Hariday Credit Cooperative Society Ltd. , Udaipur V. Pr. CIT, Udaipur

ITA 172/JODH/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3811 (ITAT-JODHPUR)
• Duration Of Justice: 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-01-2024
• Assessment Year: 2018-2019
• Appeal Filed On: 15-05-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Revision of order; Depreciation; Business expenditure; Opportunity of being heard; Principle of natural justice; Bad and doubtful debts; Difference of opinion; Corroborative evidences; Assessment record; Prejudicial to interest; Change of opinion; Set aside
• Section: 263; 143(3); 80P; 2(A); 194A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR(DB). BEFORE: DR. S. SEETHALAKSHMI, JJUDICIAL MEMBER & SHRI RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER I.T.A. No. 172/Jodh/2023 Assessment Year: 2018-19 Hariday Credit Cooperative Society Ltd. 11B Vinayak Complex, Durga Nursery Road Tehsil Girwa, Udaipur. [PAN:AAAAH5015 P ] (Appellant) Vs. PCIT, Uaipur. (Respondent) Appellant by Sh. Rajendra Jain, Adv. & Smt. Raksha Birla, C.A. Respondent by Sh. Shailendra Sharma, CIT DR Date of Hearing 24.01.2024 Date of Pronouncement 20.02.2024 ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal filed by assessee is arising out of the order of the Learned Principal Commissioner of Income Tax, Udaipur dated 09.03.2023 [here in after “ld. PCIT”] for assessment year 2018-19, which in turn arise from the order dated 15.01.2021 passed under section 143(3) read with sections 143(3A) & 143(3B)of the Income Tax Act (here in after “Act”) by the AO. I.T.A. No.172/Jodh/2023 Hariday Credit Cooperative Society Ltd. 2 2.1 At the outset of hearing, the Bench observed that there is delay of 8 days in filing of the appeal by the assessee for which the ld. AR of the assessee filed an affidavit for condonation of delay with following prayers:- “ The appellant had filed an appeal against order u/s 263 on 16.05.2023 before Hon'ble Tribunal. The appeal filed by assessee was delay of 8 days on following reasonable grounds. 1. That local chartered account of appellant had send the documents and order to Adv, Rajendra Jain, Jodhpur for preparation and filing of appeal before Tribunal. 2. That due to serious medical condition of father of Adv, Rajendra Jain, he had to rush to Jaipur for his father's treatment and subsequently he was expired. That due to such unavoidable reason, there was delay in filling of appeal. 3. The Hon'ble Delhi High Court's decision in case of HL Malhotra & Company Pvt. Ltd. Vs DCIT, Circle 12, New Delhi (ITA No. 211/2020 & CM Appeals 32045-32047/2020 dated 22nd December, 2020) wherein delay of 498 days in filing was condoned by the Hon'ble Delhi High Court and it was held that in absence of anything male fide or deliberate delay as a dilatory tactic, the Court should normally condone the delay as the intent is always to promote substantial justice following the Hon'ble Supreme Court decisions in the case of Collector, Land Acquisition, Anantnag & Anr. Vs Mst. Katiji and others (1987) 2 SCC 107 and N. Balakrishnan Vs M. Krishnamurthy 1998 (7) SCC 123. 4. Therefore in the light of above reason and looking to interest of substantial justice as held by the Hon'ble supreme Court in case of Collector, Land Acquisition v/s MST Katiji, (1987) 2 SCC 107 that "when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred". In light of above and the decision of Hon'ble Supreme Court, where substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserved to be preferred. Therefore I requested kindly condone the delay and decided the appeal on merit and oblige.” 2.2 The ld. AR of the assessee appearing in this appeal submitted that the ld. AR of the assessee due to serious medical condition of father of the counsel, he had to rush to Jaipur for his father’s treatment and I.T.A. No.172/Jodh/2023 Hariday Credit Cooperative Society Ltd. 3 subsequently he was expired and the delay of 8 days is on account of the unavoidable reason, there was delay in filing of appeal. Considering the various judicial precedent where in the courts has considered and ignored medical reason and has considered the delay. Even the Hon’ble Apex Court in the case of Collector, Land & Acquisition Vs. Mst. Katiji& Others 167 ITR 471(SC) directed the other courts to consider the liberal approach in deciding the petition for condonation as the assessee is not going to achieve any benefit for the delay in fact the assessee is at risk. 2.3 On the other hand ld. DR representing the revenue submitted that the assessee has engaged the counsel and the reasons applicable are not sufficient to condone the delay however, he left the matter to the wisdom of the bench. 2.4 We have heard the rival contentions and persuaded the petition advanced for condonation of delay. Since, the reasons advanced are sufficient to condone the delay and respectfully following the finding of the Hon’ble Apex Court and settled principles as laid down that in the interest of the justice a liberal approach is to be taken and we find merits in the reasons advanced before us by the assessee in the condonation petition. Therefore, in the facts and circumstances of the case, we condone the delay in filling the appeal by the assessee. I.T.A. No.172/Jodh/2023 Hariday Credit Cooperative Society Ltd. 4 3. In this appeal, the assessee has raised following grounds: - “ 1. That on the facts and circumstances of the case the order u/s 263 passed by the, ld. PCIT, Udaipur is bad in law and without jurisdiction. 2. That on the facts and circumstances of the case the ld. PCIT, Udaipur grossly erred in issued notice u/s 263 of the Act as same was issued without conducting basic enquiry as per law. 3. That on the facts and circumstances of the case the ld. PCIT, Udaipur erred in not recording own satisfaction in respect of assessment order passed by the ld. AO is erroneous so as it prejudicial the interest of revenue as per provision of section 263 of the Act. 4. That on the facts and circumstances of the case the ld. PCIT, Udaipur grossly erred in holding the order of the AO is erroneous and prejudicial to the interest of the revenue by treating the inquiry in the wake of a notice under section 263 is just an empty formality. 5.That on the facts and circumstances of the case the ld. PCIT, Udaipur grossly erred in not considering the provisions of the law and law decided by Hon’ble courts in right prospective and judicious manner. 6. That on the facts and circumstances of the case the ld. PCIT, Udaipur grossly erred in setting aside the assessment order passed by the u/s 143(3) without any finding as to how the assessment order passed by the ld. AO is erroneous so as it prejudicial the interest of Revenue. 7. That on the facts and circumstances of the case the ld. PCIT, Udaipur grossly erred in representing erroneous and irrelevant finding the order and thereby putting the assessee to erroneous harassment and inconvenience. 8. That the petitioner may kindly be permitted to raise any additional or alternative grounds at or before the time of hearing. 9. The petitioner prays for justice & relief.” 4. Brief fact of the case is that the assessee filed its return of income for the assessment year 2018-19 on 09.10.2018 declaring total income at Rs. 1,05,94,110/-. Thereafter, the case was selected under CASS under complete scrutiny criterion with the following issues, mainly:- I.T.A. No.172/Jodh/2023 Hariday Credit Cooperative Society Ltd. 5 i. Deduction u/s 80P ii. Deduction from total income under chapter VI-A iii business expenses The ld. AO noted that on the above issues no addition was made and ultimately assessment was completed under Faceless Assessment Scheme(FAS/FAO) on 15.01.2021 u/s 143(3) of the Act. Assessment order was passed at the income returned. 5. On culmination of assessment proceeding the ld. PCIT has called for the assessment record for examination and it was noticed that as per record the assessee has claimed deduction u/s 80P(2) by an amount of Rs. 1,59,00,120/- in the ITR. During assessment u/s 143(1), dated 01.10.2019, ITD allowed deduction u/s 80P Rs. 1,52,35,073/- and the same was allowed in assessment made u/s 143(3) by the Faceless Assessment Unit also. 5.1 In this regard, it was found that the Deduction of 80P includes interest received from Udaipur Central Co-operative Bank Rs.80,62,620/- and from Udaipur Mahila Urban Co- operative Bank Rs.1,10,876/-, which were not allowable as per provisions of section 80P(2)(d) of the Act.Under provision of section 80P(2)(d) of Act, where I.T.A. No.172/Jodh/2023 Hariday Credit Cooperative Society Ltd. 6 in the case of an assesse, being a co-operative society, the Gross Total Income includes any income in respect of Income by way of interest or dividends derived by the Co- operative society from its investments with any other cooperative society, the whole of such income shall be deducted in computing the total income of the assessee. On perusal of accounts filed and the ITR it has been revealed that the deduction claimed u/s 80P by the assessee includes interest received from Udaipur Central Co-operative Bank Rs. 80,62,620/- and Udaipur Mahila Urban Co-operative Bank Rs. 1,10,876/-, which were not allowable as per provisions of section 80P(2)(d) of the Act. Since no such disallowance has been made by the AO the assessed income has been under computed/assessed by this amount of Rs.81,73,496/-. 5.2 In view of the facts, as categorically mentioned above it was clear that the AO (FAO in this case) had failed to examine the issues of disallowance u/s 80P(2)(d) of the IT. Act, 1961. Therefore, due to lack of enquiry and also due to incorrect and incomplete appreciation of facts and also the incorrect application of law, the assessment order duly passed u/s 143(3) of the IT Act on 15.01.2021 for the A.Y. 2018-19 is erroneous insofar as it is prejudicial to the interest of revenue. Therefore, the order was proposed to be suitably modified/enhanced/cancelled by I.T.A. No.172/Jodh/2023 Hariday Credit Cooperative Society Ltd. 7 invoking the provisions of the section 263 of the I.T. Act, 1961. The ld. PCIT before doing so a notice u/s 263 of the Act was duly issued on 30.01.2023 to the assessee, for giving an opportunity of being heard as well as requiring the assessee to furnish its submission on the issue of allowability of deduction u/s 80(P)(2)(d) of the Act. The notice so issued was duly served through ITBA, through registered e-mail of the assessee and through the speed post as well. In compliance thereto, the assessee through its authorised representative (AR) filed written submission through ITBA and also furnished the reply physically in the office of ld. PCIT, Udaipur. The ld. PCIT noted that the reply of the assessee and found not tenable. He further noted that as per sub section 4 of section 80P a co-operative bank is not co-operative society and provision of section 80P(2)(d) cannot be applied. Accordingly, the ld. PCIT hold that the order of the FAO is suffering from specific defects and is erroneous and also prejudicial to the interest of the revenue. 5.3 Therefore, he hold that the order of the assessing officer is therefore, liable for revision under clause (a) & (b) of the Explanation of (2) of section of 263 of the Act. The finding of the ld. PCIT is reiterated herein below : I.T.A. No.172/Jodh/2023 Hariday Credit Cooperative Society Ltd. 8 “6. I have carefully considered the submission of the assesseee as well as the facts of the case and my observations are as under: - (i) The assessee vide its reply (supra), has furnished that the AO rightly allowed deduction u/s 80P(2)(d) of the Act, as income of a co-operative society, by way of interest or dividends, derived from its investments with a co-operative bank is also fully allowable as a deduction under section 80P(2)(d) of the Act. Further, the assessee through it's A/R has stated that the has applied his mind and allowed the claim of the assessee. The A/R citied case laws in favour of its contention. (ii) However, it is seen that during the year, a deduction of 1,52,35,073/- u/s 80P of the Act, was allowed to the assessee, which includes interest received from Udaipur Central Co-operative Bank by Rs. 80,62,620/- and from Udaipur Mahila Urban Co- operative Bank byRs. 1,10,876/-. The deduction on amount of interests earned from investment with a co-operative bank was not allowable as per provisions of section 80P(2)(d) of the Act, because of the fact that deduction u/s 80P(2)(d) of the Act, is allowable on the interest income received only from any other cooperative society and not on the interest received from the Co-operative banks. (iii) The reply of the assessee on this issue is considered but not found acceptable because only by registration with the Rajasthan Co-operative Society Act IV of 1953, the Co-Operative Bank is not treated as a Co-operative Society. As per part V of Banking Regulation Act, 1949 "Co-operative bank means a "state co- operative bank, a central co-operative bank and a primary co-operative bank" and "Co-operative society" means "a society registered or deemed to have been registered under any Central Act for the time being in force relating to the multi-State co- operative societies, or any other Central or State law relating to co-operative societies for the time being in force. As per part V of Banking Regulation act, 1949 a co- operative bank is different from the cooperative society. (iv) The assessee relied upon the decision of the ITAT, Jaipur in which reference to the judgement of Hon'ble Karnataka High Court in the case of Pr. CIT Vs TheTotagars Co-operative Sale Society (2017) 392 ITR 74, wherein it held that Co- operative Bank would be included in the words "co-operative society has been made It is seen that the deduction u/s 80(P)(2)(d) has been claimed on "interest" received from Co-operative banks. The question for consideration is whether a Co-operative bank is a Co-operative society, hence covered by section 80P(2)(d)? With regard to the reliance on the Hon'ble Karnataka High Court Judgement in the case of Totagar's Cooperative Sales Society (2017) 392 ITR 74, it is pertinent to mention here that the relied upon judgment has been reviewed by the Hon'ble] Karnataka High Court in the very same case in Appeal No 100066/2016 decided on I.T.A. No.172/Jodh/2023 Hariday Credit Cooperative Society Ltd. 9 16.06.2017 and its earlier finding on the issue has been reversed. In its subsequent judgment the High court held that ".......the character or nature of income, namely interest on investments or deposits, did not change irrespective of the fact whether it was earned or received from a schedule bank or co- operative bank. Further, the amendment of section 194A(3)(v) excluding the co-operative banks from the definition of co- operative society by Finance Act, 2015 and requiring them to deduct income tax at source u/s 194A also made the legislative intent clear that the co-operative banks were not that specie of genus co-operative society, which would be entitled to exemption or deduction under the special provisions of Chapter VIA in the form of section 80P. The person or body corporate from which such interest income was received would not change its character, viz, interest income not arising from its business operations, which made it ineligible for deduction u/s 80P. The income by way of interest earned by the assessee co- operative society on the investments made in the co-operative bank were not eligible for deductions u/s 80P(2)(d)." (v) Thus it is clear that for the purpose of section 80P(2)(d), the investment in Co- operative bank is not different from an investment made in a scheduled Bank. As the Co-operative bank is not in the nature of Co-operative society for the purpose of section 80P(2)(d). the interest received on FDRs maintained with the Co-Operative Bank cannot be treated as eligible for deduction u/s 80P(2)(d). It is further stated that the co-operative societies accepted deposits from their members only and the co-operative societies advanced loans to their members only, whereas the Co-operative Bank accepted deposits and advanced loans to the general public also. This is the main difference between the cooperative society and the Co- operative Bank. (vi) As per sub section 4 of section 80P of the Income Tax Act, the provisions of this section shall not apply in relation to any co- operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. As per sub section 4 of section 80P a Co-Operative Bank is not a co-operative society and provisions of section of this section is not applied on it. (vii) As the said interest income was received by the assessee from other than the cooperative society, hence Provisions of section 80P(2)(d) was not applicable in this case. Consequently, deduction u for Rs.81,73,496/-(80,62,620+1,10,876) was not allowable to the assessee and hence, the same was required to be disallowed and added to the total income of the assessee. However, such amount was not disallowed by the Assessing Officer while completing the assessment u/s 143(3) of the Act, on 15.01.2021. In this case, the AO allowed deduction u/s 80P(2)(d) on the interest I.T.A. No.172/Jodh/2023 Hariday Credit Cooperative Society Ltd. 10 income received from Co-operative Banks. The AO has thus erred in allowing the deduction u/s 80(P)(2)(d) on such interest income, 7. Considering the above facts, it is held that the order passed by the Assessing Officer (FAO) u/s 143(3) of the I.T. Act dated 15.01.2021 is suffering from specific defects, hence, order so passed by the AO is erroneous and also prejudicial to the interest of the revenue. The order of the assessing officer is therefore, liable to revision under clause (a) &(b) of the Explanation (2) of section 263 of the Income Tax Act, 1961. 8. In the light of above discussion, assessment order passed by the AO in the case of the assessee is Set-aside (fully) to the AO on the above mentioned issue of deduction under section 80(P)(2)(d) of the I.T. Act, 1961. Thereafter. based on outcome of such enquiries and verification, necessary additions, wherever required, may be made to the total income of the assessee as per law by modifying the assessment order u/s 143(3) of the Act dated 15.01.2021. However, the AO is directed to ensure that ample opportunities of being heard are provided to the assessee before passing such order.” 6. Feeling dissatisfied from the above order of the ld. PCIT, the assessee has preferred the present appeal on the ground as stated hereinabove. Apropos to the grounds so raised the ld. AR of the assessee relied on the submission made before the ld. PCIT and has also relied upon the following evidences:- I.T.A. No.172/Jodh/2023 Hariday Credit Cooperative Society Ltd. 11 7. On the other hand, ld. DR relied upon the detailed findings recorded in the order of the ld. PCIT and prayed that the order is speaking order has been passed, considering all the arguments raised by the ld. AR of the assessee. The ld. DR also filed written submission which reads as under:- “The following written submissions (law points) are submitted for kind consideration in support of the order u/s 263 of the Act 1. "OPINION" OF THE COMMISSIONER-PRIMA-FACIE FINDING REASONS TO INTERFERE WITH THE ORDER OF THE COMMISSIONER (PCIT/CIT) WHETHER THE COMMISSIONER (PCIT/CIT) IN ORDER UNDER SECTION 263 IS CORRECT OR NOT SHALL HAVE TO BE FOUND OUT AFTER ENQUIRY BY THE A.O. 1.1. The commissioner was perfectly competent to exercise his powers under Section 263 whenever he found, prima facie, that there was need to enquire if the interest of the Revenue had suffered by an order of assessment. He has given certain reasons: The basis for the order of the Commissioner is a question of fact I.T.A. No.172/Jodh/2023 Hariday Credit Cooperative Society Ltd. 12 and whether it is correct or not shall have to be found out after enquiry by the Income-tax Officer. The Commissioner has found that the Income-tax Officer has omitted to enquire into this question found by the Commissioner implicit in the manner in which the amounts were borrowed and advanced by the assessee- company. (Duggal & Co. v. CIT [1996] 220 ITR 456 /[1994] 77 Taxman 331 (Del.)) 1.2. There can be no doubt that merely on the basis of presumption or surmise or suspicion, an order under section263 cannot be passed. The Tribunal faited to appreciate that in this case the inference drawn by the Commissioner was not based either on presumptions or surmises or suspicion. Therefore, the Tribunal was not justified in setting aside the order of the Commissioner. (PCIT v. India Finance Ltd (2016) 389 ITR 242 (2017) 81 taxmann.com 135 (Cal.)) 1.3. It is the order of the PCIT/CIT which is in challenge before the Hon'ble Tribunal The appellant is required to show and prove the "reasons to interfere with the order of the PCIT/CIT It is not proven by the assesse that the opinion of the PCIT is based on either presumptions or surmises or suspicion, It is not proven by the assesse that the opinion of the PCIT is malafide or without jurisdiction. The law has granted "judicial discretion to the PCIT/CIT in exercise of his powers and the same can not be substituted in appeal proceedings on merits if there is mere disagreement with such opinion of the PCIT. PCIT is to form a "prima-facie" finding and he is mere required to come to an opinion" and he is not required to "prove" what he has opined in his order Order u/s 263 of the Act setting aside the assessment order merely leads to initiation of proceedings of enquiry by the A.O. and does not in itself results into levy of tax 2. NO LEVY OF TAX BY THE COMMISSIONER IN ORDER U/S 263 MATTER HAS BEEN SET ASIDE PRESENT HIS ISSUES BEFORE THE A.O. SUBSEQUENTLY ASSESSEE CAN 2.1. In the order under section 263 of the Act, the PCIT/CIT has not levied any tax and the matter has set aside to the file of the AO for passing a fresh order on the issue after affording proper opportunity of being heard to the assesse. The degree and extent of evidence required by the PCIT/CIT in arriving at his "opinion" would be much lower than the evidence which would have been required to fasten a tax liability on the assesse. In the present case the issue will be examined by the A.O. in the set-aside proceedings. 2.2. In the case of Vedanta Ltd. v. CIT (2021) 279 Taxman 358 124 taxmann.com 435 (Bom.) it was observed in the judgement that the Tribunal held that since only direction was issued for passing fresh assessment, issues raised by assessee could always be gone into by Assessing Officer after granting full opportunity to assessee Since assessment was completed without proper inquiries, it was competent for Commissioner to invoke revisional jurisdiction and direct fresh assessment I.T.A. No.172/Jodh/2023 Hariday Credit Cooperative Society Ltd. 13 3. NECESSARY / FURTHER INQUIRIES REQUIRED TO BE DONE BY THE ASSESSING OFFICER IF NOT DONE THAT ITSELF RENDERS ORDER AS ERROENOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE SCOPE OF SECTION 263 IS NOT LIMITED TO AND IS MUCH BROADER THAN APPARENT ERROR OF FACT OR LAW ASSESSING OFFICER IS ALSO AN INVESTIGATOR INCUMBENT UPON HIM TO INVESTIGATE THE FACTS STATED HE IS NOT LIKE A CIVIL COURT 3.1. The order passed by the Assessing Officer becomes erroneous because an enquiry has not been made or genuineness of the claim has not been examined where the inquiries ought to have been made and the genuineness of the claim ought to have been examined and not because there is anything wrong with his order if all the facts stated or claim made therein are assumed to be correct. The Commissioner may consider an order of the Assessing Officer to be erroneous not only when it contains some apparent error of reasoning or of law or of fact on the face of it but also when it is a stereo-typed order which simply accepts what the assessee has stated in his return and fails to make enquiries or examine the genuineness of the claim which are called for in the circumstances of the case. Supported by the decisions of the Hon'ble Supreme Court in Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84. Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC), and Malabar Industrial Co Ltd 's ([2000] 243 ITR 83 (SC)) 3.2. The Apex Court in Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 (SC) laid down a four-way test for orders being erroneous in-so-far as they are prejudicial to the interest of the revenue, liable for revision, viz incorrect application of law, wrong assumption of facts, non-observance of the principles of natural justice, and lack of inquiry. The Hon'ble Supreme Court in the instant case held that if the AO has accepted the entry in the statement of account filed by the taxpayer without making enquiry, the said order of the AO shall be deemed to be erroneous and prejudicial to the interest of the Revenue: 3.3. The position and function of the Income Tax Officer is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a civil court in the absence of any rebuttal. The civil court is neutral It simply gives decision on the basis of the pleading and evidence which comes before it The Income Tax Officer is not only an adjudicator but also an investigator He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry The meaning to be given to the word "erroneous" in section 263 emerges out of this context It is because it is incumbent on the Income Tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated I.T.A. No.172/Jodh/2023 Hariday Credit Cooperative Society Ltd. 14 therein are assumed to be correct (M/s Gee Vee Enterprises 99 ITR 375 (Delhi High Court)[1995]) 3.4. Mere failure on the part of the Assessing Officer to make the necessary inquiries or to examine the claim made by the assessee in accordance with law, renders the resultant order erroneous and prejudicial to the interest of the revenue Nothing more is required to be established in such a case. If the Assessing Officer passes an order mechanically without making the requisite inquiries or examining the claim of the assessee in accordance with law, such an order will clearly be erroneous in law as it would not be based on objective consideration of the relevant materials (Mahalakshmi Liquor promoters (P) Ltd. Vs. Commissioner of Income Tax [2013] 29 taxmann.com 70). 3.5. Where the Assessing Officer takes a wrong decision without considering the materials available on record or he takes a decision without making an enquiry into the matters, where such inquiry was prima facie warranted. The Commissioner will be well within his powers to regard an order as erroneous and prejudicial to the interest of the revenue. (Dr. Rabindra Kumar Singh vs. CIT (Central), Patna [2011] 131 ITD 39 (Ranchi)) 3.6. Where assessee explained source of cash deposit in its savings account as received from closure of previous loans given by him but same was not substantiated with any record or evidence, Principal Commissioner was justified in making revision of assessment order under section 263. (AvathanMarimuthuVs Assistant Commissioner of Income tax, Circle-III, Trichy, the Ho'ble ITAT Chennai Bench 'C', [2017] 84 taxmann.com 104 (Chennai - Trib)) 3.7. If the Assessing Officer fails to conduct the said investigation, he commits an error and the word "erroneous" includes failure to make the enquiry. In such cases, the order becomes erroneous because enquiry or verification has not been made and not because a wrong order has been passed on ments (ITO versus DG Housing Projects Limited. (2012) 343 ITR 329 (Delhi)) 3.8. The assessee claimed provision made for standard assets also as a provision for bad and doubtful debts under section 36(1)(viia) Assessing Officer allowed the deduction under section 36(1)(viia). CIT initiated proceedings under section 263 of the Act. As per CIT, the provision for standard assets could not be considered as provision for bad and doubtful debts which could be allowed under section 36(1)(vila) of the Act. Before the Tribunal the assessee submitted that Assessing Officer has taken a lawful view and therefore, CIT could not substitute his view with that of Assessing Officer The Tribunal upheld the revisional order passed by the CIT and observed that there was no enquiry made during the course of assessment proceeding. Therefore, the order which was silent on the claim made by assessee, and allowing such claim, without any discussion will definitely render it erroneous and prejudicial to the interest of revenue Tribunal dismissing the appeal followed the decision of Apex Court in case of Malabar Industrial Co. Ltd v CIT (2000) 243 ITR 83 (SC) (Bharat Overseas Bank Ltd v. CIT (2013) 152 TTJ 546 82 DTR 373 (ITAT Chennai)) I.T.A. No.172/Jodh/2023 Hariday Credit Cooperative Society Ltd. 15 4. WHAT CAN BE CONSIDERED A VIEW/OPINION OF THE ASSESSING OFFICER WHEN IT CAN BE SAID THAT AO HAS FORMED AN OPINION/TAKEN A VIEW VIEW IS DIFFERENT THAN CHANCE RESULT 4.1. Mere taking of a view by the Assessing Officer without having subjected the claim to examination would not make it a view of the Assessing Officer. A view has necessarily to be preceded by examination of the claim and opting to choose one of the possible results. In the absence of view being taken, merely because the issue itself was debatable, would not absolve the Assessing Officer of applying his mind to the claim made by the assessee and allowing the claim only on satisfaction after verification/enquiry on his part. A view in the absence of examination is no view but only a chance result Therefore, the Assessing Officer cannot abdicate his responsibility of examining the claim for deduction before allowing it Absence of examination of the claim made by the assessee while passing an assessment order and allowing the claim made, would render the order of the Assessing Officer erroneous and coupled with the fact that in this case it is admitting prejudicial to the interest of the revenue, exercise of the revisional jurisdiction under section 263 by the Commissioner proper and valid. (CIT, Nagpur v. Ballarpur Industries Ltd. (2017) 85 taxmann.com 10 (Bombay High Court)] 4.2. Non-application of mind is a ground for interference under Section 263 in the case of CIT v. Shri Bhagwan Das. (2005) 272 ITR 367 (All) the Division Bench opined that exercise of power under Section 263 was proper when there was no discussion regarding the question as to whether the amount of income shown by the assessee which was claimed to be exempted had actually been earned by him and whether the entire amount of income from agriculture and Poultry Farming was exempted from tax (Gauhati High Court in the case of CIT v. JawaharBhattacharjee [2012] 24 taxmann com 215/209 Taxman 174) 4.3. The assessee claimed depreciation on goodwill and operational expenses The Principal Commissioner invoked the provisions of section 263 of the Act on the ground that the Assessing Officer had not discussed and veified the claim of the assessee. On appeal, the assessee contended that the Assessing Officer had raised specific enquiries during the course of assessment proceedings and accepted its claim and it was not necessary to discuss about the enquiries made by the Assessing Officer in the assessment order. Held that the Assessing Officer had not discussed the issues that arose for consideration in the assessment order The proceedings before the Assessing Officer being judicial proceedings, he was expected to record his own reasons for the conclusion reached Whether it was an administrative order or judicial order, the reasons for the conclusion or decision taken had to be recorded in the order itself There was no infirmity in the order of the Principal Commissioner The Assessing Officer was directed to conduct an independent enquiry and pass a speaking order recording his own reasons without being influenced by any of the observations made by the Principal Commissioner (Health Care (P) Ltd.v CIT (2016) 46 ITR 36 (ITAT Chennai)]) I.T.A. No.172/Jodh/2023 Hariday Credit Cooperative Society Ltd. 16 5. MERE FILING OF DETAILS BY THE ASSESSEE IS NOT SUFFICIENT AND DOES NOT ITSELF CONSTITUTES APPLICATION OF MIND BY THE ASSESSING OFFICER PROPER VERIFICATION AND SPECIFIC ENQUIRIES REQUIRED TO BE DONE BY THE ASSESSING OFFICER APPLICATION OF MIND BY THE AO IF NOT DONE MEANS NON CALLING OF INFOMRATION BY THE AO DURING ASSESSMENT PROCEEDINGS IS PER SE NOT A BAR ON THE REVISION UNDER SECTION 263 5.1. Mere filing of an explanation was not sufficient and at the same time, it could not be inferred that the Assessing Officer had applied his mind. There was also no proper verification in respect of creditors from whom the assessee had accepted unsecured loans. No specific enquiries to prove the genuineness of these loans had been conducted by the Assessing Officer. The Assessing Officer had simply obtained account extracts of these parties as appearing in the books of the assessee and accepted the loan as genuine. No confirmation letters were filed from these parties. (Ambika Agro Suppliers vs. ITO, Jalgaon [2005] 95 ITD 326 (Pune)) 5.2. The observation that full facts were brought to the notice of the Inspecting Assistant Commissioner (Assessment) is also not correct in as much as after giving statement with regard to the actual cost of the assets and depreciation claimed thereon, the assessing authority was bound to consider the Explanation. Simply because the facts have been disclosed by the assessee, it does not give immunity from revisional jurisdiction which the Commissioner can exercise under section 263 and as such even in a case where the facts have been disclosed by the assessee to the assessing authority and the correct provisions of law have not been examined by the assessing authority, the power under section 263 can be invoked. (CIT v. Emery Stone Mig Co. [1995] 213 ITR 843/83 Taxman 643 (Raj.)) 5.3. Merely asking a question which goes to the root of the matter and not carrying it further is a case of non-enquiry. it the query not otherwise satisfied while responding to another query In the instant case, the Assessing is Officer raised query regarding valuation of shares in question to which response was only that the unquoted shares were valued at costs. No method of valuation of the shares was submitted to the Assessing Officer during the proceedings, leading to the assessment order It, therefore, appeared that the Assessing Officer after having asked a pertinent question of the method of valuing unlisted shares did not pursue that line of enquiry. Thus, this was a case of non- enquiry and not inadequate enquiry. Therefore, the order of the Assessing Officer was certainly erroneous and prejudicial to the revenue. (Jeevan Investment & Finance (P) Ltd. Vs Commissioner of Income Tax, City- 1. Mumbai, [2017] 88 taxmann.com 552 (Bombay)) 5.4. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Assessing Officer should have made further inquiries I.T.A. No.172/Jodh/2023 Hariday Credit Cooperative Society Ltd. 17 before accepting the statements made by the assessee in his return. (Rajalakshmi Mill Ltd vs. ITO, Coimbatore [2009] 31 SOT 353 (Chennai) (SB)) 5.5. The principle that a mere change of opinion could not be a basis for reopening completed assessments would be applicable only to situations where the Assessing Officer had applied his mind and taken a conscious decision on a particular matter in issue. It would have no application where the order of assessment did not address itself to the aspect which was the basis for reopening of the assessment Therefore, it was inconsequential whether or not the material necessary for taking a decision was available to the Assessing officer either generally or in the form of a reply to the questionnaire served upon the assessee: (Consolidated Photo &Finvest Ltd v. Asstt. CIT [2006] 281 ITR 394/151 Taxman 41 (Delhi)) 5.6. Records were filed before Assessing Officer. A detailed questionnaire was also issued by Assessing Officer a reply was filed by assessee, but Assessing Officer did neither apply his mind nor did he conduct an enquiry into matter although he recorded in note-sheet that reply filed by assessee was not satisfactory and did not explain all facts. Tribunal recorded a finding that Assessing Officer had simply accepted claim of assessee without examining records Lack of enquiry by Assessing Officer led to rendering his order erroneous and prejudicial to interest of revenue Commissioner was justified in passing an order invoking power under section 263 and remitting matter back to Assessing Officer for conducting a proper assessment. (Nagal Garment Industries (P) Ltd. v. CIT (2019) 415 ITR 134 (MP)) 5.7. It was observed that Assessing Officer, did seek an explanation from assessee in general terms for adoption of sale consideration as against stamp duty valuation, but, there was neither any specific reference to facts of case nor application of section 50C- Whether thus, view adopted by Assessing Officer being clearly unsustainable in law, even if matter was examined by Assessing Officer and it was conscious call of Assessing Officer to accept plea of assessee, such a situation would not take matter outside ambit of section 263. Therefore, revision proceedings under section 263 were justified and there was no infirmity in order of Commissioner directing re-examination of claims on merits. (Babulal S. Solanki v. ITO (2019) 176 ITD 642 104 taxmann.com 155 (ITAT Ahmedabad)) 5.8. The assessee had made payments to small labourers and machine repairers for which it did not have any valid vouchers. During the assessment proceedings it was stated before the Assessing Officer that the payments were made under emergent conditions and that the expenses were actually incurred. The Assessing Officer disallowed a sum of Rs. 2 lakhs, which disallowance was accepted by the assessee The CIT exercised revisionary powers under section 263 and directed the Assessing Officer to modify the assessment order since according to the CIT the 4 aspects mentioned in his notice were not considered by the Assessing Officer. Tribunal set- aside the order of the CIT. On appeal by the department, the High Court observed that there was no application of mind on the part of the Assessing Officer and that the 4 points mentioned by the CIT have not been considered by the Assessing Officer. Accordingly, the High Court allowing the appeal held that the CIT was I.T.A. No.172/Jodh/2023 Hariday Credit Cooperative Society Ltd. 18 justified in directing the Assessing Officer to redo the matter afresh. ( CIT v. Alloy Steels (2013) 359 ITR 355: 217 Taxman 262: 36taxmann.com514(Karn.)) 6. APPLICATION OF MIND BUT INCORRECT ASSUMPTION OF FACTS/ INCORRECT APPLICATION OF LAW BY THE ASSESSING OFFICER APPLICATION OF MIND BUT BASIS OF ESTMATION BY THE A.O. IS EITHER NOT HAVING REASONABLE NEXUS WITH MATERIAL ON RECORD OR THE SAME IS NOT UNBIASED OR THE SAME IS NOT RATIONALLY MADE 6.1. Pr. CIT while exercising his revisionary jurisdiction u/s 263 can examine the basis for estimation, whether such basis for estimation has reasonable nexus with the maternal on record, whether the estimates made and conclusion drawn by the Assessing officer are unbiased and rationally made and the authority so exercised by the Assessing officer is vindictive or capricious or not. (Hon'ble ITAT, Jaipur A Bench in ITA No. 449/JP/2019 dated 25 10.2019 in the case of Rameshwar Prasad Sharma, AY 2014-15) 6.2. Not application of mind to relevant material or an incorrect assumption of facts or an incorrect application of law will satisfy the requirement of order being erraneous and prejudicial to the interest of the revenue (CIT Vs Jawahar Bhattacharjee 342 ITR 0074 (Gauhati High Court) [2012]) 6.3. Where the Assessing Officer takes a wrong decision without considering the materials available on record the Commissioner will be well within his powers to regard an order as erroneous and prejudicial to the interest of the revenue (Dr Rabindra Kumar Singh vs. CIT (Central), Patna [2011] 131 ITD 30 (Ranchi)) 7. EXPLANATION 2(a) IN SECTION 263 OF THE ACT ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN DONE 7.1 It is also worthwhile to note that Explanation 2(a) below section 263 of the Act specifies has further clarified and strengthened and enlarged the scope of section 263 That the that the order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the revenue if in the opinion of the Pr. Commissioner, the order was passed without making any inquiries or verification which should have been made by the Assessing Officer. The aforesaid explanation was inserted with effect from 01.06.2015. 7.2. It is important to mention that in number of judgements it has been held even without considering the above explanation that order would be erroneous in so far as it is prejudicial to the revenue if it was passed without making any inquiries or verification which should have been made by the Assessing Officer 7.3. The amendment to section 263 of the Act by insertion of Explanation 2 to Section 263 is declaratory in nature and is inserted to provide clarity on the issue as I.T.A. No.172/Jodh/2023 Hariday Credit Cooperative Society Ltd. 19 to which orders passed by the AO shall constitute erraneous and prejudicial to the interest of Revenue whereby it is provided, inter-alia, that if the order is passed without making inquiries or verification by the AO which, should have been made or the order is passed allowing any relief without inquiring into the claim, the order shall be deemed to be erroneous and prejudicial to the interest of Revenue. (Anuj Jayaendra Shah vs PCIT-35. Mumbai [2016] Reported in 67 taxmann.com 38) The ratio of above noted judgments is clearly attracted on the facts of the present case at hand Also, it is apparent that the relevant issues, as discussed above were not properly examined during the course of assessment proceeding by the Assessing Officer The assessment order was passed by the Assessing Officer without making proper inquiries and relevant verifications, which he was statutorily required to do so The assessment order was passed by the AO without making the necessary enquiries and verification of these issues, which he was bound to make for ascertaining the relevant facts for the purpose of deciding the issues at hand The assessment order, suffers from infirmities and the same is erroneous in so far as it is prejudicial to the interest of the revenue in terms of the provisions of section 263 of the Act.” 8. We have heard the rival contentions, perused the material placed on record and gone through the written submission and judicial precedent cited by both the parties to drive home their respective contentions. The bench noted that the issue of claim of deduction u/s.80P has been raised by the ld.AO (APB-12&13) by issue of notice dated 22.09.2019. The ld. FAO further vide annexure to notice dated 12.11.2020 the details called for by the FAO is also reproduce here in below:- “3. Claim of deduction u/s 80P by entities that have received large amount of interest from a Banking Company In this regard, you are requested to explain the reasons of scrutiny along with supporting documents. Also furnish the following documents/details along with supporting evidences I.T.A. No.172/Jodh/2023 Hariday Credit Cooperative Society Ltd. 20 1. Please furnish return of income, computation of income, original and revised, if any, Audit Report along with annexure, Tax Audit Report (with Balance sheet, Trading P&L A/c, along with schedules for AY 2018-19. 2. Nature of business activity carried out by you 3. Details of all the bank accounts 4. Reconciliation of 26AS 5. Copies of assessment orders for last 3 year years if any 6. With respect to the deductions claimed under chapter VI-A during the year under consideration, kindly provide the following details: 1 Section/sub-section wise details of deductions claimed under VI-A. 2. Details of earnings under the relevant heads against which deduction claimed 3. Note on eligibility criteria of deductions claimed under different sections of Chapter VI-A. 4. Details of all the bank accounts along with the bank statement for the year to support the claim. 5. Documentary evidence in respect of investment/ expenditure/ payment etc. made to claim the deductions. 7. With respect to the deduction u/s 80P claimed during the year under consideration, kindly submit the below specified details: 1. Detailed note on nature of business activities carried out by the Co- operative Society during the year as well as during last three years. 2 Detailed computation of total income. 3. Calculation of amount of deduction and note on eligibility of deduction uls 80P of the Act 4. Please give details whether the entity falls under the category of Co- operative Bank or was constituted under Part V of the Banking Regulation Act, 1949. 5. Detailed note on objectives of the entity. 6. Bifurcation of income earned under the different heads. 7. The details of other deductions claimed, If any. 8. Justification how the interest income earned from a banking company is eligible for deduction u/s 80P of the Act. From the above notices issued by the ld. FAO it is evidently clear that the ld. FAO has raised the issue on hand and has allowed the claim of the assessee after applying his mind on the issue. Thus, the contention of the ld. PCIT is nothing but making the review of the assessment under I.T.A. No.172/Jodh/2023 Hariday Credit Cooperative Society Ltd. 21 taken by the ld. FAO and PCIT intend to impose his view on the order passed by the FAO and the same is not permitted under the provisions of section 263 of the Act. The view taken by the ld. FAO is purely a view permissible in the law. As argued by the ld. AR of the assessee that the powers of PCIT to invoke the provisions of Sect 263 requires two conditions precedent one the order passed by the Assessing Officer is erroneous second such order is prejudicial to the interest of Revenue. Where even one of the conditions mentioned above is satisfied but the other one is not the power of revision invoked by ld PCIT may be challenged. He also argued that in the instant case the AO has passed the assessment order after considering entire material available on record, called for the details and submitted by assessee has been verified during the course of assessment proceedings. It is not the case that the ld. AO had passed the order without conducting any inquiries into the issue under consideration and specific details regarding the deduction claimed was called for the ld. FAO vide notice dated 22.09.2019 and 12.11.2020 and therefore after he has taken a plausible view in the matter and allowed the deduction u/s. 80P(2)(d) claimed by the assessee. In context of the above and in accordance with the guiding judicial precedents as well as legal position the revisionary order thus cannot be passed merely to review the opinion formed by ld. AO for I.T.A. No.172/Jodh/2023 Hariday Credit Cooperative Society Ltd. 22 the reason that a higher authority does not concur with the view taken by ld. AO, without there being any substantive material in possession of such higher authority that has not been considered by ld. AO while forming such opinion. To support our view on the matter Reliance is placed on the following decisions: - CIT v/s Rajasthan Financial Corporation (1996) 134 CTR 145 (Raj) held that: “Once Assessing Officer has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the Assessing Offer allowed the claim being satisfied with the explanation of assessee, the decision of the Assessing Officer cannot be held to be erroneous simply because in his order not make an elaborate discussion in that regard” Commissioner Of Income Tax vs Ganpat Ram Bishnoi (2005) 198 CTR Raj 546, 2008 296 ITR 292 Rajheld that, “Undoubtedly, the jurisdiction under Section 263 is wide and is meant to ensure that due revenue ought to reach the public treasury and if it does not reach on account of some mistake of law or fact committed by the AO, the CIT can cancel that order and require the concerned AO to pass a fresh order in accordance with law after holding a detailed enquiry. But when enquiry in fact has been conducted and the AO has reached a particular conclusion, though reference to such enquiries has not been made in the order of the assessment, but the same is apparent from the record of the proceedings, in the present case, without anything to say how and why the enquiry conducted by the AO was not in accordance with law, the invocation of jurisdiction by the CIT was unsustainable. As the exercise of jurisdiction by the CIT is founded on no material, it was liable to be set aside. Jurisdiction under Section 263 cannot be invoked for making short enquiries or to go into the process of assessment again and again merely on the basis that more enquiry ought to have been conducted to find something. 12. The finding of the Tribunal that the ITO had passed assessment order after relevant enquiries and considering the aspects of the matter required by the CIT to be considered by him is a finding of fact and on the basis of which, the jurisdiction assumed by the CIT being non-existent must be held to be not sustainable” I.T.A. No.172/Jodh/2023 Hariday Credit Cooperative Society Ltd. 23 9. Even the apex court has also held in the case of M/s Malabar Industrial Co. Ltd it has been held that, “This provision cannot be invoked to correct each and every type of mistake or error committed by the AO; it is only when an order is erroneous as also prejudicial to Revenue's interest, that the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase 'prejudicial to the interest of the Revenue' has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. For example, if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order and it is prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law” 10. Based on the discussion so record we are of the considered view that no action u/s 263 is called for in this matter once the ld. AO has already examined the issue which the ld. PCIT is pointing out in his order as submitted the assessee. This submission of assessee is I.T.A. No.172/Jodh/2023 Hariday Credit Cooperative Society Ltd. 24 fortified from the observations of Hon’ble Supreme Court in the case of CIT Vs. Max India (supra) wherein it was held as under: The phrase “prejudicial to the interests of the Revenue” in section 263 of the Income-tax Act, 1961, has to be read in conjunction with the expression “erroneous” order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when the Assessing Officer adopts one of two courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the Revenue, unless the view taken by the Assessing Officer is unsustainable in law. 11. Even a bare reading of clause (a) to the Explanation 2 of Section 263(1) enables a deeming fiction for the CIT to treat the order of AO erroneous in so far as prejudicial to the interest of revenue if in the opinion of CIT the order is passed without making inquiry or verification which should have been made. This again substantiates that the assessee challenging the validity of Sec 263 is completely valid as in the present case the assessment order was passed after making due enquiry as well as verification from the assessee hence the CIT has no power to invoke the power provided under section 263 of the Act. I.T.A. No.172/Jodh/2023 Hariday Credit Cooperative Society Ltd. 25 12. Considering the totality of the facts and circumstances of the case, legal position as well as judicial pronouncements, we found merit in the contention of ld. AR, therefore we quash the order passed by ld. PCIT under section 263 of the Act. In the result, the appeal of the assesseeis allowed. Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board. Sd/- Sd/- (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) Judcial Member Accountant Member Dated 20/02/2024 Santosh (On Tour) Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order