Chhattisgarh State Minor Forest ... vs Pr. Commissioner Of Income Tax-1, ... on 9 May, 2024

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Income Tax Appellate Tribunal - Raipur

Chhattisgarh State Minor Forest ... vs Pr. Commissioner Of Income Tax-1, ... on 9 May, 2024

आयकर अपील य अ धकरण यायपीठ रायपुर म।
IN THE INCOME TAX APPELLATE TRIBUNAL,
RAIPUR BENCH, RAIPUR

BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER
AND
SHRI ARUN KHODPIA, ACCOUNTANT MEMBER

आयकर अपील सं. / ITA Nos.47, 48 & 49/RPR/2021
नधारण वष / Assessment Years : 2015-16, 2016-17 & 2017-18

Chhattisgarh State Minor Forest Produce
(Trading and Development) Co-operative
Federation Limited
Van Dhan Bhawan, Sector-24, Nava Raipur,
Atal Nagar, Raipur (C.G.)-492 015
PAN: AABAC5137E

.......अपीलाथ / Appellant

बनाम / V/s.
The Pr. Commissioner of Income Tax-1,
Raipur (C.G.)

...... यथ / Respondent

आयकर अपील सं. / ITA No.152/RPR/2023
नधारण वष / Assessment Year : 2018-19

Chhattisgarh State Minor Forest Produce
(Trading and Development) Co-operative
Federation Limited
Van Dhan Bhawan, Sector-24, Nava Raipur,
Atal Nagar, Raipur (C.G.)-492 015
PAN : AABAC5137E

.......अपीलाथ / Appellant
बनाम / V/s.
2
Chhattisgarh State Minor Forest Produce (Trading and Development)
Cooperative Federation Ltd.
ITA Nos. 47 to 49/RPR/2021
ITA No.152/RPR/2023

The Pr. Commissioner of Income Tax-1,
Raipur (C.G.)

...... यथ / Respondent

Assessee by : Dr. Rakesh Gupta, Advocate a/w.
S/sshri R. B Doshi, Rajesh Chawda,
Saksham Agrawal & Deepak Batra, CAs

Revenue by : Shri Debashis Lahiri, CIT-DR

सुनवाई क तार ख / Date of Hearing : 20.02.2024
घोषणा क तार ख / Date of Pronouncement : 09.05.2024

आदे श / ORDER

PER RAVISH SOOD, JM:

The captioned appeals filed by the assessee, a co-operative society engaged in trading and marketing of minor forest produce, are directed against the orders passed u/s.263 of the Income Tax Act, 1961 (for short 'the Act'), dated 30.03.2021 & 29.03.2023 by the Pr. Commissioner of Income-Tax, Raipur-1 (for short "Pr. CIT"), which in turn arises from the respective orders passed by the A.O under Sec.143(3) of the Income-tax Act, 1961 (in short 'the Act') dated 20.12.2017, 28.12.2018, 23.12.2019 and 27.02.2021 for the assessment years 2015-16, 2016- 17, 2017-18 and 2018-19, respectively. As the issues involved in the captioned appeals are inextricably interlinked and interwoven, therefore, the same are being taken up and disposed off by way of a consolidated order. 3

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023

2. We shall first take up the appeal filed by the assessee society in ITA No.48/RPR/2021 for assessment year 2016-17 and the said order shall mutatis- mutandis apply to the connected issues involved in the remaining appeals. The assessee society has assailed the impugned order passed by the Pr. CIT-1, Raipur u/s. 263 of the Act dated 30.03.2021 on the following grounds of appeal:

"1. On the facts and circumstances of the case, the learned Principal commissioner of Income Tax, Raipur-1 has erred in holding that no enquiry was conducted and no application of mind applied by the learned assessing officer on the issues of claim of deduction under section 80P(2)(d) and verification of expenditure.

2. On the facts and circumstances of the case, the learned Principal Commissioner of Income Tax, Raipur-1 has erred in holding that no enquiry was conducted and no application of mind was done by the learned assessing officer on the issues of claim of deduction under section 80P(2)(d) and verification of expenditure. The learned PCIT has not pointed out a single instance for holding non application of mind by the AO.

3. The learned PCIT has passed a non-speaking order for rejecting the submissions of the assessee that its income from agency business is confined to Rs 1/00 per annum through a statutory notification. Hence on the facts and circumstances of the case, the learned Principal Commissioner of Income Tax, Raipur-1 has erred in holding that order passed under section 143(3) of the Act is erroneous in so far as it is prejudicial to the interest of revenue."

Also, the assessee has raised before us additional grounds of appeal which reads as under:

"1. That having regard to the facts and circumstances of the case, Ld. PCIT has erred in law and on facts in assuming jurisdiction u/s. 263 of the Income Tax Act, 1961 and has erred in holding the assessment order u/s. 143(3) as erroneous and prejudicial to the interest of the revenue, more so when:

a) Notice u/s. 263 is prompted by proposal/reason recorded from the Ld. A O himself.

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023

b) Notice u/s. 263 is substantially copied from the proposal/reason recorded for revision forwarded by Ld. A O.

c) The assessment order was passed after making due inquiries.

d) No inquiry was conducted by Ld. PCIT.

e) Past years assessments u/s.143(3) accepting the nature of income and activity of the assessee were available to Ld. AO/Ld. PCIT.

f) Ld. AO has taken conscious decision on the issues and in any case the issues were debatable.

2. That in any case and in any view of the matter, assumption of jurisdiction u/s.263 are bad in law and against the facts and circumstances of the case."

3. Succinctly stated, the assessee society, which is engaged in the business of trading and marketing of minor forest produce had filed its original return of income for A.Y.2016-17 on 17.10.2016 declaring its income at Rs.Nil. Subsequently, the case of the assessee society was selected for scrutiny assessment u/s.143(2) of the Act.

4. Original assessment was, thereafter, framed by the A.O u/s.143(3) of the Act, dated 28.12.2018, wherein the returned income of the assessee society was accepted as such.

5. The Pr. CIT-1, Raipur after culmination of the assessment proceedings called for the assessment record. The Pr. CIT after perusing the assessment record was of a firm conviction that the assessment order passed by the A.O u/s. 143(3), dated 28.12.2018 was erroneous in so far it was prejudicial to the interest of the revenue on multiple issues, which for the sake of convenience are culled out as under:

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023

(i) The Pr. CIT observed that a perusal of the record of the assessee society for the subject year revealed that it had earned interest income as under:

            Interest earned on FDR                        Rs.35,89,32,299/-


            Interest earned on Savings Account             Rs.1,23,00,968/-


            Interest earned on record from other                Rs.65,370/-
            sources

            Interest earned on FFD A/c.                    Rs.4,39,52,970/-


            Interest earned on Group Gravity a/c.            Rs.31,32,657/-


            Interested earned on group leave                 Rs.23,40,819/-
            encashment and scheme a/c.

            Interest earned on Federation seed             Rs.6,02,40,190/-
            capital (Apex Bank)

            Total                                         Rs.48,09,65,273/-

It was observed by him that the interest income of Rs.6,02,40,190/- earned by the assessee society on its seed capital was claimed as a deduction u/s. 80P(2)(d) of the Act. It was further observed by him that all other interest income (supra) except for that earned on the seed capital were adjusted against the various expenses that were incurred for trading and marketing of the forest produce, which thus, had substantially reduced the income side. The Pr. CIT was of the view that the assessee's claim for adjustment of business expenses as against its income from other sources i.e. interest income was not as per the mandate of Sections 57 & 58 6 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 of the Act as only those expenses incurred wholly for earning the interest income were allowable as a deduction. Also, it was observed by the Pr. CIT that the assessee society had deliberately jumbled up the interest income earned and profit from trading business in its agency's profit and loss account. The Pr. CIT considering the fact that the expenditure incurred by the assessee society for its business activities was substantially higher than those related to interest income, thus, was of the view that the assessee society had manipulated its accounts to lower its taxable income and evade taxes;

(ii) Though the "Profit and Loss account" of the assessee society revealed certain amounts shown as "Payable to society", viz. (a) Incentive wages:

*Rs.1,20,59,57,416/-; (b) to sale purchase & processing of Non-nationalized MFP :

*Rs.22,61,17,016/-; and (c) to revolving fund : *Rs.7,53,72,338/-, but the A.O while framing the assessment had failed to verify the veracity of the said payable expenses, i.e. as to whether or not these were duly paid in the subsequent year.

Also, the Pr. CIT observed that the reason for recurrence of these payable expenses was not enquired into by the A.O while framing the assessment;

* Note: Though the Pr. CIT in his Show cause Notice (SCN) dated 11.03.2021, had at Para 2.2 wrongly mentioned the aforesaid figures, which in fact pertained to A.Y.2015-16, but thereafter at Para-3 of the SCN had corrected his mistake and properly referred to the figures for the subject year, i.e. A.Y.2016-17, which reads as under:

"Similarly, the debit in the Profit & Loss account under the head "payable to society" consisting of Incentive wages of Rs.1,34,33,10,169/-, to sale purchase a& processing of Non-nationalized MFP of Rs.25,18,70,657/-, to revolving fund of Rs.8,39,56,885/-" as discussed in Para 2.2 has also 7 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 not been enquired further during the assessment proceedings. Hence, this amount needs further verification."

(iii) The Pr. CIT on a perusal of the "balance sheet" of the assessee society, observed that the assessee society was having FDRs with certain banks/cooperative banks. It was observed by him that though the assessee society had claimed deduction of the interest on seed capital u/s. 80P(2)(d) of the Act but had not included the interest income accrued on the balance FDRs in its computation of income for the subject year. Accordingly, the Pr. CIT was of the view that though the interest receipts aggregating to Rs.2,43,35,41,000/- received by the assessee society from various banks would have formed part of its total income but no details regarding the said issue were called for by the A.O while framing the assessment; AND

(iv) The income of Rs.2,43,35,41,000/- and expenses of Rs.1,60,35,76,711/-(sic) disclosed in the profit and loss account of the assessee society required further verification.

6. Accordingly, the Pr. CIT based on his aforesaid deliberations was of a firm conviction that the assessment order passed by the A.O was erroneous in so far it was prejudicial to the interest of the revenue. The Pr. CIT issued a "Show Cause Notice" (SCN), dated 11.03.2021 and called upon the assessee society to put forth an explanation as to why the order passed by the A.O u/s. 143(3) r.w.s. 147 of the Act (sic), dated 28.12.2018 may not be revised in exercise of the powers vested 8 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 with him u/s. 263 of the Act. For the sake of clarity, the SCN dated 11.03.2021 issued by the Pr. CIT is culled out as under:

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 10 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 11 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 12 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 13 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 14 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023

7. As is discernible from the order passed by the Pr. CIT u/s. 263 of the Act dated 30.03.2021 the assessee society had objected to the validity of the jurisdiction that was assumed by him u/s. 263 of the Act. The assessee society also submitted its reply regarding the specific issues on which the assessment order was sought to be revised. The assessee society vide its reply tried to impress upon the Pr. CIT that the order passed by the A.O u/s. 143(3) of the Act dated 28.12.2018 was not amenable for revision. For the sake of clarity, the aforesaid reply of the assessee society as had been considered and culled out by the Pr. CIT in his order passed u/s. 263 of the Act dated 30.03.2021 is reproduced as under:

"We are in receipt of above referred show cause notice proposing revision proceedings u/s 263 for Assessment year 2016-17 referring the following matter as emanating from the assessment order passed in the case of the assessee u/s. 143(3) by the learned Assistant Commissioner of Income Tax (AO) Raipur, vide order dated 28.12.2018.

The time period allowed to us submit our reply on such an exhaustive note is very short. The time frame allowed does not commensurate to the basic need of natural justice, particularly when the entire area is getting caught in the grip of another wave of Pandemic Covidl9, so much so that our Managing Director has been tested positive yesterday and is presently under isolation. The life and working during Pandemic Covid 19 is full of uncertainties due to frequent curfew, lock down, isolation, building sealing, sanitization and other measures taken by the authorities to combat its impact.

Notwithstanding the above constraints, but with a view to cooperate with the tax administration we are submitting our reply. We appreciate that amidst the Pandemic Covid 19 the tax administration has been working for nation building and in spite of all constraints, has been proactive in its endeavor.

1. Background of Assessee Federation:

1. Origin and object :

In the state of Chhattisgarh around 44% of the area is covered by dense forest. In the forest area there are many forest produce gets grown which are collected by the tribal and villagers residing in such area. It is 15 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 estimated that approximately fourteen lakhs families are getting their livelihood from collection of the forest produce which are grown in the forest area of Chhattisgarh. These persons do not have management bandwidth to get proper value of forest produce collected by them and in order to get them the monetary benefit of the forest produce collected by them; the State Government initiated a structure of co-operative movement so that entire benefit of the forest produce is passed on the person collecting it from the forest.

In earlier regime forest used to be allotted by the State Government, to private Contractors through auction. State Government used to earn auction money from such contractors These contractors were free to collect the forest produce from the jungle allotted to them. This method was not giving the benefit of forest produce to the tribal people/ villagers who were actually collecting such forest produce. On the contrary the benefit was getting passed on to the private contractors. It is a well known and acknowledged fact that tribal and villager residing in and around forest should get the benefit of the forest produce.

Thus in order to provide proper remuneration to tribal and villagers engaged in collection of minor forest produce, through a sustainable model the assessee federation was incorporated under the *visions of Chhattisgarh Sahkari Society Adhiniyam 1960 read together with Chhattisgarh Sahkari Society Rules 1962. As per the provision of section 47K of Chhattisgarh Sahkari Society Act, 1960, the assessee federation is the apex body working through 31 Districts Cooperative Society and 901 working Primary Forest Cooperative Societies.

The mandate to the federation (assessee) is given by the State Government, Forest Environment and Cultural Department vide order dated 23/02/2001 bearing no.454/2001. A copy of the said order is attached herewith for your ready reference. (annexure "A"). A copy of this order was also submitted during assessment proceedings and is well referred during the assessment proceedings.

It can be seen that the order is very clear and it spells out the role of federation (assessee) is to act as an agency to facilitate collection, storage, processing and disposal of specified forest produce in the state of Chhattisgarh. In order to carry out this activity the assessee is entitled to its remuneration of Rs. 1 (Rupees one) Per annum. This goes to show that the assessee is not supposed to have any other income other than the nominal amount of Rs.1 to be taken as consideration for having appointed as agency under the provisions of Chhattisgarh Vanopaj (Vypar Viniyam) Adhinayam 1964 read with section 4 of the said Act. Thus the role and object of the assessee Federation is to act as a coordinator, whereby the collection of the major forest produce is done and after the collection its storage and disposal is arranged in a 16 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 transparent manner to maximize the return to the tribals and villagers who have been engaged in collection of such forest produce.

1. Organization and working structure The villagers and tribal persons, being member of Primary Cooperative Societies,-engaged in collection of the forest produce are the real owners of such specified forest produce. The Primary Cooperative Societies have been constituted by its members who are local villagers/ tribal's of the area. These members elect their Board of Directors. There after the primary cooperative societies in turn select the director for the District Cooperative Union. Thereafter the District Cooperative Union elects and selects the board of directors of the assessee Federation. Thus so far as the assessee federation is concerned, all its agency related activities are devoted towards the mandate received by the State Government to act for the betterment of villagers and tribal(s). Thus there is a three tier structure as under:

CH RAJYA LAGHU VANOPAJ (TRADING AND DEVELOPMENT) VYPAR AND VIKAS SAHKARI SANGH MARYADIT (TOP SOCIETY) ↑ JILA VANOPAJ SAHKARI SANGH MARYADIT (DISTRICT LEVEL -31 SOCIETIES) ↑ PRATHMIK VANOPAJ SAHKARI SAMITI MARYADIT (PRATHMIK -901 SOCIETIES)

1. Upfront prayer of the Assessee federation :

1. The assessee Federation has its own seed capital and the same is deposited with a Cooperative bank.

2. Interest earned on the seed capital forms part of the income portion of the assessee federation.

3. Under the provisions of section 80P (2) of the Income Tax Act such interest is eligible for deduction and accordingly it was claimed by the assessee federation.

4. The case of the assessee Federation for Assessment year 2016-17 was selected for Complete Scrutiny Assessment vide notice dated 05.07.2017 under section 143(2) of the Income Tax Act. During the course of assessment proceedings complete books of accounts including detailed FDR statements, Tax Audit report, evidence for claiming 17 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 deduction, bye --laws of the Society along with other documents/information as required by the learned assessing officer were duly produced by the assessee. After complete scrutiny of the books of accounts the learned assessing officer specifically raised query on interest income earned. The assessee in response to the query raised by the learned Assessing officer duly submitted its reply on 24.12.2018 and 26.12.2018 respectively. The authorized representative of the assessee also appeared before the learned assessing officer to explain the bye- laws of the Federation and accounting treatment followed by the Federation. After considering the reply the returned income was accepted by the AO in the assessment order passed on 28.12.2018.Copy of replies submitted on 24.12.2018 and 26.12.2018 is attached herewith for your honor's ready reference. Annexure "B "

It can be seen that interest income and FDRs were completely examined by the learned AO during the assessment proceedings and after due examination and application of mind the order u/s 143(3) was passed. Therefore invoking provisions of section 263 on the vague ground that the order is erroneous and prejudicial to the interest of revenue without any material on record is not justified.

1. Further Submissions: With respect to notice under section 263 of Income Tax Act bearing number ITBA/REV/F/REV1/2020-21/ 1031410138(1) dated 11/03/2001, we further submit as under:

1. It can be seen from the plain reading of the notice itself that it has been drafted with an intent of preconceived notion by ignoring the facts on record, so much so that in the haste of sending notice, the content of notice are far away from reality, not based on facts and are grossly in accurate. This is demonstrated from our following submissions.

1. It is respectfully submitted that any Assessment order by Assessing officer, fitting into the criteria of "erroneous" in so far as it is prejudicial to the interest of the revenue is the subject matter of the revisionary power under section 263 of the IT Act.

1. It is respectfully submitted that neither the order of Assessing officer is erroneous nor it is prejudicial to the interest of the revenue.

1. It is further respectfully submitted that notice under section 263 of income tax act is definitely erroneous and this is exhibited by following factual narration:

1. It is mentioned on the first Para of the notice received (Page 1 of 6):

"On examination of your Income Tax records for the above assessment order, I find that the order passed u/s.143(3) r.w.s 147 on 28.12.2017 of the Income Tax Act, 1961 is erroneous in so far as it is prejudicial to the interest of revenue in the following manner."

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 It can be seen that while sending a notice it is mentioned that earlier Assessment order was passed under Section 143(3) read with section

147. This is factually incorrect. There was no proceeding initiated under section 147 against the assessee and record would reflect this submission is factually correct.

1. In Para 4 of the notice received (page 5 of 6) it is mentioned that:

"Hence, there is no application of mind on part of the AO to correctly tax the income of the assessee in the return of income and therefore, the assessment order passed u/s 144 of the Act is erroneous in so far as it is prejudicial to the interest of revenue."

It is submitted that the assessment of the assessee was made under section 143(3) and not under section 144. At the cost of repetition it is stated that impugned assessment was made after thorough verification of all facts, after considering books of accounts and thus it was not "best judgment" assessment as has been alleged in the notice aforesaid. Thus the basic premise for issuing notice under section 263 that the assessment was framed under section 144 is not factually correct. It is thus prayed that as the foundation of the notice itself is faulty the proceedings initiated thereupon are equally faulty and are thus not sustainable.

           Interest earned on FDR                     Rs.35,89,32,299/-
           Interest earned on Savings                  Rs.1,23,00,968/-
           Account
           Interest earned on record                         Rs.65,370/-
           from Other sources
           Interest earned on FFD                       Rs.4,39,52,970/-
           A/c.
           Interest earned on group                       Rs.31,32,657/-
           gravity A/c.
           Interest earned on Group                       Rs.23.40,819/-
           Leave encashment and
           scheme A/c.
           Interest     earned     on                   Rs.6,02,40,190/-
           Federation Seed Capital

On subsequent perusal of the Audit Report of the assessee for the F.Y. 2014-15, it is found that the assessee had earned interest incomes as:

It is respectfully submitted that the above figures are not in respect of financial year 14-15 as mentioned in the notice.

With respect to the above we respectfully submit that the background under which assessee federation is incorporated and was duly disclosed during the assessment complete verification of interest earned was made 19 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 by the learned assessing officer during the assessment proceedings and assessee's reply was found satisfactory by the learned assessing officer. The same is verifiable from the assessment order itself.

The learned assessing officer in the assessment order has clearly mentioned that "The assessee. society (Federation) had been appointed the nodal agency by the Chhattisgarh government vide order dated 23.02.2001, for the purchase of minor forest produce through primary cooperative societies and storage and marketing of forest produce on token commission of Rs. 1/-. The overall object of the Federation is to protect the interest of the tribals and villagers who are engaged in the collection of Tendu patta, Sal seed, Harra, Kullu Gond etc. After considering the submission of the assessee and income declared in the return of income filed for the year under consideration, the returned income of the assessee is found acceptable. Accordingly, income of the assessee, as discussed above, is assessed at Nil."

So far as above interest income is concerned in view of the categorical submission made before the learned assessing officer, during the assessment proceeding itself along with the strength of the supporting documentary evidence i.e. copy of order of the Chhattisgarh State Government dated 23-02-2001, it was explained that only the interest income accruing on seed capital invested by the Federation is the income of the Federation and for all other activities carried out by it although separate accounts are to be maintained by it, though the accounts are in the capacity of Federation being the agency and not for its own. Thus out of the interest income mentioned above in the table, only interest earned on Federation seed capital i.e. Rs.6,02,40,190/- is income of the assessee. This has been duly noted by the learned assessing officer and appropriate deduction under section 80P(2)(d) has been allowed to the assessee.

1. Reply for Para 2.1 (Page 2 of 6):

In this para of the notice it is mentioned that the assessee has claimed deduction under section 80P(2)(d) of the Income Tax Act in respect of Rs.6,02,40,190/- which is the interest earned by the federation on the seed money deposited with the Cooperative Bank. In this regard we bring to your kind attention, the Provisions of above section for your ready reference as under:

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.

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 (2) The sums referred to in sub-section (1) shall be the following, namely

(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;

It can be seen that "any income" is covered for this particular deduction. Hence the point raised in the above para that interest has been adjusted with other expenses is neither factually correct nor legally sustainable as the entire income earned by way of interest from deposits made with any other cooperative society/ bank is covered under the section 80P(2)(d). The assessment has been framed well within the four corners of the law and the deduction has been allowed to the assessee which is legally and factually correct. The same is also verifiable from the books of accounts produced during the course of assessment.

In the notice aforesaid it is mentioned the assessee has deliberately jumbled up interest income earned and profits from trading in its agency profit and loss account. Out of these two types of incomes that earned from interest income is much higher and that from business activity is very minimal. This entire statement is factually incorrect. The assessee federation has prepared separate account in respect of its agency business where the remuneration receivable by it is Re.1 per annum. The account made in respect of own activities conclude income earned by way of interest on seed capital invested with the Cooperative Bank. The interest income has been duly reflected and has been duly assessed. The applicable legally admissible deductions under section 80P(2)(d) has been allowed to the assessee and which does not require any revisiting on the issue.

1. Reply for Para 2.2 (Page 3 of 6):

In this para, again a factually incorrect statement has been made that the veracity of payable expenses has not been verified during the original assessment.

It can be seen that the case was selected for Complete scrutiny under section 143(2). Thereafter the assessing officer has verified complete books of accounts and records maintained by the assessee.

As a result of the complete and full verification of all the liabilities, the assessing officer pointed out query on interest income earned which was replied by the assessee to the satisfaction of the learned assessing officer. Hence the statement that it has not been verified is not factually correct and is not based on any evidence on record.

1. Reply for Para 3 (Page 4 of 6):

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 In this Para it is mentioned that on further analysis of Balance Sheet of the assessee, it is found that the FDR has been received from certain banks other than cooperative then a table has been appended.

In this regard, it is respectfully submitted that "FDR have not been received" rather these are made out of the funds available to the assessee federation from the agency work carried out by it.

It is also respectfully submitted that so far as 80P(2)(d) deduction is concerned, it is not claimed on any of the interest earned on the FDR mentioned in the table mentioned in Para 3 above. The deduction under section 80P(2)(d) has been claimed only in respect of the interest earned on the investment made of the seed capital fund which belongs to the assessee federation.

This amount has been separately deposited into the FDR of a cooperative Bank. Thus it has nothing to do with the table mentioned in para 3 above. Hence it is once again submitted with humbleness that incorrect data has been mentioned in the notice aforesaid.

In this para the starting point is with reference to the FDR and in the end it is mentioned that similarly the debit in profit and loss account of incentive, wages etc. has not been enquired during assessment proceedings. This is also factually incorrect.

The conclusion drawn in this Para is devoid of any merit that the above income and expenses needs further verification. It is respectfully submitted that the authority given under section 263 has to be exercised based on facts and circumstances and essentially where the order passed is erroneous and prejudicial to the interest of the revenue. Thus roving enquiries and merely mentioning of suspicion is outside the scope of section 263. This has also been held in number of judicial pronouncements that the right of revisionary power has to be exercised based on facts and circumstances which are conclusive of "erroneous" and "prejudicial to the interest of revenue".

1. Reply for Para 3 (Page 6 of 6):

"In the above para it is mentioned that: "there is no documentary evidence to satisfactorily explain the nature and source of cash transaction/contract receipts. Consequently there is no proper verification made by A.O. in this case."

In this regard it is most humbly submitted that the above para shows lack of due diligence and preconceived notion while framing the notice. There is no instance of cash receipts or contract receipts in our case as mentioned above. It seems data and information of some other case has 22 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 been referred in our case. It is thus clear that such an ambiguous notice is not at all sustainable in law.

Our submissions in support of the above facts in the light of various, judicial Pronouncements:

The facts as stated above existent in our case are supported by judicial pronouncements in various cases on similar facts and case. The facts and relevant judicial pronouncement are produced below for your honor's kind consideration:

1. It is respectfully submitted that on the points mentioned in the notice u/s 263 an attempt has been made to bring on record that there are two views on the same subject. In this manner a case has been attempted to be made that the order passed by the learned Assessing officer was erroneous and prejudicial.

This is not based on facts and circumstance and further more Hon'ble Supreme Court in the case of Commissioner of Income Tax Vs. Max India Ltd. (2007) 213 CTR 0266, (2007) 295 ITR 0282, (2008) 166 TAXMAN 0188 has clearly held that where there are two views possible and ITO has already taken one view with which the Hon'ble CIT does not agrees it cannot be held to be erroneous order or prejudicial to the interest of the revenue unless the view taken by ITO is unsustainable in law.

In our case the view taken by AO is very much sustainable in law as it is based on facts and circumstances of the case. We have already depicted it in detail that all the material which was available with the learned Assessing officer was clearly establishing that our income from agency work entrusted to us by the State Government is only Rupee 1 per annum.

Therefore our income cannot increase by more than that amount by any stretch of imagination and thus the order of AO is neither erroneous nor prejudicial to the interest of the revenue. We attach herewith a copy of the above decision for your ready reference.

In the above judgement of Hon'ble supreme court following case laws were also followed and impliedly approved :

1. Malabar Industrial Co. Ltd. vs. CIT (2000) 15 CTR (SC) 1: (2000) 243 ITR 83 (SC)

2. Russell Properties (P) Ltd. vs. A. Chowdhury, Addl. CIT (1977) 109 ITR 229 (Cal)

3. CIT vs. Max India Ltd. (2004) 191 CTR (P & H) 23 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023

1. It is respectfully submitted that where the view taken by the assessing officer in accepting books of account was plausible and permissible view, in this scenario the CIT cannot invoke his powers under section 263 of the Income Tax Act. This was also held by Hon'ble Supreme Court of India in case of COMMISSIONER OF INCOME TAX vs. KWALITY STEEL SUPPLIERS COMPLEX Mar 21, 2017 (2017) 98 CCH 0326 ISCC. While delivering the judgment, the Hon'ble Supreme court took into account various other decisions given by it/other judicial authorities. These are detailed in the order, a copy of which is attached herewith.

1. It is respectfully submitted that our case was selected for full-fledged complete scrutiny covering all aspects. The assessment was completed in all respect with full due diligence by the AO. Therefore it is humbly submitted that records are clearly reflecting that the learned AO had applied his mind to the various items appearing in the books of accounts of the assessee.

1. The learned AO had duly scrutinized the assessee's books of accounts. Thus the ingredient required for invoking the jurisdiction under 263 i.e. (a) Erroneous and (b) Prejudicial to the interest of revenue, both are missing in the present proceedings.

1. There is no such foundation on record justifying invocation of exercise of revisionary powers that too suo moto. Thus exercise of revisionary powers in the absence of clear foundation power is impermissible. This is also been held in the judgment given by the HIGH COURT OF MADHYA PRADESH in the case of judgment where on similar fan the COMMISSIONER OF INCOME TAX vs. Ramesh Singh. While delivering the judgment honorable High Court had also relied upon various other and circumstances the Division Bench decision of the Bombay High Court in Commissioner of Income Tax Vs. Gabriel India Limited (1993) 203 ITR 108 (Bombay) had held that the interference in the present case with the assessment order was not justified. The said case was also referred in Commissioner of Income Tax Vs. M/s Associate Food Products Pvt. Limited, Jabalpur, which was decided on 21.11.2005 in which the above judgment of the Bombay High Court was followed and it was held that it is clear as Crystal that before exercise of power under section 263 of the Act, two requisites are imperative to be present. In the absence of such foundation exercise of a suo motu power is impermissible. It should not be presumed that initiation of power under Suo motu revision is merely an administrative act. It is an act of a quasi judicial authority and based on formation of an opinion with regard to existence of adequate material to satisfy that the decision taken by the Assessing Officer is erroneous as well as prejudicial to the interest of the Revenue.

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023

1. It is respectfully submitted that all desired documents and information were submitted to the learned assessing officer during the course of assessment proceedings. The assessment was also not made in undue hurry or without making any verification of the submissions made by the assessee.

1. The assessee Federation is a government agency engaged in facilitating procurement, processing, storage and disposal of forest produce collected by the villagers and tribal living in forest area. The accounts are subject to audit by Chartered Accountants as well as by the government appointed auditor. Keeping similar circumstances in view it was held in the case of COMMISSIONER OF INCOME TAX vs. RATLAM COAL ASH CO. (1987) 65 CTR 0305, 0141, (1987) 34 TAXMAN 0443 by honorable High Court of Madhya Pradesh, CIT was therefore not justified and while holding this, the Hon'ble High court emphasized that the proceeding u/s 263 has not been rightly initiated as the ingredient of order passed by the ITO could not be held to be prejudicial to the interest of the revenue.

1. It is respectfully submitted that the learned A.O. has completed the assessment under discussion after considering the evidence on record and thus the notice under section 263 is not just vague but also is not based on any substance arising out of records. It was held in COMMISSIONER OF INCOME TAX vs. MEHROTRA BROTHERS by Hon'ble High court of Madhya Pradesh (2003) 71 CCH 0144 MPHC that when assessment was completed after considering the evidence on records, the order under section 263 on the vague ground that the ITO did not made proper enquiry was not valid and thus rejected by the Hon'ble High court.

1. It is respectfully submitted that the opinion formed by the learned assessing officer in the assessment order is based on the facts and circumstances and material available on record. It is respectfully submitted that various court of law have already held that Commissioner of Income Tax cannot invoke his revisionary power by forming a different opinion on the same fact. Please refer to judgment given by Hon'ble High court of Madhya Pradesh in the case of COMMISSIONER OF INCOME TAX vs. JAGDISH KALANI (2006) 74 CCH 0126 MPHC

1. It is respectfully submitted that in our case the view taken by the learned assessing officer is well within the four corners of the law and therefore as was held in BHAGYODAYA FRIENDS URBAN CO-OP BANK LTD. vs. PRINCIPAL COMMISSIONER OFINCOME TAX by Hon'ble ITAT NAGPUR in (2016) 48 CCH 0359 Nag Trib that in such a situation exercise of jurisdiction by CIT was not valid. While giving this decision Hon'ble ITAT relied upon the decision of apex court in the case of CIT vs. Max India Ltd. 295 ITR 282. Similar decision has also been 25 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 given by ITAT Nagpur in case of HARIHAR HOUSING AGENCY vs. COMMISSIONER OF INCOME TAX (2015) 45 CCH 0541 Nag Trib.

1. It is respectfully submitted that we had given all detailed explanation and requisite information with respect to various issues during the assessment proceedings. These have been duly examined by the learned AO before completing the assessment and the AO has taken up the matter and the order was passed by him. This cannot be regarded as to erroneous or prejudicial to the interest of revenue in the absence of any further material on record. It was also held by the than jurisdictional Tribunal ITAT Nagpur in the case of INDO LAHARI BIO POWER LTD. vs. ASSISTANT COMMISSIONER OF INCOME TAX.

1. In case of KAILASHCHAND AGRAWAL vs. PRINCIPAL COMMISSIONER OF INCOME TAX (2016) 48 CCH 0361 Nag Trib, ITAT Nagpur held that It is settled law that issue on which two views were possible and AO had adopted one of views, assumption of jurisdiction u/s 263 by CIT was invalid.

1. It is respectfully submitted that there is no material on record that justifies for jurisdiction under section 263 by the CIT. It was held in case of PURANLAL AGRAWAL (HUF) vs. COMMISSIONER OF INCOME TAX that Thus, the CIT acted beyond his jurisdiction in calling such information/report through Director of IT/Addl. Director of IT and the same cannot be termed as "record" within the meaning of s. 263. Copy of all the above judicial pronouncements referred as above is attached herewith for your honor's ready reference. (Annexure "C")

1. Other Judgments Relied upon:

1. The power of the CIT u/s 263 is quasi-judicial in character. Therefore, it is necessary for him to state in what manner he considered that the order of the A.O., was erroneous and prejudicial to the interests of the revenue and what was the basis for such a conclusion (1988), 170 ITR 28 (All.), 112 ITR 445 (P & H), 142 ITR 178 (Pat.).

1. It was decided in Venkatakrishna Rice Co. v. CIT, (1987) 163 ITR 129 (Mad) has been relied on in S.S. Muddanna v. State of Karnataka [(1993) 89 STC 90, 95-96 (Karn) that scope of section 263 The scope of interference under section 263 is not to set aside merely unfavorable orders and bring to tax some more money to the treasury nor is the section meant to get at sheer escapement of revenue which is taken care of by other provisions in the Act.

The prejudice that is contemplated under section 263 is prejudice to the income-tax administration as a whole. Section 263 is to be invoked not as a jurisdictional corrective or as a review of a subordinate's order der in 26 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 exercise of the supervisory power but it is to be invoked and employed only for the purpose of setting right distortions and prejudices to the Revenue which is a unique conception which has to be understood in the context of and in the interest of revenue administration. Such a power cannot in any manner be equated to or regarded as approaching any way in appellate jurisdiction or even the ordinary revisional jurisdiction conferred on the Commissioner under section 264.

1. It was decided in Cf. Bidar SahakarKarkhane Ltd. V. State of Karnataka, (1985) 58 STC 65, 67, (Karn): H. Kenche Gowda v. State of Karnataka, (1988) 174 ITR 389, 393(Karn) that revision vis-a-vis income escaping assessment. The revision power under section 263 cannot be exercised in respect of a matter which falls within the power to assess escaped income. The revising authority, in order words, should not trench upon the powers which are expressly reserved to the Assessing Officer under section 147. The Commissioner, in exercise of its revision jurisdiction, should not ignore such specific power.

1. It was decided in Garden Silk Mills Ltd. V. CIT, (1996) 221 ITR 861, 865, 866-67 (Guj) that no power to ignore binding decisions. In passing an order of revision under section 263, the Commissioner is not empowered to ignore the binding decisions rendered by the Supreme * Court or even by the jurisdictional High Court. Merely because the Department is contemplating to file a special leave petition, the Commissioner cannot refuse to follow or cannot ignore such binding decision when the Court has settled the law in question. In that view of the matter, when the assessing Officer has passed an order in consonance with the law laid down by the binding decision; it cannot to said that the Assessing Officer's order is erroneous so as to entitle the Commissioner to exercise his revision power.

1. It was decided in CIT v. G.M. Mittal Stainless Steel P. Ltd.. (2003) ITR 255, 258 (SC) that if, at the time when the power of revision under section 263 is exercised the decision of the jurisdictional High Court has not been set aside by the Supreme Court or at least has not been appealed from, it is not open to the Commissioner to proceed on the basis that the decision of the High Court is erroneous.

1: It is respectfully submitted that the meaning of 'Erroneous' is that the expressions 'erroneous assessment' and erroneous judgment' have been defined in Black's Law Dictionary, Sixth Edition, page542. According to the definition, 'erroneous' means 'involving error;' deviating from the law'. 'Erroneous assessment' refers to an assessment that deviates from the law and is therefore invalid, and is a defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly, 'erroneous judgment' means 'one rendered according to course and practice of 27 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 court, but contrary to law, upon mistaken view of law, or upon erroneous application of legal principles.'

1. From the aforesaid definitions, it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. When AO makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. Section 263 does not visualize a case of substitution of the judgment of the Commissioner for that of the Assessing Officer, who passed the order, unless the decision is held to be erroneous [CIT v. Gabriel India Ltd., (1993) 203 ITR 108, 114-15 (Bom)]. Also see, Nabha Investments Pvt. Ltd. V. Union of India (2000) 246 ITR 41, 52 (Del).

1. It was decided in CIT v. Barbheta Estate Pvt. Ltd. (2001) 252 ITR 379, 381 (Call). Also see, CIT v. General Magnets Ltd. (2002) 256 ITR 471, 475 (Cal) that the term 'erroneous' can be looked into from the facts and circumstances and the materials which were placed before the Assessing Officer at the time of the assessment. There is no scope under section 263 to reopen an assessment on subsequent event nor any new material [Jai Kumar Kankaria v. CIT, (2001) 251 ITR 707, 710 (Cal]. In that view of the matter, the Tribunal has been held justified in law in holding that the Commissioner was not empowered under section 263 to direct the Assessing Officer not to allow deduction under section 35CCA on the basis of the withdrawal of approval of the payee-society by a subsequence order, which was purported to be given retrospective effect.

1. It was decided in Dawjee Dadabhoy & Co. v. S.P. Jain (1957) 31 ITR 872 (Cal); Add CIT v. Mukur Corporation, (1978) 111 ITR 312 (Guj); CIT v. Gabriel India Ltd., (1993) 203 ITR 108, 115, 116 (Bom); CIT v. Smt. Minalben S. Parikh, (1995] 215 ITR 81, 86-87 (Guj) that prejudicial to the interest of the revenue.- The words "prejudicial to the interests of the revenue" have not been defined, but they must mean that the orders of assessment challenged are such as are not in accordance with law, in consequence where of the lawful revenue due to the State has not been realized or cannot be realized.

1. In other words, the two conditions must be satisfied before the Commissioner can exercise power under section 263, namely, the order of the Assessing Officer must be found to be erroneous and further it must also be found to be prejudicial to the interests of the Revenue. Unless both the conditions are satisfied, the Commissioner does not get jurisdiction to pass an order under section 263 revising the assessment order. It is not necessary that every order which is found erroneous is also prejudicial to the interests of the Revenue [CIT v. Smt. Minalben S. Parikh, (1995) 215 ITR 81,85 (Guj)].

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023

1. Objective consideration of the CIT which is essential should prevail over the subjective consideration. (1983) 142 ITR 778 (Pat.); (1993) 203 ITR 108 (Bom.); (1970) 40 Comp. Cases 918 (SC).

1. The analysis of the judicial pronouncements on the subject leads to an inevitable conclusion that it is necessary for the CIT to state the manner in which the order was prejudicial and the basis for such conclusion. (1978) 112 ITR 445 (P & H).

1. It was decided in CIT v. Mc Dermott international Inc., (2008) 302 ITR 268 (Uttarakhand) that the power under section 263 could not be exercised by the CIT merely on the ground that the order can be prejudicial to the interests of the Revenue. What is required under the section is that the CIT should not only have reason to believe that the order passed by the AO is prejudicial to the interests of the Revenue but also that it is erroneous in law.

1. It was held in CIT v. Trustees of Anupam Charitable Trust, (1987) 167 ITR 129 (Raj) that the error envisaged by section 263 is not one which depends on possibility of guesswork, but it should be actually an error either of fact of law.

1. It was held in CIT v. Goyal Private family specific Trust, (1988) 171 ITR 698,701-02(All), that the orders of the Assessing Officer may be brief and cryptic, but that by itself is not sufficient reason to brand the assessment orders as erroneous and prejudicial to the interests of the Revenue. Writing an order in detail may be a legal requirement, but the order not fulfilling this requirement, cannot be said to be erroneous and pre-judicial to the interests of the Revenue. It is for the Commissioner to point out as to what error was committed by the Assessing Officer in having reached the conclusion that the income of the trust was exempt in its hands and was assessable only in the hands of the beneficiaries. The Commissioner having failed to point out any error, no error can be inferred from the orders of the Assessing Officer for the simple reason that they are bereft of details. If the order is not erroneous, then it cannot be prejudicial to the interests of the Revenue. In the case of the assessee no error has been pointed out in the notice hence the notice is liable to be quashed as there is nothing erroneous and therefore nothing prejudicial to the interests of the revenue.

1. As is evident from the assessment order under consideration, all the requisite information / evidence in support of the return, had been furnished and it was only after satisfying himself that the information furnished, explains the returns of income, that the assessing officer had framed assessment.

1. Thus, the impugned assessment was not made in undue haste. Hence it is neither erroneous nor prejudicial to the revenue. Since the impugned assessment having been completed in accordance with law, cannot be 29 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 regarded as erroneous, let alone be prejudicial to the interest of the revenue. It is axiomatic that any assessment, which is in accordance with law cannot, at the same breath, be regarded as erroneous and if the assessment is erroneous, it cannot be prejudicial to the interests of the revenue or for that matter to the interests of the assessee as well. This is on the principle that nothing can be prejudicial either to the department or to the assessee if it is in accordance with the law. (101 ITR page 1 (Kar.) and 163 ITR 129 (Mad.).

1. The fact that the A.O. obtained all the requisite information and evidences and after satisfying himself about their correctness and completeness only, made the impugned assessment as per law and not in haste. Hence, a legally completed assessment cannot be set-aside u/s.263 to impose upon the A.O. to make enquiries as the CIT desires and to frame assessment by substituting CIT's opinion to that of the A.O.'s satisfaction. This section does not authorise the CIT to put something in the mouth and mind of the A.O. to do a particular assessment on a particular point as the CIT likes or thinks it proper.

1. There is a biblical saying that we do not live by bread alone. Varying this saying, it may be said that the revenue does not live by tax alone. In this sense, therefore the interests of the revenue are not tied up merely with realizing as much revenue as possible, willy nilly, merely looking to the productivity aspects of taxation.

1. In the decision reported in 210 ITR 567 The All. HC observed that the CIT u/s.263 was not authorised to set aside assessment completed u/s 143(1) on the ground that the impugned assessment was completed without proper enquiries, as according the ALL. HC, the ITAT took note of the fact that the enquiry contemplated by the CIT had already been made by the A.O., in WT proceedings and hence the order u/s.263 of the CIT was held as invalid and without jurisdiction, by the ALL. HC. In the case of assessee the impugned assessment was framed as per law after obtaining all the requisite particulars and information and evidences on record and after the A.O. having been satisfied about their correctness and completeness. Hence since the enquiry contemplated in the notice u/s. 263 having already been instituted and completed by the A.O., before framing assessment under section 143(3) of the Act, the present proceedings u/s 263 of the Act in the light of the above facts and judicial analysis, being invalid and without jurisdiction, needs to be dropped.

1. The A.O. had framed the assessment after satisfying himself with respect to the correctness and genuineness of all the information/evidences obtained from the assessee, as per law. Such a legally completed assessment cannot be interfered with by the CIT u/s 263 as the law does not envisage that the CIT can impose upon the A.O. to make an assessment as the CIT likes.

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 Powers of assessment are vested with the A.O. and not with the CIT who simply holds supervisory powers to ensure that the interests of both the parties is not adversely affected.

1. It is respectfully submitted that it was held in Russell Properties Pr. Ltd. v. Addl. CIT, (1977) 109 ITR 229, 245 (Cal) that in order to exercise the power under section 263(1), there must be material for the Commissioner to consider that the order passed by the Assessing Officer was erroneous in so far as it is prejudicial to the interests of the revenue. It is true, unlike section 147/148, for the initiation of proceeding under section 263(1), no conditions precedent are required to be fulfilled but when a statutory authority proceeds to act by virtue of the power conditions precedent are given under a statutory enactment, exercise of which is dependent upon the existence of certain objective factors and when a challenge is thrown that such objective factors are not present and such challenge is made by placing before the court factors which the statutory authority considered to be factors relevant for the exercise of the power, it is open to the court to examine whether such factors are relevant for the exercise of the power.

3. It is respectfully submitted that it was held in Rayan Silk Mills v. CIT, (1996) 221 ITR 155, 161 (Guj) that it is an essential condition of exercise of the power under section 263 that the Commissioner must find that the error which is found in the order of the Officer is prejudicial to the interests of the Revenue. The conclusion of the Commissioner that the order is prejudicial to the interests of the Revenue is not a matter of subjective satisfaction of the Commissioner. That is to be founded on the objective material after assessing the contentions raised by the assessee on opportunity of hearing being afforded to him before passing the order.

4. It is respectfully submitted that it was held in CIT v. Taj Printers, (1989) 178 ITR 384, 385 (All) that where it is found that the basic requirement of assuming jurisdiction under section 263 is missing as the Commissioner did not either set out the points for inquiry nor did he record any reason or refer to any material as to how the order of the Officer was erroneous or prejudicial to the interests of the revenue, the Tribunal was held justified in cancelling the revision order passed by the Commissioner.

1. It is respectfully submitted that it was held in CIT v. Kanda Rice Mills, (1989) 178 ITR 446, 449 (Punj) that similarly, where a reading of the entire order of the Commissioner clearly goes to show that he did not furnish his opinion or consider the cited cases or the argument raised and merely observed that these were the points which deserved consideration and after setting aside the order of the Officer, issued a direction for making assessment afresh, the Tribunal was held justified in vacating the revision order.

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023

1. It is respectfully submitted that it was held in CIT v. General Trade Agencies, (1973) Tax LR 1383 (Cal) that where the show cause notice did not fairly indicate the grounds used by the Commissioner in his order under section 263, it was held that the assessee was deprived of fair opportunity to show cause against proposed action. In such a case, the revision order of the Commissioner cannot be sustained. 1: It is respectfully submitted that the Calcutta High Court was held in Bagsu Devi Bafna v. CIT (1967) 63 ITR 333 (Cal), thus laid down the extent and limitations of the rules of natural justice applicable to section

263.

1. It is respectfully submitted that it was held in Hindu ank Karur Ltd. v. Addl. CIT, (1976) 103 ITR 553 (Mad) that the words "erroneous in so far as they are prejudicial to the interests of the revenue" have to be taken together and require to be widely construed.

2. It is respectfully submitted that it was held in Jai Kumar Kankaria v CIT [2001] 251 ITR 707 (Cal.) that the term 'erroneous' will be looked into from the facts and circumstances and the materials which were placed before the Assessing Officer at the time of assessment. Therefore is no scope under section neither 263 to reopen an assessment on subsequent event nor any new material.

1. It is respectfully submitted that it was held in H.H. Maharaja Rja Pawer Dewas v. CIT [1982] 138 ITR 518 (MP) that the two essential pre- requisites two pre-requisites must be present before the Commissioner can exercise the revisional jurisdiction conferred on him. First is that the order passed by the ITO must erroneous. Second is that the error must be such that it is prejudicial to the interests of the revenue. If the order is erroneous but it is not prejudicial to the interests of the revenue, the Commissioner cannot exercise the revisional jurisdiction under section 263(1).

1. It is respectfully submitted that it was held in Nazir Singh v. CIT [2001] 252 ITR 820 (MP) that that demonstrative criteria for exercising power of revision - before the Commissioner invokes the powers of revision under section 263, he should get satisfied about the following points, viz., prejudicial to the interests of the revenue; (2) Both the two things should be in existence together and not isolated and the case should be indicating the concealment or the evasion of payment of tax of huge amount; and (3) The time-gap between the act of invoking the jurisdiction and passing of the order has to be taken into consideration. There have to be reasons recorded justifying the exercise of power. These are the demonstrative points and not exhaustive criteria. Each and every case has to be treated independently on its facts and circumstances. 32

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023

1. It is respectfully submitted that it was held in Jeewanlal (1929) Ltd. v. Addl. CIT [1977] 108 ITR 407 (Cal.) that suggestion by audit party cannot from the basis of revision where the Commissioner purported to exercise his powers of revision on the basis of a suggestion made by the audit department, the notices issued by him under section 263 were liable to be quashed, since the Commissioner did not exercise his own discretion and judgement.

1. It is respectfully submitted that was held in CIT v. R. K. Metal Works [1978] 112 ITR 445 (Punj. & Har.) that basis for revision must be disclosed - in passing an order for revision, it is necessary for the Commissioner to state in what manner he considered that the order of the ITO was erroneous and prejudicial to the interests of the revenue and what was the basis for such a conclusion.

1. In the case of KARTHIK FINANCIAL SERVICES LTD. vs. COMMISSIONER OF INCOME TAX (2019) 55 CCH 0170 Mum Trib it was held that when details were made available with AO, who with due application of mind as well as after due examination, accepted assessee's CIT on this account were factually incorrect and working. Consequently, observations made by CIT on this account were factually incorrect and, therefore, same could not form basis of invoking revisional jurisdiction u/s 263.

1. In the case of PRAVARDHAN SEEDS PVT. LTD. vs. ASSISTANT COMMISSIONER OF INCOME TAX (2019) 55 CCH 0086 HydTrib it was held that In terms of s. 263, CIT shall not stop merely on finding that order was erroneous but also had to establish that order of AO was prejudicial to interests of Revenue.

1. In the case of COLORS TEXTILES LIMITED vs. INCOME TAX OFFICER (2018) 54 CCH 0300 Chd Trib it was held that Mere suspicion cannot be the basis for holding that the enquiry conducted by the AO was insufficient and the order consequently passed was erroneous for the purpose of assuming jurisdiction u/s 263.

1. In the case of LINERS INDIA LIMITED vs. ASSISTANT COMMISSIONER OF INCOME TAX (2018) 54 CCH 0211 Vishakapatnam Trib it was held that Invocation of revisionary power u/s 263 is not justified where AO has called for all the details necessary before allowing the deduction and there was no error in the assessment order.

2. In the case of SANSPAREILS GREENLANDS PVT. LTD. vs. COMMISSIONER OF INCOME TAX (2018) 54 CCH 0486 Del Trib it was held that Commissioner's exercise of revisional jurisdiction under provisions of s. 263 could not be based on whims or caprice. It was trite law that it was a quasi-judicial power hedged in with limitation and not an unbridled and unchartered arbitrary power. Exercise of power was limited 33 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 to cases where Commissioner on examining records concluded that earlier finding of AO was erroneous and prejudicial to interest of Revenue and that a fresh determination of case was warranted. There must be material to justify Commissioner's finding that order of assessment was erroneous insofar as it was prejudicial to interest of Revenue. Commissioner's exercise of revisional jurisdiction under provisions of s. 263 could not be based on whims or caprice.

1. In the case of MEENU BANSAL Vs. PRINCIPAL COMMISSIONER OF INCOME TAX (2018) 54 CCH 0352 Chd Trib it was held that In terms of Explanation 2(a) of s. 263, the PCIT was required to demonstrate that the assessment order passed by AO was without making enquiries or investigation.

Prayer:

In view of facts enumerated above and judicial pronouncements, the proposed action u/s 263 may kindly be dropped.

However, if your honors do not agree with the aforesaid submissions and if any adversity is sought to be held against the society in any of the above matter, then an opportunity of being heard may kindly be given to the assessee to submit its further defense. This request being in consonance with the principles of natural justice may kindly be acceded."

8. The Pr. CIT after considering the aforesaid reply in the backdrop of the issues involved, based on which, he had called upon the assessee society to explain as to why the order passed by the A.O u/s. 143(3), dated 28.12.2018 may not be revised u/s. 263 of the Act, did not find favour with the same. The Pr. CIT observed that the submissions of the assessee society were neither convincing nor satisfactory. He was of the view that as the order passed by the A.O u/s. 143(3) of the Act, dated 28.12.2018 was without application of mind and conducting necessary enquiries, thus, the same was rendered as erroneous in so far it was prejudicial to the interest of the revenue. The Pr. CIT relied upon certain judicial pronouncements wherein the Hon'ble Courts/Judicial Forums had observed that in a case where the assessment was framed by the A.O without carrying out 34 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 necessary enquiries and application of mind then exercise of jurisdiction by the Commissioner u/s. 263 was justified. The Pr. CIT after referring to the case records and submissions of the assessee society which were furnished both during the course of assessment proceedings and in the course of revisional proceedings before him, observed that the A.O while framing the assessment had not conducted proper enquiries regarding the genuineness of the contentions that were raised by the assessee society. Accordingly, the Pr. CIT based on his aforesaid observations, concluded that the assessment order passed by the A.O was erroneous in so far it was prejudicial to the interest of the revenue as per the mandate of "Explanation 2" to Section 263 of the Act, and thus, directed the A.O to verify the assessee's claim for deduction of the interest received from the banks on FDRs, FFD and savings banks interest etc. u/s. 80P(2)(d) of the Act AND verify its claim of expenditure. Accordingly, the Pr. CIT set-aside the assessment order and remanded it back to the file of the A.O for fresh adjudication of the issues after conducting necessary enquiries and allowing adequate opportunity of being heard to the assessee society.

9. The assessee society being aggrieved with the order passed by the Pr. CIT u/s. 263 of the Act, dated 30.03.2024 has carried the matter in appeal before us.

10. We have heard the ld. authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as 35 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. BRIEF BACKGROUND OF THE ASSESSEE SOCIETY :-

11. Before proceeding any further, we deem it fit to cull out the background of the assessee society and as to how it had come to exist. As is discernible from the record to which our attention was drawn by the Ld. AR the assessee society is the apex body working through 31 District Co-operative Societies and 901 primary Co- operative societies incorporated under the provisions of Chhattisgarh Sahkari Society Adhiniyam, 1960 read along with Chhattisgarh Sahkari Society Rules, 1962. As per the order dated 23.02.2001, bearing No.454/2001 of Government of Chhattisgarh, Forest Environment and Cultural Department, the assessee society was appointed as an agent of State Government of Chhattisgarh to facilitate collection, storage, processing and disposal of specified forest produce within the periphery of the State of Chhattisgarh, Page 102 of APB read a/w. Page 49 of APB (Vol-2). As per the aforesaid notification dated 23.01.2001 (supra) the assessee society was entitled for a commission of Re.1/- per annum for the aforesaid services rendered by it as an agent of the State Government of Chhattisgarh.

12. Elaborating on the reasons for appointment of the assessee society as an agent of the State Government of Chhattisgarh, the Ld. AR submitted that about fourteen lakhs families (approx.) comprising of tribals and villagers residing in the forest areas are getting their livelihood from collection of the forest produce which 36 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 are grown in the forest areas of Chhattisgarh. As the aforesaid persons were unable to get proper value for the forest produce collected by them, therefore, the State Government had initiated a structured co-operative movement so that the entire benefit of the forest produce is passed on to the persons collecting it from the forests. As brought to our notice by the Ld. AR in the earlier regime forests used to be allotted by the State Government to private contractors through auction. As the contractors were free to collect the forest produce from the jungles allotted to them, the benefit of forest produce would not fully pass on to the tribal people/ villagers who were actually collecting the same. Considering the fact that the tribals/villagers were not being properly compensated for the value of the forest produce by the private contractors the assessee society was brought into existence under the provisions of Chhattisgarh Sahkari Society Adhiniyam, 1960 read a/w. Chhattisgarh Sahkari Society Rules, 1962. As observed by us hereinabove, as per the order dated 23.02.2001, bearing No.454/2001 issued by the State Government, Forest Environment and Cultural Department, the role of the assessee society was to act as an agency to facilitate collection, storage, processing and disposal of the specified forest produce in the State of Chhattisgarh against a remuneration of Re.1/- (Rupee one) per annum. As per the mandate the assessee society was not supposed to have any income other than the nominal amount of Re.1/- as consideration for having been appointed as an agent under the provisions of Chhattisgarh Vanopaj (Vypar Viniyam) Adhinayam, 1964 read with Section 4 of the said Act. As such, the role and object of the assessee society was to act as a 37 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 coordinator, whereby the collection of the major forest produce was to be arranged in a transparent manner to maximize the return to the tribals and villagers who were engaged in collection of such forest produce.

13. As regards the organization and working structure of the assessee society, the Ld. AR submitted that 901 primary co-operative societies were constituted comprising of local villagers and tribals of the respective areas as its members and thereafter, the said primary cooperative societies would select the directors for the District Cooperative Union, who in turn, would select the board of directors of the assessee federation. For the sake of clarity, the three tier structure of the assessee society/federation as brought to our notice is culled out as under:

CH RAJYA LAGHU VANOPAJ (TRADING AND DEVELOPMENT) VYPAR AND VIKAS SAHKARI SANGH MARYADIT (TOP SOCIETY) ↑ JILA VANOPAJ SAHKARI SANGH MARYADIT (DISTRICT LEVEL -31 SOCIETIES) ↑ PRATHMIK VANOPAJ SAHKARI SAMITI MARYADIT (PRATHMIK -901 SOCIETIES) CONTENTIONS RAISED BEFORE US :

14. S/Shri Rakesh Gupta & R.B Doshi, Ld. AR's for the assessee society have placed their respective contentions before us. At the threshold, it was averred by the Ld. AR's that the Pr. CIT had grossly erred in law and facts of the case in assuming jurisdiction and setting aside the order passed by the A.O u/s. 143(3) of 38 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 the Act, dated 28.12.2018 by treating the same as erroneous and prejudicial to the interest of the revenue u/s. 263 of the Act. Elaborating on their contentions, the Ld. AR's submitted that as the A.O while framing the assessment had carried out exhaustive verifications/enquiries regarding the subject issues, and only after finding the claim of the assessee as being in order had taken a conscious view by accepting the same, therefore, the Pr. CIT had clearly traversed beyond the scope of his jurisdiction by taking recourse to proceedings u/s. 263 of the Act. Our attention was drawn by the Ld. AR to the "computation of income" of the assessee society for the subject year. The Ld. AR submitted that though the assessee society was in receipt of interest on deposits with a co-operative bank of Rs.6.02 crore (approx.) but had restricted its claim for deduction u/s. 80P(2)(d) of the Act to the extent of its total taxable income, i.e. Rs.5.93 crore (approx.). Carrying his contention further, the Ld. AR submitted that the assessee society in its agency "profit and loss account" for the subject year, after considering the gross surplus/profit brought forward from the trading account of Rs.132.49 crore (approx.) and indirect income of Rs.43.01 crore (approx.) [including interest income of Rs.41.51 crore (approx.)] had after considering the expenses incurred in respect of its aforesaid activities as an agent was left with a net surplus/profit of Rs.167.91 crore (approx.) which was to be distributed/payable to the members of the society in the ratio 80 : 15 : 5 as it was the income of the primary co-operative societies. The Ld. AR explaining the basis for distribution/payment of the surplus in the aforesaid ratio, i.e. 80 : 15 : 5 had taken us through the order dated 03.11.2009 of 39 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 the Government of Chhattisgarh, Forest Environment and Cultural Department, marked as No. F. 13-31/2009/10-2 which contemplated distribution of "net profit" of Tendu leaf business in the aforesaid ratio, i.e. 80 : 15 : 5. For the sake of clarity, the aforesaid order dated 03.11.2009 (supra) is culled out as under (Page 103 of APB):

The Ld. AR submitted that income of the assessee society which was comprised of interest income on seed capital of Rs.6,02,40,190/- (supra) and Re.1/- that was received as commission for rendering its services as an agent to the State Government were duly accounted for as income in its return of income for the year under consideration.

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023

15. The Ld. AR to fortify his claim that the various aspects based on which the Pr. CIT had revised the assessment order u/s. 263 of the Act were queried and deliberated upon by the A.O while framing the assessment had drawn our attention to the notice(s) issued u/s.142(1) of the Act dated 29.08.2018 and 27.12.2018. The Ld. AR had specifically taken us through the queries raised by the A.O as regards the token commission of Re.1/- (supra) and also as to why the interest income (other than that received on seed capital) may not be added in its hands as its business income, Page 177 of APB. The Ld. AR submitted that the assessee society had filed its reply to the aforesaid queries vide its letter dated 26.11.2018, Page 181-182 of APB, wherein, it was specifically brought to the notice of the A.O that the State Government of Chhattisgarh vide its letter dated 03.11.2009 had directed the assessee federation regarding the manner in which the money earned from its aforesaid activities as an agent was to be utilized. It was specifically brought to the notice of the A.O that the assessee society was the custodian of the money earned by selling the lots collected by the primary co-operative societies. Also, it was brought to the notice of the A.O that as per the direction of the Government of Chhattisgarh from the year 2010 onwards the interest income earned from sale receipts of NTFP, i.e. Non-Timber Forest Produce was to be utilized to compensate late payments etc. The Ld. AR had further taken us through the reply of the assessee society dated 24.12.2018 wherein, it had, inter alia, submitted before the A.O that the amount of Rs.685.62 crore (approx.) shown on the liability side of the balance sheet as "payable to the societies (C.G.)" was a 41 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 year-wise accumulation payable to 901 village societies which were the beneficiaries of the forest produce.

16. The Ld. AR based on his aforesaid contention tried to impress upon us that as the A.O while framing the assessment had queried on the various facets of the issues which, after necessary deliberations and considering the reply of the assessee were accepted by him, therefore, the Pr. CIT in the garb of proceedings u/s.263 of the Act had grossly erred in traversing beyond the scope of his jurisdiction for seeking substitution of his view on the said issues as against that arrived at by the A.O. Also, the Ld. AR submitted that as the A.O had taken a conscious view on the multi-facet issues which were debatable in nature while framing the assessment, therefore, the Pr. CIT could not have stepped in and dislodged such plausible view in exercise of powers vested with him u/s.263 of the Act.

17. The Ld. AR had further assailed the validity of the jurisdiction assumed by the Pr. CIT u/s. 263 of the Act for the reason that he had while exercising his revisionary jurisdiction failed to cumulatively satisfy the pre-conditions set out in the said statutory provision. Elaborating on his contention, the Ld. AR submitted that a cursory glance of Section 263(1) of the Act reveals that it is incumbent on the part of the Pr. CIT to call for and examine the records for any proceeding under the Act, and it is only if he considers that the order passed by the A.O is erroneous in so far 42 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 it is prejudicial to the interest of the revenue that he may assume jurisdiction under the said statutory provision.

18. Carrying his contention further, the Ld. AR submitted that a conjoint perusal of the SCN dated 11.03.2021 issued by the Pr. CIT u/s. 263 of the Act read along with the reasons recorded for revision of the order u/s. 263 of the Act by the ACIT- 1(1), Raipur, Page 175 to 178 of APB (Volume-IV), revealed that the Pr. CIT without any application of mind had merely acted upon the reasons recorded by the ACIT-1(1), Raipur, and based on the same, had assumed jurisdiction u/s. 263 of the Act. Elaborating further, the Ld. AR submitted that neither anything is discernible from the records nor from the order of the Pr. CIT u/s. 263 of the Act, which would reveal that the latter had called for the record and only after examining the same arrived at an independent view that the order passed by the A.O u/s. 143(3) of the Act, dated 28.12.2018 was erroneous in so far it was prejudicial to the interest of the revenue within the meaning of Section 263 of the Act. The Ld. AR to buttress his contention had vehemently submitted that the contents of the SCN, dated 11.03.2021 and the aforesaid reasons recorded for revision of the order u/s. 263 of the Act dated Nil by the ACIT-1(1), Raipur remained the same. The Ld. AR in order to buttress his aforesaid contention had taken us through Para 1 - Para 3 of the SCN dated 11.03.2021 issued by the Pr. CIT u/s. 263 of the Act, who as per him had merely copied the reasons recorded for revision of the order u/s. 263 of the Act dated Nil prepared by the ACIT-1(1), Raipur.

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023

19. The Ld. AR submitted that now when Section 263 of the Act mandates calling for and examination of the records by the Pr. CIT and nobody else, therefore, the jurisdiction assumed in the present case u/s. 263 of the Act based on reasons recorded by the ACIT-1(1), Raipur clearly militates against the aforesaid pre-condition for valid assumption of jurisdiction. The Ld. AR submitted that as the Pr. CIT had failed to satisfy the statutory pre-condition for valid assumption of jurisdiction u/s. 263 of the Act and had merely acted upon the report/reasons provided by the A.O, therefore, the jurisdiction so assumed by him for initiating proceedings u/s. 263 of the Act suffered from a fundamental defect, which, thus, rendered the entire proceedings and the consequential order so passed by him as void-ab-initio. The Ld. AR to buttress his aforesaid claim had relied on the order of the ITAT, Jaipur in the case of Shri Dharmendra Kumar Bansal Vs. CIT (2015) 152 ITD 406 (Jaipur). It was submitted by the Ld. AR that the Tribunal in its aforesaid order had held that the Commissioner before taking any action u/s.263 of the Act, must record his satisfaction and issuance of notice u/s. 263 of the Act on the basis of a proposal made by the ITO would be void ab initio. Also, the Ld. AR had drawn support from the order of the ITAT, Ahmedabad in the case of M/s. Shantai Exim Ltd. Vs. CIT (2016) 178 TTJ 451 (Ahd.).

20. The Ld. AR has further assailed the order passed by the Pr. CIT u/s. 263 of the Act for the reason that he had though set-aside the order passed by the A.O u/s. 143(3), dated 28.12.2018 by treating the same as erroneous in so far it was prejudicial to the interest of the revenue u/s. 263 of the Act but had failed to carry 44 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 out independent inquires, based on which, he had concluded that the assessment order was erroneous and prejudicial to the interest of the revenue. The Ld. AR vehemently submitted that the Pr. CIT while exercising his jurisdiction u/s. 263 of the Act was statutorily required to arrive at a conclusion that the assessment order was erroneous by conducting necessary inquires, if required, before passing order u/s. 263 of the Act. Elaborating further on his contention, the Ld. AR submitted that as held in the various judicial pronouncements the revisional authority cannot remand the matter to the file of the A.O to decide whether the findings recorded by his predecessor are erroneous. Carrying his contention further, the Ld. AR submitted that it is only where the CIT conducts inquiries and verification and is able to establish and show that an error or mistake had crept in the order passed by the A.O making the same unsustainable in law; or the facts on record per-se justified making of further inquiries or investigation but the A.O had wrongly not undertaken the same, it is only then after recording of a clear and unambiguous finding on the said aspect that the CIT can remand the matter to the file of the A.O. The Ld. AR submitted that as the Pr. CIT in the present case had summarily remanded the matter to the file of the A.O by dispensing with the statutory obligation of carrying out the inquiries or verification on his part based on which the order passed by the A.O was being held by him as erroneous, therefore, the same could not be sustained and was liable to be struck down on the said count itself.

21. The Ld. AR further assailed the order passed by the Pr. CIT u/s. 263 of the Act, dated 30.03.2021 for the reason that the view taken by the A.O while framing 45 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 the assessment for the subject year, i.e. A.Y.2016-17 was in conformity with that arrived at by his predecessors while framing the assessments for the preceding years u/s. 143(3) of the Act. Elaborating on his contention, the Ld. AR submitted that the assessee society in its returns of income for the preceding years, i.e. A.Y.2009-10 to A.Y.2014-15 had disclosed its income comprising of, viz. (i) agency's commission: Re.1/- (Rupee one) AND (ii) interest on seed capital lying as bank deposit which was claimed as deduction u/s. 80P(2)(d) of the Act. The Ld. AR submitted that the assessee society in its aforesaid returns for the preceding years had alike the year under consideration disclosed interest income/surplus as payable to the primary co-operative societies in the ratio of 80: 15 : 5. The Ld. AR submitted that the returns of income of the assessee society for the A.Ys. 2012-13 to 2014-15 were duly scrutinized and accepted by the A.O's vide their respective orders u/s.143(3) of the Act. The Ld. AR in order to fortify his aforesaid contention had drawn our attention to the copies of the returns of income, computation of income and financial statements of the assessee society for A.Y.2012-13 to A.Y.2014-15 a/w. copies of the respective assessment orders wherein the income disclosed by the assessee society was accepted by the then A.O's u/s. 143(3) of the Act, Page 213 to 260 of APB. The A.R had specifically drawn our attention to the assessment orders passed u/s. 143(3) of the Act for the respective years wherein, the A.Os had categorically observed that the assessee society was functioning as an agent for collection and trading of minor forest produce as per the mandate of the order of the State Government of Chhattisgarh for a commission of 46 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 Re.1/- only. Also, the Ld. AR had drawn our attention to the observations of the A.Os wherein they had observed that except for the commission of Re.1/- and interest earned on the seed money from the co-operative banks which was eligible for deduction u/s. 80P(2)(d) of the Act the remaining income disclosed in the agency's trading/profit and loss account of the assessee society belonged to the co-operative societies. Carrying his contention further, the Ld. AR submitted that now when the department had consistently after scrutinizing the returns of income of the assessee society in the backdrop of its financial statements for the preceding years arrived at a conscious view that the income of the assessee society was restricted to the extent of the agency commission of Re.1/- and interest on its seed money lying with the co-operative bank which was entitled for deduction u/s. 80P(2)(d) of the Act, therefore, the Pr. CIT during the subject year was not justified in arriving at a contrary view based on the same set of facts as were there in the preceding years.

22. The Ld. AR further challenged the order passed by the Pr. CIT for the reason that he had held the assessment order passed by the A.O u/s. 143(3) of the Act, dated 28.12.2018 as erroneous in so far it was prejudicial to the interest of the revenue u/s. 263 of the Act based on a non-speaking order. The Ld. AR vehemently submitted that the Pr. CIT in exercise of powers vested with him u/s. 263 of the Act had while setting-aside the assessment order not recorded any independent observations/findings as to why the submissions filed by the assessee on the various issues before him were not to be accepted. Elaborating on his 47 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 contention, the Ld. AR submitted that though the assessee society had vide its reply filed pursuant to the SCN, dated 11.03.2001 furnished its written submissions before the Pr. CIT dated 22.03.2021 regarding the multiple issues on which, he had purported to hold the assessment order passed by the A.O u/s. 143(3) of the Act dated 28.12.2018 as erroneous and prejudicial to the interest of the revenue, but the Pr. CIT without dealing with the exhaustive submissions of the assessee society had by way of a non-speaking order rejected the same and set-aside the assessment order in the garb of the powers vested with him u/s. 263 of the Act. The Ld. AR to fortify his aforesaid contention had taken us through the written submissions qua the various aspects/issues which were raised by the Pr. CIT vide SCN dated 11.03.2021, Page 01 to 18 of APB.

23. Per contra, the Ld. Departmental Representative (for short 'DR') relied on the orders of the lower authorities. The Ld. DR had controverted the contentions that were advanced by the assessee's counsel. It was submitted by the Ld. DR that the A.O while framing the assessment had without carrying out any verification grossly erred in summarily accepting the claim of the assessee for deduction u/s. 80P(2)(d) of the Act. Apropos the claim of the assessee's counsel that the Pr. CIT had wrongly assumed jurisdiction without calling for and examining the records of the assessee society, and had merely endorsed the reasons as were recorded by the ACIT-1(1), Raipur for revising the order u/s. 263 of the Act, i.e. without any application of mind to the material facts emanating therefrom, the Ld. DR submitted that the same was factually incorrect and misconceived. 48

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023

24. The Ld. DR further assailed the contention of the assesse's counsel that as the A.O had framed the assessment vide his order u/s. 143(3) of the Act, dated 28.12.2018 after making due inquiries and necessary verification on the various aspects, therefore, the Pr. CIT in the garb of powers vested with him u/s. 263 of the Act had wrongly assumed jurisdiction for seeking substitution of his view as against that arrived at by the A.O. Elaborating on his contention, the Ld. DR submitted that as the A.O had failed to carry out the bare minimum verifications and inquiries on certain issues which ought to have been done by him while framing the assessment, therefore, the Pr. CIT had rightly stepped in and set-aside his order with a direction to him to re-adjudicate the same after affording a reasonable opportunity of being heard to the assessee society. The Ld. DR in order to fortify his aforesaid contention had drawn our attention to the assessment order passed by the A.O u/s.143(3) of the Act, dated 28.12.2018. Taking us through the assessment order, the Ld. DR submitted that the A.O had by way of a cryptic order without carrying out the basic verifications summarily accepted the returned income of the assessee society. Apart from that, the Ld. DR submitted that the Pr. CIT as per the "Explanation 2(a)" of Section 263 of the Act (as had been made available on the statute vide the Finance Act, 2015 w.e.f. 01.06.2015) after taking cognizance of the fact that the A.O had passed the assessment order without making inquiries or verifications which should have been made had rightly set- aside his order with a direction to re-adjudicate the issues after affording a reasonable opportunity of being heard to the assessee society. 49

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023

25. Apropos the contention of the Ld. AR that the Pr. CIT while holding the assessment order as erroneous in so far it was prejudicial to the interest of the revenue u/s. 263 of the Act had failed to carry out any independent inquiries on his own, the Ld. DR rebutted the same. The Ld. DR submitted that the Pr. CIT had though vide SCN dated 22.03.2021 purported to revise the order passed by the A.O u/s. 143(3) of the Act, dated 28.12.2018 on multiple issues and had called upon the assessee society to put forth an explanation as regards the same, but thereafter, had vide his order passed u/s. 263 of the Act, dated 30.03.2021 revised the same only on two-aspects, viz. (i) verification of the assessee's claim for deduction u/s. 80P(2)(d) of the Act of the interest income received from banks on FDRs, FFD and SB interest etc.; and (ii) to verify the assessee's claim for expenses. It was submitted by the Ld. DR that as the Pr. CIT after specifically confronting the assessee society vide SCN dated 11.03.2021, on the aforesaid issues, had considered its reply (as culled out in the body of the order passed u/s. 263 of the Act) and had observed that the A.O had failed to conduct proper inquiries regarding the genuineness of the contentions that were advanced by the assessee on the aforesaid issues, viz. (i) assessee's claim for deduction u/s. 80P(2)(d) of the Act of the interest income received from banks on FDRs, FFD and SB interest etc., and (ii) assessee's claim for expenses; therefore, the order so passed by him was erroneous in so far it was prejudicial to the interest of the revenue in view of "Explanation 2(a)" to Section 263 of the Act. The Ld. DR submitted that the Pr. CIT after considering the reply of the assessee society in the 50 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 backdrop of the queries raised in the SCN, and drawing support from a host of judicial pronouncements, had after due application of mind to the facts before him validly revised the assessment order u/s. 263 of the Act.

26. The Ld. DR submitted that as it was a case of a failure on the part of the A.O to carry out necessary verifications and inquiries while framing of the assessment, a fact which was glaring on the very face of it, therefore, the Pr. CIT taking cognizance of the aforesaid serious lapse of the A.O, after drawing support from a host of judicial pronouncements had rightly held the order passed by him as erroneous in so far it was prejudicial to the interest of the revenue u/s. 263 of the Act. It was, thus, averred by the Ld. DR that it was incorrect on the part of the assessee society to claim that the Pr. CIT while revising the order u/s. 263 of the Act had failed to carry out any inquiries.

27. As regards the claim of the assessee's counsel that as the department had accepted the returned income of the assessee society for the previous years, therefore, there was no justification for the Pr.CIT to have adopted an inconsistent view during the year under consideration, the Ld. DR vehemently objected to the same. It was submitted by the Ld. DR that as the Pr.CIT had rightly assumed jurisdiction and set-aside the order passed by the A.O which was found to be erroneous in so far it was prejudicial to the interest of the revenue within the meaning of Section 263 of the Act, therefore, the aforesaid contention of the assessee's counsel was without any substance.

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023

28. The Ld. DR based on his aforesaid contentions submitted that as the appeal filed by the assessee society was devoid and bereft of any merit, therefore, the same was liable to be dismissed.

ISSUES INVOLVED :-

29. We shall now advert to the issues involved in the present appeal. At the threshold, we may reiterate that though the Pr. CIT had vide his SCN, dated 11.03.2021 initially called upon the assessee society to put forth an explanation as to why the order passed by the A.O u/s. 143(3) dated 28.12.2018 may not be revised on multiple issues, but a careful perusal of his order passed u/s. 263 of the Act, dated 30.03.2021 reveals that he had, thereafter, set-aside the impugned assessment order for fresh adjudication on certain limited issues, viz. (i) non- verification of the claim of the assessee society for deduction of the interest receipts from the banks on FDRs, FFD and Savings bank interests etc. u/s. 80P(2)(d) of the Act; and (ii) non-verification of the assessee's claim of expenditure.

30. We, thus, considering the aforesaid directions given by the Pr. CIT-1, Raipur vide his order passed u/s. 263 of the Act dated 30.03.2021 confine our adjudication to the aforesaid two issues, on which, the order passed by the A.O u/s. 143(3) of the Act dated 28.12.2018 had been set-aside for fresh adjudication by the Pr. CIT. (A) RE : CLAIM FOR DEDUCTION U/s. 80P(2)(d) OF THE ACT :

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023

31. On a perusal of the computation of income of the assessee society for the subject year, i.e. A.Y.2016-17, Page 122-123 of APB, it transpires that it had raised a claim for deduction of the interest on its deposits (seed capital) with a cooperative bank amounting to Rs.6,02,40,190/- u/s.80P of the Act.

32. Admittedly, as observed by the Pr.CIT the interest of Rs.6,02,40,190/- (supra) was earned by the assessee society during the year on its seed capital. On further perusal of the record, it transpires that the assessee society had claimed to have received interest income on its FDR (sourced out of its seed capital) with "Apex bank". In so far the entitlement of a co-operative society for deduction u/s. 80P(2)(d) of the interest income received on deposits lying with a co-operative bank is concerned, we find that the said issue is squarely covered by the order of the ITAT, Mumbai in the case of M/s. Solitaire CHS Ltd. Vs. Pr. Commissioner of income Tax-26, Mumbai, ITA No.3155/MUM/2019 dated 29.11.2019. The Tribunal after deliberating at length on the various facets of the issue in hand, i.e. entitlement of a co-operative society for claiming deduction of interest on deposits lying with a co-operative bank u/s. 80P(2)(d) of the Act, had observed as under:

"6. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. Our indulgence in the present appeal has been sought, for adjudicating, as to whether the claim of the assessee for deduction under section 80P(2)(d) in respect of interest income earned from the investments/deposits made with the co-operative banks is in order, or not. In our considered view, the issue involved in the present appeal revolves around the adjudication of the scope and gamut of sub-section (4) of Sec. 80P as had been made available on the statute, vide the Finance Act 2006, with effect from 01.04.2007. On a perusal of the order passed by the Pr. CIT under Sec. 263 of the Act, we find, that he was of the view that pursuant to insertion of 53 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 sub-section (4) of Sec. 80P, the assessee would no more be entitled for claim of deduction under Sec. 80P(2)(d) in respect of the interest income that was earned on the amounts which were parked as investments/deposits with co-operative banks, other than a Primary Agricultural Credit Society or a Primary Co-operative Agricultural and Rural Development Bank. Observing, that the co-operative banks from where the assessee was in receipt of interest income were not co- operative societies, the Pr. CIT was of the view that the interest income earned on such investments/deposits would not be eligible for deduction under Sec. 80P(2)(d) of the Act.

7. After necessary deliberations, we are unable to persuade ourselves to be in agreement with the view taken by the Pr. CIT. Before proceeding any further, we may herein reproduce the relevant extract of the aforesaid statutory provision, viz. Sec. 80P(2)(d), as the same would have a strong bearing on the adjudication of the issue before us.

"80P(2)(d) (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)............................................................................................

(b)............................................................................................

(c)............................................................................................

(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;"

On a perusal of Sec. 80P(2)(d), it can safely be gathered that interest income derived by an assessee co-operative society from its investments held with any other co-operative society shall be deducted in computing its total income. We may herein observe, that what is relevant for claim of deduction under Sec. 80P(2)(d) is that the interest income should have been derived from the investments made by the assessee co-operative society with any other co-operative society. We are in agreement with the view taken by the Pr. CIT, that with the insertion of sub-section (4) of Sec. 80P, vide the Finance Act, 2006, with effect from 01.04.2007, the provisions of Sec. 80P would no more be applicable in relation to any co- operative bank, other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. However, at the same time, we are unable to subscribe to his view that the aforesaid amendment would jeopardise the claim of deduction of a co-operative society under Sec. 80P(2)(d) in respect of its interest income on investments/deposits parked with a co-operative bank. In our considered view, as long as it is proved that the interest income is being derived by a 54 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 co-operative society from its investments made with any other co- operative society, the claim of deduction under the aforesaid statutory provision, viz. Sec. 80P(2)(d) would be duly available. We find that the term „cooperative society‟ had been defined under Sec. 2(19) of the Act, as under:-

"(19) "Co-operative society" means a cooperative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any state for the registration of co-operative societies;"

We are of the considered view, that though the co-operative banks pursuant to the insertion of subsection (4) to Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but as a co- operative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies, therefore, the interest income derived by a co-operative society from its investments held with a co-operative bank would be entitled for claim of deduction under Sec.80P(2)(d) of the Act.

8. We shall now advert to the judicial pronouncements that have been relied upon by the ld. A.R. We find that the issue that a co-operative society would be entitled for claim of deduction under Sec. 80P(2)(d) on the interest income derived from its investments held with a co-operative bank is covered in favour of the assessee in the following cases:

(i) Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH 52 (Mum)

(ii) M/s C. Green Cooperative Housing and Society Ltd. Vs. ITO-21(3)(2), Mumbai (ITA No. 1343/Mum/2017, dated 31.03.2017

(iii) Marvwanjee Cama Park Cooperative Housing Society Ltd. Vs. ITO-

Range-20(2)(2), Mumbai (ITA No. 6139/Mum/2014, dated 27.09.2017.

(iv). Kaliandas Udyog Bhavan Pemises Co-op. Society Ltd. Vs. ITO, 21(2)(1), Mumbai We further find that the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon'ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), had held, that the interest income earned by the assessee on its investments with a co-operative bank would be eligible for claim of deduction under Sec. 80P(2)(d) of the Act. Still further, we find that the CBDT Circular No. 14, dated 28.12.2006, also makes it clear beyond any scope of doubt that the purpose behind enactment of sub-section (4) of Sec. 80P was that the co- operative banks which were functioning at par with other banks would no more be entitled for claim of deduction under Sec. 80P(4) of the Act. 55

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 Insofar the reliance placed by the Pr. CIT on the judgment of the Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. vs. ITO (2010) 322 ITR 283 (SC) is concerned, we are of the considered view that the same being distinguishable on facts had wrongly been relied upon by him. The adjudication by the Hon‟ble Apex Court in the aforesaid case was in context of Sec. 80P(2)(a)(i), and not on the entitlement of a co- operative society towards deduction under Sec. 80P(2)(d) on the interest income on the investments/deposits parked with a co-operative bank. Although, in all fairness, we may herein observe that the Hon'ble High Court of Karnataka in the case of Pr. CIT Vs. Totagars co-operative Sale Society (2017) 395 ITR 611 (Karn), had concluded that a co-operative society would not be entitled to claim of deduction under Sec. 80P(2)(d). At the same time, we find, that the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon'ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), had observed, that the interest income earned by a co-operative society on its investments held with a co-operative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act. We find that as held by the Hon'ble High Court of Bombay in the case of K. Subramanian and Anr. Vs. Siemens India Ltd. and Anr (1985) 156 ITR 11 (Bom), where there is a conflict between the decisions of non-jurisdictional High Court‟s, then a view which is in favour of the assessee is to be preferred as against that taken against him. Accordingly, taking support from the aforesaid judicial pronouncement of the Hon‟ble High Court of jurisdiction, we respectfully follow the view taken by the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon'ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), wherein it was observed that the interest income earned by a cooperative society on its investments held with a co-operative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act.

9. Be that as it may, in our considered view, as the A.O while framing the assessment had taken a possible view, and therein concluded that the assessee would be entitled for claim of deduction under Sec. 80P(2)(d) on the interest income earned on its investments/deposits with co-operative banks, therefore, the Pr. CIT was in error in exercising his revisional jurisdiction u/s 263 for dislodging the same. In fact, as observed by us hereinabove, the aforesaid view taken by the A.O at the time of framing of the assessment was clearly supported by the order of the jurisdictional Tribunal in the case of Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH 52 (Mum). Accordingly, finding no justification on the part of the Pr. CIT, who in exercise of his powers under Sec. 263, had dislodged the view that was taken by the A.O as regards the eligibility of the assessee towards claim of deduction under Sec. 80P(2)(d), we „set aside‟ his order and restore the order passed by the A.O under Sec. 143(3), date 14.09.2016.

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023

10. Resultantly, the appeal filed by the assessee is allowed."

33. Although, we are principally in agreement with the Ld. AR that the interest income received by a co-operative society on its deposits with a co-operative bank would be entitled for deduction u/s. 80P(2)(d) of the Act, but at the same time, we find from a perusal of the record that the A.O while framing the assessment had at no stage verified the authenticity of the claim of the assessee society that the deduction raised by it u/s. 80P(2)(d) of the Act pertained to the interest income on its deposits parked with a co-operative bank/banks. As nothing is discernible from the record nor any material has been filed before us in the course of hearing of the appeal, which would reveal that the assessee's claim for deduction u/s. 80P(2)(d) of the Act was raised as regards the interest income earned on its deposits lying with a co-operative bank/banks, therefore, to the said extent, we concur with the Pr. CIT that the A.O without carrying out any verification on the aforesaid material aspect had summarily accepted the claim of the assessee society for deduction u/s. 80P(2)(d) of the interest income of Rs.6,02,40,190/- (restricted in the computation of income to Rs.5,93,27,545/- i.e. the net taxable income disclosed in the return of income for the subject year). Accordingly, in terms of our aforesaid observations the order of the Pr. CIT to the said limited extent is upheld. (B) RE : AO HAD AFTER APPLICATION OF MIND ARRIVED AT A PLAUSIBLE VIEW ON THE ISSUE :

34. We shall now deal with the contention of the Ld. AR that as the A.O had framed the assessment vide his order u/s. 143(3) of the Act, dated 28.12.2018 after 57 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 due application of mind and raising specific queries on the issues, based on which, the order had been revised u/s. 263 of the Act, therefore, there was no justification for the Pr. CIT to seek substitution of his view as against that of the A.O in the garb of powers vested with him u/s. 263 of the Act.

35. The Ld. AR had drawn our attention to the notice(s) u/s. 142(1) of the Act dated 29.08.2018 and 27.12.2018 wherein queries were raised by the A.O on various issues. Also, the Ld. AR had taken us through the written submissions filed by the assessee society in reply to the aforesaid query letters.

36. We have thoughtfully considered the aforesaid claim of the assessee society and are unable to persuade ourselves to subscribe to the same. As observed by us hereinabove, though the Pr. CIT vide SCN dated 11.03.2021 had initially sought to revise the assessment order passed by the A.O u/s. 143(3) of the Act, dated 21.12.2018 on multiple issues but had thereafter revised the order only on two issues, viz. (i) verification of the assessee's claim for deduction u/s. 80P(2)(d) of the Act of interest income received from banks on FDRs, FFD and SB account interest etc., and (ii) to verify the assessee's claim for expenditure. Although, it is the claim of the Ld. AR that the assessee society had filed replies regarding the subject issues in the course of the proceedings before the A.O but we find the same to be factually incorrect.

37. On a perusal of the replies in the backdrop of the records available before us, it transpires that nothing is discernible therefrom which would reveal that the 58 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 seed money of the assessee was lying in the form of deposits with a co-operative bank, which thus, would have entitled it to claim deduction u/s. 80P(2)(d) of the Act. Also, a perusal of the notices issued by the A.O u/s. 142(1) of the Act does not reveal that he had in the course of the assessment proceedings on any occasion raised any query on the aforesaid material aspect and verified, i.e. whether the interest income of Rs.6.02 crore (approx.) on seed capital which was claimed as deduction u/s. 80P(2)(d) was earned from its funds parked with a co-operative bank/banks. Accordingly, to the said extent, we are unable to concur with the Ld. AR that as specific queries to the extent relatable to its entitlement for deduction u/s. 80P(2)(d) of the Act were raised by the A.O in the course of the assessment proceedings and were duly answered by the assessee society, therefore, the Pr. CIT in the garb of his powers u/s. 263 of the Act had wrongly assumed jurisdiction and set-aside the order of the A.O.

38. We shall now deal with the Ld. AR's contention regarding the second facet of the observation of the Pr. CIT, based on which, the order of the A.O had been set-aside u/s. 263 of the Act. The Pr. CIT had, inter alia, observed that as the A.O while framing the assessment had failed to verify the assessee's claim of expenditure and summarily accepted the same without carrying out any inquiries, therefore, the said inaction on his part had rendered the order passed by him u/s. 143(3) of the Act, dated 28.12.2018 as erroneous and prejudicial to the interest of the revenue. On a perusal of the financial statements of the assessee society for the year under consideration, it transpires that the assessee society in its agency's 59 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 profit and loss account for the year under consideration, i.e. A.Y.2016-17 had debited an amount of Rs.1,67,91,37,711.77, as under: (relevant extract) "To payable to Society 1,67,91,37,711.77 To Incentive Wages 1,34,33,10,169.00 To Sale purchase & Processing of 25,18,70,657.00 Non-Nationalized MFP To Revolving Fund 8,39,56,885.77"

The Pr. CIT observed that the A.O while framing the assessment had not carried out any verification of the aforementioned amounts which were projected as an expenditure in the agency's profit and loss account for the subject year. We have perused the notice(s) u/s. 142(1) of the Act dated 29.08.2018 and 27.12.2018 that were issued by the A.O in the course of the assessment proceedings, and also the replies filed by the assessee in compliance thereto. On perusal of the reply dated 24.12.2018, it transpires that the assessee society on the issue of the aforesaid amount of Rs.167.91 crore (approx.) had stated that the same was transferred to the primary co-operative societies on account of profit from sale of tendu leaves and interest earned on the time/fixed deposits on the idle funds of the society in order to avoid any revenue loss. For the sake of clarity, the reply filed by the assessee society is culled out as under:

"e. That on the perusal of submitted agency profit and loss account this may please be observed that total amount transferred to the Society is Rs.167,91,37,711.77 which is on account of Tendu leaves and interest on surplus distributable fund to them kept with bank against Time/Fixed Deposit to earn interest so that no revenue loss also could be suffered by the societies till the payment is made to them as the fund belongs to them only."

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 Although it was clarified by the assessee society that as the aforesaid amount was the surplus on account of business of trading of tendu leaves along with interest on the deposits of the funds of the primary co-operative societies, and the same had been transferred as it belonged to the primary co-operative societies, but nothing was queried into by the A.O as to what was the basis for bifurcating the aforementioned amount under various heads, viz. (i) to Incentive Wages; (ii) to sale purchase & processing of Non-Nationalized MFP; and (iii) to revolving fund. Also, we find that the Pr. CIT vide SCN, dated 11.03.2021 had, inter alia, observed that the veracity of certain expenses claimed by the assessee as "payable to society"

appearing on the debit side of the profit and loss account were not verified in the course of the original assessment proceedings. However, the assessee society instead of coming forth with any plausible explanation as regards the nature as well as veracity of the "payable expenses" had simply stated before the Pr. CIT that the same were verified during the course of the original assessment proceedings. For the sake of clarity, the reply of the assessee society on the aforesaid aspect is culled out as under:

"I. Reply for Para 2.2 (Page 3 of 6):

In this para, again a factually incorrect statement has been made that the veracity of payable expenses has not been verified during the original assessment.

It can be seen that the case was selected for Complete scrutiny under section 143(2). Thereafter the assessing officer has verified complete books of accounts and records maintained by the assessee.

As a result of the complete and full verification of all the liabilities, the assessing officer pointed out query on interest income earned which was 61 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 replied by the assessee to the satisfaction of the learned assessing officer. Hence the statement that it has not been verified is not factually correct and is not based on any evidence on record."

Ostensibly, the assessee society even before the Pr. CIT had adopted an evasive approach and did not think it fit to fully explain the nature of the aforesaid "payable expenses", and also the basis for allocation of the aforesaid amount under the respective heads.

39. The Ld. AR in the course of the respective hearings of the appeal had taken us through the order dated 03.11.2009 of the Government of Chhattisgarh, Forest Environment and Cultural Department, marked as No. F. 13-31/2009/10-2, which contemplates distribution of "net profit" of tendu leaf business in the aforesaid ratio, i.e. 80 : 15 : 5. It was submitted by the Ld. AR that the allocation of the surplus from the trading of tendu leaves and interest on bank deposits of the primary co- operative societies amongst the various heads was based on the order of the Government of Chhattisgarh, Forest Environment and Cultural Department. As the Pr. CIT in his order u/s. 263 of the Act dated 30.03.2021, had observed that "payable expenses" of Rs.167.91 crore (supra) needs further verification, therefore, the Ld. AR was specifically queried as to on what basis the aforesaid figure was arrived at. It was submitted by the Ld. AR that the amount of Rs.167.91 crore (supra) was the net of expenses of the gross receipts of trading of tendu leaves and interest income on the bank accounts/deposits of the primary co-operative societies and did not pertain to the assessee society. We find that neither any reply regarding the basis for arriving at the amount of Rs.167.91 crore (supra) allocated 62 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 to the co-operative societies or that regarding the expenses claimed in the agency's profit and loss account of the assessee society which had scaled down the distributable amount to Rs.167.91 crore (supra) was either filed in the course of the assessment proceedings or before the Pr. CIT (despite a specific query) nor was forth coming despite a specific query to the said affect raised by the Bench. Rather, the only reply forthcoming was that as the aforementioned expenses which had scaled down the gross receipts from trading of tendu leaves and interest income on deposits pertained to the primary co-operative societies, therefore, the same were not liable to be looked into in the case of the assessee society. We are unable to comprehend the aforesaid explanation of the assessee society. Admittedly, the assessee society pursuant to the order of the State Government of Chhattisgarh under the provisions of Chhattisgarh Vanopaj (Vypar Viniyam) Adhinayam 1964 read with Section 4 of the said Act is an "agent" of the 901 primary co-operative societies. As the assessee society being an agent, i.e. a representative assessee of the aforesaid 901 primary co-operative societies as per Section 161 of the Income Tax Act, 1961 was subjected to the same duties, responsibilities, liabilities, as if the subject income was the income received by or accruing to or in its favour beneficially, therefore, the A.O was obligated to have verified and inquired into the veracity of the expenses claimed by the assessee society in its agency's profit and loss account which after netting of the gross receipts was reduced to an amount of Rs.167.91 crore (supra) (distributable to 901 63 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 primary co-operative societies), which, we find he had failed to do. For the sake of clarity, Section 161 of the Act is culled out as under:

"161. (1) Every representative assessee, as regards the income in respect of which he is a representative assessee, shall be subject to the same duties, responsibilities and liabilities as if the income were income received by or accruing to or in favour of him beneficially, and shall be liable to assessment in his own name in respect of that income; but any such assessment shall be deemed to be made upon him in his representative capacity only, and the tax shall, subject to the other provisions contained in this Chapter, be levied upon and recovered from him in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him.

(1A) Notwithstanding anything contained in sub-section (1), where any income in respect of which the person mentioned in clause (iv) of sub-

section (1) of section 160 is liable as representative assessee consists of, or includes, profits and gains of business, tax shall be charged on the whole of the income in respect of which such person is so liable at the maximum marginal rate :

Provided that the provisions of this sub-section shall not apply where such profits and gains are receivable under a trust declared by any person by will exclusively for the benefit of any relative dependent on him for support and maintenance, and such trust is the only trust so declared by him. (2) Where any person is, in respect of any income, assessable under this Chapter in the capacity of a representative assessee, he shall not, in respect of that income, be assessed under any other provision of this Act."

(emphasis supplied by us) Alternatively, the assessee society had though vehemently claimed that the amounts of Rs.167.91 crore (supra) belonged to the 901 primary co-operative societies but had neither produced before the A.O or the Pr. CIT or before us any material which would conclusively substantiate that the said amount had been disclosed by the said 901 primary co-operative societies in their respective returns of income for the subject year.

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023

40. Also, as observed by us hereinabove, the assessee society had adopted an evasive approach before the Pr. CIT and despite specific directions had not come forth with any explanation much the less any material which would substantiate the authenticity of the aforesaid expenses. Based on our aforesaid deliberations, we find that neither the claim of expenses in the agency profit and loss account of the assessee society, which had resulted to scaling down of the distributable amount to the primary cooperative societies to Rs.167.91 crore (approx.) had been verified by the A.O nor the basis of allocation of the aforesaid balance distributable/payable amount to the primary co-operative societies under various heads was queried by him while framing the assessment. Further, the Pr. CIT had rightly observed that the A.O had not verified as to whether the aforesaid "payables" were paid by the assessee society in the subsequent year, and also, not looked into the reasons of its recurrence in various years. We, thus, based on the aforesaid facts concur with the Pr. CIT that failure of the A.O to carry out necessary verification on the aforesaid material aspects had rendered the order passed by him u/s.143(3) of the Act, dated 28.12.2018 as erroneous in so far it was prejudicial to the interest of the revenue u/s. 263 of the Act. Accordingly, we find no infirmity in the order of the Pr. CIT who had to the said extent after due application of mind set-aside the assessment order with a direction to the A.O to verify the aforesaid claim of expenditure.

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023

41. Accordingly, in terms of our aforesaid observations, we are unable to persuade ourselves to subscribe to the contention of the Ld. ARs that as the A.O while framing assessment had raised queries and deliberated on the replies filed by the assessee society qua both the aforesaid issues, viz. (i) verification of the assessee's claim for deduction u/s.80P(2)(d) of the Act of interest received from banks on FDRs, FFD and SB interest etc.; and (ii) verification of the assessee's claim for expenditure; and had arrived at a plausible view, therefore, the Pr. CIT in exercise of powers vested with him u/s.263 of the Act had grossly erred in law and facts of the case by seeking substitution of his view as against that arrived at by the A.O.

42. As in the present case before us, the A.O while framing of the assessment had not queried on the material aspects pertaining to the both the issues, on which, the Pr. CIT had set-aside his order u/s. 263 of the Act, viz. (i) non-verification of satisfaction of the requisite conditions rendering the assessee eligible to claim deduction on interest on bank deposits (seed money) u/s. 80P(2)(d) of the Act; and

(ii) non-verification of the claim of expenditure in the agency's profit and loss account of the assessee society, therefore, the judicial pronouncements that had been relied upon by the Ld. AR to impress upon us that where the A.O had while framing the assessment arrived at a plausible view on the issue, the same cannot be substituted in the garb of powers vested with the CIT u/s. 263 of the Act, being distinguishable on facts would by no means assist the case of the present assessee society before us.

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 RE : ABSENCE OF CALLING FOR AND EXAMING OF THE RECORDS BY THE PR. CIT:-

43. We shall now advert to the Ld. AR's contention that the Pr. CIT had grossly erred in law and facts of the case by passing an order u/s. 263 of the Act without calling for and examining the records of the assessee society. Elaborating on his contention, the Ld. AR submitted that as per Section 263(1) of the Act it is statutorily required on the part of the Pr. CIT to call for and examine the records for any proceedings under the Act, and it is only if he considers that the order passed by the A.O is erroneous in so far as it is prejudicial to the interest of the revenue that he may assume jurisdiction under the said statutory provision. Carrying his contention further, the Ld. AR submitted that the Pr. CIT in the present case, had not called for and examined the records of the assessee society and had mechanically acted upon the reasons recorded for revision of the order u/s. 263 of the Act by the ACIT-1(1), Raipur, Page 175 to 178 of APB (Volume-IV). The Ld. AR based on his aforesaid contention had tried to impress upon us that as the Pr. CIT had failed to call for and examine the records of the assessee society, and further failed to apply his independent mind on the said record, therefore, he had wrongly assumed jurisdiction and passed the order u/s. 263 of the Act. The Ld. AR in order to fortify his aforesaid contention had drawn support from the fact that the reasons for revision u/s. 263 of the Act as were recorded by the ACIT-1(1), Raipur had formed part of the SCN, dated 11.03.2021 issued by the Pr. CIT u/s. 263 of the Act. However, before adverting to the facts and adjudicating the aforesaid claim of the 67 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 Ld. AR, based on which, he has assailed the validity of the jurisdiction assumed by the Pr. CIT u/s. 263 of the Act, it would be relevant to cull out the provisions of Section 263 of the Act: (relevant extract) "263. (1) The Principal 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, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify...............", (emphasis supplied by us)

44. Admittedly, as stated by the Ld. AR, and rightly so, sub-section (1) to Section 263 of the Act casts an obligation on the CIT to 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, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. At the threshold, we may herein observe that though it is the claim of the Ld. AR that the Pr. CIT had not called for the assessment record and examined the same, i.e. failed to discharge an obligation which was statutorily required to be satisfied on his part, we are unable to concur with the same. On a perusal of the SCN, dated 11.03.2021 issued by the Pr. CIT u/s. 263 of the Act, we find that he had clearly stated that the notice was being issued after examining the income tax records for 68 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 the subject year. For the sake of clarity, the relevant extract of the SCN, dated 11.03.2021, Page 7 to 12 of APB is culled out as under: (relevant extract) "On examination of your income tax records for the above assessment year, I find that the order passed u/s. 143(3) r.w.s. 147 on 28.12.2018 of the Income tax Act, 1961 is erroneous in so far it is prejudicial to the interest of the revenue in the following manner...."

(emphasis supplied by us)

45. Also, a perusal of the order passed by the Pr. CIT u/s. 263 of the Act dated 30.03.2021, reveals that he had at the very thresold made a mention that subsequent to the culmination of the assessment u/s. 143(3) of the Act dated 28.12.2018, he had perused the records of the assessee for the subject year. For the sake of clarity, the observation of the Pr. CIT is culled out as under: (relevant extract) "1. On subsequent perusal of the record of the assessee for the F.Y.2014-15, it is found that the assessee had earned interest income, as under....."

(emphasis supplied by us) Also, a reference of perusal of the financial statements of the assessee society can be traced in Para-3 of the order passed by the Pr. CIT u/s. 263 of the Act. Further, the Pr. CIT while concluding that the order passed by the A.O was erroneous in so far it was prejudicial to the interest of the revenue in view of "Explanation-2" to Section 263 of the Act, had observed at Para 5 of his order that he had gone through the case records. For the sake of clarity, the relevant observations of the Pr. CIT are culled out as under:

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 "5. I have gone through the case record and submission of the assessee furnished during assessment proceedings and revision proceedings. From the facts narrated above, it is clear that the Assessing Officer has not conducted proper enquiry regarding genuineness of the contention made by the assessee. Therefore, I am satisfied that the assessment order is erroneous in so far as it is prejudicial to the interest of revenue in view of Explanation 2 of Section 263 of the Income tax Act. The A.0 is directed to verify the claim of deduction u/s 80P(2)(d) of the IT Act 1961 on interest received from banks on FDR, FFD, SB interest etc. and verify the claim of expenditure. I, therefore, set aside the assessment order and remand it back to the Assessing Officer for fresh adjudication of the issues discussed herein above by conducting necessary enquiries in this case and framing fresh assessment order after affording adequate opportunities to the assessee."

(emphasis supplied by us)

46. We are of a firm conviction that pursuant to the specific reference of examination of the income tax records of the assessee society by the Pr. CIT in the SCN dated 11.03.2021, and also, similar reference of perusal of the assessment records, financial statements etc. in the body of his order reveals beyond doubt that the case records of the assessee society were called for and examined prior to assumption of jurisdiction by the Pr. CIT u/s. 263 of the Act. In our considered view once the Pr. CIT in the SCN, dated 11.03.2021 had observed that he had examined the records, then it cannot be presumed on the mere say of the assessee that he had without examining the assessment records and application of mind to the same had assumed jurisdiction and issued "show cause" notice to the assessee u/s. 263 of the Act. Our aforesaid view is supported by an analogy that can safely be drawn from a recent order of the Hon'ble High Court of Chhattisgarh in the case of Hitesh Golecha Vs. ACIT, Central Circle-1, Raipur, Tax case Nos. 76 & 79 of 2024, dated 10.04.2024. The Hon'ble High Court in its order had observed as under:

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 "5. The order of the Assessing officer of approval (Annexure - 4) would reflect that Joint Commissioner was satisfied on the basis of the documents on record that such approval was justified. In a given case, it can not be presumed on the mere say of the assessee that no application of mind was there while granting the approval. It is the subjective satisfaction and the language of the (Annexure - 4) would show that on the basis of the document produced before the Joint Commissioner, he was convinced of the fact that such approval would be necessary as the statute mandate.

6. From perusal of the language of the letter (Annexure - 4), we cannot presume that there was no application of mind as the approval need not be a detailed assessment order. The presumption under Section 114 of the Evidence Act would follow when such official Act has been done in accordance with official procedure and will lead to presumption that due diligence was followed. Even otherwise, the order of the ITAT would reflect that the case of appellant was remanded back to the Assessing Officer for fresh adjudication of the issue. Further the liberty was given to the assessee to raise all such issues before the Revenue Authorities and furnish necessary information/evidences in support of his contention. When such right has already been reserved in favour of the assessee, to raise grounds, we do not find that any prejudice has been caused and in fact the ITAT has principally accepted the contention of the appellant and in furtherance to advance the rules of natural justice, opportunity is given to appellant assessee."

(emphasis supplied by us) We, thus, in terms of our aforesaid observations, are unable to persuade ourselves to concur with the contention of the Ld. AR that the Pr.CIT had without calling for and examining the records of the assessee society wrongly assumed jurisdiction by merely acting upon the reasons/report provided by the ACIT-1(1), Raipur and passed the order u/s.263 of the Act.

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023

47. We shall now deal with the Ld. AR's claim that a perusal of the SCN dated 11.03.2021 issued by the Pr. CIT u/s. 263 of the Act, Page 7-12 of APB, and reasons recorded for revising of the assessment order passed by the ACIT-1(1), Raipur revealed that there is a mere transposition of the observations of the A.O, i.e. ACIT-1(1), Raipur and no independent application of mind by the Pr. CIT while assuming jurisdiction u/s. 263 of the Act. The aforesaid contention of the Ld. AR on a conjoint perusal of the SCN dated 11.03.2021 r.w. reasons recorded by the ACIT-1(1), Raipur at the first blush appeared to be very convincing but a careful perusal of the records revealed a different factual position. Ostensibly, the Pr. CIT after perusing the information provided by the ACIT-1(1), Raipur had incorporated the same in the SCN dated 11.03.2021 issued by him u/s. 263 of the Act. However, we are unable to concur with the Ld. AR that the Pr. CIT had merely acted upon bald observations of the ACIT-1(1), Raipur and had failed to independently apply his mind prior to assuming jurisdiction u/s. 263 of the Act. We, say so, for the reason that though the Pr. CIT was convinced with the material infirmities and lapses emanating from the order passed by the A.O u/s. 143(3) of the Act dated 28.12.2018 as was shared with him by the ACIT-1(1), Raipur, but thereafter, he had duly applied his mind for arriving at a prima facie view that the assessment order so passed was erroneous and prejudicial to the interest of the revenue, and based on his said conviction, had called upon the assessee society to explain as to why the same may not be revised u/s. 263 of the Act.

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023

48. On a perusal of the SCN dated 11.03.2021, Para-3-4, we find that the Pr. CIT had after referring to the facts emanating from the record, which revealed that the order passed by the A.O was erroneous and prejudicial to the interest of the revenue u/s.263 of the Act, observed that the A.O while framing the assessment had failed to carry out proper verifications. Also, the Pr. CIT referring to the facts as were narrated in the SCN dated 11.03.2021, had observed that as there was no application of mind by the A.O to correctly bring the income of the assessee society to tax, therefore, assessment order so passed by him was rendered as erroneous in so far it was prejudicial to the interest of the revenue. The Pr. CIT after referring to the facts, based on which, the order passed by the A.O u/s.143(3) dated 28.12.2018 was sought to be revised had called upon the assessee society to explain as to why the said order may not be suitably revised in exercise of powers vested with him, which, inter alia, included the power to set-aside such order. The Pr. CIT had, thereafter, afforded an opportunity to the assessee society to explain its case based on details, documents and necessary evidences along with a word of caution that in case of absence of furnishing of requisite details it would be presumed that it had no objection to the proposed action which shall be accordingly finalized. We are of a firm conviction that though the Pr. CIT had incorporated the reasons recorded by the ACIT-1(1), Raipur, wherein, he after perusing the records had concurred with the A.O that the order passed by his predecessor u/s. 143(3) dated 28.12.2018 suffered from certain infirmities/lapses resulting on account of failure on the latter's part to carry out any verifications, had incorporated the same 73 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 in the body of the SCN dated 11.03.2021, but thereafter, he had independently observed that recourse to the revisional proceedings was being taken for the reason that neither there was any documentary evidence to satisfactorily explain the nature and source of the transactions nor any proper verification was carried out by the A.O. Accordingly, the Pr. CIT had in the SCN dated 11.03.2021 applied his mind and arrived at an independent observation that the A.O while framing the assessment had not carried out proper verifications, which thus, rendered the case amenable for revision u/s. 263 of the Act. We, thus, in terms of our aforesaid observations, are unable to concur with the Ld. AR who had alleged that the Pr. CIT had merely acted upon the borrowed observations of the ACIT-1(1), Raipur and in a mechanical manner without any application of mind to the material before him assumed jurisdiction u/s. 263 of the Act.

49. Also, we are unable to concur with the Ld. AR that the Pr. CIT in exercise of jurisdiction u/s.263 of the Act cannot act upon the information or material provided by his subordinate authorities. As observed by us hereinabove, Section 263 of the Act contemplates that the Pr. CIT for assuming jurisdiction is statutorily required to call for and examine the record of any proceeding under this Act, and if he considers that any order passed by the A.O. is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. Although, the exercise of revisional jurisdiction by the Pr. CIT pre-supposes 74 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 as a sine-qua-non application of mind on his part to the record of any proceedings under the Act, but the same does not come with any such rider which would divest him from acting upon any material or information coming from the subordinate authorities. Admittedly, it is the application of mind by the Pr. CIT to the records before him, which is indispensably required for valid assumption of jurisdiction u/s. 263 of the Act, but the material or information, i.e. the record that would be available before him for examination may come from any source, which would also include details provided by the A.O. It is incomprehensible that the Pr. CIT in exercise of his revisional jurisdiction would be expected to gather the entire material or information on his own and cannot act upon any such material or information that is shared with him by the assessment unit. If the Ld. ARs view is to be accepted, then it would lead to a situation wherein it would be practically impossible for the Pr. CIT to assume jurisdiction u/s. 263 of the Act. In fact, what is required as per the law is that if the Pr. CIT after calling for and examining the records of any proceeding under the Act, considers that any order passed by the A.O. is erroneous in so far as it is prejudicial to the interest of the revenue, then, he can validly assume jurisdiction to revise the said order after affording a reasonable opportunity of being heard to the assessee.

50. In case, any bottlenecks are placed restricting the sources from where information or material can be received by the Pr. CIT, then it would lead to a situation wherein power to exercise revisional jurisdiction would merely be rendered as an academic exercise. Our aforesaid view that where subordinate 75 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 authorities place certain records before the Commissioner pointing out errors and breaches, the CIT is not debarred from exercising the power of revision vested with him u/s. 263 of the Act is supported by the judgment of the Hon'ble High Court of Calcutta in the case of Smt. Sumitra Devi Khirwal vs Commissioner of Income- Tax, (1972) 84 ITR 26 (Cal.). We, thus, are of a firm conviction that merely because the A.O had shared certain material or information with the CIT who thereafter had invoked the powers vested u/s. 263 of the Act, it cannot be said that the CIT had initiated proceedings without application of mind or abdicated his function. After all someone has to place relevant material or information before the CIT. Our aforesaid view is further supported by the order of the ITAT, Kolkata in the case of Karabi Deals (P) Ltd. (2022) 144 taxmann.com. 174 (Kolkata). The Tribunal after relying on the judgment of the Hon'ble High Court of Delhi in the case of ITO Vs. D.G Housing Finance Co. Ltd. (2012) 343 ITR 329 (Delhi) had rejected the claim of the assessee that the Pr. CIT had wrongly assumed jurisdiction u/s. 263 of the Act for the reason that he had acted on the proposal of the A.O and initiated proceedings u/s. 263 of the Act. It was observed by the Tribunal that the information/proposal of the A.O would be nothing more than a "stimuli" for the Pr. CIT which could be either an internal or external source. It was further observed by the Tribunal that the proposal of the A.O would only be suggestive in nature and what was important was application of mind by the Pr. CIT on the records of the case for valid assumption of jurisdiction u/s. 263 of the Act. Accordingly, it was observed by the Tribunal that as the Pr. CIT based on the 76 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 proposal received from the A.O, had after examining the assessment records and applying his mind embarked upon a journey of revisional proceedings, therefore, no infirmity could be attributed to him as regards the assumption of jurisdiction on his part u/s. 263 of the Act.

51. We, thus, in terms of our aforesaid observations are of the view, viz. (i) that the Pr. CIT after receiving the proposal from the ACIT-1(1), Raipur had duly applied his mind to the records before him for arriving at a view that due to certain failure of the A.O to carry out necessary inquiries/verifications the assessment order passed by him u/s.143(3) of the Act dated 28.12.2018 was rendered as erroneous in so far it was prejudicial to the interest of the revenue and thus, validly assumed jurisdiction u/s. 263 of the Act; and (ii) that there was no restriction on the Pr. CIT to have acted upon material placed before him by the A.O for arriving at a prima facie view that the order so passed u/s. 143(3) of the Act being erroneous and prejudicial to the interest of the revenue was amenable for revision u/s. 263 of the Act, thus are unable to concur with the aforesaid contentions advanced by the Ld. AR.

RE : Pr. CIT HAD TAKEN AN INCONSISTENT VIEW AS AGAINST THAT TAKEN BY THE A.O IN THE PRECEDING YEARS.

52. We shall now deal with the contention of the Ld. AR that as the view taken by the A.O while framing the assessment for the subject year, i.e. A.Y.2016-17, was in conformity with that arrived at by his predecessor(s) while framing the 77 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 assessments for the preceding years u/s. 143(3) of the Act, therefore, the Pr. CIT was divested of his jurisdiction u/s. 263 of the Act to adopt a view that was inconsistent with that which was adopted by the department in the said earlier years. The Ld. AR in support of his aforesaid contention had relied on the following judicial pronouncements:

(a) CIT Vs. Excel Industries Ltd. (2013) 358 ITR 295 (SC)

(b) Radhasoami Satsang Vs. CIT (1992) 193 ITR 321 (SC)

(c) Noor Resorts Pvt. Ltd. Vs. Chief CIT (2021) 198 DTR 161, ITAT Chandigarh Bench.

(d) CIT Vs. Kohinoor Foods Ltd. & Ors (2019) 180 DTR 41, High Court of Delhi.

(e) CIT Vs. Hero Auto Ltd. (2012) 343 ITR 342, High Court of Delhi.

(f) CIT Vs. Sumbeam Auto Ltd. (2011) 332 ITR 167, High Court of Delhi

(g) Vashti Management Services Vs. ITO (2011) 52 DTR 88, ITAT, Delhi Bench.

(h) CIT Vs. Leisure Wear Exports Ltd. (2010) 46 DTR 97, High Court of Delhi

(i) CIT Vs. Aunaben Sumankumar (2022) 177 CTR 470, High Cour of Gujrat

(j) CIT Vs. Gabriel India Ltd. (1993) 203 ITR 108, High Court of Bombay

(k) CIT Vs. Amit Corporation (2012) 81 CCH 69, High Court of Gujrat.

53. As observed by us hereinabove, the Ld. AR had submitted that alike the subject year, the assessee society in its return of income for the preceding years, i.e. A.Y.2009-10 to A.Y.2014-15 had returned its income comprising of, viz. (i) agency commission : Re.1/- (Rupee one); and (ii) intertest on its seed capital lying as bank deposits which was claimed as deduction u/s. 80P(2)(d) of the Act. The 78 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 Ld. AR submitted that as the assessee's returned income had been accepted by the department in the preceding years, therefore, there was no justification for the Pr. CIT to have adopted an inconsistent view during the subject year specifically when the fact situation remained the same. Also, the Ld. AR had submitted that the assessee society had alike the year under consideration disclosed interest income/surplus as payable to the primary co-operative societies in the ratio 80 : 15 : 5 which was consistently accepted by the department since inception. Also, the Ld. AR in order to fortify his aforesaid contention had drawn support from the fact that the returns of income of the assessee society for A.Y.2012-13 to A.Y.2014-15 were duly scrutinized and accepted by the A.O's vide their respective orders u/s. 143(3) of the Act. Accordingly, it is the assessee's claim that now when the fact that its income only comprises of commission of Re.1/- (Rupee one) a/w. interest earned on the seed money from co-operative banks which was eligible for deduction u/s. 80P(2)(d) of the Act, had throughout been accepted by the department, therefore, there was no justification for the Pr. CIT to have arrived at a contrary view based on the same set of facts as were there in the preceding years.

54. We have thoughtfully considered the aforesaid claim of the Ld. AR and are unable to persuade ourselves to subscribe to the same. Admittedly, as per the principle of consistency, there is no justification for the department to take a view other than that arrived at based on same set of facts in the preceding years. At the same time, a mistake cannot be allowed to perpetuate in light of the consistency. Also, there is nothing provided u/s. 263 of the Act which restricts the Pr. CIT from 79 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 exercising his powers u/s. 263 of the Act for the reason that a wrong claim raised by the assessee in the preceding years was not dislodged by the department. All that is required as per Section 263 of the Act is that in case if the Pr. CIT finds that the order passed by the A.O is found to be erroneous in so far it is prejudicial to the interest of the revenue, then, he remains well within his jurisdiction to revise the same. Apart from that, we cannot also loose sight of the fact that the department taking cognizance of the fact that the A.Os while framing the assessments in the case of the assessee had failed to verify certain identical aspects, which thus, had rendered their respective orders as erroneous in so far it was prejudicial to the interest of the revenue for A.Y.2015-16, A.Y.2017-18 and A.Y.2018-19 had taken recourse to the corrective mechanism contemplated u/s. 263 of the Act. Apart from that, we find that as had been brought to our notice by the Ld. DR, the erroneous claim of the assessee society had also not been accepted by the department in the succeeding years i.e. A.Y.2019-20 onwards and had been corrected while framing assessments for the said years.

55. Be that as it may, in our view all that is required for the Pr. CIT to exercise the jurisdiction vested with him u/s. 263 of the Act is a cumulative satisfaction of the conditions therein contemplated, i.e. if he considers that any order passed by the Assessing Officer is erroneous in so far it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, revise the order in exercise of powers vested with him under the said statutory provision. As 80 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 nothing is provided in Section 263 of the Act, which jeopardizes the exercise of revisional jurisdiction by the Pr. CIT on the ground that a similar mistake in the preceding year had not been set-right and was allowed to perpetuate, therefore, we find no substance in the Ld. AR's contention who based on the same had tried to circumscribe the scope of jurisdiction of the Pr. CIT u/s. 263 of the Act. Also, we cannot loose sight of the fact that as every assessment year is an independent year and the principle of res-judicata is not applicable to taxing statutes, therefore, on the said count also the aforesaid contention of the Ld. AR does not merit acceptance.

RE : PT.CIT HAD REVISED THE ORDER WITHOUT MAKING OR CAUSING TO BE MADE ANY INQUIRY

56. We shall now deal with the grievance of the Ld. AR that the Pr. CIT had passed the order u/s. 263 of the Act dated 30.03.2021 without satisfying the statutory obligation that was cast upon him, i.e. carrying out either on his own or through the A.O any such inquiries as he deemed necessary before holding the order passed by the A.O as erroneous in so far it was prejudicial to the interest of the revenue u/s. 263 of the Act. As observed by us hereinabove, the Ld. AR had claimed that though the Pr. CIT while exercising jurisdiction u/s. 263 of the Act was statutorily required to arrive at a conclusion that the assessment order was erroneous by conducting necessary inquiries, if required before passing order u/s. 263 of the Act, but he had in the present case failed to do so. Elaborating on his contention, it was the claim of the Ld. AR that the Pr. CIT could not have remanded 81 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 the matter to the file of the A.O to decide whether the findings recored in the order passed by his predecessor were erroneous. The Ld. AR had stated that it is only where the Pr.CIT conducts inquiries and verification and is able to establish and show that error or mistake had crept in the order passed by the A.O making the same unsustainable in law; or the facts on record per-se justified making of further inquiries or investigation but the A.O had wrongly not undertaken the same, it is only then after recording of a clear and unambiguous finding on the said aspect that the CIT can remand the matter to the file of the A.O. The Ld. AR submitted that as the Pr. CIT in the present case had summarily remanded the matter to the file of the A.O by dispensing with the statutory obligation of carrying out the inquiries or verification on his part, based on which the order passed by the A.O was being held by him as erroneous, therefore, the same could not be sustained and was liable to be struck down on the said count itself.

57. We have given a thoughtful consideration to the contentions advanced by the Ld. AR in the backdrop of the orders of the lower authorities and the material available on record. Before proceeding any further, we think it apt to cull out the relevant provisions of Section 263 of the Act to the extent the same would be relevant for adjudicating the aforesaid claim of the assessee, as under: (relevant extract) "263. (1) The Principal 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, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems 82 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 necessary, pass such order thereon as the circumstances of the case justify.....including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.", (emphasis supplied by us) Admittedly, the Pr. CIT as per the mandate of Section 263(1) of the Act before holding the order passed by the A.O as erroneous and prejudicial to the interest of the revenue remains under a statutory obligation to "make" or "cause to be made"

such inquiry as he deems necessary, and therein pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. At the threshold, we may herein observe that the term "as he deems necessary" used in sub-section (1) of Section 263 clearly reveals a subjective view of the Pr. CIT as regards making or causing to be made any inquiry regarding the issues before treating the order passed by the A.O as erroneous and prejudicial to the interest of the revenue. On a careful perusal of the order passed by the Pr. CIT u/s. 263 of the Act dated 30.12.2018, we find that he had after validly putting the assessee society to show cause as regards the issues on which he was of the prima-facie view that the order passed by the A.O u/s. 143(3) of the Act dated 28.12.2018 was erroneous and prejudicial to the interest of the revenue, had after considering the reply filed by the assessee, which as observed by us hereinabove did not divulge the complete details on both the subject issues, on which, the order had been revised, viz. (i) entitlement of the assessee society for claiming deduction u/s.

80P(2)(d) of the Act of the interest on deposits of seed capital claimed to have 83 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 been made with co-operative bank/banks; and (ii) verification of the assessee's claim of expenditure; therefore, we are unable to comprehend as to what inquiry the Pr. CIT was expected to have either carried out on his own or got done from the A.O when the assessee society itself was hesitant to come forth with the complete details. We are of the view that as per Section 263 of the Act the pre-

conditions of making of an inquiry by the revisional authority before passing an order of the revision is qualified with the term "as he deems necessary", therefore, it can safely be concluded that it is for revisional authority to decide considering the facts involved in the case before him as to what inquiry would be necessary in the backdrop of the circumstances of the case before him. As it is the subjective satisfaction of the Pr. CIT as to what inquiry is necessitated in the backdrop of the facts involved in the case before him, therefore, the assessee can have no say as to what inquiry as per him ought to have been carried out by the revisional authority.

58. Be that as it may, the Pr. CIT after carrying out a conjoint perusal of the order passed by the A.O u/s. 143(3) of the Act dated 28.12.2018, and the written submissions of the assessee filed before both during the course of assessment proceeding and revisional proceedings, was of a firm conviction that the A.O had not conducted proper inquiries regarding the genuineness of the contentions made by the assessee society on both the subject issues, viz. (i) entitlement of the assessee society for claiming deduction u/s. 80P(2)(d) of the Act of the interest on deposits of seed capital stated to have made with co-operative bank/banks; and (ii) 84 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 verification of the assessee's claim of expenditure. Accordingly, the Pr. CIT after due application of mind and considering the fact that the assessee society had neither provided the requisite details that were required to substantiate its claim for deduction u/s. 80P(2)(d) of the Act and the expenditure, both in the course of the assessment proceedings as well as in the proceedings before him, therefore, had taken a conscious view that in absence of any such details having been filed before him despite specific directions in the course of the revisional proceedings, the matter was required to be remanded back to the file of the A.O for fresh adjudication of the said issues after conducting necessary inquiries and affording an adequate opportunity of being heard to the assessee society.

59. We are unable to fathom that now when the assessee society on the one hand had neither provided the requisite details substantiating the genuineness of its claim of deduction and expenditure before the A.O nor in the course of the revisional proceedings before the Pr. CIT, then, what inquiry by the revisional authority in absence of the said complete details was expected. The Pr. CIT in our view after considering the circumstances of the case, in all fairness, remanded the matter for fresh adjudication on the aforesaid issues. We, thus, in terms of our aforesaid observations, finding no substance in the claim of the Ld. AR that the Pr.

CIT without carrying out any inquiry had wrongly held the order passed by the A.O u/s. 143(3) of the Act dated 28.12.2018 as erroneous in so far it was prejudicial to the interest of the revenue u/s. 263 of the Act, reject the same.

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 RE : PR CIT HAD PASSED THE ORDER WITHOUT APPLYING HIS MIND TO THE SUBMISSION FILED BY THE ASSESSEE SOCIETY BEFORE HIM

60. We shall now advert to the contention of the Ld. AR that as the Pr. CIT had passed the order u/s. 263 of the Act dated 30.03.2021 without applying his mind regarding the issues, on which, the assessment order dated 28.12.2018 had been set-aside by him, therefore, the same is liable to be set-aside on the said count itself.

61. As observed by us hereinabove, the Ld. AR had submitted that as the order passed by the Pr. CIT is bald, bland and blind in the backdrop of the reply that was filed by the assessee society in response to the SCN dated 11.03.2021, i.e. had passed the order without considering the specific replies to the queries that were raised by him, therefore, the said order deserves to be quashed. It was submitted by the Ld. AR that the non-application of mind by the Pr. CIT both at the stage of assuming jurisdiction and issuing SCN dated 11.03.2021, and passing the order was clearly discernible from the record. Elaborating on his contention, the Ld. AR had stated that not only the Pr. CIT had merely copied the proposal/reasons recorded for revision u/s. 263 of the Act by the ACIT-1(1), Raipur in the body of the SCN dated 11.03.2021, but also had failed to give any cogent reason as to why the order passed by the A.O u/s. 143(3) of the Act dated 28.12.2018 after considering the reply filed by the assessee society was being held by him as erroneous and prejudicial to the interest of the revenue. The Ld. AR in support of his contention that the Pr. CIT was statutorily obligated to have applied his mind after examining 86 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 the records and arrive at a satisfaction that the order so passed by the A.O was erroneous in so far it was prejudicial to the interest of the revenue had drawn support from the following judicial pronouncements:

(a) Dharmendra Kumar Bansal Vs. CIT 101 DTR 377 (JP)

(b) Shantai Exim Ltd. Vs. CIT 136 DTR 313 ( Ahd.)

(c) Alfa Laval Lund AB Vs. CIT (International Taxation), 210 DTR 313 (Pune)

(d) Span Overseas Ltd. Vs. CIT, ITA No.1223/PN/2013 dated 21.12.2015

(e) Sh. Raghuvir Singh Vs. PCIT, ITA No.1132/Del/2022 dated 10.11.2023

(f) Sh. Sanjay Kumar and Sh. Dariyav Singh Vs. Pr. CIT, ITA No.2187 & 2029/Del/2018 dated 28.06.2023.

62. We have thoughtfully considered the aforesaid claim of the assessee in the backdrop of the orders of the lower authorities and the material available on record. Although, it is the claim of the Ld. AR that the Pr. CIT had passed the order u/s. 263 of the Act dated 30.03.2021 without applying his mind to the issues, based on which, the order of the A.O passed u/s. 143(3) of the Act dated 28.12.2018 was held by him as erroneous and prejudicial to the interest of the revenue, but we are unable to concur with the same. As observed by us hereinabove, the Pr. CIT vide SCN dated 11.03.2021 had called upon the assessee society to explain as to why the order passed by the A.O u/s.143(3) dated 28.12.2018 being erroneous and prejudicial to the interest of the revenue on multiple issues may not be revised u/s. 263 of the Act. The Pr. CIT had initially sought to revise the assessment order on multiple issues, but thereafter considering the reply of the assessee and perusing 87 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 the records had confined the revision of the order to only two issues, viz. (i) entitlement of the assessee society for claiming deduction u/s. 80P(2)(d) of the Act of the interest on deposits of seed capital claimed to have made with co-operative bank/banks; and (ii) verification of the assessee's claim of expenditure. In our view, the very fact of initially seeking revising of the assessment order on multiple issues, but thereafter, limiting the same to only two issues in itself reveals due application of mind by the revisional authority. As the assessee society regarding the aforesaid two issues, on which, the Pr. CIT had held the order passed by the A.O u/s. 143(3) of the Act dated 28.12.2018 as erroneous in so far it was prejudicial to the interest of the revenue had not only failed to provide the requisite details to support genuineness of its claim of deduction u/s. 80P(2)(d) of the Act of interest income on deposits and claim for deduction of expenditure in the course of the assessment proceedings, but had also sat-tight in the course of the revisional proceedings and did not come forth with the said details despite specific queries raised by the Pr. CIT, therefore, the latter was constrained to set-aside the issue to the file of the A.O with a direction to him to re-adjudicate the same afresh after affording a reasonable opportunity of being heard to the assessee society. We are of the view that the Pr. CIT in absence of the complete details being made available by the assessee society to support its claim of deduction u/s.80P(2)(d) and expenses was left with no other option but, in all fairness, restore the matter to the file of the A.O for re-adjudication. One can comprehend that in a case where the details as were called for by the revisional authority were though fully made available but the latter 88 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 had without applying his mind to the same had held the order passed by the A.O as erroneous and prejudicial to the interest of the revenue that the assessee would be justified in carrying a grievance that without dislodging the authenticity of his claim and considering the supporting material the revisional authority had without application of mind most arbitrarily held the order as erroneous and prejudicial to the interest of the revenue u/s. 263 of the Act. However, it is incomprehensible that while for the assessee society before us had adopted an evasive approach and failed to come forth with the requisite details not only in the course of the assessment proceedings, but also failed to provide the same despite specific directions by the revisional authority, thereafter, is carrying a grievance that the Pr. CIT had failed to apply his mind to the issues and mechanically revised the order passed by the A.O.

63. Apropos the contention of the Ld. AR that as the Pr. CIT had merely copied the reasons recorded by the ACIT-1(1), Raipur for revising the order passed by the A.O u/s. 143(3) of the Act dated 28.12.2018, the same thus, reveals non- application of mind by the revisional authority at the stage of assuming jurisdiction u/s. 263 of the Act, we have hereinabove separately dealt with and rejected the said contention as per our observations recorded in the preceding paragraph of this order.

64. At this stage, we may herein observe that as held by the Hon'ble Supreme Court in the case of Deniel Merchants (P) Ltd. Vs. Income Tax Officer, (2018) 89 Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023 95 taxmann.com 366 (SC), where the A.O had not made any inquiry while making the assessment and had summarily accepted the explanation of the assessee, the CIT was held to have rightly set-aside such assessment order u/s. 263 of the Act. As in the present case before us, the Pr. CIT by drawing support from the powers vested with him under "Explanation 2(a)" to Section 263(1) of the Act which vested with him the jurisdiction to hold the order passed by the A.O as erroneous and prejudicial to the interest of the revenue, if the same had been passed without making any inquiries which should have been made, had set-aside the assessment order, therefore, the exercise of jurisdiction by him in the backdrop of our aforesaid deliberations does not suffer from any infirmity. For the sake of clarity, "Explanation 2(a)" to Section 263 of the Act is culled out as under: (relevant extract) "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) to (d)............."

(emphasis supplied by us)

65. We, thus, in terms of our aforesaid observations, finding no infirmity in the view taken by the Pr. CIT who in the totality of the facts involved in the case before him, had vide his order u/s.263 of the Act rightly set-aside the assessment order passed by the A.O u/s.143(3) of the Act dated 28.12.2018 with a direction to re- adjudicate the subject issues after affording a reasonable opportunity of being heard to the assessee, uphold the same.

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023

66. In the result, appeal filed by the assessee in ITA No.48/RPR/2021 for A.Y.2016-17 is dismissed in terms of our aforesaid observations. ITA No. 47/RPR/2021, ITA No. 49/RPR/2021 & ITA No.152/RPR/2023

A.Ys.2015-16, 2017-18 & 2018-19

67. As the facts and the issues involved in the captioned appeals remains the same as were there before us in the assessee's appeal in ITA No.48/RPR/2021 for A.Y.2016-17, therefore, the view therein taken shall mutatis-mutandis apply for the purpose of disposing off the captioned appeals i.e. ITA No.47/RPR/2021 for A.Y.2015-16, ITA No.49/RPR/2021 for A.Y.2017-18 and ITA No.152/RPR/2023 for A.Y.2018-19. In these cases also, we, finding no infirmity in the view taken by the Pr. CIT who in the totality of the facts involved in the cases before him, had vide his respective orders u/s.263 of the Act rightly set-aside the assessment order(s) passed by the A.O's u/s.143(3) of the Act dated 20.12.2017, 23.12.2019 and 27.02.2021 with a direction to re-adjudicate the subject issues after affording a reasonable opportunity of being heard to the assessee society, uphold the same.

68. In the result, appeals of the assessee in ITA No.47/RPR/2021 for A.Y.2015- 16, ITA No.49/RPR/2021 for A.Y.2017-18 and ITA No.152/RPR/2023 for A.Y.2018- 19 are dismissed in terms of the aforesaid observations. 91

Chhattisgarh State Minor Forest Produce (Trading and Development) Cooperative Federation Ltd.

ITA Nos. 47 to 49/RPR/2021 ITA No.152/RPR/2023

69. In the result, all the captioned appeals of the assessee society are dismissed in terms of our aforesaid observations.

Order pronounced in open court on 09th day of May, 2024.

              Sd/-                                                Sd/-
         ARUN KHODPIA                                        RAVISH SOOD
      (ACCOUNTANT MEMBER)                                 (JUDICIAL MEMBER)

रायपुर/ RAIPUR ; दनांक / Dated : 09th May, 2024.
***###SB
आदे श क    त ल प अ े षत / Copy of the Order forwarded to :
1. अपीलाथ / The Appellant.
2.   यथ / The Respondent.
3. The Pr. CIT, Raipur-1 (C.G)
4. वभागीय त न ध, आयकर अपील य अ धकरण, रायपुर बच,
रायपुर / DR, ITAT, Raipur Bench, Raipur.
5.     गाड फ़ाइल / Guard File.

                                               आदे शानस
                                                      ु ार / BY ORDER,

          // True Copy //
                                               नजी स चव / Private Secretary
                                       आयकर अपील य अ धकरण, रायपुर / ITAT, Raipur.

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Income Tax Appellate Tribunal - Raipur

Chhattisgarh State Minor Forest ... vs Pr. Commissioner Of Income Tax-1, ... on 9 May, 2024