Rameshwara Kudumangalore Prathamika Krushi Pattinasahakara Sanga Niyamitha, Kodugu V. The Principal Commissioner Of Income Tax, Kodugu

ITA 492/BANG/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5923 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Appeal Filed On: 28-09-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSAN D GEORGE; OSD
• Keywords: Revision of order; Opportunity of being heard
• Section: 263; 143(3); 80P

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH : BANGALORE BEFORE SHRI N.V VASUDEVAN, VICE PRESIDENT AND MS. PADMAVATHY S, ACCOUNTANT MEMBER ITA No.492/Bang/2021 Assessment year : 2015-16 Rameshwara Kudumangalore Prathamika Krushi Pattinasahakara Sanga Niyamitha, Hassan Road Kudige Kodagu – 571 232 PAN – AAAAR0645R Vs. The Pr. Commissioner of Income- tax, No.21/16 Residency Road, Nazarbad, Mysore-570010. APPELLANT RESPONDENT Assessee by : None Revenue by : Mrs. Susan D George, CIT(OSD) Date of hearing : 19.07.2022 Date of Pronouncement : 19.07.2022 O R D E R Per Padmavathy S, Accountant Member This appeal is against the order of the Pr. Commissioner of Income Tax, Mysore passed u/s 263 of the Income-tax Act (the Act) dated 06/03/2020 for the assessment year 2015-16. ITA No.492 /Bang/2021 Page 2 of 8 2. The assessee raised following grounds:- “1. The Impugned Order as passed by the Hon'ble Pr.CIT u/s 263 of the Income-tax Act, 1961 is arbitrary, unjust and illegal under the facts and circumstances of the appellant case. 2. On the facts and circumstances of the case and on law, the Hon'ble Pr.CIT has assumed the jurisdiction u/s 263 under incorrect application of law as twin condition of "erroneous Order and Prejudicial to interest of revenue" as enunciated u/s 263 were not satisfied simultaneously and therefore assumption of jurisdiction u/s 263 and impugned Order passed thereunder liable to be quashed as void-ab-initio. 3. On the facts and circumstances and law, the original Order passed by the learned AO was after proper application of mind and proper appreciations of law and the intervention caused by the Hon'ble Pr. CIT by invoking the provisions of section 263 has no sanction of settled position of Law and therefore liable to be quashed as non-est. 4. On the facts and circumstances and on Law, the Hon'ble Pr.CIT observations and directions by way of impugned Order u/s 263 is incorrect on facts and further untenable in law and the case law relied on by the Hon'ble Pr.CIT is distinguishable on facts and circumstances of the appellant case and therefore premise on which impugned Order u/s 263 passed is an impermissible act and therefore final impugned Order u/s 263 deserved to be annulled. 5. On the facts and circumstances and on law, the Hon'ble Pr.CIT has assumed the jurisdiction u/s 263 on the issues which were not part of CASS Limited scrutiny mandate resulting-in violating the CBDT guidelines/instructions and therefore assumption of improper jurisdiction u/s 263 by breaching CBDT Instructions and impugned Order thus passed thereof is bad in law and liable to be annulled. 6. On the facts and circumstances and on law, the Order passed by the learned AO as on 19.12.2017 u/s 143(3) was neither erroneous nor prejudicial to the interest on revenue and therefore the intervention by the Hon'ble Pr.CIT by invoking ITA No.492 /Bang/2021 Page 3 of 8 provisions of the Section 263 is without proper jurisdiction and impugned Order thus passed u/s 263 is void-abinitio liable to be annulled. 7. On the facts and circumstances and on Law, the Hon'ble Pr.CIT assumed the jurisdiction u/s 263 on the issues on which the escapement of income are on probability and further based on pure guess-work which is not permissible u/s 263 and therefore improper assumption jurisdiction on surmises and conjectures is bad in law and further void-ab-initio and Impugned Order thus passed liable to be set-aside in toto. 8. On the facts and circumstances and on law, the Hon'ble Pr.CIT assumed the jurisdiction u/s 263 on an opinion which is different from that of the learned AO which is not permissible on a settled law on subject and therefore improper assumption of jurisdiction u/s263 on a debatable issue and indifferent view discern on issues which is already dealt by AO is bad in law and directions thereof u/s 263 is liable to be annulled. 9. On the facts and circumstances of the appellant case, the Hon'ble Pr.CIT ought not to have directed the learned AO to deny the deduction u/s 80P(2)(a)(i) on a claim based on the settled law on the subject and further decision relied on by the Hon'ble Pr.CIT is distinguishable to the facts of the appellant case and therefore interest on bank deposit of Rs 1,28,311/- denied by the Hon'ble Pr.CIT u/s 260 impugned Order is liable to be deleted and deduction be eligible to the appellant as originally allowed by learned AO. 10.On the facts and circumstances, the Hon'ble Pr.CIT ought not to have directed the learned AO to verify the details of deduction claimed under Leave Encashment Rs.1,32,013/- without proper appreciation of facts the said leave encashment is an ascertained Liability and not contingent in nature and therefore direction passed under assumptions and presumption on this count is liable for total deletion. 11.On the facts and circumstances, the Hon'ble Pr.CIT ought not to have directed the learned AO to verify the details of deduction claimed under Audit Fee of Rs.45,552/- as audit fee is an ascertained Liability and not contingent in nature and therefore ITA No.492 /Bang/2021 Page 4 of 8 direction passed under assumptions and presumption on this count is liable for total deletion. 12.On the facts and circumstances, the Hon'ble Pr.CIT ought not to have directed the learned AO to disallow the interest received on income tax refund of Rs.1,490 u/s.80P(2)(a)(i) and brought to tax under other sources without appreciating that such interest is part of business income and therefore the intervention on this subject requires total deletion 13.That the grounds of appeal herein are without prejudice to each other and are independent of each other. 14.The appellant craves leave to amend, alter, modify, substitute, and to, abridge and/or rescind any or all of the above grounds.” 3. The brief facts of the case are that the assessee filed the return of income for the assessment year 2015-16 on 28/9/2015 declaring a total income of Rs.1,77,980 after claiming deduction u/s 80P(2)(a)(i) of the Income Tax Act (the Act) of Rs.10,63,923/-. The assessment in this case was completed u/s 143(3) of the Act on 19/12/2017 by the ITO- Ward-1, Madikeri determining total taxable income of Rs.5,78,780/-. The AO during the course of hearing called for details of loan given and deposits taken from the nominal member and interest received on account of such loans/deposits. The AO stated that these details were called for since the assessee is not entitled to deduction u/s 80P of the Act in respect of income earned on such loans or deposits given to nominal member in the light of decision of Hon’ble Supreme Court judgment rendered in the case of Citizen Cooperative Society Vs. ACIT in Civil Appeal No.10245/2017. The AO noticed that the total amount of interest received on account of transaction with the nominal members of Rs.4,52,588/- and held that the assessee is not entitled for ITA No.492 /Bang/2021 Page 5 of 8 deduction u/s.80P on the portion of profit earned on accounts of its transactions with nominal members. The AO concluded stating that the assessee earned a profit of Rs.43,883/- and disallowed the same has not being eligible for deduction u/s 80P. The assessee had derived income from Hall rent to the extent of Rs.3,22,375 and had claimed charges towards the Hall for an amount of Rs.3,56,920 u/s.80P which the AO disallowed as not eligible for deduction u/s.80P. 4. The PCIT proposed to revise the order of the AO u/s 263 stating that the order of the AO is erroneous and prejudicial to the interest of the revenue. The PCIT noticed that the P&L account of the assessee for the year ended 31/3/2015 reflected an amount of Rs.1,28,311/- as interest income from investment which the PCIT held to be earned not from the business of banking or lending credit to the members of the society thereby not being eligible for deduction u/s 80P(2)(a)(i) of the Act as per the ratio laid down by the Karnataka High Court in the case of PCIT vs Totagars Cooperative Sale Society. The PCIT also noticed that the assessee has made a provision of Rs.1,32,013 towards leave encashment and Rs.45,552 which the PCIT proposed to add back to the net profit for the reason that there is no proof for the expenditure having been incurred. The PCIT further noticed that the interest on income tax refund Rs.1,490 was offered by the assessee as Business Income against which the deduction u/s.80(2)(a)(i) was claimed. The PCIT proposed to bring it back to tax as income from other sources. ITA No.492 /Bang/2021 Page 6 of 8 5. In reply to the show cause notice, the assessee filed a reply stating that the investments were made in the District Cooperative Bank which is eligible for deduction u/s 80P(2)(d) of the Act. In this regard, the assessee placed reliance on the decision of the Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Society Ltd., Vs. ITO in ITA No.307/2014 dated 28.10.2014, wherein Hon’ble High Court held that the interest accrued from the deposits made by the assessee in a nationalized bank out of the amounts which was used by the assessee for providing credit facilities to its members and therefore interest earned there from is eligible for deduction u/s 80P(2). With regard to amount paid towards leave encashment the assessee submitted that the same is paid to one Mr.Shivanna M who retired from the services and submitted the vouchers substantiating the transfer of money to his account. The audit fees, the assessee submitted that is paid towards audit of the accounts for the financial year 2014-15 and is a specific expenditure paid subsequently. 6. The PCIT did not agree with contention of the assessee and concluded to this extent held that order of the AO is erroneous and prejudicial to the interest of revenue and issued directions to the AO to verify the claim of deduction u/s 80P(2)(a)(i) of the interest income earned by the assessee, whether the leave encashment and audit fee are ascertained liabilities and that the interest on income tax refund to be brought to tax under the head Income from Other Sources. ITA No.492 /Bang/2021 Page 7 of 8 7. Aggrieved, the assessee is in appeal before us. 8. None appeared for the assessee and we heard the ld DR who supported the order of the PCIT. We notice that the coordinate bench of the Tribunal in the case of Kakkabe VSSN Bank Ltd., in ITA No.490/Bang/2021 dated 28.02.2022 has dealt with the similar issue, where the Hon’ble Tribunal has remanded the issue back to the file of the AO for de novo assessment with certain directions and held that “6. We note that though prima facie, the issues needs to be revisited by the Ld.AO, however, the directions of the Ld.Pr.CIT to make addition in respect of the provision for gratuity as well as expressing the intention of disallowing certain income while computing 80P(2)(e) as well as (a)(i) is not in accordance with law. We also refer that Hon'ble Supreme Court in the case of Mavilayi Service Cooperative Bank Ltd. Vs.CIT (2021) reported in 123 taxmann.com 161 (SC) considered the issue relating to interest income earned and has distinguished the decisions of Hon’ble Karnataka High Court in case of Tumkur Merchants Souharda Credit Co- operative Society Ltd. vs. ITO (supra). In view of the above, we modify the directions of Ld.Pr.CIT by directing the Ld.AO to carry out de novo verification on the issues considered by the Ld.Pr.CIT in the impugned order having regard to the principle laid down by Hon’ble Supreme Court in case of Mavilayi Service Cooperative Bank Ltd. Vs.CIT (supra). The assessee is directed to file all requisite details in support of the claim which would be verified by the Ld.AO in accordance with law. Needless to say that proper opportunity of being heard to be granted to assessee in accordance with law.” ITA No.492 /Bang/2021 Page 8 of 8 9. Respectfully following the decision of the coordinate bench of the Tribunal, we remand the case back to the AO to carry out de novo verification on the issues considered by the PCIT in the impugned order in the light of the principles laid down by the Hon’ble Supreme Court in the case of Mavilayi Services Cooperative Bank Ltd., (Supra) and provide reasonable opportunity of being heard to the assessee . The assessee is directed to file the required documents before the AO and extend full cooperation to the AO. 10. In the result, the appeal by the assessees is allowed for statistical purpose. Order pronounced in court on 19 th day of July, 2022 Sd/- Sd/- (N.V VASUDEVAN) ( PADMAVATHY S) Vice President Accountant Member Bangalore, Dated, 19 th July, 2022 PSslf/Desai S Murthy / Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore.