SHIVKRIPA SAHAKARI PATPEDHI LTD, MUMBAI V. PCIT-29, MUMBAI

ITA 1672/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8644 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2014-2015
• Appeal Filed On: 20-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: YASHVANT BHASKAR
• Keywords: Earning of tax free income; Set aside
• Section: 143(3); 142(1); 143(1); 80P; 143(2); 263

Judgement Text

INTHEINCOMETAX APPELLATETRIBUNAL MUMBAI BENCHGMUMBAI BEFORE SHRI S. RIFAURRAHMAN(ACCOUNTANT MEMBER)AND SHRI PAVANKUMARGADALE (JUDICIAL MEMBER) ITANO.1672/MUM/2019 ASSESSMENT YEAR:2014-15 SHIVKRUPASAHAKARI PATPEDHI LTD., 219/3111, GROUP NO. 1, DR. AMBEDKARCHOWK, TAGORENAGAR, VIKHROLI (EAST), MUMBAI-400083. VS. THEPCIT-29, C-10, 3 RD FLOOR, PRATYAKSH KAR BHAVAN, BANDRAKURLA COMPLEX, BANDRA (EAST), MUMBAI-400051. PANNO. AAAAS3870 K APPELLANT RESPONDENT ASSESSEEBY : MR. KISHORPHADKE, AR REVENUEBY : MR. YASHVANT BHASKAR, DR DATE OF HEARING : 10/05/2021 DATE OF PRONOUNCEMENT : 12/07/2021 ORDER PER S.RIFAUR RAHMAN, A.M. THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED U/S 263 OF THE INCOME TAX ACT, 1961 (IN SHORT ACT) PASSED BY THE PR. COMMISSIONEROFINCOMETAX-3,MUMBAI (IN SHORT PR.CIT). 2. THE BRIEF FACTS OF THE CASE ARE, ASSESSEE FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2014-15 ON 28.09.2014 DECLARING TOTAL INCOME OF RS. NIL. THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (IN SHORT ACT). SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS SELECTION. ACCORDINGLY, STATUTORY NOTICES U/S 143(2) AND 142(1) WERE ISSUED AND SERVED SHIVKRUPA SHAKARI ITA NO. 1672/M/2019 2 ON THE ASSESSEE. IN RESPONSE, THE AR OF THE ASSESSEE ATTENDED AND FILED THE RELEVANT INFORMATION AS CALLED FOR.SUBSEQUENTLY, THE ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED ON 19.12.2016, IN THE RETURN OF INCOME ASSESSEE HAD CLAIMEDDEDUCTIONU/S80POFTHEACTTOTHEEXTENTOFRS.15,02,44,211/-ANDTHE ASSESSINGOFFICERALLOWEDTHEABOVEDEDUCTIONCLAIMEDBYTHEASSESSEEU/S80P ANDTHETOTAL INCOME WASASSESSEDAT RS.20,76,874/- 3. THE LD. PR. CIT-29, MUMBAI ON VERIFICATION OF THE ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE ACT, OBSERVED THAT IN THE ORIGINAL ASSESSMENT, THE ASSESSING OFFICER NOTICES FROM INCOME AND EXPENDITURE ACCOUNT THAT ASSESSEE HAD MADE INVESTMENT IN THE VARIOUS BANKS INCLUDINGCO- OPERATIVE BANKS AND EARNED INTEREST INCOME OF RS.24,75,98,759/- ON BANK DEPOSITS AND OTHER INCOME OF RS.13,78,137/-. LD. PR. CIT OBSERVED THAT THE ASSESSEE HAS NOT OFFERED THE SAME FOR TAXATION AND CLAIMED EXEMPTION U/S 80P(2)(A), 80P(2)(D) AND 80P(2)(E) OF THE ACT, WHICH WAS ALLOWED BY THE ASSESSING OFFICER AND NO ADDITION WAS MADE TOWARDS INTEREST INCOME NOT OFFEREDFORTAXATION. LD.PR.CITOBSERVEDTHATASPERPROVISIONOFSECTION80P(2)(C)INTHECASE OF CO-OPERATIVE SOCIETY ENGAGED IN THE ACTIVITIES OTHER THAN THOSE SPECIFIC IN CLAUSES (A), (B) IN ADDITION TO OR ANY OTHER ACTIVITIES SO SPECIFIED SO MUCH OF ITS PROFIT AND GAIN ATTRIBUTABLE TO SUCH ACTIVITIES, THERE SHALL BE ALLOWED DEDUCTION OFSUMDOESNOTEXCEEDRS.50,000/-.HEOBSERVEDTHATTHEASSESSEESHOULDHAVE DISCLOSED THE NATURE AND SOURCE OF INTEREST INCOME ON BANK DEPOSITSANDOTHER INCOME BEFORE THE ASSESSING OFFICER DURINGASSESSMENT PROCEEDINGS. SINCE, THE ASSESSEE FAILED TO DO SO AND THE ASSESSING OFFICER FAILED TO MAKE ANY INQUIRY RELATING TO THE ISSUE OF INTEREST INCOME OF BANK DEPOSITS AND OTHER INCOME. ON SHIVKRUPA SHAKARI ITA NO. 1672/M/2019 3 FAILURE ON THE PARTOFASSESSINGOFFICERTOENQUIREANDEXAMINE THE TAXABILITYOF INTEREST INCOME OF BANK DEPOSITS AND OTHER INCOME DURING THIS PERIOD, THE ASSESSMENT ORDER DATED 19.12.2016 APPEAR TO BE PRIMA FACIE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. ACCORDINGLY, HE ISSUED NOTICE U/S 263 OF THE ACT TO THE ASSESSEE WITH THE ABOVE FACTS ON THE RECORD AND ASSESSEE WAS ASKED WHY THE ASSESSMENT ORDER PASSED U/S 143(3) SHOULD NOT BE REVISED U/S 263 OF THE ACT. IN RESPONSE TO THE ABOVE SHOW CAUSE NOTICE, ASSESSEE FILED THE FOLLOWING SUBMISSIONS BEFORE LD. PR. CIT, FOR THE SAKE OF CLARITY IS REPRODUCED BELOW: EXPLANATION : 1- REGARDING TAXABILITY OF INTEREST INCOME RECEIVED FROM CO-OPERATIVE BANKS. SHIVKRIPASAHAKANPATPEDHILTDISAREGISTEREDCO-OPERATIVESOCIETY,REGISTEREDBYTHE REGISTRAR OF CO-OPERATIVE SOCIETIES, MUMBAI. THE MAIN OBJECT OF THE SOCIETY IS PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND COLLECT DEPOSITS FROM THEM. THE GROSS TOTALINCOMEINCLUDESANYINCOMEREFERREDTOINSUBSECTION(2),INCOMPUTINGTHETOTAL INCOME OFTHE ASSESSEE. AS PER SECTION80P(2)(A)(I)(D)IN RESPECT OF ANY INCOME BY WAY OFINTEREST OR DERIVED BYCO-OPERATIVESOCIETYFROMITSINVESTMENTWITHOTHERCO-OPERATIVESOCIETY,WHOLEOF SUCHINCOMEIS EXEMPT FROM INCOME FAXACT, 1961. IN PRISON CASE THE SHIVKRUPA SAHAKARI PAIPEDHI LTD HAS CLAIM THE TOTAL INCOME OF RS.15,02,44,210/- ASEXEMPTU/S80P(2)(A)(I) & (D) AS EXEMPT INCOME. WE HAVE RECEIVED INTEREST INCOME OF RS.24,75,93,759.47 FROM INVESTMENT IN COOPERATIVEBANK, NATIONALIZEDBANKANDPUBLICSECTORBANKANDCOMMISSIONINCOME. ON 15/12/2017 WE HAVE PAID ADVANCE TAX OF RS.1,79,000/-ON INTEREST INCOME RECEIVED FROM NATIONALIZEDBANKS, PRIVATESECTOR BANK ANDONCOMMISSIONINCOME. CBDT HAS ISSUED NOTIFICATION IN ASPECT OF INTEREST INCOME OF CO-OPERATIVE SOCIETY IS INCOMEFROMTHE BUSINESSAND NOTFROMTHE OTHERSOURCES HENCEIT ISALLOWABLEUNDER SECTION 80P OFTHE INCOMETAX ACT,1961. SHIVKRUPA SHAKARI ITA NO. 1672/M/2019 4 IN RESPECT OF INTEREST INCOME RECEIVED FROM CO-OPERATIVE BANK-AS PER SUCTION 80P(2)(A)(I)(D)INRESPECTOFANYINCOMEOYWAYOFINTERESTORDIVIDENDDERIVEDBYCO- OPERATIVE SOCIETY FROM ITS INVESTMENT OTHER CO-OPERATIVE SOCIETY, WHOLE OF SUCH INCOME IS EXEMPT FROM THE INCOME TAX ACT, 1961. A CO-OPERATIVE BANK HAS TO FIRST REGISTERED WITH REGISTRAR OF SOCIETIES AS A SOCIETY UNDER MAHARASHTRA STATE COOPERATIVESOCIETIESACT 1960 ANDTHENHAS OBTAIN BANKINGLICENCEFROMRBI. AS PER MSC ACT 1960 WE HAVE TOKEPT 30% OF DEPOSIT ACCEPTED FROM OUR MEMBERS AS LIQUIDITY FOR REPAYING DEPOSITS ON DEMAND OR ONMATURITY. WEHAVE INVESTEDHIS 30% AMOUNT INTHESE BANKS. HENCE INVESTMENTIS FOR OURBUSINESS PURPOSE. TOTGAR CO-OPERATIVE SALE SOCIETY CASE GIVEN IN THE LETTER IS TOTALLY DIFFERENT INRESPECT OF OUR SOCIETY'SCASE.ITISENGAGEDINBUSINESSOFMARKETING OFAGRICULTURALPRODUCE OF ITS MEMBERS. 4. AFTERCONSIDERINGTHESUBMISSIONSOFTHEASSESSEE,LD.PR.CITREJECTEDTHE SUBMISSIONS OF THE ASSESSEE AND OBSERVED THAT THE ASSESSEE HAD RECEIVED INTEREST INCOME ON BANK DEPOSITS AND OTHER INCOME DURING THE RELEVANT ASSESSMENT YEAR AND THIS INCOME WAS NOT OFFERED BY THE ASSESSEE FOR TAXATION. THE INTEREST EARNED BY WAY OF INVESTMENT IN CO-OPERATIVE BANKS AND OTHER BANKSANDOTHERINCOMEWASNOTELIGIBLEFORDEDUCTIONU/S80P(2)(A)OFTHEACT. HE FURTHER OBSERVED THAT THE INCOME DERIVED BY WAY OF INTEREST FROM FIXED DEPOSITS AND SAVING ACCOUNTS WITH CO-OPERATIVE BANKS AND OTHER BANKS FALLS UNDER THE HEAD INCOME FROM OTHER SOURCES AND IT CANNOT FALL WITHIN THE EXPRESSION PROFIT AND GAINS OF BUSINESS, THEREFORE, IS NOT ADMISSIBLE FOR DEDUCTION U/S 80P(2)(A), (B) (D) WHEREAS IF ITS INCOME FROM OTHER SOURCES DEDUCTION IS ADMISSIBLE U/S 80P(2)(C) OF THE ACT TO THE EXTENT OF RS.50,000/- ONLY. SINCE, THE ASSESSEE HAS CLAIMED THE ABOVE SAID INCOME U/S 80P OF THE ACT ANDASSESSINGOFFICERALSOFAILEDTOMAKENECESSARYINQUIRYANDEXAMINATIONIN RESPECT OF THIS TRANSACTION. HE OBSERVED THAT OMISSION TO DO SO HAS RESULTED IN SHIVKRUPA SHAKARI ITA NO. 1672/M/2019 5 UNDERASSESSMENT OF INCOME. ACCORDINGLY, HE SET ASIDE THE ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) DATED 19.12.2016 IS REQUIRED TO BE REVISED AND SET ASIDE UNDER PROVISIONS OF SECTION 263 OF THE ACT AS THE SAME IS ERRONEOUS AND SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND THE SAME WAS COMPLETEDWITHOUTMAKING INQUIRIESORVERIFICATION AND DIRECTEDTHE ASSESSING OFFICERTO FRAMETHEASSESSMENT DENOVO . 5. AGGRIEVED WITH THE ABOVEORDER,ASSESSEE ISINAPPEAL BEFORE USAND FILED THE MODIFIEDGROUNDSOF APPEAL READASUNDER: 1. THE LEARNED PCIT-29, MUMBAI ERRED IN LAW AND ON FACTS IN ASSUMING JURISDICTION U/S 263 OF THE ITA, 1961 ON THE ANALOGY THAT THE ORDER PASSED U/S 143(3) OF THE ITA, 1961DATED 19/12/2016WASERRONEOUS AND PREJUDICIAL TOTHEINTEREST OF THE REVENUE. 2. THE LEARNED PCIT-29, MUMBAI ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT ALL THE DETAILS / INFORMATION RELATING TO INTEREST INCOME AND COMMISSION EARNED FROM INSURANCE, MSEB BILL AND DD; WERE SUBMITTED DURING THE SCRUTINY PROCEEDING U/S 143(3) OF THE ITA, 1961 ON 18/11/2016, AND WERE DULY VERIFIED BY THE LEARNED AO, AS SUCH ORDER U/S 143(3) OF THE IT ACT, 1961 IS NEITHER ERRONEOUS NORPREJUDICIALTOTHEINTEREST OF THE REVENUE, 3. THE LEARNED PCIT-29, MUMBAI ERRED IN LAW AND ON FACTS IN HOLDING THAT FOLLOWING INCOME OUGHT TO HAVE BEEN OFFERED UNDER 'INCOME FROM OTHER SOURCES', INSTEAD OF 'PROFITS AND GAINS OF BUSINESS AND PROFESSION' AND THE SAID INCOME IS NOT ELIGIBLEFOR DEDUCTIONU/S 80P(2)(A) OF THEITA,1961: A) INTERESTINCOME- RS.24,75,98,759/- B) COMMISSION INCOME - RS.13,78,136/- 4. THELEARNEDPCIT-29,MUMBAIERREDINLAWANDONFACTSINAPPLYINGTHERATIOOFTHE JUDGMENT OF THE HONORABLE SUPREME COURT IN THE CASE OF TOTGARS CO-OPERATIVE SHIVKRUPA SHAKARI ITA NO. 1672/M/2019 6 SALES SOCIETY LTD. VS. ITO- 322ITR 283; WITHOUT APPRECIATINGTHAT THE FACTS INTHE CASEOFTOTGARSCO-OPERATIVESALESSOCIETYLTD.AREDIFFERENTASTHATINPRESENTCASE. 5. THE LEARNED PCIT-29, MUMBAI ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT INTERESTINCOMEOFRS.24,09,66,492/-(OUTOFTOTALINTERESTOFRS.24,75,9S,759/-)IS ELIGIBLEFOR DEDUCTIONU/S 80P(2)(D) OF THE ITACT, 1961. 6. BEFORE US, LD. AR BROUGHT TO OUR NOTICE PAGE 55 OF THE PAPER BOOK WHEREIN HE BROUGHT TO OUR NOTICE STATEMENT CONTAINING SUMMARY OF PROFITABILITYANDPASTASSESSMENTFORASSESSMENTYEAR2011-12,2012-13,2013- 14 AND 2014-15. WITH REFERENCE TO THE ABOVE, HE SUBMITTED THAT ASSESSEE HAS CLAIMED DEDUCTION U/S 80P FOR THE INTEREST EARNED BY THE ASSESSEE FROM FIXED DEPOSITS WITH NATIONALIZED BANK AS WELL AS CO-OPERATIVE BANK. ALL ALONG ASSESSEE WAS ALLOWED TO CLAIM THE DEDUCTION U/S 80P AND CONSEQUENTLY ASSESSINGOFFICERALLOWEDTHEABOVECLAIMMADEBYTHEASSESSEEINTHISAYALSO. FURTHER, HE BROUGHT TO OURNOTICE PAGE 84OF THE PAPERBOOK TO SUBMIT THAT THE ISSUE RAISED BY THE PR. CIT IN 263 ORDER, HE SUBMITTED THAT THISISSUE IS ALREADY COVERED BY THE DECISIONS OF HONBLE KARNATAKA HIGH COURT IN GUTTIGEDARARA CREDIT CO-OPERATIVE SOCIETY LTD. V. INCOME TAX OFFICER , WARD 2(2), [2015] 60 TAXMANN.COM215(KARNATAKA)THATTHEINCOMEEARNEDBYASSESSEEBYPROVIDING CREDIT FACILITIES TO ITS MEMBERS WAS DEPOSITED IN BANKS FOR A SHORT DURATION WHICHEARNEDINTEREST.THEHONBLEHIGHCOURTHASALLOWEDTHEINTERESTINCOME EARNED BY THE ASSESSEE ON SUCH DEPOSITS WITH THE BANKS. SIMILARLY, HE BROUGHT TO OURNOTICE89OFTHE PAPERBOOK TO SUBMIT THE HONBLE KARNATAKAHIGHCOURT INTHECASEOF TUMKURMERCHANTSSOUHARDACREDITCO-OPERATIVELTD.V.INCOMETAX OFFICER WARD-V [2015] 55 TAXMANN.COM 447 (KARNATAKA) SUBMIT THAT CO- OPERATIVE SOCIETY WAS ENGAGED IN THE ACTIVITY OF CARRYING OF BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND THE AMOUNT NOT IMMEDIATELY SHIVKRUPA SHAKARI ITA NO. 1672/M/2019 7 REQUIRED TO BE LENT THE MEMBERS WAS INVESTED IN BANKS TO EARN INTEREST. THE HONBLE HIGH COURT HAS ALLOWED THE ASSESSEE TO CLAIM DEDUCTION U/S 80P(1) OF THE ACT. HE SUBMITTED THAT THE ISSUE UNDER CONSIDERATION IS ALREADY SETTLED IN FAVOUR OF THE ASSESSEE AND THE ASSESSING OFFICER HAS ACCEPTED THE VIEWS BASED ON ABOVE DECISIONS OF THE HONBLE HIGH COURT AND THE ASSESSMENT ORDER U/S 143(3) WAS COMPLETED. THEREFORE, HE PRAYED THAT THE ORDER PASSED U/S 263 BE SETASIDE. 7. ON THE OTHERHAND,THE LD. DRRELIEDON THE ORDERSPASSEDBYLD.PR.CIT. 8. CONSIDEREDTHERIVALSUBMISSIONSANDMATERIALSONRECORD.WENOTICETHAT ASSESSEE MADE THE INVESTMENT IN VARIOUS BANKS INCLUDING CO-OPERATIVE BANK ANDEARNEDTHE INTERESTINCOME ANDOTHER INCOME.WE NOTICE THAT ASSESSEE HAD CLAIMED INCOME U/S 80P(2)(A) OF THE ACT AND CONSTANTLY ASSESSING OFFICER WAS ALLOWINGTHEDEDUCTIONSINTHEPREVIOUSASSESSMENTYEARSFROM2011-12TOTHIS ASSESSMENT YEAR. AS BROUGHT TO OUR NOTICE THE RESPECTIVE DECISIONS OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF GUTTIGEDARARA CREDIT CO-OPERATIVE SOCIETY LTD. (SUPRA) AND DECISION IN WHICH HONBLE KARNATAKA HIGH COURT ALLOWED THE CLAIM OF THE ASSESSEE ON INTEREST EARNED BY THEM ON THE INVESTMENTS MADE IN BANKS AS DEDUCTIBLE U/S 80P AND THESE DECISIONS WERE PASSED ON 28.10.2014 AND 09.06.2015. THEREFORE, IN OUR CONSIDERED VIEW THE ISSUE OF CLAIMING INTEREST ON BANK DEPOSITS BY CO-OPERATIVE SOCIETIES ARE ALREADYSETTLEDINFAVOUROFTHEASSESSEE,NOWTHELD.PR.CITRAISINGSUCHSETTLED ISSUED U/S263 IN THIS ASSESSMENT YEARWITH THE FINDINGSTHAT ASSESSING OFFICER HAS NOT MADE INQUIRIES IN THESE TRANSACTIONS. THEREFORE, IN OUR VIEW REVISITING THE SETTLED ISSUE AND THIS ISSUE WAS CONSIDERED BY THE ASSESSING OFFICER AND PASSED THE RELEVANT ASSESSMENT ORDER BY RELYING BASED ON THE SUBMISSIONS OF SHIVKRUPA SHAKARI ITA NO. 1672/M/2019 8 THE ASSESSEE THAT THIS INTEREST WAS ALLOWED IN THE PREVIOUS ASSESSMENT YEARS AND COVERED BY THE HONBLE HIGH COURT ORDER WHICH CANNOT BE CONSIDERED AS ERRONEOUSIN SO FARASIT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, REVISIONSU/S263INTHECASEOFTHEASSESSEEISBADLEGALPRECEDENT.ACCORDINGLY, GROUNDSRAISEDBYTHEASSESSEEIN THISREGARDARE ALLOWED. 9. IN THE RESULT,THE APPEALFILEDBYTHE ASSESSEEISALLOWED. ORDER PRONOUNCEDINTHEOPENCOURTON 12/07/2021. SD/- SD/- ( PAVANKUMARGADALE ) ( S. RIFAURRAHMAN ) JUDICIALMEMBER ACCOUNTANTMEMBER MUMBAI; DATED:12/07/2021 RAHUL SHARMA,SR. P.S. COPYOFTHEORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT,MUMBAI 6. GUARDFILE. BY ORDER, //TRUE COPY// (DY./ASSISTANTREGISTRAR) ITAT,MUMBAI