Appeal details
Counselvise Citation
[2022] 105 COUNSELVISE.COM (IT) 8513 (ITAT-AMRITSAR)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 9 month(s) 30 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
20-02-2022
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
DB
Assessment Year
2014-2015
Appeal Filed On
21-04-2019
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. RAVISH SOOD, JUDICIAL MEMBER AND Dr. M. L. MEENA, ACCOUNTANT MEMBER ITA No. 259/(Asr)/2019 Assessment Year: 2014-15 M/s. The Bains Cooperative Thrift and Credit Society Ltd., Mahilpur, Distt. Hoshiarpur. [PAN: AAATT7569H] Vs. Dy. Commissioner of Income Tax, Hoshiarpur Circle, Hoshiarpur. (Appellant) (Respondent) Appellant by : Sh. Surinder Mahajan, Adv. Respondent by: Shri Sunil Gautam, CIT-D.R. Date of Hearing: 20.12.2021 Date of Pronouncement: 21.02.2022 ORDER Per Dr. M. L. Meena, AM: The appeal has been filed by the Assessee against the impugned order dated 27.03.2019, passed u/s. 263 by Principal Commissioner of Income Tax-I, Jalandhar for the Assessment Year 2014-15. In the grounds of appeal, the Assessee has raised the following grounds: “1. That order u/s 263 of the Act, passed by Learned Commissioner of Income Tax, Jalandhar-1 (‘Ld. CIT’), is illegal & without jurisdiction. 2. That Learned Commissioner of Income Tax, Jalandhar-I(‘Ld. CIT’) has grossly erred in holding that assessment order passed by the Assessing Officer (‘AO’) was erroneous and prejudicial to the interest of revenue. ITA No. 259/ASR/2019 2 Action of the Learned Commissioner of Income Tax, Jalandhar-I (‘Ld. CIT’) in invoking provisions of section 263 of the Act is illegal & bad in law. 3. That proceedings u/s. 263 of the Act were initiated by Pr. Commissioner of Income Tax-1 by holding that assessee has indulged in banking business and as such not entitled to deduction claimed u/s 80P(2) of the Act. Order u/s 263 of the Act has been passed by holding that order passed by the Assessing Officer is erroneous and prejudicial to interest of revenue since activities of the appellant are in violation of the cooperative society Act and the principle of mutuality is missing in the case. Initiating proceedings on one issue and passing order on an another issue for which no show cause notice has been issued, makes the order illegal and bad in law. 4. That order passed u/s 263 of the Act by Pr. Commissioner of Income Tax-1 holding order passed by the Assessing Officer to be erroneous and prejudicial to interest of revenue since interest on funds with HDFC Bank is not exempt u/s. 80P(2) of the Act is illegal and bad in law since there was no such show cause notice to the assessee. 5. That various written submissions filed during proceedings u/s 263 of the Act and various case laws relied upon by the assessee have been ignored and brushed aside arbitrarily, which makes the order passed u/s 263 of the Act illegal and bad in law. 6. That the order of the Learned Commissioner of Income Tax, Jalandhar- I(‘Ld. CIT’) u/s 263 is arbitrary, unjust, is based on assumptions & presumptions since no error existed or prejudice was caused to revenue, therefore, the order of the Learned Commissioner of Income Tax, Jalandhar- I(‘Ld. CIT’) passed u/s 263 of the Act deserves to be quashed. 7. That on the facts & circumstances of the case, Learned Commissioner of Income Tax, Jalandhar-I(‘Ld. CIT’) has grossly erred in setting aside the assessment framed with the directions to pass fresh order after considering all aspects of the matter and after carrying out proper enquiries. Non issuance of specific directions for assessment to be framed clearly proves that it is a case of only change of opinion and the assessment framed is neither erroneous nor prejudicial to the interest of the revenue. 8. That the Appellant requests for leave to add or amend the grounds of appeal before the appeal is heard or disposed off.” ITA No. 259/ASR/2019 3 2. The assessee filed return of Income for A.Y. 2013-14 electronically filed by declaring total Income of Rs.2,08,280 and the case was selected under scrutiny assessment for the verification of large deduction claimed under Chapter-VIA of the Act. On perusal of the order u/s 143(3) of the Income-tax Act, 1961 dated 23.12.2016, and on examination of record for the assessment year 2014-15, in the above noted assessee, the Pr. CIT has noticed the following discrepancies:- (i) The assessee filed return of income for the asstt. year 2014-15 on 23.11.2014 showing total income at Rs.2,08,280/- after claiming deduction of Rs.67,69,095/- u/s. 80P(2) of the Income tax Act, 1961. In the scrutiny assessment u/s 143(3) of the Income tax Act, 1961 passed for the said assessment year i.e. 2014-15, the Assessing Officer allowed the deduction u/s. 80P(2) of the Income tax Act, 1961. In the preceding assessment year i.e. 2013- 14, the assessee society had claimed similar deduction u/s S0P(2) of the Income tax Act, 1961 and the Assessing Officer disallowed the same and addition was made. In the appeal, the CIT(A)-I, Jalandhar had confirmed the addition made by the Assessing Officer u/s 80P(2) of the Income tax Act, 1961 observing that the assessee was indulging in banking business and was thus not entitled to this deduction u/s 80P(2) allowable to a society. (ii) Since the facts of the case of the assessee for the assessment year 2014-15 are similar to that of the assessment year 2013-14, the assessment order passed u/s 143(3) of the Income Tax Act, 1961 for the assessment year 2014-15 in which deduction u/s 80P(2) of the Income Tax Act, 1961 was allowed, becomes erroneous in so far as it is prejudicial to the interest of the revenue. 3. In view of the above discrepancy, The Pr. CIT has issued a show cause notice u/s.263 of the Income Tax Act, 1961 to the assessee on 25.10.2018. He noted that the decision of Hon'ble ITAT in the case of Mantola Cooperative Thrift and credit Society also covers all the aspects and grounds raised by the assessee. He has discussed that the fact of the case of Totgar's Co-operative Sale Society Ltd. are similar to the assessee's case, where interest income on surplus fund is to be taxed under the head income from other sources and benefit of section 80P is not available on such interest income. Accordingly, ITA No. 259/ASR/2019 4 the Pr. CIT has held that the benefit of Section 80P is only admissible to the extent of business activity with members. Thus, the assessee was not entitled to deduction under section 80P(2)(d) in respect of investment made in HDFC Bank. In the backdrop of above discussion and following the judgment of the Hon'ble Supreme Court, he holds that the order of the assessing officer in case of M/s Bains Cooperative Thirft & Credit Society Ltd, A.Y. 2014-15 dated 23.12.2016 was erroneous and prejudicial to revenue. 4. The Ld AR submitted that action of the Learned Principal Commissioner of Income Tax, Jalandhar-I (‘Ld. CIT’) in invoking provisions of section 263 of the Act is illegal & bad in law; that the proceedings u/s. 263 of the Act were initiated by Pr. Commissioner of Income Tax-1 by holding that assessee has indulged in banking business and as such not entitled to deduction claimed u/s 80P(2) of the Act. and Order u/s 263 of the Act has been passed by holding that order passed by the Assessing Officer is erroneous and prejudicial to interest of revenue since activities of the appellant are in violation of the cooperative society Act and the principle of mutuality is missing in the case. Initiating proceedings on one issue and passing order on another issue for which no show cause notice has been issued, makes the order illegal and bad in law. He further submitted that order passed u/s 263 of the Act by Pr. Commissioner of Income Tax-1 holding order passed by the Assessing Officer to be erroneous and prejudicial to interest of revenue since interest on funds with HDFC Bank is not exempt u/s. 80P(2) of the Act is illegal and bad in law since there was no such show cause notice to the assessee. To support, the Ld. Ar has filed a written synopsis which reads as under:- ITA No. 259/ASR/2019 5 1. That appellant is a cooperative society registered under the Punjab State Cooperative Societies Act, 1861. That appellant filed return declaring gross total income at Rs. 69,77,375/- and claimed deduction u/s 80P of Rs. 67,69,095/- and therefore net taxable income was shown to be Rs. 2,08,280/-. That case was picked up for complete scrutiny under CASS One of the reasons for selection of case in scrutiny was verification of large deduction claimed under chapter- VIA of the Act. As per the return of income the assessee had claimed deduction u/s 80P(2) of the Act at Rs. 67,69,095/-. 2. That in the notice u/s 142(1) of the Act issued on 17.11.2015, the assessee was asked, vide question no. 17 to justify its claim for deduction u/s 80P of the Act or to show cause as to why the deduction u/s 80P should not be disallowed in view of findings in the assessee’s case as per the assessment framed for the A.Y. 2013-14. 3. That assessee in response to the notice u/s 142(1) of the Act filed following submissions: i) That the society was not doing any banking activities but was a cooperative society helping and providing credit facilities to its members, encouraging thrift and working only for members as per the cooperative rules, and its activities were not covered under the Banking Regulation Act, 1949 since it was not dealing with the public; ii) That every year being an independent year, findings of the preceding year could not be applied without verification of facts; iii) That there were 565 regular members, 366 nominal members and only 52 non-members of the society during the year as against findings by the A.O. in the A.Y. 2013-14 that there were 500 odd non- members of the society, which was incorrect since the figure of non- members included ‘nominal members’ also iv) That amount of deposit specified in the balance/books of account against the head ‘non-member’ included deposits from nominal members also v) That no amount was advanced as loan to any of the non- members which could have affected nature of its activities for taxability of income. ITA No. 259/ASR/2019 6 vi) It was finally pleaded that the assessee was not covered under definition of ‘Cooperative Bank’ as per chapter V of the Banking Regulation Act 1949 and was eligible for deduction u/s 80P(2) of the Act. vii) Attention was also drawn to the latest decision dated 21.09.2015 of Hon’ble Karnataka High Court in ITA No. 100092 of 2014 in the case of CIT Belgaum vs Sh. Basaveshwar Cooperative Credit Society Ltd. Belgaum wherein the Hon’ble Court have held that in view of the ‘Explanation’ below the relevant clauses, in the event of a dispute as to the primary object or principal business of any other cooperative society referred to in clauses (cciv), (ccv) and (ccvi) of section 56 of the Banking Regulation Act, 1949, it would require the dispute to be resolved by the Reserve Bank of India, before the Income Tax Authorities could term the assessee as a Cooperative Bank for the purposes of section 80P of the Act. viii) . Further it was submitted that out of deposits of Rs. 3,69,62,6131- specified in the balance sheet as non-members in the saving accounts includes deposits of Rs. 3,46,63,739/- from nominal members and only 22,98,874/- from non-members. Similarly, amount of fixed deposits from non-members was Rs. 6,59,943/- only. 4 That learned assessing officer after going through submissions as given in para 3 above framed assessment at returned income at Rs. 208280/- with following observations: a) The assessee is registered as a cooperative society and its Memorandum/Deed, was registered with the Circle Registrar, Cooperative Societies, Hoshiarpur on 03.02.1934 under the relevant State Act at that time. Its main objectives were- i. to collect funds for the purpose of making advances to members for essential objects; ii. to purchase and sale of agriculture implements, seeds and produce; iii. to arrange for educational facilities for it s members; iv. to explore other suggestions for encouraging thrift and credit among members. b) That during the course of assessment proceedings for the assessment year 2013-14, the existence of nominal members with the ITA No. 259/ASR/2019 7 society was never brought on record by the assessee. Further as per the deposit ledgers, the deposit accounts, both saving and fixed deposit, both in the preceding year as well as the current year, have been classified under two heads -Members’ and ‘Non-members’ only. On being pointed out, assessee had submitted that deposits from nominal members were also included under the head non-members deposits. c) That during the course of assessment proceedings for the assessment year 2013-14 on being asked to justify its claim for deduction u/s 80P of the Act, assessee explained case but certain facts were not clarified. Based on explanation of assessee, it was concluded that, it was not eligible for deduction u/s 80P(2) of the Act in view of provisions of section 80P(4) of the Act. However, during the proceedings for the current assessment year, i) the assessee had claimed that its primary object was to provide credit facilities to its members only and it was not engaged in any type of banking activities, it is not fulfilling the conditions prescribed for a Primary Cooperative Bank. ii) It was also argued that since it had accepted deposits mostly from members, nominal members and only a few non-members residing in the area of its operation only, it was not dealing with public which was essential to be termed as ‘banking’. Since there was difference of opinion of the department and that of the assessee as to whether acceptance of deposits from non-members coupled with other facts discussed above, would be termed as the assessee engaged in the business of banking or not, assessee submitted that it was an accepted proposition that when two views are possible, the one beneficial to the assessee should be adopted iii) That in the absence of any adverse finding from the Reserve Bank of India, it should be allowed deduction u/s 80P of the Act, as has been held by the Hon’ble Karnataka High Court. d) Therefore, it was noticed that there was no change in the activities of the assessee from that in the preceding year; that the Hon’ble High Court have also not negated the fact that for deciding categorization of credit society as cooperative bank, fulfillment of conditions referred to in clauses (cciv), (ccv), (ccvi) of the section 56 of the B.R. Act 1949, have to be verified and that if there is dispute on the nature of activities i.e. decision of the RBI would be final; hence ITA No. 259/ASR/2019 8 keeping in view the Explanation below clauses (cciv), (ccv) and (ccvi) of section 56 of the Banking Regulation Act 1949, and the judgment of Hon’ble Karnataka High Court referred to above, this office has referred the issue to the Reserve Bank of India. e) After considering these submissions of the assessee though it is felt that the judgment depends upon facts of each case which may be similar or different, in view of the fresh submissions of the assessee, deduction u/s 80P of the Act on the amount of income from business, is for time being allowed to the assessee which will be subject to amendment based upon the decision given by the RBI on the nature of activities of the assessee That proceedings u/s 263 of the Act were initiated. Show cause notice dated 25.10.2018 was issued which has been incorporated on page 1 of the order u/s 263 of the Act. Perusal of reasons recorded reveals that proceedings u/s 263 of the Act were initiated since addition made by the Assessing Officer u/s 80P(2) of the Act for A.Y. 2013-14 was confirmed by CIT(A) Jalandhar and facts of the case for A.Y. 2014-15 being same, deduction allowed u/s 80P(2) of the Act is erroneous and prejudice to interest of revenue. Only reason for initiation of proceedings u/s 263 of the Act was deduction allowed u/s 80P(2) of the Act. Pr. CIT-1, Jalandhar in para 4.1 has concluded as under:- “Thus during assessment year 2014-15 deposits have been received from members and also non- members. The concept of mutuality has thus been violated and activities of the Co-Operative Society are in violation of the co-operative Societies. The assessee has indulged in business with members, nominal-members and non-members without any approval from the Registrar of the societies. The activities of the appellant are in violation of the co-operative Societies Act. The principle of mutuality is missing in the case., The ratio of the judgment of the Hon’ble Supreme Court in the case of The Citizen Co-Operative Society Limited versus Assistant Commissioner of Income Tax is squarely applicable in case of the assessee. ” Conclusion drawn by Pr. CIT-1, Jalandhar is not based on assessment record. There is no material to support conclusion drawn by Pr. CIT as to: a) Deposits have been received from members and also non- members. ITA No. 259/ASR/2019 9 b) The concept of mutuality has been violated. c) Activities of the Co-Operative Society are in violation of the co- operative Societies. d) The assessee has indulged in business with members, nominal- members and non-members without any approval from the Registrar of the societies. e) The activities of the appellant are in violation of the co-operative Societies Act. The principle of mutuality is missing in the case. It is an established law that proceedings u/s 263 of the Act are to be invoked by CIT from examination of record of proceedings under the Act. Conclusion drawn is not based on record of the proceedings which makes the order bad in law. Whole exercise carried out by the Pr. CIT is based on appeal order of CIT(A) for A.Y. 2013-14. This makes the order u/s 263 of the Act bad in law. Reliance is being placed on: a) JASWINDER SINGH VS. COMMISSIONER OF INCOME TAX IN THE ITAT CHANDIGARH (2012) 150 TTJ 0033 (UO) b) B & A PLANTATION & INDUSTRIES LTD. & ANR. VS. COMMISSIONER OF INCOME TAX & ORS HIGH COURT OF GAUHATI (2007) 290 ITR 0395 c) COMMISSIONER OF INCOME TAX VS. SOHANA WOOLLEN MILLS HIGH COURT OF PUNJAB AND HARYANA (2008) 296 ITR 0238 d) COMMISSIONER OF INCOME TAX VS. SAT PAL AGGARWAL HIGH COURT OF PUNJAB & HARYANA (2007) 293 ITR 0090 That Pr. CIT-1, Jalandhar passed order u/s 263 of the Act wherein Ld. Pr. CIT-1, Jalandhar has observed as under: - “In view of the above discussion and the judgment of the Hon’ble Supreme Court, the order of the Assessing Officer in case of M/s Bains Cooperative Thrift & Credit Society Ltd, A.Y. 2014-15 dated 23.12.2016 is erroneous and prejudicial to revenue Considering all ITA No. 259/ASR/2019 10 these facts, the order passed by the A.O. is held to be erroneous and prejudicial to the interest of the revenue. In view of the above facts and discussions, I am satisfied that the assessment order passed by the Assessing Officer on 23.12.2016 is erroneous in so far as it is prejudicial to the interests of the revenue Therefore, the said order passed on 23.12.2016 is set aside to this extent to the file of the assessing officer to pass fresh order after making necessary enquiries/investigations in the light of the discussions made above and after giving due opportunity to the assessee of being heard. ” From the observations of the Ld. Principal Commissioner of Income Tax-1, Jalandhar, it will be observed that there is no specific direction by the Ld. Principal Commissioner of Income Tax-1, Jalandhar. No decision about the erroneous nature of the order has been taken by Ld. Principal Commissioner of Income Tax-1, Jalandhar since Ld. Principal Commissioner of Income Tax-1, Jalandhar in para 6 has directed Assessing Officer to pass fresh order after making necessary enquiries/investigations. Order u/s 263 of the Act without proper directions is illegal and bad in law. Reliance is being placed on a) COMMISSIONER OF INCOME TAX vs. KANDA RICE MILLS HIGH COURT OF PUNJAB AND HARYANA (1989) 178 ITR 0446 b) COMMISSIONER OF INCOME TAX vs. UNIQUE AUTOFELTS (P) LTD. HIGH COURT OF PUNJAB AND HARYANA (2009) 30 DTR 0231 c) SATISH KUMAR VS PR CIT ITA NO. 258/ASR/2019 7. That words erroneous and prejudicial to the interest of revenue have not been defined in the law. An order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law make certain assessment, the same cannot be branded as erroneous simply because, the order should have been written more elaborately. Case may be visualized where the Income-tax Officer while making an assessment examines the accounts makes enquiries, applies his mind to the facts and ITA No. 259/ASR/2019 11 circumstances of the case and determines the income either by accepting the accounts or by making some estimates himself. On perusal of the records, one may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a high figurer than the one determined by the Income himself at the higher figures. This is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous. It may be said in such a case that the order in question is prejudicial to the interest of the revenue. Reliance is being placed on a) COMMISSIONER OF INCOME-TAX VS. GHABRIAL INDIA LTD. 203 ITR 108 (BOM.) b) MALABAR INDUSTRIAL CO. LTD, VS. COMMISSIONER OF INCOME-TAX 243 ITR 83 (SUPREME COURT) 8. That order passed by the Assessing Officer after enquiring on all the matters cannot be held to be erroneous because every loss of revenue as a consequence of an order of A.O., cannot be treated as prejudice to the interest of revenue. For this proposition reliance is being placed on: a) COMMISSIONER OF INCOME-TAX vs. ARVIND JEWELLERS HIGH COURT OF GUJRAT (2002) 177 CTR (Guj) 546 : (2003) 259 ITR 502 ( Guj) (2002) 124 TAXMAN 615. b) COMMISSIONER OF INCOME TAX vs. SUNBEAM AUTO LTD. HIGH COURT OF DELHI (2009) 227 CTR (Del) 133 : (2011) 332 ITR 167 : (2010) 189 TAXMAN 436 : (2009) 31 DTR 1 c) COMMISSIONER OF INCOME TAX vs. VINOD KUMAR GUPTA HIGH COURT OF PUNJAB & HARYANA (2007) 165 TAXMAN 225 (P&H) d) COMMISSIONER OF INCOME TAX vs. DESIGN & AUTOMATION ENGINEERS ( BOMBAY) (P) LTD. HIGH COURT OF BOMBAY (2008) 13 DTR (Bom) 145 : (2010) 323 ITR 632 : ( 2009) 177 TAXMAN. ITA No. 259/ASR/2019 12 e) COMMISSIONER OF INCOME TAX vs. MUNJAL CASTING HIGH COURT OF PUNJAB & HARYANA (2008) 2 DTR (P&H) 20 : (2008) 303 ITR 23 : (2008) 168 TAXMAN 241. f) COMMISSIONER OF INCOME TAX vs. MAX INDIA LTD. SUPREME COURT OF INDIA (2007) 213 CTR (Supreme Court) 266 ; (2007) 295 ITR 282 (Supreme Court): (2008) 166 TAXMAN 188 (SC) g) COMMISSIONER OF INCOME TAX vs. MAHENDRA KUMAR BANSAL HIGH COURT OF ALLAHABAD (2008) 214 CTR (All) 349 : (2008) 297 ITR 99 (All) h) COMMISSIONER OF INCOME TAX vs. DEEPAK MITTAL HIGH COURT OF PUNJAB AND HARYANA (2010) 37 DTR 0008, (2010) 324 ITR 0411 i) COMMISSIONER OF INCOME TAX vs. LEISURE WEAR EXPORTS LTD. HIGH COURT OF DELHI (2010) 46 DTR 0097, (2012) 341 ITR 0166 j) NARAIN SINGLA VS. PR. CIT’, 62 TAXMAN.COM 225 (CHD. TRIB.) k) JIWAN KUMAR VS. PCIT ITAT AMRITSAR BENCH, AMRITSAR, ITA NO. 182/ASR/2016 I) DHARAMPAL VS. PCIT ITAT AMRITSAR BENCH, AMRITSAR, ITA NO. 219 & 672/ASR/2015 m) RAMAN LAKHA VS. ITO WARD-2, HOSHIARPUR ITA NO. 324/ASR/2016 9. That in para 3, page 14 of the order, Ld. Principal Commissioner of Income Tax-1, Jalandhar has observed that position of law stands substantially altered with the inception of explanation 2 in section 263 by Finance Act 2015. As the provision in that section has been specifically invoked the decision relied upon by the assessee pertaining to the pre amended section 263 would no way hold good. It is submitted that it is an established law that explanation 2 in section 263 is not applicable retrospectively. For this proposition reliance is being placed on: a) SATISH KUMAR VS PR CIT ITA NO. 258/ASR/2019 b) A.V. Industries vs. ACIT ITA No.3469/M/2010 ITA No. 259/ASR/2019 13 c) Metacaps Engineering & Mahendra Construction Co. vs. CIT I.T.A. No, 2895/Mum/2014 Order pronounced in the open court on December, 2021. 5. The Ld. DR vehemently argued in support of the department and contended that Pr. Commissioner of Income Tax-1 was justified in holding the order passed by the Assessing Officer to be erroneous and prejudicial to interest of revenue since interest on funds with HDFC Bank is not exempt u/s. 80P(2) of the Act. While passing order passed u/s 263 of the Act, Pr. CIT has followed the Coordinate Bench judgement and the Hon’ble Apex Court in the case Totgar's Co- operative Sale Society Ltd. 6. We have heard both the sides and perused the impugned orders, and the case law cited. It is admitted fact that the assessee society is registered under Punjab Cooperative Societies Act and receiving interest on deposits from commercial banks HDFC. The assessee, a co-op credit society, was engaged in providing credit facilities to its members. The assessee had surplus funds which it invested in deposits with Commercial Banks. The question before us is whether the said interest earned on the said deposits was “business profits” and eligible for deduction u/s 80P(2)(a)(i)? 7. The ld. AR for the assessee argued that its activity of providing credit facilities to its members was an “eligible activity” u/s 80P(2)(a)(i) and that as the ITA No. 259/ASR/2019 14 investments were made not with the idea of investments, but for the reason that cash should be available with the appellant as and when it was needed for the purpose of its business. 8. The Ld AR argued that The Pr. CIT observed that the assessee has been indulged in banking business and as such not entitled to deduction claimed u/s 80P(2) of the Act. But the Order u/s 263 of the Act has been passed by holding that order passed by the Assessing Officer is erroneous and prejudicial to interest of revenue since activities of the appellant are in violation of the cooperative society Act and the principle of mutuality is missing in the case. Thus, initiating proceedings on one issue and passing order on another issue for which no show cause notice has been issued, makes the order illegal and bad in law. He further submitted that order passed u/s 263 of the Act by Pr. Commissioner of Income Tax-1 holding order passed by the Assessing Officer to be erroneous and prejudicial to interest of revenue since interest on funds with HDFC Bank is not exempt u/s. 80P(2) of the Act is illegal and bad in law since there was no such show cause notice to the assessee. 9. From the aforesaid show cause notice, it is evident that in the appeal, the CIT(A)-I, Jalandhar had confirmed the addition made by the Assessing Officer u/s 80P(2) of the Income tax Act, 1961 observing that the assessee was indulging in banking business and was thus not entitled to this deduction u/s 80P(2) allowable ITA No. 259/ASR/2019 15 to a society. The allegation of the assessee that Order u/s 263 of the Act has been passed by holding that order passed by the Assessing Officer is erroneous and prejudicial to interest of revenue since activities of the appellant are in violation of the cooperative society Act and the principle of mutuality is missing in the case is factually incorrect. While concluding the discussion the Pr.CIT has held that interest income on surplus fund is to be taxed under the head income from other sources and benefit of section 80P is not available on such interest income. Accordingly, the Pr. CIT has held that the benefit of Section 80P is only admissible to the extent of business activity with members. Thus, the assessee was not entitled to deduction under section 80P(2)(d) in respect of investment made in HDFC Bank. 10. On identical facts, in the case of “the NBI Employees Co-operative Non- Agricultural Thrift & Credit Society Ltd. Vs. Pr.CIT”, in ITA No. 275/(Asr)/2018 for Assessment Year: 2013-14, we have discussed the issue at length and decided the same in favour of department, following the Hon’ble Jurisdictional Punjab and Haryana High Court, in the case M/s Punjab State Co¬operative Federation of Housing Building Societies Ltd., wherein the Hon’ble High Court, while following the judgment of Hon’ble Supreme Court, in the case of The Totgars Co- operative Sale Society Ltd. Vs ITO 2010(35) DTR 25, have held that interest received by the assessee from Commercial banks was not covered by Section ITA No. 259/ASR/2019 16 80P(2)(a)(i) of the Act and was taxable under section 56, being income from other sources. We held such interest income is to be charged to Tax as income from other sources in the context of the assessee due to the non-availability of deduction u/s.80P(2)(d) on such amount. 11. In the backdrop of the above discussion, we find no infirmity in the order of the Pr. CIT passed U/s 263 of the Act by holding the assessment order as prejudicial to the interest of revenue because the interest income was charged to Tax as income from other sources in the context of the assessee due to the non- availability of deduction u/s.80P(2)(d) on such amount. 12. We, therefore, hold that the Ld. Pr. CIT was justified in revising the assessment order. The impugned order is upheld. Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board. Sd/- Sd/- (Ravish Sood) (Dr. M. L. Meena) Judicial Member Accountant Member Date: 21.02.2022 prabhat Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(Appeals) (4) The CIT concerned (5) The Sr. DR, I.T.A.T By Order
