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TMI Blog2022 (8) TMI 1218X X X X Extracts X X X X X X X X Extracts X X X X ..... s the mandate provided in section 263(1) of the Act. Hence the revision order passed u/s 263 of the Act deserves to be quashed on this count itself. From the perusal of the entire order of ld. PCIT u/s 263 we find that there is no mention of even issuance of show cause notice u/s 263 of the Act to the assessee by the ld. PCIT. Hence the reply of the assessee to the said show cause notice, if any, is also not reflected / considered by the ld. PCIT before concluding that the order passed by the ld. AO is erroneous and prejudicial to the interest of the revenue warranting revision u/s 263 of the Act. Hence the entire order passed u/s 263 of the Act by the ld. PCIT suffers from this basic legal infirmity and deserves to be quashed on this count also. PCIT himself had defended the assessment order framed u/s 143(3) dated 27.11.2019 before the Internal Audit Party of Income Tax Department specifically stating that the order passed by the ld. AO on 27.11.2019 is neither erroneous nor prejudicial to the interest of the revenue. Having done so, how the same PCIT could say that the order of the ld. AO is erroneous and prejudicial to the interest of the revenue while passing revision or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22 for A.Y.2017-18 preferred by the order against the revision order of the ld. Commissioner of Income Tax(Exemptions), Mumbai u/s.263 of the Act dated 24/03/2022 for the A.Y.2017-18. 2. The assessee has raised the following grounds of appeal before us:- 1. On the facts and in the circumstances of the case and in law the Ld. Principal Commissioner of Income Tax-1, Thane was not justified in invoking the provision of section 263 of the Income Tax Act 1961 even though the assessment order passed u/s. 143(3) of the Act was pursuant to the proper enquiry and verification and therefore, the said order is neither erroneous nor prejudicial to the interest of revenue. 2. On the facts and in the circumstances of the case and in law the Ld. Principal Commissioner of Income Tax-1, Thane was not justified to set aside the assessment order passed by the Income tax Officer, Ward-2, Panvel dated 27-11-2019 and direct the Assessing Officer to examine applicability of provisions of section-80P9(2)(d) and section-269SS and to verify the applicability of deduction u/s. SOP of the Income Tax Act, 1961. 3. The Ld. PCIT has passed an unsustainable order based on the audit party observat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance sheet. d) Low income in comparison to high loans/advances/investment in shares appearing in balance sheet. e) Large deduction under Chapter VI-A from Total Income. f) Large value cash deposit during demonetization period reported. 5. The ld. AO sought to examine the aforesaid items in the course of assessment proceedings. Notice u/s 133(6) of the Act by the ld. AO to the respective banks. The ld. AO observed that on analysis of bank accounts of the assessee, it was noticed that assessee had deposited cash in Karnala Nagri Sahakari Bank and The Raigad District Central Cooperative Bank Ltd. The ld. AO issued notice u/s 142(1) of the Act directing assessee to explain the source of cash deposits inter alia, among other issues. The assessee furnished reply in that regard before the ld. AO. The ld. AO gave a categorical finding that the cash deposited in the bank accounts are sourced out of amounts received by the assessee society from its members, which is evident from the list of members submitted by the assessee during the course of assessment proceedings. After verification of various details with evidences submitted by the assessee society, the ld. AO completed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as deduction u/s 80P(2)(d) of the Act. The Pune Tribunal by placing reliance on aforesaid decision of Hon ble Gujarat High Court decided the issue in favour of the assessee. Hence it was submitted that the objection of Internal Audit Party was not acceptable to the department. Accordingly, it was specifically pleaded in the last para of the said submission made to CIT(Audit) Pune that the order of the ld. AO is neither erroneous nor prejudicial to the interest of the revenue and requested for dropping /withdrawal of the audit objection. It is pertinent to note that this submission was made to CIT(Audit) Pune through proper channel i.e the reply was sent through the office of ld. PCIT having jurisdiction over the assessee herein. 8. The CIT(Audit) Pune vide letter dated 17.2.2022 did not accede to withdraw the objection of the AO. In the last para of this letter, the CIT(Audit) Pune had reported that the reply given by the PCIT on the objections raised is not acceptable and therefore requested the PCIT to take necessary remedial action as per law. 9. With reference to audit objection raised by the Internal Audit Party in various cases, directions were sought from Chief Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act by the ld. PCIT suffers from this basic legal infirmity and deserves to be quashed on this count also. 11.2. From the perusal of the order of ld. PCIT u/s 263 of the Act, we find that the PCIT himself had defended the assessment order framed u/s 143(3) dated 27.11.2019 before the Internal Audit Party of Income Tax Department specifically stating that the order passed by the ld. AO on 27.11.2019 is neither erroneous nor prejudicial to the interest of the revenue. Having done so, how the same PCIT could say that the order of the ld. AO is erroneous and prejudicial to the interest of the revenue while passing revision order u/s 263 of the Act. Hence the order passed by the ld. PCIT u/s 263 of the Act suffers from this legal infirmity also. 12. In any case, on merits, with regard to interest income from co-operative banks and its consequential eligibility of deduction u/s 80P(2)(d) of the Act, the issue is squarely covered in favour of the assessee by various decisions of tribunals and also by the decision of Hon ble Gujarat High Court in the case of State Bank of India reported vs CIT reported in 389 ITR 578 (Guj). The relevant operative portion of the said judgement is r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty in cash was subject matter of examination and verification by the ld. AO in the course of assessment proceedings. This fact is duly addressed by the ld. AO in page 2 of his order. Hence it could be safely concluded that the ld. AO had made adequate enquiries in this regard in the assessment proceedings itself and had arrived at only possible view on the matter. Hence the same cannot be disturbed by the ld. PCIT by invoking revision jurisdiction u/s 263 of the Act. Infact, we further find that in none of the audit objections (which is the primary basis of ld. PCIT invoking revision jurisdiction u/s 263 of the Act in the instant case) , the aspect of violation of provisions of section 269SS of the Act , was even addressed. Hence we hold that the ld. PCIT grossly erred in directing the ld. AO to examine the applicability of provisions of section 269SS of the Act. 13. Hence we hold that the revision order passed by the ld. PCIT u/s 263 of the Act deserves to be quashed for more than one reason as detailed supra and hence is hereby quashed. Accordingly, the grounds raised by the assessee are allowed. 14. In the result, the appeal of the assessee is allowed. Order pronounced ..... X X X X Extracts X X X X X X X X Extracts X X X X
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