OM GURUDUTTA NAGARI SAHAKARI PAT SANSTHA, Nagpur V. CIT-III, Nagpur

ITA 289/NAG/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1614 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 26-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Assessee Lawyers: D K GANERIWALA
• Keywords: Business income
• Section: 143(3); 263

Judgement Text

1 ITA NO. 289/NAG/2014 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) I.T.A. NO.289/NAG/2014 ASSESSMENT YEAR : 2009 - 10. OM GURUDUTTA NAGARI SAHAKARI COMMISSIONER OF INCOME - TAX - III, PAT SANSTHA, VS. NAGPUR. NAGPUR. PAN AAAJO0071B APPELLANT. RESPONDENT. APPELLANT BY : SHRI D.K. GANERIWALA. RESPONDENT BY : S HRI NARENDRA KANE. DATE OF HEARING : 0 9 - 11 - 2015. DATE OF PRONOUNCEMENT : 16 TH NOV., 2015. O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX - III, NAGPUR PASSED U/S 263 OF I.T. ACT DATED 26 - 03 - 2015 AND PERTAINS TO ASSESSMENT YEAR 2009 - 10. 2. IN THIS CASE THE LEARNED CIT NOTED THAT THE ASSESSEE HAS EARNED INTEREST ON FIXED DEPOSIT WITH VARIOUS BANKS. LEARNED CIT WAS OF THE OPINION THAT THE INTEREST IS NOT AN ALLOWABLE DEDUCTION U/S 80P OF THE INCOME - TAX ACT I N VIEW OF THE HONBLE SUPREME COURT DECISION IN THE CASE OF M/S TOTGARS CO - OP. SOCIETY LTD. 332 ITR 283. THE ASSESSEE EXPLAINED THAT THE SAID DECISION OF HONBLE APEX COURT IS NOT APPLICABLE ON THE FACTS OF THE CASE. IT WAS SUBMITTED THAT IN ASSESSEES OWN CASE INTEREST IS EARNED FROM COOPERATIVE BANK AND THE INTEREST INCOME H AS RESULTED ON ACCOUNT OF INVESTMENT OF WORKING CAPITAL WHICH CONSTITUTES PART OF PROFITS AND GAIN OF THE BUSINESS OF THE SOCIETY. THAT THESE FUNDS ARE RAISED BY WAY OF INTEREST BEARING DEPOSITS AND FORMS PART OF WORKING 2 ITA NO. 289/NAG/2014 CAPITAL OR CIRCULATING CAPITAL IN ACCORDANCE WITH SECTIO N 2(31) OF THE MAHARASHTRA COOPERATIVE ACT, 1960 AND HENCE THE SAME CANNOT BE TREATED AT PAR WITH THE SURPLUS FUNDS AS WAS THE TOTGARS CASE. HOWEVER, LEARNED CIT WAS NOT SATISFIED. HE HELD THAT HE WAS SATISFIED THAT THE ORDER OF THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE TO THE EXTENT OF TAXABILITY OF INTEREST INCOME. HENCE LEARNED CIT SET ASIDE THE ORDER WITH A DIRECTION THAT THE ASSESSMENT BE MADE AFRESH IN ACCORDANCE WITH THE PROVISIONS OF INCOME - TAX ACT AND APPLICABLE CIRCULARS/JU DICIAL DECISIONS AFTER MAKING APPROPRIATE ENQUIRIES IN THIS RESPECT . 3. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. AT THE THRESHOLD LEARNED COUNSEL OF THE ASSESSEE REFE RRED TO PARAGRAPH 2.1 OF THE LEARNED CITS ORDER. IN THE SAID PARAGRAPH LEARNED CIT HAS REFERRED TO ITO WARD - 6(3), NAGPURS LETTER WHICH MOVED A PROPOSAL U/S 263 OF THE ACT WITH RESPECT TO INTEREST INCOME ON FIXED DEPOSITS. IT WAS ALSO PROPOSED THAT HONBL E APEX COURT DECISION IN TOTGARS CASE (SUPRA) WAS APPLICABLE AND HENCE THE INCOME SHOULD HAVE BEEN BROUGHT TO TAX AS INCOME FROM OTHER SOURCES AND NOT ALLOWED AS BUSINESS INCOME. REFERRING TO THIS PARAGRAPH, LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT LEARNED CIT HAS EXERCISED THE JURISDICTION OF SECTION 263 ON A PROPOSITION FROM THE ITO WITHOUT ANY APPLICATION OF HIS OWN MIND. HENCE HE SUBMITTED THAT ASSUMPTION OF JURISDICTION BY THE LEARNED CIT IS BAD. IN THIS REGARD LEARNED COUNSEL OF THE ASSESSEE RE FERRED TO THE DECISION OF ITAT, JAIPUR BENCH IN THE CASE OF SHRI HUKUM JAIN VS. CIT IN ITA NO.425/JP/2013 VIDE ORDER DATED 26/02/2014. 5. PER CONTRA LEARNED D.R. SUBMITTED THAT LEARNED CIT IN PARAGRAPH NO. 2.2 HAS REFERRED TO THE FACT THAT HE HAS PERUSED T HE CASE RECORDS AND HAS FOUND THAT ASSESSMENT ORDER U/S 143(3) IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF 3 ITA NO. 289/NAG/2014 REVENUE. HENCE LEARNED D.R. SUBMITTED THAT IT CANNOT BE SAID THAT THERE IS NO APPLICATION OF MIND BY LEARNED CIT. 6. UPON CAREFUL CONSIDERATION I NOTE THAT THERE WAS A PROPOSAL BY THE ITO TO TAKE ACTION U/S 263. THE AO H AS ALSO REFERRED TO THE FACT O F INTEREST IN FIXED DEPOSITS AND THE DECISION OF HONBLE APEX COURT IN TOTGARS CO - OP. SOCIETY LTD. I FIND THAT SECTION 263 OF THE ACT MANDATES THAT T HE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORDS OF ANY PROCEEDINGS UNDER THIS ACT AND IF HE CONSIDERS THE AOS ORDER TO BE PREJUDI CIAL TO THE INTEREST OF REVENUE, HE MAY PASS AN ORDER AS ENVISAGED UNDER THE ACT. IN THIS CASE IT IS EVIDENT THAT LEARNE D CIT HAS ACTED UPON THE PROPOSAL OF THE ITO TO MOVE ACTION U/S 263. . LEARNED CIT HAS SIMPLY FOLLOWED THE PROPOSITION OF THE AO. IT CANNOT BE SAID THAT THERE WAS ANY INDEPENDENT APPLICATION OF MIND BY THE LEARNED CIT. IN SIMILAR SITUATION, THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SHRI HUKUM JAIN (SUPRA) HAS ALSO HELD THAT SUCH A NOTICE ISSUED U/S 263 OF THE ACT ON THE BASIS OF A PROPOSAL MADE BY THE AO WAS VOID AB INITIO. FOR THIS PROPOSITION THE TRIBUNAL HAS REFERRED TO THE FOLLOWING CASE LAWS : 1) RAJIV ARORA VS. CIT (2011) 131 ITD 58 (JP.) 2) JHEENDU RAM VS. CIT (2011) 7 ITR 463 (LUCKNOW) 3) MS. BINA INDRA KUMAR VS. ITO (2012) 137 ITD 238/80 DTR 180 (MUM.) 4) PRADEEP BANDHU VS. CIT (2013) 81 DTR 289 (JD.) 5) MANISH KUMAR VS. CIT 134 ITD 27/17 ITR 324 (INDORE). FROM THE ABOVE IT IS EVIDENT THAT JURISDICTION ASSUMED BY THE LEARNED CIT WAS NOT VALID AND ACCORDINGLY THE ORDER U/S 263 IS LIABLE TO BE QUASHED AND THE SAME IS QUASHED. 7. ON MERITS OF THE ACTION TAKEN U/S 263 LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THIS TRIBUNAL IN IDENTICAL SITUATION IN ITA NO. 371/NAG/2012 IN 4 ITA NO. 289/NAG/2014 THE CASE OF CHHATISGARH URBAN CREDIT SAHAKARI SANSTHA MARYADIT, VIDE ORDER DATED 27 - 05 - 2015 HAS FOUND THA T RELIANCE BY THE REVENUE IN SIMILAR CASES ON THE APEX COURT DECISION IN THE CASE OF TOTGARS COOPERATIVE SOCIETY WAS NOT APPLICABLE. FOR THIS PROPOSITION THE TRIBUNAL HAD REFERRED TO THE ITAT, AHMEDABAD BENCH DECISION IN THE CASE OF DHANLAXMI CREDIT COOP ERATIVE SOCIETY LTD. VS. ITO IN ITA NO. 2342/AHD/2012 VIDE ORDER DATED 08 - 02 - 2013 WHEREIN IT WAS FOUND THAT THE FACTS IN THE CASE DEALT WITH BY HONBLE APEX COURT WERE TOTALLY DIFFERENT. CONSIDERING THE SAID DECISION THE TRIBUNAL HAS CONCLUDED AS UNDER : WE FIND THAT THE RATIO OF ABOVE CASE ALSO APPLIES TO THE PRESENT CASE. AS OBSERVED IN THE ABOVE CASE LAW, IN THIS CASE ALSO THE SUBMISSIONS OF THE ASSESSEES COUNSEL IS THAT THE ASSESSEE SOCIETY IS MAINTAINING OPERATIONAL FUNDS AND TO MEET ANY EVENTUALIT Y TOWARDS REPAYMENT OF DEPOSIT THE COOPERATIVE SOCIETY IS MAINTAINING SOME LIQUIDATED FUNDS AS SHORT TERM DEPOSITS WITH BANKS. HENCE ADHERING TO THE DOCTRIN STAIR DESISES, WE HOLD THAT THE ASSESSEE SHOULD BE GRANTED BENEFIT OF DEDUCTION UNDER SECTION 80P(2 )(A)(I). ACCORDINGLY, THE INTEREST ON DEPOSITS WOULD QUALIFY FOR DEDUCTION UNDER THE SAID SECTION. ACCORDINGLY, WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. REFERRING TO THE ABOVE, LEARNED COUNSEL OF THE ASS ESSEE SUBMITTED THAT SINCE ON MERITS THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE, THE ORDER U/S 263 IS NOT SUSTAINABLE ON THIS COUNT ALSO. 8. PER CONTRA LEARNED D.R. SUBMITTED THAT LEARNED CIT HAS ONLY SET ASIDE THE MATTER TO THE FILE OF THE AO AND THE ASSESSEE CAN MAKE HIS SUBMISSION BEFORE THE AO. 9. UPON CAREFUL CONSIDERATION, I FIND THAT ON MERITS, ON IDENTICAL SITUATION THIS TRIBUNAL HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESEE. HENCE IN MY CONSIDERED OPINION NO PURPOSE WILL BE SERVED BY REMITTIN G THE ISSUE AGAIN TO THE FILE OF THE AO. HENCE FOLLOWING THE ABOVE SAID TRIBUNALS DECISION WHERE IT WAS 5 ITA NO. 289/NAG/2014 HELD THAT HONBLE APEX COURT DECISION IN THE CASE OF TOTGARS COOPERATIVE SOCIETY IS NOT APPLICABLE AND THE INTEREST ON FIXED DEPOSITS IN THIS CASE QUA LIFY FOR EXEMPTION U/S 80P, I SET ASIDE THE ORDER OF LEARNED CIT AND HOLD THAT THE ORDER U/S 263 IS INVALID. 10. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF NOV., 2015. SD/ - ( SHAMIM YAHYA) ACCOUNTANT MEMBER. NAGPUR, DATED: 16 TH NOV., 2015. COPY FORWARDED TO : 1. OM GURUDUTTA NAGARI SAHAKARI PAT SANS THA, HTA PLOT NO. 7, AYURVED LAYOUT, RAGHUJI NAGAR, AYODHYA NAGAR POST OFFICE, NAGPUR440009. 2. I.T.O., NAGPUR. 3. C.I.T. - II I , NAGPUR. 4. D.R., ITAT, NAGPUR. 5. GUARD FILE TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, NAGPUR WAKODE