Income Tax Appellate Tribunal - Mumbai
Saphale Parisar Bigarsheti , Sahkari ... vs Pcit-1, Thane on 31 March, 2023
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "G" MUMBAI
BEFORE SHRI KULDIP SINGH (JUDICIAL MEMBER)
AND
SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER)
ITA No. 190/MUM/2023
Assessment Year: 2017-18
SaphaleParisarBigarshetiSahkariPatsansthaMaryadit, Pr. CIT-1,
Saphale, Ashar IT
Ambika Nagar, Ambika Rice Mill Compound, Vs. Park, 6th
Tandulwadi Road, Umbarpada, Saphale East, Dist floor,
Palghar-401 102. Income Tax
Office,
Wagle
Estate,
Thane-
400604.
PAN No. AAFAS 4609 H
Appellant Respondent
Assessee by : Mr. Unmesh Narvekar, AR
Revenue by : Dr. Kishor Dhule, CIT-DR
Date of Hearing : 20/03/2023
Date of pronouncement : 31/03/2023
ORDER
PER OM PRAKASH KANT, AM
This appeal has been preferred by the assessee against the revision order dated 28.03.2022 passed by the Ld. Principal Commissioner of Income-tax Thane-1 (in short 'the PCIT') for assessment year 2017-18, raising following grounds:
SaphaleParisarBigarshetiSahkari 2 ITA No. 190/Mum/2023
1. The learned Pr. CIT CIT-1, 1, Thane has aggrieved your appellant by setting aside the legally an andd judiciously passed Assessment order u/s 143(3) by the Ld. Assessing
2. The learned Pr. CIT 1, Thane has aggrieved your appellant CIT-1, by not giving reasonable time ( only 7 days' time given) to reply show cause notice and also notprovided opportunity of nal hearing and hastily passed the order in just 3 days' personal time after initial reply cum submission and violated the principle of natural justice.
CIT 1, Thane erroneously passed the order
3. The learned Pr. CIT-1, conceived notion and ordered to redo the with pre-conceived assessment without having any solid reason/groundfor revision.
CIT 1, Thane has exceeded his authority
4. The learned Pr. CIT-1, and passed theuniustified order order without any jurisdiction when he himself has failed to form anopinion that the order passed by the Ld. AO u/s143(3) was erroneous.
CIT 1, Thane has ignored the facts of the
5. The learned Pr. CIT-1, case and various judgments of the Hon'ble High Courts &Hon'blee ITAT Benches where in it was held that power /s 263 is to be used only when both the conditions specified us 263 aresatisfied ie i. the order passed by the AO to be erroneous and ii. it should be prejudicial to the interest of the revenue.
6. The learned Pr. CIT-1,1, Thane ought to have appreciated that the appellant being co operative credit society was co-operative eligible to claim deduction u/s 80(2)(d) of the Act in respect of on fixed deposits earned from co-operative co bank.
7. The learned Pr. CIT-1, CIT Thane ought to have appreciated that the Assessing Officer has allowed deduction u/s 80P(2)(d) of the Act after considering the detailed replies filed by the appellant society during the course of assessment proceedings.
SaphaleParisarBigarshetiSahkari 3 ITA No. 190/Mum/2023
8. The learned Pr. CIT-1, CIT 1, Thane ought to have appreciated app that the view adopted byAssessing Officer cannot be said to be unsustainable or impossible view.
CIT 1, Thane ought to have appreciated
9. The learned Pr. CIT-1, that the provisions of Section 269SS of the Act are not applicable to the appellant society as it run on theconcept of Mutuality. In any case, applicability of provision u/s 266SS was not withinthe limited scrutiny jurisdiction and hence could not have been made base of revisionus 263 of the Act.
10. Your appellant submits that the order of the Pr.
P CIT-1, Thane setting aside the order passed by the Ld AO us 143(3) and ordering to redo the assessment andexamining the applicability of section 269SS be set aside or quashed and restore the original order passed by the Ld AO.
11. Your appellant submits that the re-assessment assessment carried CIT 1, Thane be out based on the saidorder of the LdPr CIT-1, adjudged void an initio and being invalid have no effect on the original assessment save your appellant from unjustified demand and undue financial hardship.
pellant also submits & prays that the appeal be
12. Your appellant admitted by condoning the delay in filing the appeal caused due to prolong illness & subsequent sad demise of the mother of the Chartered Accountant who takes care of the appeal matters ofthe appellant.
our petitioner also submits & prays for either cancelling
13. Your or dropping or grantingstay against all the assessment, penalty and recovery proceedings initiated or maybe initiated in future against your petitioner in this respect till the disposal of this appeal appe
2. At the outset, the Ld. Counsel of the assessee submitted that 20.05.2022 whereas filed on the appeal was due to be filed on 20.05.2022, 19.01.2023, thus, there was a delay of 244 days in filing the present appeal. He referred to the application of the assessee for SaphaleParisarBigarshetiSahkari 4 ITA No. 190/Mum/2023 seeking condonation of the delay filed by the assessee along with affidavit. He submitted delay occurred due to following reasons:
(i) Though the order was received through e-mail, e but not knowing the immediate consequences of the order, the assessee did act immediately,
(ii) The mother of the Chartered Accountant looking after the Income tax matter was almost bed ridden and critical Income-tax during this period, period, therefore he could give time for presentation and preparation/filing of this appeal. He also lost his mother on 06.10.2022 and thereafter, there he was being in GST matter till December 2022.
2.1 We have heard submission of the rival parties on the issue condonation of delay in filing appeal. In our opinion, there is sufficient cause on the part of the assessee in not filing the present appeal on time. The delay is accordingly condoned and appeal is admitted for adjudication.
3. he case are that for the year under Briefly stated, facts of tthe consideration no regular return of income was filed by the assessee. On the basis of the information analyzed from data collected from various banks and processed by the Directorate of Income-tax (System),a notice u/s 14 tax Act, 1961 (in short 142(1)(i) of the Income-tax 'the Act') was issued to the assessee asking to file return of income response, the assessee filed for the year under consideration. In response SaphaleParisarBigarshetiSahkari 5 ITA No. 190/Mum/2023 return of income only on 24.02.2018. In the return of income filed essee declared gross total income of Rs.48,50,102/ the assessee Rs.48,50,102/- and claimed deduction u/s 80P of the Act at Rs.48,50,102/-
Rs.48,50,102/ and, thus offered taxable income at Rs. Nil. The gross total income of Rs.48,50,102/- consisted consist of interest received from loans given to Rs.16,61,819/ interest received from fixed deposits members of Rs.16,61,819/-;interest with other operative co-operative banks of Rs.31,41,927/-
Rs.31,41,927/ and commission received from Maharashtra State Electricity
Distribution Company Ltd. (MSEDCL) for electricity bill collection of the gross total income, the assessee claimed Rs.46,356/-.. Against the deduction u/s 80P(2)(a)(i) of Rs.16,61,819/-;
Rs.16,61,819/ deduction u/s
Rs.46,356/ and deduction
80P(2)(c)(i) of Rs.46,356/- u/s 80P(2)(d) of
Rs.31,41,927/-. In this manner, total deduction under section 80P of Rs.48,50,102/- was claimed claime by the assessee.
4. The Assessing Officer during the course of scrutiny examined the issue of cash deposits of Rs.3,15,000/- in bank account maintained by the assessee with Vasai Vikas Sahakari Bank Ltd. during the demonetization period (09.11.2016 to 30.12.2016) 30 for deposit. The assessee justified that said deposits were collected from the customers for deposits of their electricity bills with MSEDCL, which was one of the permitted activities during the period of demonetization. The Assessing Officer aft after verifying, accepted the claim of the assessee, but denied the deduction SaphaleParisarBigarshetiSahkari 6 ITA No. 190/Mum/2023 relevant to commission income received from MSEDCL electricity bill and accordingly made addition at Rs.46,356/-.
4.1 Subsequently, in the case of the assessee an internal audit objection was raised by the internal audit team of Income-tax Income Department, to the effect that deduction allowed to the assessee for interest income earned on deposits/investment with co co-operative bank ank amounting to Rs.31,41,927/-
Rs.31,41,927/ and on which deduction was Act was not allowable as same was not claimed u/s 80P(2)(d) of the Act, income attributable to the activities of the assessee society.
society The internal audit party also relied on the decision of Hon'ble Supreme Su Court in the case of Totgar Co operative Society vs ITO 322 ITR Co-operative 283(SC) and Karnataka High Court, Dharwad Bench in ITA No. 100069/2016 dated 5/01/2017. This audit objection was not accepted by the Assessing Officer and it was submitted that Tribunal in the case of KaliandasUdhyog Bhavan Premises Co-
operative Society vs. Income-tax Income tax Officer, Mumbai 94 taxmann.com15 (Mumbai-Trib.),the (Mumbai he interest received from Co Co-
operative Banks has been held in the character of interest received from credit co-operative operative so society.
ciety. However, on the direction of the Ld. CCIT, Pune, the Ld. PCIT was of the view that action of the Assessing Officer in allowing the deduction of Rs.31,41,927/ 31,41,927/- u/s 80P(2)(d) in respect of interest received on fixed deposits with other nk was liable for tax under the head 'income co-operative bank ' from other sources' in terms of section 56 of the Act. The Ld. PCIT SaphaleParisarBigarshetiSahkari 7 ITA No. 190/Mum/2023 accordingly issued show cause notice to the assessee u/s 263 of the Act and after taking into consideration submission of the assessee, assessee held the e assessment order passed by the Assessing Officer as erroneous in so far as prejudicial to the interest of the Revenue observing as under:
"5. I have carefully considered the detalls submitted by the assessee. Since, the interest received of Rs. 31,41,927 31,41,927/- by the assessee are from Investments made with Co Co-operative Banks and not from any other Co Co-Operative Operative Socletles, clalm of deduction u/s.BOP(2)(d) of the Act cannot be allowed by treating the same as the income attributable to the scivitas of the assesse Society. Therefore amount of RS.
31,41,927/- being Interest recelved from Investment with op Banks Is not allowable to the assessee within varlous Co-op the provisions of section BOP(2)d) of the I.T. Act, 1961 which reads as under
"(d) in respect of any income by way of interest or dividends co operative soclety from Its investments with derived by the co-operative any other cooperative Society, the whole of such income"
5.1The purpose of granting deduction us. 80P was to creditfacilities in rural areas where the banks encourage the creditfacilities were not willing or were not able to function.The obiect of the society to serve its members by offering the credit facilities is the purpose for which the deduction is available. It is for this purpose 80P(2)(d) has been inserted in the Act to ensure that any surplus of one society may be utilized by other Society to serve their Members. The interest on deposits made with the banks has not been made eligible for deduction us. 80P because of lack of mutuality criteria.
Also, vide Finance Act 2006, deduction from income of Co Co- operativeBanks as per the provisions of Section 80P of the Act, has been withdrawn by way of insertion of Section 80P(4) w.e.f. 1/4/2007 which differentiates a co-operative co bank in comparison to co operative society. It is thus clear co-operative operative bank is a commercial bank and does not that a co-operative SaphaleParisarBigarshetiSahkari 8 ITA No. 190/Mum/2023 fall under the purview of a Co Co-operative operative Society and interest income is not eligible for deduction u/s. 80P(2)(d) of the Income-tax the above, the said tax Act,1961. Hence in view of the deduction is required to be disallowed and added back to income.
The Karnataka High Court in the case of PCIT, Hubli Vs. op. Sale Society 395 IT 611 dated 16.06.2017 (ITA Totgar Co-op.
No. 100066/2016) has decided the issue in favour of the epartment by holding that the interest income earned by department co operative bank does way of deposits of surplus funds In co-operative not change its character and thus clause (d of section 80P(2) of the Act, would not apply in these circumstances Aggrieved with the decision of the Karnataka High Court (PCIT, Hubli Vs. TotgarCo op. Sale Society 395 IT 611 dated 16.06,2017 (IT°A No. 100066/2016)) the assessee has filed SLP which Is pending and as the Issue Is still sub-Judice.
sub
6.Considering the above mentioned facts, I am of the th opinion that theassessment u/s 143(3) made by the A.0. dated prejudic al & erroneous to the interests of the 21.11.2019 Is prejudicial revenue. I therefore, set isle the order of the AO passed u/s 143(3) with the direction to examine the appllcablity of of he Income Tax provisions off section SOP(2)(4) and 269ss ofvhe Act, 1961 61 and to redo the assessment after, af ter, affording adequate opportunity to the assessee."
assessee.
5. We have heard rival submission of the parties on the issue issue-in-
dispute and perused the relevant material on record record. Before us, the issue in dispute is whether the assessment order passed by the Assessing Officer is erroneous in so far as prejudicial to the interest of the revenue on two accounts, firstly,, allowing deduction u/s 80P(2)(d) od the Act wrongly, secondly, non-initiation initiation of penalty u/s 269SS of the Act. As far as first reason of 263 proceedings is he Ld. Counsel of the assessee contended that similar concerned, the action u/s 263 in the cases case of other co-operative operative societies has been SaphaleParisarBigarshetiSahkari 9 ITA No. 190/Mum/2023 vacated by the Pune Bench of the Tribunal in ITA No. 303/Pun/2022 in the case of Pragati Gramin BigarshetiSahakariPatsansthaMaryadit& Others v. PCIT PCIT.The Ld. Counsel submitted that the co operative banks are primarily co co-operative co-
operative societies and therefore, the interest received from deposits de with co-operative operative banks has been correctly claimed as deduction u/s 80P(2)(d) of the Act. The Ld. DR on the other hand, relied on the decision of the Karnataka High Court in the case of PCIT v. Totgar Co-op op Sales Society 393 ITR 611 (supra) cited by the Ld. PCIT in the impugned order. We find that the issue of claim of deduction u/s 80P(d) of the Act has been dealt by the Tribunal in the case of Pragati Gramin BigarshetiSahakariPatsansthaMaryadit& Others (supra) and action of the PCIT u/s 263 has bee been he relevant finding of the Tribunal is reproduced as overturned.The under:
6. Coming to the cases of eligibility of deduction "6.
u/s.80P(2)(d), the respective assessees are Cooperative credit societies engaged in providing credit facilities to its members. The ld. PCIT has held the assessment order to be erroneous and prejudicial to the interest of the Revenue only on the ground that the claim of deduction u/s.80P on interest int income was not in order. In this regard, it is observed that operative banks, other than primary agricultural though co-operative co operative agricultural and rural credit society or a primary co-operative development bank, are not eligible for deduction pursuant to tion of section 80P(4) w.e.f. 1.4.2007, but this provision insertion does not dent the otherwise eligibility u/s 80P(2)(d) of the Act of a cooperative society on interest income on co operative bank, investments/deposits parked with a co-operative which is a registered co-operative co ive society as per section 2(19) co operative society to mean a co-
of the Act, defining co-operative co SaphaleParisarBigarshetiSahkari 10 ITA No. 190/Mum/2023 operative society registered under the Co-operative Co operative Societies Act, 1912 or under any law for the time being in force. The assessees are also Co-operative Co ered.
society registered.
7. Similar view has been taken by the Pune Benches of the Tribunal in several cases including The Sesa Goa Employees Coop. Credit Society Ltd. Vs. ACIT (ITA No.203/PUN/2019, order dated 16-11-2022).
168. In view of the fact that the Pune Benches of tthe he Tribunal in series of decisions have held that the assessees are entitled to deduction u/s.80P(2)(a)(i)/80P(2)(d) in respect of interest income, we hold that the impugned orders cannot be sustained. All the orders are, therefore, overturned."
overturned.
5.1 d that in view of various decisions discussed by the We find Tribunal (supra), the action of the Assessing Officer in allowing deduction u/s 80P(2)(d) is not being erroneous, erroneous the order of the Ld. PCIT to the extent is set aside. As far as the direction of the Ld. the PCIT for examining the applicability of section 269SS is e find that the Ld. PCIT has nowhere issued any show concerned,we cause to the assessee for invoking provision of section 269SS and therefore any such action by the Ld. PCIT is not justified being in iolation of the principles of natural justice. We find the Hon'ble violation Bombay High Court in the case of PCIT Vs Universal Music India P Ltd in ITA 238 of 2018 in judgment dated 19/04/22 has held that if particular issue has not been raised in show cause notice issued u/s 263, then assessment order can't be revised to that extent.. The relevant finding of the Hon'ble high court is reproduced as under:
SaphaleParisarBigarshetiSahkari 11 ITA No. 190/Mum/2023 "7.
7. It is true that the Apex Court in Amitabh Bacchan (supra) has held, all that CIT is required to do before reaching r his decision and not before commencing the enquiry, CIT must give the assessee an opportunity of being heard. It is true that the Judgment also says no notice is required to be issued. But in the case at hand, there is a finding of fact by the ITAT that no show cause notice was issued and no issue was ever raised by the CIT regarding payments made to persons specified under Section 40A(2)(b) of the Act before reaching his decision in the Order dated 20th March, 2013. If that was not correct certainly certainly the order of the CIT would have mentioned that an opportunity was given and in any case, if there were any minutes or notings in the file, revenue would have produced those details before the ITAT. 8. In Amitabh Bachchan (supra), the Apex Court came to a finding that ITAT had not even recorded any findings that in the course of the suo motu revisional proceedings opportunity of hearing was not offered to the assessee and that the assessee was denied an opportunity to contest the facts on the basis of which h the CIT had come to its conclusions as recorded in his order under Section 263 of the Act. It will be useful to reproduce paragraphs 10, 11 and 13 of Amitabh Bachchan (supra) and the same read as under : "10. Reverting to the Section 263 of the Act what has to be specific provisions of Section seen is that a satisfaction that an order passed by the Authority under the Act is erroneous and prejudicial to the precondition for exercise interest of the Revenue is the basic precondition of jurisdiction under Section 263 of the Act. Act. Both are twin conditions that have to be conjointly present. Once such satisfaction is reached, jurisdiction to exercise the power would be available subject to observance of the principles of natural justice which is implicit in the requirement cast by the Section to give the assessee an opportunity of being heard. It is in the context of the above position that this Court has repeatedly held that unlike the power of reopening an assessment under Section 147 of the Act, the power of Section 263 is not contingent on the giving of a revision under Section notice to show cause. In fact, Section 263 has been understood not to require any specific show cause notice to be served on the assessee. Rather, what is required under the said provision is an opportunity of he aring to the hearing assessee. The two requirements are different; the first would comprehend a prior notice detailing the specific grounds on SaphaleParisarBigarshetiSahkari 12 ITA No. 190/Mum/2023 which revision of the assessment order is tentatively being proposed. Such a notice is not required. What is contemplated by Section 263, is an opportunity of hearing to be afforded to the assessee. Failure to give such an opportunity would render the revisional order legally fragile not on the ground of lack of jurisdiction but on the ground of natural justice. Reference in this violation of principles of natural regard may be illustratively made to the decisions of this Court in Gita Devi Aggarwal vs. CIT [1970] 76 ITR 496 and in CIT v. Electro House [1971] 82 ITR 824 (SC). Paragraph 4 of the decision in Electro House (supra) being illumination of the issue indicated above may be usefully reproduced hereunder: "This section unlike Section 34 does not prescribe any notice to be given. It only requires the Commissioner to give an opportunity to the assessee of being heard. The section does not speak of any notice. It is unfortunate that the High Court failed to notice the difference in language between Sections 33-B33 B and 34. For the assumption of jurisdiction to proceed under Section 34, the notice as prescribed in that section is a con dition precedent. But no condition 33 B. The jurisdiction such notice is contemplated by Section 33-B. of the Commissioner to proceed under Section 33-B 33 is not dependent on the fulfilment of any condition precedent. All that he is required to do before reaching his decision decisi and not before commencing the enquiry, he must give the assessee an opportunity of being heard and make or cause to make such enquiry as he deems necessary. Those requirements have nothing to do with the jurisdiction of the Commissioner.
They pertain to the region of natural justice. Breach of the principles of natural justice may affect the legality of the order made but that does not affect the jurisdiction of the Commissioner. At present we are not called upon to consider whether the order made by the Commissioner is vitiated because of the contravention of any of the principles of natural justice. The scope of these appeals is very narrow. All that we have to see is whether before assuming jurisdiction the Commissioner was required to issue a notice nd if he was so required what that notice should have and contained? Our answer to that question has already been made clear. In our judgment no notice was required to be issued by the Commissioner before assuming jurisdiction to proceed under Section 33-B. 33 erefore the question what that Therefore notice should contain does not arise for consideration. It is SaphaleParisarBigarshetiSahkari 13 ITA No. 190/Mum/2023 not necessary nor proper for us in this case to consider as to the nature of the enquiry to be held under Section 33 33-B. Therefore, we refrain from spelling out wha whatt principles of natural justice should be observed in an enquiry under Section 33B.B. This Court in Gita Devi v. CIT, West Bengal ruled that Section 33-B 33 B does not in express terms require a notice to be served on the assessee as in the case of Section
34. Section ection 33 B merely requires that an opportunity of being 33-B heard should be given to the assessee and the stringent requirement of service of notice under Section 34 cannot, therefore, be applied to a proceeding under Section 33 33-B." (Page 827828).
828). [Note: Section
Sec 33-BB and Section 34 of the
Income Tax Act, 1922 corresponds to Section 263 and Section 147 of the Income Tax Act, 1961] 11. It may be that in a given case and in most cases it is so done a notice proposing the revisional exercise is given to the assessee asses indicating therein broadly or even specifically the grounds on which the exercise is felt necessary. But there is nothing in the section (Section 263) to raise the said notice to the status of a mandatory show cause notice affecting the initiation of he exercise in the absence thereof or to require the C.I.T. to the confine himself to the terms of the notice and foreclosing consideration of any other issue or question of fact. This is not the purport of Section 263. Of course, there can be no dispute that while the C.I.T. is free to exercise his jurisdiction on consideration of all relevant facts, a full opportunity to controvert the same and to explain the circumstances surrounding such facts, as may be considered relevant by the assessee, must be afforded to him by the C.I.T. prior to the finalization of the decision. 13. The above ground which had led the learned Tribunal to interfere with the order of the learned C.I.T. seems to be contrary to the settled position in decisions of this Court law, as indicated above and the two decisions in Gita Devi Aggarwal (supra) and M/s Electro House (supra). The learned Tribunal in its order dated 28th August, 2007 had not recorded any finding that in course of the suo motu revisional proceedings, hearing of which was spread er many days and attended to by the authorized over representative of the assessee, opportunity of hearing was not afforded to the assessee and that the assessee was denied an opportunity to contest the facts on the basis of which the learned C.I.T. had come to his conclusions as recorded in the order dated 20th March, 2006. Despite the SaphaleParisarBigarshetiSahkari 14 ITA No. 190/Mum/2023 absence of any such finding in the order of the learned Tribunal, before holding the same to be legally unsustainable the Court will have to be satisfied that in the course of ththe revisional proceeding the assessee, actually and really, did not have the opportunity to contest the facts on the basis of which the learned C.I.T. had concluded that the order of the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. The above is the question to which the Court, therefore, will have to turn to." 9. In the case at hand, there is a finding by the Tribunal, as noted earlier, that no issue was raised by the CIT in respect of particulars of payment made to persons specified under Section 40A(2)(b) of the Act and even the show cause notice is silent about that. 10. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are pr properly operly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law."
law.
5.2 Respectfully following the finding of Hon'ble High Court (Supra), the PCIT can't revise the assessment order on the issue of penalty for violation of 269SS of the Act.
5.3 order of the Ld. PCIT is set aside, both on the Accordingly, the order ility of section 80P(2)(d) and 269SS of the Act. ground of applicability The grounds of appeal of the assessee are accordingly allowed.
6. In the result, the appeal filed by the assessee is allowed.
03/2023.
Order pronounced in the open Court on 31/03/2023.
Sd/- Sd/
Sd/-
(KULDIP
KULDIP SINGH
SINGH) OM PRAKASH KANT)
(OM
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai;
SaphaleParisarBigarshetiSahkari 15 ITA No. 190/Mum/2023 Dated: 31/03/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. CIT
4. DR, ITAT, Mumbai
5. Guard file.
BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai