Shree Motabhela Seva Sahakari Mandali Ltd. , At, Motabhela, Tal. Maliya Miyana, Dist. Morbi V. The Pr. CIT-1, Rajkot, Rajkot

ITA 148/RJT/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3845 (ITAT-RAJKOT)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 31-01-2024
• Assessment Year: 2018-2019
• Appeal Filed On: 15-05-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 263; 143(3); 80P; 72

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (Conducted through E-Court at Ahmedabad) BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I .T .A . N o .1 4 8 /R j t /2 02 3 ( A s se ss m e nt Y e a r : 20 18- 1 9 ) Sh r ee M o ta b h e la S e v a Sa ha ka ri Ma n d ali L td ., C/ o . Sa rd a & Sa r d a , C A s, 1 s t F lo or , “ S ak a r ” , Dr . R a d ha kr is hn a n R o a d, Op p. R aj k u m ar C ol le g e, Ra j ko t- 3 6 00 01 V s.Th e P r i nc ip a l C o mm i s si o n er o f I n co m e T a x - 1 , R a j ko t [P AN N o.A A A A S2 5 9 1R] (Appellant) . . (Respondent) Appellant by : Shri Vimal Desai, A.R. Respondent by: Shri Shramdeep Sinha, CIT DR D a t e of H ea r i ng 01.02.2024 D a t e of P r o no u n ce me nt 15.02.2024 O R D E R PER SIDDHARTHA NAUTIYAL, JM: This appeal has been filed by the assessee against the order passed by the Ld. Principal Commissioner of Income Tax-1, (in short “Ld. PCIT”), Rajkot in DIN & Order No. ITBA/REV/M/REV5/2022- 23/1050963298(1) vide order dated 19.03.2023 passed for Assessment Year 2018-19. 2. The assessee has taken the following grounds of appeals:- “1. The order u/s. 263 of the Act is bad in law. 2. The learned Pr. CIT has erred in law as well as on facts in not considering the submissions of the appellant on the strength of which the assessment order was ITA No.148/Rjt/2023 Shree Motabhela Seva Sahakari Mandali Ltd. vs. PCIT Asst.Year –2018-19 - 2 - neither erroneous nor prejudicial to the interest of revenue and therefore, the provisions of Section 263 of the Act were not applicable to the case of the appellant. 3. The learned Pr. CIT has erred in law as well as on facts in setting aside the assessment order passed by the ld. A.O. u/s. 143(3) and directing de-novo assessment for verification of the eligibility of deduction claimed of Rs. 69,08,803/- u/s. 80P(2)(d) in respect of interest earned from the Co-operative Bank. The appellant craves leave to add, alter, amend, delete or withdraw one or more grounds of appeal.” 3. The brief facts of the case are that the Ld. PCIT initiated the proceedings under Section 263 on the ground that the assessee had shown interest income of Rs. 69,08,803/- in the return of income but as per the details submitted in the course of assessment proceedings, the interest income received from its members was Rs. 61,21,056/-. On this basis, the Ld. PCIT was of the view that the differential amount of Rs. 7,87,747/- was received from Co-operative bank which was not eligible for deduction under Section 80(2)(d) of the Act. Thereafter, the Id. PCIT has passed order under Section 263 setting aside the assessment order under Section 143(3) on the alleged ground that the deduction of Rs.69,08,803/- claimed under Section 80P(2)(d) of the Act in respect of interest income wholly received from Co-operative Bank is not eligible for deduction under Section 80P(2)(d) of the Act. 4. The assessee is in appeal before us against the order passed by PCIT under Section 263 of the Act. 5. Before us, the Counsel for the assessee submitted that the case of the assessee was originally selected for Limited Scrutiny Assessment for ITA No.148/Rjt/2023 Shree Motabhela Seva Sahakari Mandali Ltd. vs. PCIT Asst.Year –2018-19 - 3 - the following issues, which is evident from Page No. 1 of the assessment order dated 23.02.2021: i. Investments/Advances/Loans ii. Disallowance u/s. 40(9) (Contribution to Fund, etc.) iii. Disallowance u/s. 40A(7) (Gratuity provision) 6. However, Ld. PCIT exercised the jurisdiction under Section 263 of the Act in respect of deduction claimed under Section 80P of the Act by the assessee. It was submitted that the said claim of deduction was not within the purview of examination of the Assessing Officer in limited scrutiny assessment and therefore, the order of the AO cannot be treated as erroneous. In view of this, it was submitted that the issue taken up by the ld. PCIT for revision under Section 263 was beyond the scope of limited scrutiny and therefore, the impugned order passed by the Ld. PCIT under Section 263 of the Act deserves to be quashed. Reliance was placed on the following of Rajkot ITAT in this regard: (i) Mrs. Trushaba C. Manek (L/h. of Late Shri Chandrasinh P. Manek) vs. PCIT in ITA No. 91/Rjt/2021 decision dated 29.08.2023 (ii) M/s. Lion Palace vs. PCIT in ITA No. 106/Rjt/2022 decision dated 08.12.2023 (iii) Prashantsinh Ajitsinh vs. PCIT in ITA No. 123/Rjt/2022 decision dated 24.02.2023 ITA No.148/Rjt/2023 Shree Motabhela Seva Sahakari Mandali Ltd. vs. PCIT Asst.Year –2018-19 - 4 - 7. Further, without prejudice to the above explanation, it was also submitted that the ground of Ld. PCIT that interest income received from Co-operative Bank is not eligible for deduction under Section 80P(2)(d) of the Act is also legally not correct. This issue is already covered in favour of the appellant by virtue of the decision of the Hon'ble Rajkot ITAT wherein the revision under Section 263 was disapproved by the ITAT on the very same issue of deduction under Section 80P(2)(d) of the Act in respect of dividend income or interest income derived from the Co-operative Bank. Reliance was placed on the following judicial precedents in support of the contention: (i) Rajkot Jila Sahakari Kharid Vechan Sangh Limited in ITA No. 49/Rjt/2022 decision dated 09.08.2023 (ii) TIFS Credit Cooperative Society in ITA No. 115/Rj/2023 decision dated 23.08.2023 8. Further, it was submitted that in the following judicial pronouncements, it has been decided that the benefit of deduction under Section 80P(2)(d) is available in respect of interest income from Co- operative Banks: (i) Hon’ble Gujarat High Court in case of Surat Vankar Sahakari Sangh Ltd. – 72 taxmann.com 169 (ii) Rajkot ITAT in case of M/s. Surendranagar District Co- operative Milk Producers Union Ltd. vs. DCIT – 111 taxmann.com 69 ITA No.148/Rjt/2023 Shree Motabhela Seva Sahakari Mandali Ltd. vs. PCIT Asst.Year –2018-19 - 5 - (iii) Hon’ble Karnataka High Court in case of PCIT vs. Totagars Co-operative Sale Society – 78 taxmann.com 169 9. Further, it was submitted that in the most recent decision dated 18.07.2023 in the very same case of Totagar Co-operative Sale Society Ltd., Bangalore ITAT in ITA No. 376 to 379/Bang/2023 held that income earned by a cooperative society on its investments held with a cooperative bank would be eligible for claim of deduction under Section 80P(2)(d) of the Act. In this decision, the earlier SC judgment and Karnataka HC judgment both have been duly considered by the Bangalore ITAT while deciding the issue in favour of the assessee. It was further submitted that in the recent judgment dated 10.10.2023 in the case of Thorapadi Urban Coop Credit Society Ltd. (156 taxmann.com 419), the Hon'ble Madras High Court has also allowed the benefit of Section 80P(2)(d) on the income earned from investments with co-operative bank. 10. In view of the above judicial pronouncements, it was submitted that the order of the AO cannot be treated as erroneous and therefore, the Ld. PCIT could not have exercised the jurisdiction under Section 263 of the Act. Without prejudice to the above, it was also submitted that even if the contrary view of the Ld. PCIT is considered for a moment, it will be a case of debatable position having two possible legal views. Even in this situation, it will not be open for Ld. PCIT to exercise the jurisdiction under Section 263 of the Act as the AO has taken a plausible view in the matter which is not erroneous. The reliance placed on the decision ITA No.148/Rjt/2023 Shree Motabhela Seva Sahakari Mandali Ltd. vs. PCIT Asst.Year –2018-19 - 6 - of Hon'ble Supreme Court in case of CIT vs. Max India Ltd. in 166 Taxman 188 in support of the above contention. 11. In response, the Ld. DR placed reliance on the observations made by PCIT in the 263 order. 12. We have heard the arrival contentions and perused the material on record. We concur with the views of the counsel for the assessee that PCIT cannot enhance the scope of limited scrutiny proceedings by restoring to proceedings under section 263 of the Act. In this case, the assessment proceedings had been initiated for examining the following issues: (i) Investments/Advances/Loans (ii) Disallowance u/s. 40(9) (Contribution to Fund, etc.) (iii) Disallowance u/s. 40A(7) (Gratuity provision) 13. However, in the 263 proceedings, the PCIT sought to revise the assessment order on the ground of non-consideration of claim of deduction of interest under Section 80P of the Act. In our view, this is not permissible in light of various judicial precedents, on the subject, as highlighted in the preceding paragraphs which have held that it is not open to the PCIT, while exercising powers under Section 263 of the Act, to find fault with assessment order on the ground of it being erroneous on an issue not covered by the scope of limited scrutiny assessment, when the Assessing Officer could not have possibly examined such issue under limited scrutiny assessment. The Courts in various decisions have held ITA No.148/Rjt/2023 Shree Motabhela Seva Sahakari Mandali Ltd. vs. PCIT Asst.Year –2018-19 - 7 - that in case of limited scrutiny, the Assessing Officer could not go beyond the reason for which the matter was selected for limited scrutiny and thus, it would not be open to the Principal Commissioner to pass revisionary order under Section 263 of the Act on aspects other those forming part of limited scrutiny assessment and remit the matter to the Assessing Officer for fresh observation. Therefore, for the aforesaid reason, we hereby set aside the 263 order and hold that the assessment order, is not erroneous and prejudicial to the interest of the revenue. 14. In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 15/02/2024 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 15/02/2024 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, राजोकट / DR, ITAT, Rajkot 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार Dy./Asstt.Registrar) आयकर अपील य अ धकरण, राजोकट / ITAT, Rajkot 1. Date of dictation 12&14.02.2024(Dictation given on Dragon software by Hon’ble Member) 2. Date on which the typed draft is placed before the Dictating Member 12&14.02.2024 3. Other Member..................... 4. Date on which the approved draft comes to the Sr.P.S./P.S 13&14.02.2024 5. Date on which the fair order is placed before the Dictating Member for pronouncement .02.2024 6. Date on which the fair order comes back to the Sr.P.S./P.S 15.02.2024 7. Date on which the file goes to the Bench Clerk 15.02.2024 8. Date on which the file goes to the Head Clerk.......................................... 9. The date on which the file goes to the Assistant Registrar for signature on the order.......................... 10. Date of Despatch of the Order.......................................... 11.