The Gujarat Rajya Handloom, Handicrafts & Audyogic Sahakari Federation Ltd., Ahmedabad V. The Income Tax Officer, Ward-5(3)(2), Ahmedabad

ITA 321/AHD/2023

AI Insights

The case involves The Gujarat Rajya Handloom, Handicrafts & Audyogic Sahakari Federation Limited, which appealed against the order of the CIT(A) confirming the disallowances made by the Assessing Officer for the Assessment Year 2014-15. The primary issues revolved around the reopening of the assessment under Section 147, and the disallowances of deductions claimed under Section 80P(2)(d) and Section 80P(a)(ii) related to interest income from fixed deposits and activities classified under cottage industries, respectively. The Tribunal examined the legal provisions and precedents cited by both parties, ultimately deciding to allow the deductions while dismissing the challenge to the reopening of the assessment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129366 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 01-08-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 01-05-2023
• Other Referred Cases: Gujarat Power Corporation Limited vs. ACIT, 350 ITR 266, Sabarkanta District Co-operative Milk Producer's Union Limited vs. CIT in Tax Appeal No.473 of 2014, District Co-operative Development Federation, 88 ITR 330
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Difference of opinion; Change of opinion
• Section: 56; 80P

Judgement Text

ITA No.321/Ahd/2023 Assessment Year: 2014-15 Page 1 of 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.321/Ahd/2023 Assessment Year: 2014-15 The Gujarat Rajya Handloom, Handicrafts & Audyogic Sahakari Federation Limited, B-2, Swaminarayan Complex, Near Jain Merchant Society, Paldi, Ahmedabad. [PAN – AAATT 2789 H] Vs. Income Tax Officer, Ward – 5(3)(2), Ahmedabad. (Appellant) (Respondent) Assessee by Shri Tushar Hemani, Sr. Advocate & Parimalsinh B. Parmar, AR Revenue by Ms. N.J. Vyas, Sr. DR Da te o f He a r in g 02.08.2023 Da te o f P ro n o u n ce m e n t 06.09.2023 O R D E R This appeal is filed by the Assessee against order dated 15.03.2023 passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2014-15. 2. The Assessee has raised the following grounds of appeal :- “1. The Ld. CIT (A) has erred both in law and on the facts of the case in confirming the action of AO in reopening the assessment u/s.147 of the Act. On the facts and circumstances of the case, Ld. CIT (A) ought to have held that the action of reopening is without jurisdiction and not permissible either in law or on facts. The Ld. CIT (A) has failed to appreciate that mere change of opinion is not valid aground to reopen the case. 2. The Ld. CIT (A) has erred in law and on facts in confirming action of the Ld. AO in disallowing deduction claimed u/s.80P(2)(d) of the Act amounting to Rs.17,83,802/- in respect of interest received from fixed deposits kept with the Gujarat State Co-op. Bank. 3. The Ld. CIT (A) has erred in law and on facts in confirming action of the Ld. AO in disallowing deduction claimed u/s.80P(a)(ii) of the Act amounting to Rs.17,93,171/- in respect of cottage industry. 4. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring ITA No.321/Ahd/2023 Assessment Year: 2014-15 Page 2 of 4 various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. The action of the lower authorities is in clear breach of law and principles of natural Justice and therefore deserves to be quashed. 5. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of the Ld. AO in levying interest u/s.234A/B/C/D of the Act. 6. The Learned CIT(A) has erred in law and on facts of the case in confirming action of Ld. AO in levying penalty u/s.271(1)(c) of the Act.” 3. The assessee filed its return of income on 26.11.2014 declaring total income of Rs.11,42,400/-. The assessee claimed deduction under Section 80P(2)(d) of the income Tax Act, 1961 amounting to Rs.17,83,802/- on account of interest earned from Gujarat State Co-operative Bank Limited. The Assessing Officer observed that the interest income is in the nature of income from Other Sources as per Section 56 of the Act attributable to the activities of the assessee society and not derived from a Co-operative Society, thus no deduction is allowable on such interest income. Further, the assessee claimed deduction under Section 80P(a)(ii) of the Act available for Cottage Industries for Rs.17,93,172/-. The assessee filed its reply before the Assessing Officer. The Assessing Officer made disallowance of deduction claimed under Section 80P of the Act to the extent of Rs.35,76,974/- 4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee. 5. As regards to ground no.1, the Ld. AR submitted that the reopening was done on the very same reason when the original question of the scrutiny was conducted by the Assessing Officer. The Ld. AR relied upon the decision of Hon’ble Gujarat High Court in the case of Gujarat Power Corporation Limited vs. ACIT, 350 ITR 266. As regards to ground no.2 relating to deduction claimed under Section 80P(2)(d) of the Act amounting to Rs.17,83,802/- in respect of interest received from the fixed deposit kept with Gujarat State Co-operative Bank, the same is covered by the decision of Hon’ble Gujarat High Court in the case of Sabarkanta District Co-operative Milk Producer’s Union Limited vs. CIT in Tax Appeal No.473 of 2014. The Ld. AR submitted that the assessee earned interest ITA No.321/Ahd/2023 Assessment Year: 2014-15 Page 3 of 4 from Gujarat State Co-operative Bank Limited which is a Co-operative Society and, therefore, the assessee qualifies for deduction under Section 80P(2)(d) of the Act. As regards to ground no.3 relating to deduction claimed under Section 80P(a)(ii) amounting to Rs.17,93,171/- in respect of Cottage Industries Limited, the Ld. AR submitted that similar issue in Assessment Year 2015-16 has been decided in favour of the assessee and in fact the interpretation given by the Assessing Officer as well as the CIT(A) in respect of the industry will not be applicable in assessee’s case as the activities of the assessee is coming under the purview of Cottage Industries is not categorically in consonance with the observations of the Assessing Officer as Circular No.722 dated 19.09.1995 it becomes explicit that in case of Co-operative Society sole of the amount of profit and gain of business to such activity shall be allowed as deduction. The Ld. AR relied upon the decision of District Co-operative Development Federation, 88 ITR 330 passed by the Hon’ble Allahabad High Court. 6. The Ld. DR in respect of ground no.1 submitted that the reasons were properly recorded and, therefore, reopening is justified by the Assessing Officer. As regards to ground no.2, the Ld. DR relied upon the Assessment Order and the order of the CIT(A). As regards to ground no.3, the ld DR submitted that the assessee does not qualify as Cottage Industry and, therefore, the CIT(A) has rightly confirmed the order of the Assessing Officer. 7. Heard both the parties and perused all the relevant material available on record. As regards to ground no.1, the contention of the Ld. AR that the scrutiny was done in the original assessment proceedings on the very same reason is not justified and, therefore, ground no.1 is dismissed. As regards to ground no.2, the contention of the Ld. AR that the same is covered by the decision of Hon’ble Gujarat High Court in the case of Sabarkanta District Co-operative Milk Producer’s Union Limited vs. CIT appears to be justifiable as the interest earned on Fixed Deposits from Co-operative Bank deposits is coming under the purview of Section 80P(2)(d) of the Act . Thus, ground no.2 is allowed. As regards to ground no.3, the contention of the Ld. AR that is applicable in the assessee‘s case as the assessee takes up the handloom orders from outside and various members of the Society. The manufacturing activities of the orders received in handlooms and handicrafts are assigned to its member societies/workers and the assessee ITA No.321/Ahd/2023 Assessment Year: 2014-15 Page 4 of 4 society had power to direct, supervise and control over manufacturing carried out by the members of assessee society. The Circular cited by the Ld. AR also applies in assessee’s case and, therefore, ground no.3 is allowed. As regards to ground nos. 4, 5 & 6, the same are consequential and hence no adjudication is required at this juncture. Appeal of the assessee is thus partly allowed. 8. In the result, appeal filed by the assessee is partly allowed. Order pronounced in the open Court on this 6 th September, 2023. Sd/- (SUCHITRA KAMBLE) Judicial Member Ahmedabad, the 6 th September, 2023 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad