Income Tax Appellate Tribunal - Rajkot
Shri Avadh Nagarik Sahkari Mandali ... vs The Pr. Cit-1, Rajkot, Rajkot on 31 July, 2024
IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT
BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER
And
DIESH MOHAN SINHA, JUDICIAL MEMBER
आयकरअपीलसं./ITA No.126/RJT/2023
( नधारणवष / Assessment Yea r: (2018-19)
(Hybrid Hea ring)
Shr i Avadh Nagar ik Sahkar iMandli Vs. The Pr. CIT - 1,
Lt d., Rajkot
Opp. Head Post Office, Near t o
Rajkama l Chowk, Amr eli, 36 5601
Gujarat
थायीले खासं . /जीआइआरसं . /PAN/GIR No. : AAKAS1380A
(Appellant) (Respondent)
Appellantby : Shri D. M. Rindani, AR
Respondent by : Shri Shramdeep Sinha, CIT-DR
Date of Hearing : 01/05/2024
Date of Pronouncement : 31/07/2024
आदे श / O R D E R
PER DR. A. L. SAINI, AM:
By way of this appeal, the assessee has challenged the correctness of the order dated 18.03.2023 passed by the Learned Principal Commissioner of Income-tax-Rajkot (in short "Ld PCIT"), under section 263 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), for the assessment year 2018-19.Grievances raised by the assessee, which being interconnected will be taken up together, are as follows:
"1. The learned Principal Commissioner of income-tax - 1, Rajkot, erred in holding that the assessment order dated 19-01-2021 passed u/s 143(3) of the Act was erroneous and prejudicial to the interest of revenue and thus erred in assuming jurisdiction u/s 263 of the Act, in the light of show cause notice and the order passed u/s 263 of the Act and hence the impugned order is bad in law.
2. The learned Principal Commissioner of income-tax - 1, Rajkot, erred in setting aside the assessment order framed u/s 143(3) of the Act, by holding that the A.O. did not conduct any inquiries in respect of eligibility of deduction of interest and ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
dividend income earned from Co-operative Bank, claimed by the Assessee u/s 80P(2)(d) of the Act.
3. The learned Principal Commissioner of Income-tax - 1, Rajkot, failed to appreciate that the impugned issue was duly examined by the assessing officer by way of specific inquiry/notice and reply thereto, while finalizing assessment proceedings u/s 143(3) of the Act.
4. The assessee craves leave to add, amend, alter and withdraw any ground of appeal anytime up to the hearing of this appeal."
Facts of assessee`s case
2. Brief facts, as discernible from the orders of lower authorities are that assessee before us, is a Co-operative Society, and engaged in the business of providing credit facilities to the member of the society. The assessee had filed return of income for assessment year(AY) 2018-19, on 13.08.2018, declaring total income at Rs. Nil, after claiming deduction u/s 80P(2)(d) of the Act. The assessee's case was selected for Scrutiny Assessment, under the E-assessment Scheme, 2019 as mentioned in assessment order. The assessment was finalized by the assessing officer,under section, 143(3) of the Act, on 19.01.2021, accepting returned income of Rs. Nil.
3. Later on, Learned Principal Commissioner of Income-tax-Rajkot (in short "Ld PCIT"), exercised his jurisdiction, under section 263 of the Income-tax Act, 1961.On verification of assessee`s case records, it was noted by Ld. PCIT that assessee has claimed deduction u/s 80P(2)(d), on interest, on fixed deposit of Rs.16,52,694/- and interest on saving account with Amreli Jilla Madhyasth Sahakari Bank. Further, the assessee-society has also claimed dividend, as deduction u/s 80P(2)(d) of the Act. The ld. PCIT noted that assessee has claimed total deduction u/s 80P(2)(d) of the Act, to the tune of Rs.18,41,436/- (interest on FD and Dividend). The ld. PCIT noted that while passing the assessment order, the Assessing Officer has incorrectly allowed deduction u/s 80P(2)(d) of the Act, on interest income on Bank Fixed Deposits, along with interest income and dividend Page | 2 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
from Co-operative Bank. Considering these facts, notice u/s 263 of the Act was issued to the assessee, by Ld. PCIT, which is reproduced below:
"Sub: Notice under section 263 of the Income tax Act, 1961 AY.2018-19 - Reg.
Please refer to your Mandli's return of income for AY 2018-19 e-filed on 13-08- 2018 declaring total income of Rs. Nil after claiming deduction of chapter VI-A of the Act. The case was selected for Limited Scrutiny through CASS with reasons of "(i) Investments / Advances / Loans & (ii) Unsecured Loans and (iii) Deduction from total income under Chapter VI-A". The scrutiny assessment u/s 143(3) r.w.s.
143(3A) & 143(3B) of the IT Act for A.Y 2018-19 had been completed on 19-01- 2021 and total income was assessed at Nil.
2. On perusal of Balance Sheet and your mandli's reply during the course of assessment proceedings, it is seen that your mandli has earned interest on FD of Rs. 16,52,694/- received from Amreli JillaMadhyasthSahakari Bank and claimed deduction u/s.80P on the same. In this regard, the provisions with regard to allowing deduction in respect of interest income earned by a co-operative society are contained in section 80P(2)(d) of the Income tax Act, 1961, which read as under:
"in respect of any income by way of interest or dividends derived by the co- operative society from its investments with any other co-operative society, the whole of such income"
On plain reading of the above provision, it is clear that the section refers to interest and dividends earned from investments in another co-operative society only. Thus, this deduction cannot be extended to the interest income earned from the investment in any co- operative bank. It is pertinent to note here that vide Finance Act, 2006, deduction from income of Co-operative banks as per the provision of section 80P of the Act, has been withdrawn by way of insertion of section 80P(4) of the I. T. Act, 1961, w. e. f. 01.04.2007 which differentiate a co- operative bank in. "comparison to co-operative society. The co- operative banks are functioning at par with the other commercial banks, which do not enjoy any tax benefit. Therefore section 80P of the Income tax Act was amended by inserting a new sub section (4) so as to provide that the provisions of the said section shall not apply in relation to any co-operative bank other than a primary agricultural credit Society or a primary co-operative agricultural and rural development bank.
The very basis of functioning of any co-operative society would be the principle of mutuality. If we go through the principle of mutuality, the three important basic conditions of the Principle are as under:
1. There must be a complete identity between the contributors and participators.
2. The actions of the participators and contributors must be in furtherance of the mandate of the association.
Page | 3 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
3. There must be no scope of profiteering by the contributors from a fund made by them which could only be expended or returned to themselves.
However, all the above conditions are not satisfied in the case of interest or dividend earned from.co-operative banks by the co operative society (assessee). There is an element of profiteering in the activities of co-operative society while earning interest at higher rates, the surplus therefore will form part of its general reserve fund, even if the same is distributed as dividend even then the principle of mutuality is not satisfied as held by The Hon. Supreme Court in the case of CIT vs. Kumbakonam Mutual Benefit Fund Ltd., 53 ITR 241 (SC) wherein it was held that if the profits are distributed to shareholders as shareholders, the principle of mutuality is not satisfied. Further, in a very recent land mark judgment in the case of M/s. Bangalore Club vs. Commissioner of Income tax, The Hon'ble Supreme Court of India has gone into minute details for deciding the nature/character of "Principle of Mutuality", under which the tax exemption has been claimed by various Societies. The Honorable Supreme Court held that "in our opinion, unlike the surplus amount' itself, which is exempt from tax under the doctrine of mutuality, the amount of interest earned by the assessee (Bangalore Clubs from the member banks will not fall within the ambit of the mutuality principle and will therefore, be eligible to Income-Tax in the hands of the assessee-club". In this case, the surplus funds in the hands of the assessee were placed at the disposal of the corporate members viz. the banks, with the sole motive to earn interest, which brings in the commerciality element and thus, the interest so earned by the assessee has to be treated as a revenue receipt, eligible to tax. Hence, keeping surplus funds in co-operative bank is not falling under concept of mutuality and interest earned on such deposits are not eligible for deduction u/s 80P(2)(d).
Reliance is placed on the decision of Hon'ble Karnataka High Court in the case of Principal CIT, Hubballi Vs TotagarsCo.Op.Sale Society 83 taxmann.com 140 (dt.16/06/.2017) wherein it was held that Interest or dividend earned by assessee, a co- operative society, marketing members' agriculture product, from surplus deposits kept with a co-operative bank, was not eligible for deduction under section 80P(2)(d). Further, the review petition filed in the above case was also dismissed by the Hon'ble Karnataka High Court dated 22/09/2017.
In the findings of the High Court of Gujarat in SCA No.20585 of 2019 dated 4/01/2022 in the case of KatlaryKariyana Merchant SahkariSarafiMandali Ltd. Vs. ACIT, Himmatnagar, it is reiterated that the Assessing Officer has rightly formed opinion while reopening the Assessment u/s 147 of the Income Tax Act, 1961, that the Interest derived from the surplus funds invested by the assessee in the nature of FDRs other than the Co-operative Societies i.e. other Co-operative Banks and Nationalized Bank will certainly not fall in the category to be entitled to claim the deductions under Section 80P(2)(i) and Section 80P(2)(d) of the I.T. Act as the character of the interest is different from the income attributable to the business of the society of providing credit facilities to its members. Therefore, it is only the interest derived from the credit provided to its members which is deductible under section 80P(2)(a)(i) of the Act and the interest derived by depositing surplus funds with the Nationalized Banks is not being attributable to the business carried on by the Mandali and cannot be deducted under section 80P(2)(a)(i) of the Act.
Page | 4 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
The issue of taxability of interest or dividend earned from surplus funds decided by the Hon'ble Supreme Court in the case of Totgars' Co-operative Sale Society Ltd. v. ITO [2010] 322 ITR 283/188 Taxman 282, wherein it was held that the assessee being Co-operative Society is engaged in providing credit facilities to its members or marketing agricultural product of its members, interest or dividend 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 the I.T. Act and it cannot be said to be attributable to the activities of the Society and therefore, the interest did not qualify for deduction u/s. 80P(2)(a)(i) of the I.T. Act.
Hence it is clear that the interest income received by the Mandli has to be assessed as Income from other source and it is also not eligible for deduction under section 80P(2)(a)/(b). Therefore, in view of the above discussion and decisions as above, the deduction u/s80P claimed in respect of interest on FD of Rs.16,52,694/- is not allowable in this case and required to be taxed accordingly.
3. Thus, it is clear that while completing the assessment u/s 143(3) r.w.s. 143(3A) & 143(3B) of the IT Act for A.Y 2018-19 on 19/01/2021, the AO has not properly verified/ examined the facts of the case and the issue under consideration. Therefore, at present, in your Mandli's case, there is an under assessment of Rs.16,52,694/-.
4. As per the provision of section 263 of the I..T. Act, Explanation-2, any order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue. In this case deduction u/s. 80P(2)(d) of the Income tax Act has been allowed to the you which in view of the facts discussed herein above paras is erroneous & prejudicial to the interests of the revenue. The deduction to the extent of Rs. 16,52,694/- has been allowed without inquiring into the claim. Therefore in view of the above, the assessment order is erroneous and prejudicial to the interest of revenue.
5. In view of the above and in the light of facts and circumstances of the case. the order passed by the AO u/s 143(3) r.w.s. 143(3A) & 143(3B) of the IT Act for A.Y 2018- 19 on 19/01/2021 being erroneous and prejudicial to the interest of revenue and therefore needs to be revised u/s 263 of the IT Act. Therefore, I hereby initiate proceedings u/s 263 of the Act with a view to pass a suitable order. Before passing of such order, you are hereby given an opportunity of being heard in the matter. In this connection you are requested to furnish your reply / submission / explanation or objection if any by mail address id [email protected]/ speed post to this office on or before 17-01-2023."
4. In response to the above show -cause notice, the assessee submitted its reply before the Ld. PCIT and stated that during course of lending and borrowing funds, some funds were deposited with the Amreli Jilla Madhayasth Sahakari Bank Ltd., (a scheduled co-operative institution) for the purpose of earning interest. As and when the amount is required, the deposits with the Amreli Jilla Madhayasth Sahakari Bank Ltd. are liquidated Page | 5 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
and utilized for the purposes of lending to members or for working capital purposes. The deposit of amount with Amreli Jilla Madhayasth Sahakari Bank Ltd. is therefore placed during the course of business and part of the activities of the society and cannot be seen in isolation. The financing and investing are integrated activities for a credit society and are permitted under the state law governing such societies. Therefore, interest income amounting to Rs.16,52,694/- received on fixed deposits made with Amreli Jilla Madhayasth Sahakari Bank Ltd, was claimed by us u/s 80P(2)(a)(i) of the Act while filing return of income. It was also submitted before ld PCIT that Amreli Jilla Madhayasth Sahakari Bank Ltd (Cooperative bank) is first registered as co-op. societies (A copy of registration certificate of Amreli Jilla Madhayasth Sahakari Bank Ltd was submitted by the assessee) and since all investments were made in fixed deposits with other co-operative societies, entire interest income earned there from is also entitled to deduction u/s 80P(2)(d) of the Act in view of decisions of the Jurisdictional Gujarat High Court in the case of(i) Sabarkantha District Co-operative Milk Producers Union Ltd. in Tax Appeal No. 473 of 2014 dated 16-06-2014 and
(ii) State Bank of India vs Commissioner of Income-tax (2016) 389 ITR 578,
(iii) decision of Ahmedabad Tribunal in the case of The Uttar Gujarat Uma Co-op Credit Society Ltd, in ITA No. 1670 and 1671/A/2018 dated 28-02- 2019 and (iv) Decision of Rajkot Tribunal in the case of Surendranagar District Co-op. Milk Producers Union Ltd. in ITA Nos.262-263/Rjt/2018 dated 20-09-2019.Further, Section 80P of the Income-tax Act is a benevolent provision which is enacted by the Parliament in order to encourage and promote growth of co-operative sector in the economic life of the country which was done pursuant to declared policy of the Government. Therefore, such a provision has to be read liberally, reasonably and in favour of assessee [Bajaj Tempo Limited, Bombay vs CIT (1992) 3 SCC 78]. In view of above, considering the above submissions and binding case law, it Page | 6 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
was submitted that assessee`s claim of Rs.16,52,694/-u/s 80P(2)(a)(i) is justified.
Findings of Learned Principal Commissioner of Income Tax:
5. However, Ld. PCIT rejected the contention of the assessee and noted that as per the relevant provisions of Section 80P(2)(d) of the Act, the assessee society is not eligible to claim the deduction, in respect of interest income received from Co-operative banks, on account of fixed deposit made by the assessee with the said bank. Ld. PCIT then referred the provisions of section 80P(2)(d), of the Act, which reads as follows:
"80P.(1) Where, in the case of an assessee being a co-operative society, the gross total income includes any 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 the assessee.
(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 creditfacilities to its members, or (ii) a cottage industry, or [(iii) the marketing of agricultural produce grown by its members,or
(iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or
(v) the processing, without the aid of power, of the agriculturalproduce of its members, or
(vi) the collective disposal of the labour of its members, or (vii) fishing or allied activities, that is to say, the catching, curing, processing, preserving, storing or marketing of fish or the purchase of materials and equipment in connection therewith for the purpose of supplying them to its members,the whole of the amount of profits and gains of business attributable to any one or more of such activities:
......................
(d) in respect of any income by way of interest or dividends derived by the co-
operative society from its investments with any other co-operative society, the whole of such income"
Therefore, the Ld. PCIT observed that the provisions of Income Tax Act does not extend the deduction u/s 80P(2)(d) of the Act, to the interest income, earned from the investments, made with co-operative banks. From the plain reading of the above provision, it is clear that the section refers to Page | 7 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
interest and dividends, earned from investments in another cooperative society only. Thus, this deduction cannot be extended to the interest income and dividend income earned from the investment in any co- operative bank.Further, the conditions or restrictions contemplated by one statute having a different object and purpose should not be lightly and mechanically imported and applied to a fiscal statute for non-levy of taxes, thereby causing a loss of revenue. [See; Medley Pharmaceuticals Limited vs. Commissioner of Central Excise and Customs, Daman - (2011) 2SCC 601 2011(SC) and Commissioner of Central Excise, Nagpur vs. Shree Baidyanath Ayurved Bhavan Limited,2009 (237) ELT 225 (SC).It is pertinent to note here that vide Finance Act, 2006, deduction from income of Co-operative banks as per the provision of section 80P of the Act, has been withdrawn by way of insertion of section 80P(4) of the Act w.e.f. 01.04.2007 by way of differentiating a cooperative bank in "comparison to co-operative society". The co- operative banks are functioning at par with the other commercial banks, which do not enjoy any tax benefit. Therefore, section 80P of the Income tax Act was amended by inserting a new sub - section (4) so as to provide that the provisions of the said section shall not apply in relation to any co-operative bank other than a primary agricultural credit Society or aprimary cooperative agricultural and rural development bank. The legislative intent of distinguishing the Co-operative banks from the Co-operative societies is veryclear from the below part of speech given by the then Union minister of Finance Shri P. Chidambaram on28-02-2006 presenting the budget and proposing the said amendment;
"XIV Tax Proposals- direct Taxes
166. Co-operative banks, like any other bank are lending institutions and should pay tax on their profits."
Further, the PCIT noted that the exemption and the deduction clauses of the Act, cannot be interpreted liberally. The Hon'ble Apex Court rendered in the case of Union of India v. Wood Papers Ltd (AIR 1991 SC 2049) and Page | 8 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
Hon'ble Andhra Pradesh High Court in the case of CIT v. Anakapalli Co- operative Marketing Society Ltd., [(2000) 245 ITR 616 (AP)], has held that the provisions relating to concessions are ordinarily expected to be rigidly interpreted.The ld PCIT also noted that very basis of functioning of any co- operative society would be the principle of mutuality. However, cooperative banks do not work on the principle of mutuality, hence, the deduction should not be allowed in case of interest earned from cooperative banks by the co- operative society (assessee).
6. The Ld. PCIT heavily relied on the judgement of the jurisdictional Hon`ble Gujarat High Court, in the case of Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd. Vs. ACIT,140 taxmann.com 602 (Gujarat), where in the Hon`ble Court, upheld the opinion of the assessing officer that the interest derived from surplus funds, invested by assessee, in nature of FDRs, in Co-operative Banks, other thanCo-operative Societies, will certainly not fall in the category to be entitled to claim deductions under section 80P(2)(i) and section 80P(2) (d) of the Act.The ld.PCIT observed that Hon'ble Gujarat High court has upheld the validity of reassessment notice issued u/s 148 of the Act and while upholding such notice, it has in principle held that interest income earned on Bank FDRs with Co-operative Bank is not eligible for deduction u/s 80P(2)(d) of the Act.Hon'ble Jurisdictional Gujarat High Court has further held that 'This Court further finds that by virtue of amendment in section 194A(3)(v) of the Income-tax Act, it has also excluded the co-operative banks from the definition of "co- operative society" by the Finance Act, 2015.'Therefore, the intention of legislation is clear that income from Co-operative banks which are co- operative societies who must possess a license from the RBI to do banking business is excluded from benefits of Section 80P.
Page | 9 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
7. The PCIT also noted that copy of old decisions of Hon`ble Gujarat High Court, filed by the Assessee, has been considered by the subsequent decision of Hon'ble Jurisdictional Gujarat High Court in the case of Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd. vs. Assistant Commissioner of Income-tax, [2022] 140 taxmann.com602, hence old decisions referred by assessee were not accepted by ld PCIT. Thus, Ld. PCIT noted that decision of Hon'ble Gujarat High court, in the case of Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd (supra) is direct on issue and this is later decision of Jurisdictional High Court, which clearly explains the provisions of Section 80P(2)(d) of the Act. The olddecisions relied upon by assessee, has not dealt with theratio laid down by Hon'ble High Court,in the case of Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd (supra), hence ratio of such decisions cannot be made applicable.
8. The Ld. PCIT further noted that with effect from 01/06/2015, Explanation - 2 to the section 263(1) has been inserted by which scope of section 263 of the Act has been expanded by incorporating the concept of "deemed to be erroneous". The same is reproduced as under:
Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner, -
(a) The order is passed without making inquiries or verification which should have been made;
(b) The order is passed allowing any relief without inquiring into the claim;
(c) The order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or
(d) The order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.
The Ld. PCIT noted that the impugned order of assessing officer, under consideration, has not been passed in accordance with the decision, which is Page | 10 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
prejudicial to the assessee, rendered by the jurisdictional High Court in the case of Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd (supra). Thus, the argument that the assessing officer(AO) collected details/information during assessment proceedings, does not hold good any more. Once in the opinion of PCIT, the order is passed without making inquiries or verification which should have been done, is not done by assessing officer, and without considering the ratio laid down by the decision of Jurisdictional High Court, such order needs to be treated as 'erroneous'. The ld. PCT noted that it is apparent from assessment order that assessing officer(AO) has not applied his mind regarding claim of assessee for deduction u/s 80P(2)(d). Therefore, ld PCIT was of the opinion that the impugned order was passed by the then AO without making enquiries/ verification, which should have been made. Thus, assessee`s case is covered by clause (a) of Explanation 2 to section 263 of the Act. Further, Ld. PCIT relied on the judgement of the Hon'ble Supreme Court, in the case ofACIT v. Saurashtra Kutch Stock Exchange Ltd., in Civil Appeal No. 1171 of 2004 dated15.09.2008, held as under:
"A patent, manifest and self-evident error which does not require elaborate discussion of evidence or argument to establish it, can be said to be an error apparent on the face of the record and can be corrected while exercising certiorari jurisdiction; non-consideration of a decision of the Jurisdictional High Court or of the Supreme Court can be said to be a "mistake apparent from the record" which can be rectified under section 254(2)"
Therefore, ld. PCIT observed that non-consideration of a decision of the jurisdiction Gujarat High Court in the case of Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd. vs. Assistant Commissioner of Income-tax, [2022] 140 taxmann.com 602 (Gujarat)wherein it had upheld the opinion of the Assessing Officer that theinterest derived from surplus funds invested by assessee in nature of FDRs in Co-operative Banks and Nationalized Bank, other than Co-operative Societies, will certainly not fall in category to be entitled to claim deductions under section 80P(2)(a)(i) and section 80P(2)(d) Page | 11 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
of the Act and thus have escaped assessment and will constitute Mistake apparent from record,rectifiable under section 254(2), as per the Hon'ble Supreme Court decision cited (supra), therefore, in the assessee`s case under consideration, the order passed by the assessing officer, will certainly erroneous and prejudicial to the interest of the revenue.The Ld. PCIT had held that the assessment order passed by the Assessing Officer u/s 143(3) of the Act, dated 19.01.2021, is erroneous and prejudicial to the interest of the Revenue. Therefore, ld PCIT set aside the order u/s 143(3) of the Act, dated 19.01.2021, on the issues discussed above and directed the Assessing Officer to pass a fresh assessment order after denying deduction u/s 80P(2)(d), on Fixed Deposit interest income earned of Rs.16,52,694/- from Co-operative bank 'Amreli Jilla Madhyasth Sahakari Bank'. It was further observed by ld PCIT that the assessee-society has claimed total deduction of interest income to the tune of Rs.18,41,436/- u/s 80P(2)(d) of the Act, therefore, the Assessing Officer was also directed to examine the balance interest income (Rs.18,41,436 - 16,52,694) claimed u/s 80P(2)(d) and if the same is from Co-operative Bank then disallow the same u/s 80P(2)(d) of the Act and the assessee has also claimed dividend income u/s 80P(2)(d) of the Act andif the dividend income is earned from Co-operative Bank, the Assessing Officer is directed to disallow the same as the assessee is not eligible for deduction u/s 80P(2)(d) of the Act. Therefore, ld. PCIT directed the assessing officer to examine interest from Co-operative bank of Rs.18,41,436/-, and dividend income from Co-operative Bank Rs.52,350/-.
9. Aggrieved by the order of Ld. PCIT, the assessee is in appeal before us.
Arguments of Learned Counsel for the assessee:
Page | 12 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
10. Shri D. M. Rindani, Learned Counsel for the assessee argued that Ld. PCIT has exercised his jurisdiction to examine the interest income received from Co-operative Bank, which is eligible deduction under section 80P(2)(d) of the Act. The Ld. PCIT exercised the jurisdiction in respect of the interest received from fixed deposits to the tune of Rs.16,52,694/- shown in the profit and loss account for the year ended 31.03.2013, in the income side and thereafter, the assessee derived the net profit to the tune of Rs.21,33,352.37/- vide paper book page no.28. The Ld. PCIT was of the view that interest received from fixed deposits to the tune of Rs.16,52,694/- is not eligible for deduction under section 80P(2)(d) of the Act. Therefore, Ld. Counsel for the assessee stated that since the assessee has never claimed deduction under section 80P(2)(d) of the Act, the assessee has merely shown the interest received from fixed deposits in its profit and loss account. No doubt, the assessee has received interest to the tune of Rs.16,52,694/- from Co- operative Bank and has offered for taxation and shown in the profit and loss account in the income side and thereafter computed the net profit for the year ending 31.03.2018, hence the item which was not the subject matter of examination by the Assessing Officer, in the scrutiny assessment under section 143(3) of the Act, should not be subject matter of revision proceedings under section 263 of the Act.
11. The Ld. Counsel submitted that during the assessment proceedings, the Assessing Officer issued notice under section 142(1) of the Act, dated 16.11.2020, which is placed in paper book page no.15, wherein the Assessing Officer especially asked the assessee on eligibility criteria of deduction claimed under section 80P(2)(d) of the Act. In response to the said notice of the Assessing Officer, the assessee has submitted the reply before the Assessing Officer, (vide reply dated 01.12.2020, of the assessee on page no.17 of paper book). The assessee stated in its reply that it has received Page | 13 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
interest income on fixed deposits/ or on investments from Co-operativebank the tune of Rs.18,41,436/-, and dividend income of Rs.52,350/-, (vide paper book page no.19).
12. The Ld. Counsel contended that although the assessee has not claimed the deduction under section 80P(2)(d) of the Act, to the tune of Rs.16,52,694/-, however the Assessing Officer during the assessment proceeding was aware about this figure and the assessee has submitted before the Assessing Officer that it has received interest on investment/Fixed Deposits of Rs.16,52,694/-, therefore the interest income to the tune of Rs.16,52,694/- was in the knowledge of the Assessing Officer, however, the Assessing Officer took the plausible view considering the fact that since the assessee has shown the said interest on fixed deposits in its profit and loss account for the year ended 31.03.2018, as income received from fixed deposits from Co-operative bank and computed the net profit to the tune of Rs.32,76,731/-, therefore the interest received from fixed deposits from Co- operative bank to the tune of Rs.16,52,694/- was included in the net profit arrived by the Assessing Officer. Therefore, order passed by the Assessing Officer is neither erroneous nor prejudicial to the interest of the Revenue. The Ld. Counsel stated that assessee has claimed the deduction under section 80P(2)(a)(i) on account of banking/credit facilities to its members to the tune of Rs.24,42,937/- and which has been shown in the return of income also, and in this connection, the assessee submitted its reply before the assessing officer also.
13. On legal aspect of deduction under section 80P(2)(d) of the Act, the ld. Counsel relied on several judgments which were submitted before the Bench by way of case law compilations which we have gone through. The ld Counsel submitted that Hon`ble Gujarat High Court in the case of Katlary Karayana Merchant Sahkari Sarafi Mandali Ltd, 140 Taxmann.com 602 Page | 14 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
(Guj)held that interest from co-operative banks and other banks are not eligible for deduction u/s 80P(2) (d) of the Act. However, this decision is distinguished and is not followed by Rajkot Bench of ITAT in Kutch District Co-op. Milk Producers' Union Ltd., (2024) 159 taxmann.com.This decision refers to a specific definition meant for section 194A only; andit is in a different context of section 147 of the Act and hence not a binding precedent. The ld Counsel pointed out that following decisions of Hon`ble Gujarat High Court, favor the assessee, viz:(i) Sabarkantha District Co- operative Milk Producers Union Ltd. in Tax Appeal No. 473 of 2014 dated 16-06-2014 - (Guj - HC) and (ii) Surat Vankar Sahakari Sangh Ltd., 421 ITR 134 -(Guj - HC). The ld Counsel further stated that assessing officer(A.O) based on his, scrutiny, adopted a particular view and applied the law to facts of the case; and ld PCIT taking a different view by interpreting the same set of facts, differently, is not permissible u/s 263 of the Act. The reliance was placed by ld Counsel on the following decisions, viz: (i)Shreeji Prints (P.) Ltd. (2021) 130 taxmann.com 294 (SC) - Page 41-45,(ii)Kutch District Co-op. Milk Producers' Union Ltd. (2024) 159 taxmann.com 347 (Rajkot Trib),(iii)Kansara Popatlal Tribhuvan Metal (P.) Ltd., (2023) 156 taxmann.com 433 (Guj - HC).Thus, ld Counsel contended that as majority of decisions are favoring to the assessee and the decision in the case of Katlary Kariyana (supra) is distinguishable on facts, and hence the majority decisions of Jurisdictional High Court should be followed and preferred, at least, until and unless earlier decisions are overruled by a larger Bench, which is not so at present. The ld Counsel also relied on the judgment of Hon`ble Supreme Court in the case of Vegetable Products (1973) 88ITR 192 (SC) wherein it was held even if two views are possible, the one that favours the assessee should be adopted. Therefore, ld. Counsel stated that order passed by the assessing officer is neither erroneous Page | 15 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
nor prejudicial to the interest of revenue hence, order passed by the ld PCIT under section 263 of the Act may be quashed.
Arguments of Learned Departmental Representative
14. On the other hand, Learned Commissioner of Income Tax - Departmental Representative (Ld. CIT-DR) for the Revenue vehemently argued that just to call the details from the assessee by way of issuing notice under section 142(1) of the Act and to consider the reply of the assessee by assessing officer, in respect of the details called by the assessing officer, is not sufficient. Considering the facts of the case, the assessing officer cannot take a plausible view, especially, when there is a judgement of Hon`ble Gujarat High Court in the case of Katlary Karayana Merchant Sahkari Sarafi Mandali Ltd, 140 Taxmann.com 602 (Guj) wherein it was held that interest from co-operative banks and other banks are not eligible for deduction u/s 80P(2) (d) of the Act. Therefore, Ld DR stated that order passed by the assessing officer is not sustainable in the eye of law. Hence, the Ld PCIT has rightly exercised his jurisdiction, as per clause (d) of explanation-2 of section 263 of the Act. Therefore,order passed by the Assessing Officer is erroneous as well as prejudicial to the interest of Revenue, as the Assessing Officer has not conducted any enquiry in respect of the interest income shown by the assessee in its profit and loss account, on account of interest received from fixed deposits from co-operative bank to the tune of Rs.18,41,436/- (this figure includes Rs.16,52,694/-, as mentioned by the ld PCIT in his order). The Assessing Officer ought to have conducted an enquiry in respect of interest received from fixed deposits from co-operative bank, which was shown in the profit and loss account of the assessee, for the year ended 31.03.2018, vide assessee's paper book page no.28 and later on, in the computation of total income, the assessee has reduced Rs.18,41,436/- from the head profits and gains from business and Page | 16 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
profession, and then same has been shown by the assessee under the head income from other sources, to the tune of Rs.18,41,436/- vide assessee`s paper book page number 25.The deduction under section 80P is not allowed in respect of income shown under the head income from other sources. The assessing officer did not consider the judgment of Hon`ble Gujarat High Court in the case of Katlary Karayana Merchant Sahkari Sarafi Mandali Ltd,140 Taxmann.com 602 (Guj)wherein it was held that interest from co- operative banks and other banks are not eligible for deduction u/s 80P(2) (d) of the Act. Therefore, the Ld PCIT has rightly exercised his jurisdiction, as per clause (d) of explanation-2 of section 263 of the Act.
15. Therefore, Ld. CIT-DR contended that the deduction under section 80P(2)(d) of the Act is not allowable, on account of interest received from fixed deposits from co-operative bank, and therefore, view taken by the assessing officer is not legally sustainable in the eye of law. The Ld. DR for the Revenue heavily relied on the judgement of Hon`ble Gujarat High Court in the case of Katlary Kariyana (2022) 215 DTR 0125 (Guj), and also relied on the order of the Coordinate Bench of ITAT- Rajkot in the case of Lodhika Seva Sahkari Mandali, vide ITA No.184/RJT/2022, order dated 05.04.2024 and stated that deduction under section 80P(2) (d) of the Act is not available in respect of interest income received from fixed deposit from a cooperative bank, therefore order passed by the assessing officer is erroneous as well as prejudicial to the interest of the Revenue. The ld DR also relied on the following judgments:
(i) Hon. HC of Mumbai in CIT vs Thana Electricity Supply ltd. (1994) 206 ITR 727 (Bom.)
(ii) ACIT, Rajkot vs. Saurashtra Kutch Stock Exchange Ltd. Dated 15/09/2008 (2008) 173 Taxman 322 (SC)
(iii) Hon. SC in Mavilayi Sevice Cooperative Bank ltd. V CIT [2021] 123 taxmann.com 161 (SC)/[2021] 279 Taxman 75 (SC).
Page | 17 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
(iv) PRINCIPAL COMMISSIONER OF INCOME TAXAND ANOTHER vs. TOTAGARS CO-OPERATIVE SALE SOCIETY, (2017) 99 CCH 0126 Kar HC(2017).
(v)Secunderabad Club vs CIT in CIVL APPEAL NO(S).
5195-5201 OF 2012, order Dated 17/08/2023(2023) 117 CCH 0114 ISCC, (2023).
16. The Ld. CIT-DR also pointed out that Hon'ble High Court of Bombay in the case of CIT vs. Thane Electricity Supply Ltd., (1994) 206 ITR 727 (Bom.) has explained the judicial discipline, that judgment of Jurisdictional High Court should be given importance and it should be followed. Therefore, by following the judgement of Jurisdictional Hon`ble Gujarat High Court in the case of Katlary Kariyana (Supra), the order passed by the Ld.PCIT under section 263 of the Act, may be upheld.
17. Learned Commissioner of Income Tax - Departmental Representative (Ld. CIT-DR) for the Revenue further stated that order passed by the Assessing Officer is erroneous as well as prejudicial to the interest of Revenue,as the Assessing Officer has not conducted any enquiry in respect of the interest income shown by the assessee, in its profit and loss account, on account of interest received from fixed deposits, from co-operative bank to the tune of Rs.16,52,694/-. The Assessing Officer ought to have conducted an enquiry in respect of interest received from fixed deposits from co-operative bank, which was shown in the profit and loss account of the assessee for the year ended 31.03.2018, vide assessee's paper book page no.28. However, the Assessing Officer has issued notice under section 142(1) of the Act to conduct enquiry in respect of interest received from fixed deposits of Rs.16,52,694/- (Rs.18,41,436 shown in profit and loss account) which is not allowed under section 80P(2)(d) of the Act, as this claim of the assessee is not sustainable in the eye, law.
Page | 18 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
18. The Ld. CIT-DR for the Revenue heavily relied on the latest judgment of the jurisdictional High Court of Gujarat in the case of Katlary Kariyana, (2022) 327 CTR 0138 (Guj.),whereinthe Hon'ble Gujarat High Court clearly stated that assessee is not eligible for deduction under section 80P(2)(d) of the Act in respect of interest received from co-operative bank. Thereafter, Ld. CIT-DR for the Revenue heavily relied on the judgment of the Co- ordinate Bench of ITAT, Rajkot in the case of Lodhika Seva Sahakari Mandali vs. PCIT, in ITA No.184/Rjt/2022 for AY.2017-18, order dated 05.04.2024 and stated that the jurisdictional Co-ordinate Bench of Rajkot in the above case has considered the judgement of Hon`able Gujarat High Court in the case of Katlary Kariyana (supra),140 taxmann.com 602 (Guj.). Therefore, Ld. CIT-DR contended that the issue is squarely covered in favour of Revenue by the judgment of jurisdictional High Court of Gujarat in the case of Katlery Kariyana (supra) and by the decision of jurisdictional ITAT, Rajkot in the case of Lodhika Seva Sahakari Mandli (supra).
19. The ld. DR for the revenue, again reiterated the argument advanced by him and stated that it is important to note that Hon`ble Gujarat High Court in the case of Katlary Kariyana (supra), has approved the decision of Hon`ble Karnataka High Court in the case of Totagars (supra) by clearly stating that "co-operative Banks are not species of Genus Cooperative Society." Though the issue has not yet travelled to Hon`ble Supreme Court, as far as GujaratHigh Court judgment is concerned, however, the issue is settled by the decision of Hon`ble Gujarat High Courtin the case of Katlary Kariyana (supra). Thus, the Tribunal is bound by the decision of Hon`ble Gujarat High Court, as the principal question is same, as stated in para 2.4 of the decision in KatlaryKariyana (supra), which is repeated for ready reference, as follows:
Page | 19 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
"as regards the deduction claimed by the assessee society in terms of provisions of Section 80P(2)(d) of the Income Tax Act, as not admissible being interest received on FDR's from the cooperative banks and nationalized banks."
Therefore, ld DR contended that the view of the Hon`ble High Court has been followed by ld. PCIT. However, the ITAT, Rajkot Bench in the case of Kutch District Co-operative Milk Producers Union Ltd, vide ITA No.176/Rjt/2022 has taken the contrary view, which is not correct; the said incorrect view of the Tribunal is reproduced below:
"....the Assessing Officer had taken a view which is a legally plausible view and it is a well settled law that 263 proceedings cannot be resorted to by the PCIT only with a view to supplant his own view with the view taken by Assessing Officer."
(Para 3, page 11 of Kutch District Co-operative Milk Producer's Union Ltd. Vs PCIT)"
Thus, Ld. CIT-DR argued that above order of ITAT, Rajkotis in violation of judicial discipline. In this regard, learned DR for the revenue, relied on the decision of Hon`ble High Court of Mumbai in the case of CIT vs Thana Electricity Supply Ltd, (1994) 206 ITR 727 (Bom.). Therefore, Ld. DRargued that Tribunal may consider it`s decision in Kutch District Co-op Milk producers Union Ltd; ITA No. 176/Rjt/2022,is erroneous u/s 254(2) of the Act, in accordance with the decision of Hon`ble Supreme Court in the case of ACIT, Rajkot Vs. Saurashtra Kutch Stock Exchange Ltd, dated 15/09/2008, (2008) 173 Taxman 322 (SC), wherein amongst others, it was held that non-adherence to orders of Jurisdictional High Court and Supreme Court is a mistake apparent on record.
20. The ld DR also invited our attention towards the decision of Rajkot Tribunal Bench, in the case of Rajkot Jilla Sahakari KharidVechan Sangh, in ITA Nos. 49/Rjt/2022, order dated 09.08.2023, and stated that Tribunal has reached its conclusions with respect to the decision of Hon`ble Gujarat High Court in case of State bank of India Vs. CIT (2016) 389 ITR 578 (Guj), but has not taken into consideration the decision of Katlary Kariyana Page | 20 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
(supra)issued before the date of passing this order, thereby rendering the decision sub-silentio and hence per-incurium. The ld. DR pointed out that in the judgment in case of Katlary Kariyana (supra), the Hon`ble High Court of Gujarat has discussed and distinguished the decision in case of State bank of India (supra), vis -a -vis amendment in the Income Tax Act, 1961. Thus, this decision of Tribunal in the case of Rajkot Jilla Sahakari Kharid Vechan Sangh(supra), contains a 'mistake apparent on record'.The ld.CIT-DR further pointed out that in this decision, the Tribunal referred the decision in the case of Surat Vankar Sahakari Sangh Ltd. (supra)which deals with assessment years(AY) 1991-92 to 1994, and this judgment does not deal with the reasoning adopted by Hon`ble Gujarat High Court in post amendments brought by Finance Act, 2015, in the binding decision of Katlary Kariyana (2022), on section 80(P)(2)(d) of the Act. The earlier decision referred by the Tribunal in the case of Rajkot Jilla Sahakari Kharid Vechan Sangh (supra) was the decision of the Tribunal in Surendranagar District Co-operative Society, 111taxmann.com 69 (Rajkot-Trib),in which incorrect ratio was laid down by the Tribunal. The correct ratio is mentioned in the latest judgment of Hon'ble Gujarat High Courtin the case of Katlary Kariyana (supra), wherein it was held that Co-operative Banks are no more the species of genus Cooperative Society. Thus, this decision of Ld. ITAT in the case of Rajkot Jilla Sahakari Kharid Vechan Sangh (supra), is a 'mistake apparent on record' in terms of ruling of Hon`ble Supreme Court in the case of ACIT vs Saurashtra Kutch Stock Exchange Limited (supra).
21. The ld. DR also relied on the obiter dictumof Hon`ble Supreme Court in the case of ACIT vs Saurashtra Kutch Stock Exchange Limited (supra), which is reproduced below:
"42. In our judgment, it is also well-settled that a judicial decision acts retrospectively. According to Blackstonian theory, it is not the function of the Court to pronounce a 'new rule' but to maintain and expound the 'old one'. In other words, Judges do not make law, they only discover or find the correct law.
Page | 21 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
The law has always been the same. If a subsequent decision alters the earlier one, it (the later decision) does not make new law. It only discovers the correct principle of law which has to be applied retrospectively. To put it differently, even where an earlier decision of the Court operated for quite some time, the decision rendered later on would have retrospective effect clarifying the legal position which was earlier not correctly understood."
22. The ld. CIT-DR therefore, contended that fundamental principles of judicial discipline may be considered by this Tribunal and appeal of the assessee may be dismissed while upholding the order of Ld. PCIT u/s 263 of the Act. The Ld. CIT-DR relied on the decision of Katlary Kariyana(supra), which may be considered by this Tribunal and deduction under section 80P(2)(d)may not be allowed in respect of interest received/ dividend received from the Co-operative banks, hence Ld. CIT-DR contended that the order passed by the learned PCIT, under section 263 of the Act, dated 10th March 2023, is correct, which may be upheld.
Analysis and Conclusion
23. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. PCIT and other material brought on record. We note that during the assessment proceedings, the Assessing Officer issued notice under section 142(1) of the Act, dated 16.01.2020, which is placed at paper book page no.15, wherein the Assessing Officer has especially asked the assessee, to furnish eligibility criteria of deduction claimed in different sections of Chapter VI-A, especially under section 80P(2)(a)(i) and under section 80P(2)(d) of the Act. The assessing officer, has also asked the assessee to furnish the documentary evidence in support of its claim of deduction under Chapter VI-A. In response to the said notice under section 142(1) of the Act, the assessee has submitted its reply, dated 01.12.2020 (vide paper book page nos. 17 to 21),before the Assessing Page | 22 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
Officer, the relevant part of the assessee`s reply dated 01.12.2020, is reproduced below:
Page | 23 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
Page | 24 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
From the above computation of total income and explanation of the total income submitted by the assessee, before the assessing officer, we find that assessee has shown, interest received from cooperative bank on fixed deposit, as income in profit and loss account, at Rs.18,41,436/-, (Vide assessee`s paper book page No.28), however the assessee has deducted, the said interest of fixed deposit of Rs.18,41,436/-, from its business income, in the computation of total income, (vide assessee`s computation of total income on page No. 25 of the assessee`s paper book),and the amount of Rs.18,41,436/- is show by the assessee, in the computation of total income, Page | 25 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
under the head income from other sources,and claimed the deduction u/s 80P(2)(d) of the Act, at Rs.18,41,436/-. The assessee has also shown, under the head income from other sources, amount of Rs.52,350/-, as dividend received from Co-operative Bank and claimed the deduction u/s 80P(2)(d) of the Act.
24. During the course of hearing, ld Counsel for the assessee, clarified the Bench that assessee, by mistake, wrongly submitted, in the written submission, before the ld. PCIT, as if, the assessee claimed deduction under section 80P(2) (a) (i) of the Act, in respect of amount ofRs.18,41,436/- and Rs.52,350/-, in fact, the assessee has claimed the deduction u/s 80P(2)(d) of the Act, amounting to Rs.18,41,436/- and amounting toRs.52,350/-, respectively, as stated above. Thus, we note that ld. PCIT has exercised his jurisdiction under section 263 of the Act, mainly on the amount of Rs.Rs.18,41,436/-and Rs.52,350/-, as narrated above, andld. PCIT directed the assessing officer to examine the dividend income, if the dividend income is earned by the assessee from Co-operative Bank. Therefore, ld. PCIT directed the assessing officer to disallow the interest and dividend income earned from Co-operative Bank, which, as per ld PCIT, are not eligible for deduction under section 80P(2)(d) of the Act.
25. We note that the assessee's case was selected for limited scrutiny to examine investments, advances, loans, unsecured loans, deduction from total income under Chapter VI-A of the Act. The findings of the Assessing Officer under section 143(3) of the Act,are reproduced below:
"1. The case was selected for Limited Scrutiny assessment under the E- assessment Scheme, 2019 on the following issues:
S. No. Issues
i. Investments/Advances/Loans
ii. Unsecured Loans
iii. Deduction from Total Income under Chapter VI-A
Page | 26
ITA No.126/RJT/2023
Avadh Nagarik Sahakari Mandli Ltd.
The assessee society has filed Return of Income for AY.2018-19 on 13.08.2018, vide acknowledgment no.108456181130818, reflecting Gross Total Income Rs.43,36,723/- and after claiming deduction u/s 80P(2) of the I.T. Act, 1961 Returned income is declared NIL. The same is processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter mentioned Act).
2. Notice u/s 143(2) of the Act issued on 22.09.2019 and thereafter notices u/s 142(1) of the Act along with questionnaire were issued.
3. In response to the notices issued, the assessee society has furnished all the relevant details called for. The same has been perused carefully and found to be in order.
4. In view of the above facts of the case and after considering the details furnished, the total income returned by the assessee is accepted."
26. From the above assessment order, it is vivid with that during the assessment proceedings, the assessing officer issued notice under section 142(1) of the Act, dated 16.11.2020, which is placed at assessee`s paper page No.15, and response to the said notice of 142(1) of the Act, the assessee submitted its reply, dated 01.12.2020, which is placed at paper book page No. 17 to 23. Therefore, no doubt, that during the assessment proceedings, the assessing officer called the details from the assessee to examine the deduction claimed by the assessee, under section 80P(2)(a)(i) of the Act and under section 80P (2) (d) of the Act, hence, details has been called by the assessing officer during the assessment proceedings, and these details were examined by the assessing officer, pertaining to issue raised by the ld PCIT, relating to deduction under section80P (2) (d) of the Act, that is, the solitary issue raised by the ld PCIT, that interest received from Co- operative Banks are not allowed under section 80P(2)(d) of the Act. In this regard, the ld Counsel for the assessee submitted that since during the assessment proceedings, the assessing officer had examined the issue raised by the ld PCIT and has taken the plausible view, therefore, order passed by the assessing officer, is neither erroneous nor prejudicial to the interest of Page | 27 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
revenue, hence order passed by the ld PCIT, under section 263 of the Act, may be quashed.
27. However, we do not agree with the arguments advanced by the ld. Counsel for the assessee, to the effect that the assessing officer has examined the issue raised by the ld PCIT, by calling the details from the assessee, and has taken the plausible view. We note that just to call the details by issuing notice under section 142(1) of the Act and in response to that notice submission made by the assessee and assessing officer, having examined the details filed by the assessee, took the plausible view, is not sufficient. Over and above, such exercise narrated above, the order passed by the assessing officer, should be sustainable in the eye of law.
28. Hence, we have to examine, whether order passed by the assessing officer, in the assessee's case under consideration is sustainable in the eye law.Therefore, we find merit in the submissions of the ld. D.R. for the Revenue to the effect that by way of issuing notice u/s. 142(1) of the Act and reply of the assessee against the notice u/s 142(1) of the Act, and then examination by the assessing and taking the plausible view, is not sufficient. The ld. D.R. for the Revenue stated that in the assessee's case under consideration, assessing officer cannot take a plausible view specially when there is a judgement of Hon'ble Gujarat High Court in the case of Katlary Karyana Merchant Sahkari Sarafi Mandali Ltd. (2022) 140 taxmann.com 602 (Gujarat), wherein it was held that interest received from co-operative banks and other banks are not eligible for deduction u/s. 80P(2)(d) of the Act. The reason being, the assessing officer ignored the judgement of the jurisdictional High Court of Gujarat,in the case of Katlary Karyana (Supra). Therefore, ld. D.R. stated that the order passed by the assessing officer is not sustainable in the eyes of law and hence the ld. PCIT has rightly exercised his jurisdiction as per clause (d) of explanation 2 of section 263 of the Page | 28 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
Act.Therefore, as per ld. DR. for the Revenue the order passed by the assessing officer is erroneous as well as prejudicial to the interest of the Revenue. We note that arguments advanced by the ld. D.R. for the Revenue carries weight and he has rightly stated that order passed by the assessing officer is not sustainable in the eyes of law. We also agree that during the assessment proceedings just to call the details by issuing notice u/s. 142(1) of the Act and in response to that submission of the details by the assessee and then examining the same by assessing officer(AO) and having examined the same, assessing officer takes plausible view, is not sufficient.However, that plausible view should be sustainable in the eyes of law, as there is direct judgement on the issue under consideration by the jurisdictional High Court of Gujarat, in the case of Katlary Karyana (Supra).
29. In order to find the answer of the question that plausible view taken by the assessing officer (AO) should be sustainable in the eye of law, we have to take guidance from the judgement of the Hon`ble Supreme Court, and for that, let us take the guidance of judicial precedents laid down by the Hon'ble SupremeCourt in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer's order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer's order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; then the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the Page | 29 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. "prejudicial to theinterest of the revenue'' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue"unless the view taken by the Assessing Officer is unsustainable in law".
30. Taking note of the aforesaid dictum of law laid down by the Hon'ble Apex Court, let us examine the issue under consideration. We agree with the ld. D.R. for the Revenue that just to collect the details during the assessment proceedings by issuing notice 142(1) of the Act, and furnishing of the details by the assessee, in response to that notice, and then after examination of the issue by AO and then to take a plausible view, by assessing officer is not sufficient, as we have noted that Hon'ble Apex Court in the case of Malavar Industries Ltd. (supra) has clearly pointed out that the view taken by the assessing officer, should be sustainable in the eyes of law. Therefore, in these circumstances, we have to examine whether it was necessary for the assessing officer to accept the ratio laid down by the Hon'ble Jurisdictional High Court in the case of Katlary Karayana (supra), wherein the Hon'ble Court has noted that interest from Co-operative banks and other banks are not eligible for deduction under section 80P(2)(d) of the Act. Since it is the Page | 30 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
judgement of the Jurisdictional High court of Gujarat, therefore, assessing officer should not take a plausible view specially when there is a judgment of jurisdictional High Court.Therefore, we have to examine whether judgement of Hon'ble Jurisdictional Gujarat High Court in the case of Katlary Karayana(supra),is applicable to the assessee's case under consideration or not.
31. We find that in section 80P(2)(d) of the Income Tax Act,1961, there is no special exclusion that interest received from co-operative bank is not eligible for deduction. We have noted that definition of "co-operative society" as mentioned in section 2(19) of the Income Tax Act, 1961 does not make any exclusion about co-operative bank. We note that in order to become a co-operative bank, the first condition is that it should be a co- operative society. Therefore, a co-operative society, later on decides to take license from the Reserve Bank of India to do banking business wherein the Co-operative society may lend the money and borrow the money, and for that purpose, the co-operative society has to take a license from the Reserve Bank of India and after taking license from the Reserve Bank of India said Co-operative society, becomes a co-operative bank also, which wasfirst a co-operative society. We also find that the decision rendered by the Hon'ble Jurisdictional High Court of Gujarat in the case of Katlary Karayana (supra), is in the context of a specific definition mentioned in section 194A of the Act, therefore, the judgement delivered by the Jurisdictional High Court in the case of Katlary Karayana (supra), is in a different context. Besides the judgement of Hon'ble High Court of Gujarat in the case of Katlary Karayana(supra) is in the context of reopening of assessment u/s 147/148 of the Act wherein the Hon'ble Court has examined whether income has escaped assessment or not. Hence, this judgment is not binding precedent on the assessee where there are other direct judgments of the Page | 31 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
Hon'blejurisdictionalGujarat High Court on the 'issue' under consideration, which we are going to discuss in the subsequent paragraphs of this order.
32. We note that the Hon'ble Jurisdictional Gujarat High Court in the case of Sabarkantha District Co-operative Milk Producers Union Ltd. In Tax Appeal No.473 of 2014 dated 16-06-2014 (Guj HC) held that interest received from the co-operative bank is allowable as a deduction u/s.80P(2)(d) of the Act.We also find that there is another judgment of the Hon'ble Gujarat High Court in the case of Surat Vankar Sahakari Sangh Ltd. 421 ITR 134 (Guj HC) wherein the Hon'ble Gujarat High Court held that interest received from co-operative bank is allowable deduction u/s. 80P(2)(d) of the Act. Therefore, we find that the above judgments i.e. in case of Sabarkantha District Co-operative Milk Producers Union Ltd (supra) and in case of Surat Vankar Sahakari Sangh Ltd. (supra), the Hon'ble Jurisdictional High Court clearly held that interest received from Co- operative banks, are allowable as a deduction u/s. 80P(2)(d) of the Act. These two old judgments were not distinguished by the Hon'ble Jurisdictional High court in the case of Katlary Karayana(supra) i.e. the Hon'ble Jurisdictional High Court of Gujarat did not overrule and did not distinguish and reject the earlier judgments delivered by it in case of Sabarkantha District Co-operative Milk Producers Union Ltd (supra) and Surat VankarSahakari Sangh Ltd. (supra), in the case of the latest judgement of Hon'ble Gujarat High Court in the case of KatlaryKarayana (supra). Therefore, the Hon'ble jurisdictional High Court of Gujarat in the case of KatlaryKarayana (supra) has not overruled the ratio decided by it in the earlier judgments namely; (i)Sabarkantha District Co-operative Milk Producers Union Ltd (supra) and, (ii) Surat Vankar Sahakari Sangh Ltd. (supra). Therefore, ratio of these old judgments namely;(i) Sabarkantha District Co-operative Milk Producers Union Ltd (supra) and, (ii) Surat Vankar Sahakari Sangh Ltd. (supra) will still be applicable to the assessee Page | 32 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
under consideration as these judgements never distinguished and never overruled by constituting a larger Bench by the Hon'ble Jurisdictional Gujarat High Court.
33. We also find that the Hon'ble jurisdictional High Court in the case of State Bank of India v. CIT 2016 389 ITR 578 (Guj. HC) has also held that any income by way of interest derived by a Co-operative society from its investment with any other Co-operative bank would be deductible u/s. 80P(2)(d) of the Act.
34. We also find that Hon'ble Gujarat High Court has recently modified the judgement delivered by it in Katlary Karayana (supra) on 26th April, 2024 by removing error in the judgment of Katlary Karayana (supra). The ld DR for the Revenue, informed the Bench that Hon`ble High Court has only removed the word "co-operative" from the reproduction of reasons recorded by the assessing officer. Hence it does not impact on the ratio laid down by the Hon`ble Court. Learned Counsel for the assessee, has also argued before the Bench and submitted written submission that there is no material modification done by the Hon`ble Gujarat High Court in the case of Katlary Karayana (supra).
35. Therefore, we find that the assessing officer has taken the plausible view which is sustainable in the eyes of law i.e. the view taken by the assessing officer is not against the judgment of the Jurisdictional High Court of Gujarat in the case of Katlary Karayana(supra). Because, the assessing officer has taken the plausible view based on the old judgements of the jurisdictional, Hon`ble High Court of Gujarat, namely; (i) Sabarkantha District Co-operative Milk Producers Union Ltd (supra) and, (ii) Surat Vankar Sahakari Sangh Ltd. (supra) and the ratio of these old judgments namely; (i) Sabarkantha District Co- operative Milk Producers Union Ltd (supra) and, (ii) Surat Vankar Page | 33 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
Sahakari Sangh Ltd. (supra) would still be applicable to the assessee under consideration, as these judgements never distinguished and never overruled by constituting a larger Bench by the Hon'ble Jurisdictional Gujarat High Court.Hence, we find that the assessing officer has definitely taken a plausible view after examination of the issue under consideration which cannot be subject to revision by the ld. PCIT u/s. 263 of the Act because the view taken by the assessing officer is sustainable in law. Therefore, the argument advanced by the ld. D.R. for the Revenue, to the effect that assessing officer has failed to make compliance of the judgment of Hon'ble Jurisdictional High Court of Gujarat in the case of Katlary Karayana(supra), is not acceptable, as the assessing officer, has taken the view which is sustainable in the eye of law, based on the old judgements of the jurisdictional High Court of Gujarat, which are direct judgements on the issue under consideration, hence, there is no violation of judicial discipline by the assessing officer.
36. Now, we have to deal other arguments of the ld. D.R. for the revenue one by one, are as follows:
(i) The ld. D.R. for the Revenue argued that recently the Jurisdictional Tribunal, Rajkot in the case of Lodhika Seva Sahakari Mandali vs. PCIT, in ITA No. 184/Rjt/2022 for assessment year 2017-18 vide order dated 5th April, 2014 wherein the Jurisdictional Co-ordinate Bench of Rajkot has considered the judgement of Hon'ble Gujarat High Court in the case of Katlary Karayana (supra) and adjudicate the issue in favour of the assessee.
In this context, we state that the decision of the Co-ordinate Bench of Rajkot in the case of Lodhika Seva Sahakari Mandali (supra), no doubt, it is against the assessee and in favour of the Revenue, however, we note that it is not a speaking order. We find that the Co-ordinate Bench, in Lodhika Seva Sahakari Mandali (supra) did not narrate the facts properly and the facts Page | 34 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
narrated in Lodhika Seva Sahakari Mandali (supra) are not similar to the facts as that of the assessee under consideration. We also find that in the decision of the Co-ordinate Bench in case of Lodhika Seva Sahakari Mandali (supra), there was no assistance from the A.R. of the assessee, as this order was heard by the Co-ordinate Bench ex parte and there is no representation by the A.R. of the assessee, therefore, the Bench was not informed about the correct ratio laid down by the Hon'ble Jurisdictional High Court of Gujarat in the case of Katlary Karayana (supra). The adjudication was done by the Co-ordinate Bench, based on written submission of assessee. Therefore, the judgment of the Co-ordinate Bench in the case of Lodhika Seva Sahakari Mandali (supra) is distinguishable on these facts, hence we do not accept the ratio laid down in the said decision.
(ii) The second argument made by Ld. CIT-DR that one has to follow the judicial discipline and judgment of the Jurisdictional High Court should be given importance and it should be followed invariably, for that, the ld. D.R. for the Revenue relied on the judgment of Hon'ble Bombay High Court in the case of CIT vs. Thane Electricity Supply Ltd.(1994) 206 ITR 727. In this context, we state that assessing officer has thoroughly followed the judicial discipline, as we have explained above that the judgment of the Hon'ble Jurisdictional High Court of Gujarat in the case of Katlary Karayana (supra) does not apply to the assessee under consideration and therefore the view taken by the assessing officer is plausible view and sustainable in law.Therefore, in fact, the assessing officer has followed the judicial discipline as mentioned in the judgement of Thane Electricity Supply Ltd. (supra), therefore, the plea raised by the ld. D.R. for the Revenue is hereby rejected.
(iii) The third argument advanced by Ld. CIT-DR for the Revenue is that assessing officer, no doubt, issued the notice u/s. 142(1) of the Act to Page | 35 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
conduct inquiry and assessee has submitted the reply in response to that notice, however, the assessing officer has not applied his mind that deduction u/s 80P(2)(d) of the Act is not available in respect of interest received from co-operative bank. In this context, we state that assessing officer after taking the details and evidences from the assessee, has examined thoroughly and taken a plausible view that deduction u/s. 80P(2)(d) of the Act is available to the assessee under consideration in view of the old decisions of the Hon'ble Gujarat High Court in the case of Sabarkantha District Co-operative Milk Producers Union Ltd (supra) and in the case of Surat Vankar Sahakari Sangh Ltd. (supra), as these judgments were not overruled by the Hon'ble Gujarat High Court by constituting larger Bench and not distinguished in the latest judgment in the case of Katlary Karayana(supra).
(iv) The fourth argument of Ld. CIT-DR is that Hon'ble Gujarat High Court in the case of Katlary Karayana (supra) has followed the judgment of Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd., 108 Taxman 282 (SC) which clearly states that co-operative banks are not species of genus of co-operative society. In this context, we note that the judgment of Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd(supra) is in the context of where the assessee retained sale proceeds of members whose produce was marketed by it and since funds created by such retention were not required immediately for business purpose, it invested same in specified securities and earned interest thereon. Therefore, interest earned by assessee would come in category of 'Income from other sources' and taxable under section 56 of the Act and would not qualify for deduction as business income under section 80P(2)(a)(i) of the Act. Therefore, the above judgement, of Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd (supra) does not relate to section 80P (2) (d) of the Act, rather it relates to section 80P(2)(a)(i) of the Act, Page | 36 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
hence, does not apply to the assessee under consideration.Therefore,we find that the above decision in the case of Totgars Co-operative Sale Society Ltd(supra) is in the context of Section 80P(2)(a)(i) of the Act and is distinguishable and has been distinguished by lower courts in many judgements which are reproduced below:
(a) Peroorkada Service Co-operative Bank Ltd. (2022) 442 ITR 141 (Kerala HC)
(b) Totagars Co-operative Sale Society (2017) 392 ITR 74 (Karnataka HC)
(c) Vavveru Co-operative Rural Bank Ltd. (2017) 88 taxmann.com 728 (Andhra Pradesh and Telangana HC)
(d) State Bank of India vs Commissioner of Income-tax (2016) 389 ITR 578 (Guj. HC);
(e) The Uttar Gujarat Uma Co-op. Credit Society Ltd. in ITA Nos. 1670, 1671/A/2018 dated 28-02-2019 (Ahmedabad Trib.)
(v) The fifth argument advanced by Ld. CIT-DR, is that the Co-ordinate Bench of ITAT, Rajkot, (Tribunal) has not considered the ratio of the Hon'ble jurisdictional High Court in the case of Katlery Karyana (supra), in the following recent judgments of ITAT, Rajkot, which are reproduced below:
(i) Kutch District Co-operative Milk Producers Union Ltd., 159 taxmann.com 347, order dated 29.01.2024
(ii) Rajkot Jilla Sahakari Kharid Vechan Sangh Limited, in ITA No.49/Rjt/2022, order dated 09.208.2023
(iii) Shree Keshav Co-operative Credit Society Ltd., in ITA No.26/Rjt/2022, order dated 31.05.2022 The ld DR pointed out that in accordance with the decision of Hon`ble Supreme Court in the case of ACIT, Rajkot Vs. Saurashtra Kutch Stock Exchange Ltd, dated 15/09/2008, (2008) 173 Taxman 322 (SC), wherein amongst others, it was held that non-adherence to orders of Jurisdictional High Court and Supreme Court is a mistake apparent on record, therefore, Page | 37 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
the above orders of the jurisdictional Tribunal require rectification under section 254 (2) of the Act.In this regard, we find that the Co-ordinate Bench of Rajkot, in the above decisions, has clearly considered the oldjudgments rendered by the Hon'ble Jurisdictional, Gujarat High Court, namely, (i) Surat Vandar Sahakari Sangh Ltd(Supra) and (ii) Sabarkantha District Co- operative Milk Producers' Union Ltd. (supra), these two old judgements, were not overruled and distinguished by the jurisdictional High Court of Gujarat, in the latest judgement of Hon`ble Gujarat High Court in the case of Katlary Karayana(supra), therefore, ratio of these two old judgements are equally applicable to the assessee under consideration. Moreover, the latest judgement of Hon`ble Gujarat High Court, in the case of Katlary Karayana (supra) is in the context of section 194A of the Act and section 147 of the Act, wherein the Hon'ble High Court has examined whether income has escaped assessment or not. Therefore, we note that above decisions of the Co-ordinate Bench, are speaking and reasoned decisions and hence, do not require rectification under section 254(2) of the Act, as judicial discipline has been observed in these above decisions, by following the old jurisdictional, Gujarat High Court judgements(supra), which are direct on the issue under consideration, hence we reject the plea taken by ld DR for the revenue.
37. We also state that the Co-ordinate Bench of ITAT, Banglore and Co- ordinate Bench of ITAT, Jaipur, have also followed the old judgments of the Hon'ble Gujarat High Court, as noted above, and held that interest received from Cooperative Banks are allowable deduction under section 80P(2) (d) of the Act:
(i) Totagars Co-operative Sale Society Ltd., in ITA No.376 to 379/Bang/2023, dated 18.07.2023
(ii) Jhunjhunu KaryaVikryaSahakari Samiti Ltd., ITA No.150/Jp/2022 Page | 38 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
We also note that the other Hon'ble High Courts, in the following cases, have upheld the same view, as the view taken by the Hon'ble Gujarat High Court in the old Judgments (supra), that interest received from Cooperative Banks are allowable deduction under section 80P(2) (d) of the Act:
(i) Totagars Co-operative Sale, 79 taxmann.com 169 (Karnataka)
(ii) Thorapadi Urban Co-operative Credit Society Ltd., 156 taxmann.com 419 (Mad.)
38. Final word:
Thus, we note that the judgement of the Hon'ble Supreme Court in the case of Tatgars Society Ltd. (supra) does not apply to the assessee under consideration, as this judgment is in the context of Section 80P(2)(a)(i) of the Act. We find that the assessing officer, during the assessment proceedings has followed the judgment of the Hon'ble Jurisdictional Gujarat High Court in the case of Sabarkantha District Co-operative Milk Producers Union Ltd (supra) and in the case of Surat Vankar Sahakari Sangh Ltd, (supra) has taken a plausible view, which is sustainable in the eye, law. The assessing officer has not considered the judgement of Hon'ble Gujarat High Court in the Katlary Karayana (supra), as the ratio laid down by the Hon'ble Gujarat High Court in the case of Katlary Karayana(supra)is not applicable to the assessee, under consideration and hence there is no violation of the principles laid down by the Hon'ble Supreme Court in the case of Saurastra Kutch Stock Exchange Ltd. (supra).We are of the view that the judgement of the Hon'ble Jurisdictional High Court of Gujarat in the case of Katlary Karayana(supra), is not binding on the assessing officer, as we have stated that this judgement is in different context of section 194A of the Act and specially it is in the context of income escaped assessment u/s 147 of the Act, therefore, the ratio of the judgement does not apply to the assessee, Page | 39 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
under consideration. So far as the judicial discipline is concerned, there is no violation of the judicial discipline, by the assessing officer. Considering the above facts and circumstances, we state that during the assessment proceedings, the assessing officer made enough inquiry by issuing notice u/s 142(1) of the Act and in response to the notice of the assessing officer, the assessee submitted details, documents and explanation before the assessing officer and the assessing officer having examined the details and documents of the assessee, has taken the plausible view, which is sustainable in the eyes of law, as we have explained above. The Ld. PCIT while exercising the jurisdiction u/s 263 of the Act, also referred Clause (d) of Explanation - 2 of Section 263 of the Act wherein it is stated that if the order has not been passed by the Assessing Officer in accordance with any decision which is prejudicial to the assessee and rendered by the jurisdictional High Court or Supreme Court in the case of assessee or any other person.However, as we have explained above that the said judgment delivered by the Hon'ble jurisdictional Gujarat High Court in the case of Katlery Karayana (supra), does not apply to the assessee under consideration, hence Clause (d) of Explanation - 2 of Section 263 of the Act, does not apply to the assessee. Therefore, considering these facts, the Assessing Officer has taken a plausible view which is sustainable in the eye of law, as per the ratio laid down by the Hon'ble Apex Court in the case of Malabar Industries (supra).Since the order of the Assessing Officer cannot be held to be erroneous as well as prejudicial to the interest of the revenue, in the facts and circumstances, narrated above, the usurpation of jurisdiction exercising revisional jurisdiction by the Principal CIT is ''null'' in the eyes of law and, therefore, we are inclined to quash the very assumption of jurisdiction to invoke revisional jurisdiction u/s 263 by the Principal CIT. Therefore, we quash the order of the Principal CIT dated 10.03.2023, being ab initio void.
Page | 40 ITA No.126/RJT/2023 Avadh Nagarik Sahakari Mandli Ltd.
39. In the result, appeal filed by the assessee is allowed.
Order is pronounced in the open court on 31/07/2024
Sd/- Sd/-
(DINESH MOHAN SINHA) (Dr. A.L. SAINI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Rajkot
दनांक/ Date: 31/07/2024
Copy of the Order forwarded to
1. The Assessee
2. The Respondent
3. The CIT(A)
4. Pr. CIT
5. DR/AR, ITAT, Rajkot
6. Guard File
By Order
// TRUE COPY//
Assistant Registrar/Sr. PS/PS
ITAT, Rajkot
Page | 41