable u/s 80P(2)(d) of the IT act. Hence the order dt. 30.06.2017 may not be treated as erroneous and prejudicial to the interest of revenue regarding the non-application of the law on the grant of deduction u/s 80P(2)(d) as the assessment order passed mechanically without application of mind for the reason mentioned in the notice. Hence the ld. Pr. CIT has issued notice u/s 263 to the assessee on dt. 25.03.2021 for the date of 26.03.2021. 7. In response thereto the assessee has prepared the detailed reply explanation with details explaining all the facts, details on 26.03.2021 by stating all the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enclosed (PB22-23), which was received by email on 25.03.2021 at 1.52PM vide letter of the assessee (PB24) and assessee has objected the same. The hearing was kept just next day i.e on 26.03.2021. If the ld. Pr. CIT himself not applied his mind while passing the order u/s 263, then how he can blame or say that the ld. AO has not applied his mind while passing the assessment order. Hence also the action u/s 263 and consequent order is illegal, invalid void ab-initio and liable to be quashed on this ground alone. 2.1 Action of the Pr. CIT is invalid and without jurisdiction: It is submitted the action and direction of the ld. Pr. CIT is without jurisdiction and invalid on the facts and legal position because the ld. Pr. CIT has right or jurisdiction of revision u/s 263 only when the order of the AO (i) is erroneous in so far as (ii) it is prejudicial to the interests of the revenue. S. 263 provides as under 263. (1) The Pr. Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the [Assessing] Officer is erroneous in so far as it is prejudicial to the interests of the revenue, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e details. Also vide page 1-2 of the assessment order wherein he has stated that A/R attended the proceedings from time to time and submitted the details/information, the details furnished were examined and case was discussed time to time, after examination of books of accounts and vouchers on test check basis claim for deduction as stated above is found correct. Accordingly, deduction claimed by the assessee is allowed. Thus during the course of assessment proceedings the AO verified the cash deposits and claim u/s 80P, bank book and other books of accounts on test check basis. And the AO did examine all these details, record and discussion with the assessee, after that the ld. AO had taken a possible view being a quasi judicial authority. That is why the ld. AO has noted same in the assessment order that at page 1-2. Thereafter he completed assessment at Rs. Nil vide assessment order u/s 147 rws143(3) dt. 30.06.2017 by taking a reasonable and possible view. Here we want to say that if the ld. AO has not examined the issues and claim of deduction u/s 80P he could have not made the assessment. When the assessee has filed reply on deduction u/s 80P (PB8-11) with all the bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,05,464/- from FDR s from Sikar kendriya Sahakari Bank Ltd, which is registered as a Co-operative Society certificate is enclosed. Just after he has stated that no details of interest is filed. Also vide our reply to Pr. CIT(PB26). Also vide PB 15 17 of Income and expenditure A/c. 2.7 Thus he has not looked merit of the case in their true perspective and sense and not applied his mind on the same despite available before him. He was only of the view that the AO has not made proper detailed i.e deep inquiry on the issue. He has only stated that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Hence the conclusion of the Pr. CIT that the order is prejudicial to the interest of the Revenue is not a matter of subjective satisfaction of the Pr. CIT. He, therefore ought to have found out this on the basis of Objective material after assessing the contention raised by the assessee in its reply to the show cause notice. He, however failed to do so and reached a conclusion that the order was prejudicial with a view that the present AO shall undertake that exercise after the assessment has been setaside for his consideration. Such a view or action is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It has been held that Revision-Ordering revision where case is selected for limited scrutiny-Assessee firm is a real estate firm engaged in colonizing and developing residential projects-Case of assessee was selected for limited scrutiny through CASS on account of mismatch of AIR and CIB data, and mismatch in sale turnover reported in audit report and ITR-An addition for wrong calculation of LTCG was made by A.O. which was not challenged by assessee-Subsequently, on basis of certain audit objections, PCIT issued notice u/s 263-Assessee submitted that it is a case outside jurisdiction of Commissioner of Income tax to raise objections outside scope of limited scrutiny-PCIT ordered for 'Denovo' assessment without considering reply filed by assessee-Held, there is no dispute that scope of enquiry in case of limited scrutiny is only to extent of issues for which case was selected for scrutiny under CASS-CBDT has issued instructions from time to time in this respect and has specifically instructed taxing authorities that scope of enquiry should be limited to verification of all particulars for which limited scrutiny was taken up under CASS-However, in case during assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h on issues mentioned in notice-Held, Tribunal in case of M/s Su-Raj Diamond Dealers Pvt. Ltd. CIT ITA No 3098/ Mum has quashed order passed u/s 263 in case of limited scrutiny assessment, holding that Pr. CIT under garb of section 263, cannot exceed his jurisdiction holding that when case of assessee was selected for limited scrutiny for reasons viz. (i) Large other expenses claimed in P L A/c; and (ii) Low income in comparison to High Loans/advance /Investment in shares, therefore, no infirmity could be attributed to assessment framed by A.O on ground that he had failed to deal with other issues which though did not fall within realm of limited reasons for which case was selected for scrutiny assessment-In other words, Pr. CIT in garb of his revisional jurisdiction u/s 263 cannot be permitted to traverse beyond jurisdiction that was vested with A.O while framing assessment-As A.O had aptly confined himself to issues for which case of assessee was selected for limited scrutiny, therefore, no infirmity can be attributed to his order, for reason, that he had failed to dwell upon certain other issues which did not form part of reasons for which case was selected for limited scrutiny ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly has not issued any further show cause notice for the allegations which he made in the impugned order and decided the matter, without giving further opportunity of being heard. And passed the order on 31.03.2021. It is the violation of the principal of natural justice Recently in the case of Jaidurga Minerals v/s Pr. CIT 200 DTR 205(Ctk)(Trb.) in ITA No. 276/Ctk/2015 dt. 10.08.2020 it has been held that right to fair hearing is a guaranteed right to an assessee and granting of effective opportunity is a sine qua non in Sec. 263 for unsetting a statutory order. It was the duty of the Pr. CIT to provide the assessee an effective opportunity to enable it to substantiate its claim. In any case, it is one of the fundamental principal of natural justice that no person can be condemned unheard i.e audi alteram partem, the impugned order was thus passed in violation of the principal of natural justice in absence of any effective/reasonable opportunity of hearing provided to the assessee. It is mandatory to apply the principal of natural justice irrespective of the act as to whether there is any statutory provision or not . In the present case, the assessee was not afforded opportu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2019 dt. 21.12.2020. On same plea 5.2. We also would like to draw on the observation and finding In the case of Dorabji Tata Trust vs. DCIT (EXEMPTION) ITA No. 3909/Mum/2019 28th December, 2020 (2021) 209 TTJ 0409 (Mumbai) delivered by the honble President and vice president as under: 20. Undoubtedly, the expression used in Explanation 2 to Section 263 is when Commissioner is of the view, but that does not mean that the view so formed by the Commissioner is not subject to any judicial scrutiny or that such a view being formed is at the unfettered discretion of the Commissioner. The formation of his view has to be in a reasonable manner, it must stand the test of judicial scrutiny, and it must have, at its foundation, the inquiries, and verifications expected, in the ordinary course of performance of duties, of a prudent, judicious and responsible public servant- that an Assessing Officer is expected to be. If we are to proceed on the basis, as is being urged by the learned Departmental Representative and as is canvassed in the impugned order, that once Commissioner records his view that the order is passed without making inquiries or verifications which should have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e lack of necessary inquiries and verifications, but an objective finding that the Assessing Officer has not conducted, at the stage of passing the order which is subjected to revision proceedings, inquiries and verifications expected, in the ordinary course of performance of duties, of a prudent, judicious and responsible public servant that the Assessing Officer is expected to be. 21. That brings us to our next question, and that is what a prudent, judicious, and responsible Assessing Officer is to do in the course of his assessment proceedings. Is he to doubt or test every proposition put forward by the assessee and investigate all the claims made in the income tax return as deep as he can? The answer has to be emphatically in negative because, if he is to do so, the line of demarcation between scrutiny and investigation will get blurred, and, on a more practical note, it will be practically impossible to complete all the assessments allotted to him within no matter how liberal a time limit is framed. In scrutiny assessment proceedings, all that is required to be done is to examine the income tax return and claims made therein as to whether these are prima facie in accordan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasonable faith in the assessee and not doubting everything coming to the Assessing Officer s notice in the assessment proceedings cannot be said to be lacking bonafide, and as long as the path adopted by the Assessing Officer is taken bonafide and he has adopted a course permissible in law, he cannot be faulted- which is a sine qua non for invoking the powers under section 263. In the case of Malabar Industrial Co Ltd Vs CIT [(2000) 243 ITR 83 (SC)], Hon ble Supreme Court has held that Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. The test for what is the least expected of a prudent, judicious and responsible Assessing Officer in the normal course of his assessment work, or what constitutes a permissible course of action for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share transaction loss claimed by the assessee was bogus or not genuine but merely stated that the transaction could have been verified by the contract notes from the brokers, challan etc. Revision order of the PR. CIT Set Aside. Also refer Subrata Kumar Nag v/s PR. CIT 127 TTJ 238(Kol), Rajiv Arora v/s PR. CIT (Supra). We would like to refer the case of Kartik Financial Services Ltd V/s CIT 55 CCH170 (Mum. Tribunal)(2019). The principal of the case is also applicable here in the present case. In the case of Nalco Company vs CIT 200 DTR 275(Pune-C) ITA No.1217/Kol/2017 dt. 05.02.2021 it has been held that if the AO makes inquiry, examines the issue which is born out from the record of the assessment proceedings, then reaches a conclusion in favour of the assessee which is legally possible, the assessment order cannot be characterized as erroneous and prejudicial to the interest of the Revenue. Since none of the four clauses of the Expln. 2 to s. 263(1) appies to the case under consideration, revisionary power, even under the enlarged scope of the Expl. 2, was not legally exercisable. 6. No requirement of deep investigation: Thus, on the perusal of the order of the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... truction (P) Ltd. vs. CIT (2009) 28 CCH 0434 KolTrib held that Revision-Erroneous and prejudicial order-Lack of proper enquiry-There was a time of two years for investigation, the AO had issued questionnaire, the assessee had produced books of account, bills, etc. and replied to various issues raised by AO-Thus, it could not be said that order was passed in haste without making any inquiry on the issues-AO had taken one view where two views are plausible and such view cannot make the order erroneous and prejudicial to the interest of the Revenue-CIT s view cannot be invoked to substitute the view of the AO-Assessment also does not become erroneous where queries raised during the assessment proceedings are not recorded in the final assessment order. 6.1. On perusal of the order in the present case the ld. CIT has taken action u/s 263 only on the assumption and presumption that the no inquiry has been made by the AO on the issues and not verified. Kindly refer CIT v/s Paras Cotton Co. 288 ITR 211(Raj.) where held that CIT could not have acted on mere assumption. Mere suspicion cannot take place of proof and the order of CIT u/s 263 cannot be sustained. 7.1 In C IT V/s Girdh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sumption can be drawn that the AO had not applied its mind to the various aspects of the matter. In such circumstances, without even prima facie laying foundation for holding that assessment order is erroneous and prejudicial to interest in any matter merely on spacious ground that the AO was required to make an enquiry, cannot be held to satisfy the test of existing necessary condition for invoking jurisdiction under s. 263. When enquiry in fact has been conducted and the AO has reached a particular conclusion, though reference to such enquiries has not been made in the order of the assessment, but the same is apparent from the record of the proceedings the invocation of jurisdiction by the CIT was unsustainable. As the exercise of jurisdiction by the PR. CIT is founded on no material, it was liable to be set aside. Jurisdiction under s. 263 cannot be invoked for making short enquiries or to go into the process of assessment again and again merely on the basis that more enquiry ought to have been conducted to find something. The finding of the Tribunal that the ITO had passed assessment order after relevant enquiries and considering the aspects of the matter required by the CIT to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew taken by the Assessing Officer is unsustainable under the law. (vi) If while making the assessment, the Assessing Officer examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income, the PR. CIT, while exercising his power under section 263, is not permitted to substitute his estimate of income in place of the income estimated by the Assessing Officer. (vii) The Assessing Officer exercise quasi-judicial power vested in him and if he exercise such power in accordance with law and arrives as a conclusion, such conclusion cannot be termed to be erroneous simply because the PR. CIT does not feel satisfied with the conclusion. (viii) The PR. CIT, before exercising his jurisdiction under section 263 , must have material on record to arrive at a satisfaction. (ix) If the Assessing Officer has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation be a letter in writing and Assessing Officer allowed the claim on being satisfied with the explanation of the assessee, the decision of the Assessing Officer cannot be held to be erro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erroneous includes the failure to make enquiry. It is submitted that the AO made the enquiry and it is not a case of lack of enquiry. The Hon ble Delhi High Court in the case of CIT v. Vikas Polymers [2010] 236 CTR (Del.) 476 had an occasion to consider the passing of order under s. 263 of the Act by the learned CIT when the AO made an enquiry and the assessee filed the reply. The Hon ble Delhi High Court held that assumption of jurisdiction under s. 263 of the Act by learned CIT is not warranted. It will be useful to reproduce the head note from this decision: Provisions of s. 263 when read as a composite whole make it incumbent upon the PR. CIT before exercising revisional powers to : (i) call for and examine the record, and (ii) give the assessee and opportunity of being heard and thereafter to make or cause to be made such enquiry as he deems necessary. It is only on fulfillment of these twin conditions that the PR. CIT may pass an order exercising his power of revision. Minutely examined, the provisions of the section envisage that the PR. CIT may call for the records and if he prima facie considers that any order passed therein by the AO is erroneous insofar as it is p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P) Ltd. was duly reflected in the assessment order of the said person. The reliance is also placed in the order of the Hon ble High Court of Bombay in the case of PR. CIT v. Gabrial India Ltd. [1993] 71 TAXMAN 585 (BOM.). It will be useful to reproduce the held portion of the case: Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 1973-74 - Assessee claimed a sum of ₹ 99,326 described 'as plant relay out expenses' as revenue expenditure and ITO, after making enquiries in regard to nature of said expenditure and considering explanation furnished by assessee in that regard, allowed assessee's claim- Subsequently, Commissioner, exercising powers under section 263, cancelled order of the ITO observing that order of ITO did not contain discussion in regard to allow ability of claim for deduction which indicated non-application of mind and that claim of assessee required examination as to whether expenditure in question was a revenue or capital expenditure and directed ITO to make a fresh assessment on lines indicated by him - Whether under section 263 substitution of the judgment of the Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Shree Salasar Overseas (P) Ltd. vs. PR. CIT (2012) 144 TTJ 0041 (UO) held Revision-Erroneous and prejudicial order-Lack of proper enquiry- CIT set aside the assessment order on the ground that the AO has not verified as to whether the provision for development expenses claimed as deduction by the assessee-developer was made on scientific basis having regard to the accrued liability incurred by the assessee-Not justified-Assessee had filed relevant details before the AO in a letter stating that such deductions was also allowed in earlier years-Hence, this is not a case where there was no enquiry-Action under s. 263 cannot be taken on account of inadequate enquiry-Therefore, CIT was not justified in setting aside the assessment order by exercising power under s. 263-Swapan Sakar Insurance Consultant Marketing Services (P) Ltd. (ITA No. 117/JP/2010, dt. 6th Jan., 2011) followed. In the cae of CIT vs. Ashish Rajpal 320 ITR 0674 (Del) it has been held that Revision-Erroneous and prejudicial order-Lack of proper enquiry-After issue of notice under s. 143(2), several communications were addressed by the assessee to the AO whereby the information, details and documents s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the facility of milkshaalas, cowsheds, goat farming and pig farming. The Society is mainly dealing in control items such as seeds, fertilizer, pesticides and other agriculture products etc. whose prices are decided by government and selling the same to its members on pre-determined government prices to its members. The Society is mainly dealing in such other works which are for the benefit of members and for the benefit of society and which are incidental to achieve the objectives. Justification on Deduction in respect of income of co-operative societies U/s 80P :-As Per Sec. 80P of Income tax Act, 1961- (1) Where in the case of an society being a co-operative society, the gross total income referred to in sub section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub- section (2) in computing the total income of society. (2) The sums referred to in sub section (1) shall be the following namely (a) In the case of a co-operative society engaged in (i) Carrying on the business of banking or providing credit facilities to its members, or (iv) Purchase of agricultural implements, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... department has assailed the judgment order of the Income Tax Appellate Tribunal whereby tribunal has allowed the appeal of the assessee-company-Federal Society which is registered under the Cooperative Societies Act,1912. 2.1 The case of the department is that the assessee claimed benefit under Section 80P(2)(a)(iv) 80P(2)(d)of the Income Tax Act, 1961 which reads as under:- 80P(1) ... . (2) (a)... (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agricultural for the purpose of supplying them to its members, or 3. It manifests from the material on record that the assessing officer while considering the law prevailing at the relevant point of time for the assessment years in question has rejected the claim of the assessee in view of the judgment in Assam Cooperative Apex Marketing Society Ltd. Vs. Additional CIT: (1993) 113 CTR (SC) 58, which came to be further confirmed by the CIT (Appeals) while dismissing the appeal preferred by the assessee against the order of the Assessing Officer. However, the tribunal has also thoroughly examined the matter in detail in the light of the decision of the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me. The reliance was also placed upon the judgement of Hon'ble Punjab Haryana High Court in the case of CTT vs. Haryana State Co-operative Housing Society (1998) 234 ITR 714. 4. Counsel for the Department, Mr. Sanjay Jhanwar, has drawn our attention to the provisions contained in Section 80P(2)(a) (iv) of the Income Tax Act, 1961 which reads as under:- 80P(1) ... . (2) (a)... (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agricultural for the purpose of supplying them to its members, or 5. Counsel for the respondent in support of submission has relied on the decision of the Supreme Court in case of UP Cooperative Cane Union Federation Ltd. Vs. Commissioner of Income Tax: (1997) 11 SCC 287 and more particularly paragraph no 7, 8 and 9 which reads as under:- 7. The relevant part of Section 80P(2)(a) (i) of the Act is reproduced as under: section 80P Deduction in respect of income of co-operative societies: (2) The sums referred to in Sub-section (1) shall be the following, namely: (a) in the case of a co-operative society engaged in (i) carrying on the business of banking or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention of Mr. Gupta, learned counsel appearing for the Revenue, is that the Tribunal was wrong in allowing deduction under Sec. 80P(2)(d) of the Act because it is not established that the assessee had derived the interest by investing all the amount of surplus funds. It is further contended by Mr. Gupta that the assessee has paid interest to Jalandhar Central Cooperative Bank and has also received interest from the said cooperative bank, thereby showing that the assessee has on the aggregate paid interest to the bank and, therefore, no deduction under Sec.80P(2)(d) can be allowed. To appreciate this argument, we have to look to the provisions of Section 80P(2)(d) of the Act, For facility of reference, it is reproduced as under: 80P.(2)(d) in respect of any income by way of interest or dividends derived by the cooperative society from its investment with any other cooperative society, the whole of such income. 6. So far as the principle of interpretation applicable to a taxing statute is concerned, we can do no better than to quote the bynow classic words of Rowlatt J., in Cape Brandy Syndicate v. IRC (1921) 1 KB 64, 71: ...In a taxing Act, one has to look mere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l is required to be accepted, and therefore, both the issues are answered in favour of the assessee and against the Department. The copy of this case law is submitting herewith for your ready reference. The Society is a registered co-operative society and claimed the deduction under section 80P(2)(d) complying with all the provisions within specified criteria. 11. I also would like to submit a latest judgments of the honble In the case of Bardoli Vibhag Gram Vikas Co.Op. Credit Society Ltd. vs. Pr. CIT I.T.A No.283/SRT/2019 May 12, 2021(2021) 62 CCH 0114 SuratTrib. We pray to consider the same being the same issue. 12. Hence in view of the above facts, submission and legal positions of laws the order of the Pr. CIT u/s 263 may kindly may kindly be quashed and oblige. 10. On the other hand, the ld. CIT DR has relied upon the order passed by the ld. PT.CIT and submitted that the A.O. has passed the assessment order U/s 147 r.w.s 143(3) of the Act thereby accepting the total income as declared in return of income filed u/s 148. However, the A.O. was required to examine the issue relating to the allowability the deduction u/s 80P(2)(d) but not examined the same by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed above, the assessee had produced all the details, copies of all the sources of income, submitted details of all the bank accounts, details of cash deposits in the bank accounts, cash book and bank book and relevant books of account for verification. In response thereto, the assessee had also furnished all the details admittedly vide replies to the A.O. which is at page No. 3 to 4 and 6 to 11of the paper book and this fact has also not been disputed by the ld. PT.CIT in its order which goes to show that after examining all the documents, verifying all the details, the A.O. had taken a plausible view being a quasi judicial authority i.e. on the reason the A.O. in his order of assessment had categorically mentioned that the assessee attended and submitted the requisite details, information and clarifications sought for as per notices and order sheet entries. The above specific finding recorded by the AO goes to show that the AO had taken a reasonable and plausible view after examining all the details as were required for surviving the A.O. in respect of the issue of cash deposits, which was under consideration before the A.O. 13. If so then how the ld. Pr.CIT can assume the ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of limited scrutiny is only to extent of issues for which case was selected for scrutiny under CASS-CBDT has issued instructions from time to time in this respect and has specifically instructed taxing authorities that scope of enquiry should be limited to verification of all particulars for which limited scrutiny was taken up under CASS-However, in case during assessment proceeding if AO is of view that substantial verification of other issue is also required then case may be taken up for comprehensive scrutiny with approval of Pr.CIT/DIT concerned-It is also instructed that such an approval shall be accorded by Pr.CIT/DIT in writing after being satisfied about merits of issue(s) necessitating wider and detailed scrutiny in case-AO is duty bound to follow instructions in case limited scrutiny assessment proceeding are proposed to be converted into complete scrutiny and without following said procedure and necessary approval of competent authority conducting an enquiry on issue which is outside limited scrutiny would be beyond jurisdiction of AO-As a necessary corollary, Pr. CIT u/s 263 cannot be permitted to traverse beyond jurisdiction that was vested with A.O while framing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revisional jurisdiction u/s 263 cannot be permitted to traverse beyond jurisdiction that was vested with A.O while framing assessment-As A.O had aptly confined himself to issues for which case of assessee was selected for limited scrutiny, therefore, no infirmity can be attributed to his order, for reason, that he had failed to dwell upon certain other issues which did not form part of reasons for which case was selected for limited scrutiny under CASS-Case of assessee was selected for limited scrutiny under CASS for reason that there is substantial increase in capital in relevant year and AO passed assessment order and accepted return filed by assessee after examining issue regarding increase in capital account as assessee had credited his capital account with agricultural income and capital gain from sale of flat-Assessee has reflected that same in its capital account-Further in response to letter issued by AO during assessment proceedings, assessee submitted his reply explaining reason for increase in capital-However, Pr. CIT exercising jurisdiction under section 263, directed AO to make fresh assessment on issues which were not subject matter of limited scrutiny-Since, issue r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income. The total interest received by the society on its investments of ₹ 14,05,465.00. The total interest received from Sikar Kendriya Sahakari Bank Ltd. ₹ 14,05,465.00. The Sikar Kendriya Sahakari Bank Ltd. is a co-operative society and certificate of co-operative society is enclosing herewith. To support this reply, the assessee has also drawn our attention to the Page 15, 17 and 18 of the paper book which are P L account and B/s from which it is also clear that the assessee has received FDR s interest only from Sikar Kendriya Sahakari Bank Ltd not from other bank and no investments or deposits in other banks and as per Sec. 80P(2)(d) the same is allowable. The ld. A/R has also drawn our attention to the decision of Honble Rajasthan High Court in case of CIT, Jaipur-II Vs. M/s Rajasthan Rajya Sahakari Kray Vikray Sangh Ltd under D.B. Income Tax Appeal s No.139/2002, 20/2004, 24/2004, 27/2004, 305/2005 59/2006. Thus also looking to the above facts and decisions of the Honble Rajasthan High Court in case of CIT, Jaipur-II Vs. M/s Rajasthan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge 2 of the assessment order. The AO has also asked about expenditures debited in the P L account in response to the assessee also filed the reply. The AO has also disallowed expenditure of ₹ 2,86,918/- on account of provisions and audit fees. Thus the AO at page 3 of assessment order computed the income of the assessee at ₹ 3,95,382/- as against ₹ 1,08,464/- and after deduction u/s 80P(2)(a)(i) and 80P(2)(a)(iv) at nil income. Thus the assessment was completed U/s 148 r.w.s. 143(3) of the Act on 30.06.2017 thereby taking a reasonable and plausible view. However, the ld. PT.CIT issued notice U/s 263 of the Act alleging that the order passed by the A.O. was found to be erroneous as it is prejudicial to the interests of the revenue on reason that the deduction of interest income of ₹ 1,08,464/- has been claimed u/s 80P(2)(d). Besides, interest of ₹ 14,05,446/- on FDR received from Sikar Central Co-operative Bank, PNB, RGB and SBI has been claimed and the same was allowed by the AO, which is not allowable u/s 80P(2)(d) of the IT act. Hence the order dated 30.06.2017 may not be treated as erroneous and prejudicial to the interest of revenue regarding the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill mean that virtually any order can be subjected to revision proceedings; all that will be necessary is the recording of the Commissioner s view that the order is passed without making inquiries or verification which should have been made . Such an approach will be clearly incongruous. The legal position is fairly well settled that when a public authority has the power to do something in aid of enforcement of a right of a citizen, it is imperative upon him to exercise such powers when circumstances so justify or warrant. Even if the words used in the statute are prima facie enabling, the courts will readily infer a duty to exercise a power which is invested in aid of enforcement of a right-public or private-of a citizen. [L Hirday Naran Vs Income Tax Officer [(1970) 78 ITR 26 (SC)]. As a corollary to this legal position, when a public authority has the powers to do something against any person, such an authority cannot exercise that power unless it is demonstrated that the circumstances so justify or warrant. In a democratic welfare state, all the powers vested in the public authorities are for the good of society. A fortiorari, neither can a public authority decline to exercise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then take a call, in the light of his expert knowledge and experience, which areas, if at all any, required to be critically examined by a thorough probe. While it is true that an Assessing Officer is not only an adjudicator but also an investigator and he cannot remain passive in the face of a return which is apparently in order but calls for further inquiry but, as observed by Hon ble Delhi High Court in the case of Gee Vee Enterprises Vs ACIT [(1995) 99 ITR 375 (Del)], it is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. (Emphasis, by underlining, supplied by us). It is, therefore, obvious that when the circumstances are not such as to provoke an inquiry, he need not put every proposition to the test and probe everything stated in the income tax return. In a way, his role in the scrutiny assessment proceedings is somewhat akin to a conventional statutory auditor in real-life situations. What Justice Lopes said, in the case of Re Kingston Cotton Mills [(1896) 2 Ch 279, 288)], in respect of the role of an auditor, would equally apply in respect of the role of the Assessing Officer as well. Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that lack of bonafides or unreasonableness in conduct cannot be inferred on mere suspicion; there have to be some strong indicators in direction, or there has to be a specific failure in doing what a prudent, judicious and responsible officer would have done in the normal course of his work in the similar circumstances. On a similar note, a coordinate bench of the Tribunal, in the case of Narayan T Rane vs ITO [(2016) 70 taxmann.com 227 (Mum)] has observed as follows: 20. Clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provision shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. ClT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis-a-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is an admitted fact that there is no straight jacket formula or parameter to make inquiry in the assessment proceedings' What is required is that the AO should frame the assessment in accordance with the provisions of the Act, as interpreted and in the light of the relevant judicial pronouncements, as available on the date of framing the assessment or material available before him. In this regard, we draw strength from the decision in the case of CIT v/s Girdhari Lal 258 ITR 331(Raj.) wherein it has been held: When the Assessing Officer after going through the material on record and after considering the explanation of the assessee' made some additions and rejected the books of accounts, it could not be said that he had not applied his mind. It is not always necessary that every assessee in the line of business should have the same rate of profit The tribunal was correct in cancelling the order under sec 263 of Income Tax Act 19. We further observe that the department can assume jurisdiction under Section 263 of the Act if twin conditions of the order being erroneous and prejudicial to the interest of the revenue are satisfied. If the view taken by the A.O ..... X X X X Extracts X X X X X X X X Extracts X X X X
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