The Khedbrahma Taluka Primary Teachers Co.Op. Credit Society Ltd., Himatnagar V. The Income Tax Officer, Ward-1, Himatnagar

ITA 499/AHD/2022

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 0697 (ITAT-AHMEDABAD)
• Duration Of Justice: 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-10-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 24-11-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Principle of natural justice; Revision of order
• Section: 143(3); 263; 64; 80P; 72; 80(P)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member The Khedbrahma Taluka Primary Teachers Co-op. Credit Society Ltd. Station Road, Nr. Dave Hospital, Khedbrahma-383255 PAN: AABTT2489D (Appellant) Vs The Income Tax Officer, Ward-1, Himatnagar (Respondent) Assessee Represented: Shri Rushin Patel, A.R. Revenue Represented: Ms. Saumya Pandey Jain, Sr.D.R. Date of hearing : 23-10-2023 Date of pronouncement : 27-10-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Assessee as against the order dated 31.10.2022 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “NFAC”), arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2017-18. ITA No. 499/Ahd/2022 Assessment Year 2017-18 I.T.A No. 499/Ahd/2022 A.Y. 2017-18 Page No The Khedbrahma Taluka Primary Teachers Co.Op. Credit Society Ltd. vs. ITO 2 2. The solitary issue in this appeal is that the interest of Rs. 2.55 lakhs received on fixed deposit received from Sabarkantha District Co.Op. Bank should not be disallowed and the same did not qualify for deduction under section 80P(2)(a)(i) of the Act. 3. The brief facts of the case is that the appellant is a Cooperative Credit Society, it had deployed its fund available with District Co.Op. Bank as per the requirement of RBI and earned interest income which is eligible for deduction u/s. 80P(2)(a)(i) of the Act. Thus the assessee had interest income of Rs. 2,55,000/- on FDR placed with Sabarkantha District Cooperative Bank. The assessee also borrowed money as unsecured loan from members and paid interest of Rs. 2,10,000/-. Thus the net interest earned by the assessee is Rs. 45,000/- only. For the Assessment Year 2017-18, the assessee filed its Return of Income on 22.01.2018 declaring Nil Income. The Return was taken up for scrutiny assessment and the Assessing Officer denied the benefit of Section 80P(2)(a)(i) and made addition of Rs. 2,55,000/- received from Sabarkantha Bank as income from other sources. 4. Aggrieved against the same, the assessee filed an appeal before National Faceless Appeal Centre, Delhi (NFAC). The Ld. NFAC set aside the assessment to the file of the A.O. with a direction to examine whether the assessee has incurred any expenditure for earning interest income which is assessed under the head “other sources” and allow the deduction u/s. 57 of the Act. Thus the appeal was partly allowed. I.T.A No. 499/Ahd/2022 A.Y. 2017-18 Page No The Khedbrahma Taluka Primary Teachers Co.Op. Credit Society Ltd. vs. ITO 3 5. Aggrieved against the same, the assessee is in appeal before us raising the following Grounds of Appeal: 1. The Learned Commissioner of Income Tax (Appeals) has erred in law and on facts of the case in sustaining the disallowance of deduction u/s. 80P(2)(d) of the Income Tax Act, 1961. 2. The appellant craves leave to add, amend, alter or delete the grounds of appeal at the time of hearing, if need arise. 6. At the outset, Ld. Counsel Shri Rushin Patel appearing for the assessee submitted that identical issues was considered by this Tribunal in various decisions namely ITA No. 153/Ahd/2022 dated 21.04.2023, SMC Bench case in ITA No. 321/Ahd/2023 dated 06.09.2023 and Jurisdictional High Court in the case of CIT Vs. Sabarkantha District Cooperative Milk Producers Union Ltd. in Tax Appeal No. 473 of 214 dated 16.06.2014. Thus pleaded that the assessee is entitled for deduction u/s. 80P(2)(a)(i) of the Act and the assessee appeal is to be allowed. 7. Per contra, the Ld.Sr. D.R. Ms. Saumya Pandey Jain appearing for the Revenue supported the order passed by the Lower Authorities. 8. We have given our thoughtful consideration and perused the materials available on record. This issue was considered by us in ITA No. 153/Ahd/2022 dated 21.04.2023 held as follows: “6. .......This issue was considered by Co-ordinate Bench of this Tribunal and passed the following order after considering the Karnataka High Court judgment in the case of Totagar’s Co-operative Sale Society Ltd. and State Bank of India vs. CIT of our Jurisdictional High Court. The relevant portion of the order is reproduced as follows: “...5. We have given our thoughtful consideration and perused the materials available on record including the Paper Book filed by the assessee. As rightly argued by the Ld. Representative of the assessee, this issue is being dealt by the Co-ordinate Bench of the Tribunal in its decision I.T.A No. 499/Ahd/2022 A.Y. 2017-18 Page No The Khedbrahma Taluka Primary Teachers Co.Op. Credit Society Ltd. vs. ITO 4 in the case of The Sardar Patel Co-operative Credit Society Ltd (cited supra), wherein its held as follows: 4. We have heard the arguments of both the sides and also perused the relevant material available on record. As submitted by the learned Counsel for the assessee, the assessment completed by the Assessing Officer under Section 143(3) of the Act allowing the similar claim of the assessee for deduction under Section 80P(2) of the Act in respect of interest income earned on the deposits with Mehsana Urban Co-operative Bank was set aside by the same learned PCIT vide his order passed under Section 263 of the Act in the case of the People Co-op. Credit Society Ltd by relying on the decision of Hon'ble Karnataka High Court in the case of Totgars Cooperative Sale Society (supra) and, on appeal by the assessee, the Coordinate Bench of this Tribunal vide its order dated 21.02.2022 passed in ITA No.384/Ahd/2020 set aside the order passed by the learned PCIT under Section 263 of the Act restoring that of the Assessing Officer by relying inter alia on the decision of the Hon'ble jurisdictional High Court in the case of State Bank of India (supra). Copy of the said order of the Tribunal is also placed on record and perusal of the same shows that a similar issue was decided by the Tribunal vide paragraph No.7 of its order as under:- "7. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the entire details called for during the assessment proceedings were submitted by the assesses at the time of assessment under Section 143(3) of the Act and the Assessing Officer was very well aware that section 80P claim was reflected in the details of the assessee. The assessee vide letter dated 22.05.2017 submitted the details regarding deduction under Section 80P of the Act which was claimed in the return of income which included in the interest income from Mehsana Urban Co-operative Bank. The PCIT has issued the show cause notice under Section 263 on 14.02.2020 on the very same issue which was verified by the Assessing Officer in Section 143(3) proceedings itself. Once the issue verified by the Assessing Officer and the jurisdictional Court has allowed the said claim related to interest income earned from Co-operative Bank, the PCIT cannot exercise Section 263 of the Act. The Id. A.R. aptly relied upon the decision of State Bank of India vs. CIT (2016) 72 Taxmann.com 64 dated 25.04.2016. On the basis of Hon'ble Karnataka High Court decision in the case of Totgars Co-operative Sales Society (supra), the PCIT cannot invoke provisions of section 263 of the Act. Thus, Section 263 does not sustain and appeal of the assessee is allowed." 5.1. Further the Co-ordinate Bench judgment in the case of People’s Co.Op. Credit Society Ltd. (cited supra) held as follows: 4. We now advert to the lead issue of Section 80(P)(2) disallowance of Rs.27,97,019/- in respect of assessee's interest income derived I.T.A No. 499/Ahd/2022 A.Y. 2017-18 Page No The Khedbrahma Taluka Primary Teachers Co.Op. Credit Society Ltd. vs. ITO 5 from its deposits with the Banas Co-operative Bank. Both the lower authorities quote the legislative amendment vide Finance Act, 2006 w.e.f. 01.04.2007 inserting subsection 4 in Section 80P as well as CBDT's explanatory notes to the above Finance Act dated 28.122006 in holding that the impugned interest income derived from co-operative bank is not eligible for deduction. Learned Departmental Representative vehemently contends that hon'ble Karnataka high court's recent decision in (2017) 83 taxmann.com 140 (Karnataka) PCIT vs. Totagars Co-operative Sale Society has settled the law that such an income is not allowable as Section 80P deduction in view of the legislative amendment hereinabove. Mr. Kabra thereafter files hon'ble apex court's judgment in (2017) 397 ITR 1 (SC). The Citizen Co-operative Society Ltd. vs. ACIT settling Section 80P deduction issue in respect of ordinary and nominal members. We however find that the above former decision goes contrary to hon'ble jurisdictional high court's judgment in Tax Appeal No. 473 of 2014 CIT vs. Sabarkantha District Cooperative Milk Producers Union Ltd. declining Revenue's identical question of law challenging tribunal's decision allowing Section 80P deduction in respect of interest earned on fixed deposits with a cooperative bank in assessment year 2009-10 i.e. post Section 80P(4) amendment w.e.f. 01.04.2007. Their lordships' reasoning to this effect reads as under: "4.0. Now, so far as proposed question no. B i.e. whether the Appellate Tribunal has substantially erred in upholding the order of the CIT(A) in deleting the disallowances of Rs.1,42,19,5157- under Section 80(P)(2)(d) of the Act is concerned, it is required to be noted that the assessee claimed deduction under Section 80(P)(2)(d) of the Act on the interest earned on the fixed deposit with Cooperative Bank and the Societies and it has been found that as such the income was received from the investment in Cooperative Societies and Cooperative Bank. Considering Section 80(P)(2)(d) of the Act when the only requirement was that the income should be received from investment in Cooperative Societies and the Cooperative Bank which in the present case has been fulfilled, it cannot be said that the learned Tribunal has committed any error in deleting disallowance of Rs.1,42,19,515/- under section 80(P)(2)(d) of the Act. We are in complete agreement with the view taken by the learned Tribunal. Under the circumstances, proposed question B is also answered against the revenue." We therefore follow hon'ble jurisdictional high court's judgment than hon'ble Karnataka high court's decision. Coming to hon'ble apex court's decision in the Citizen Co-operative Society Ltd. (supra), we find that there is no dispute about the category of members as it was before their lordships. We thus conclude in view of all these facts and circumstances that hon'ble jurisdictional high court's judgment is binding on us. We accordingly delete the impugned disallowance of Rs.27,97,019/- in question. This lead appeal ITA No. 1891/Ahd/2014 is partly accepted. I.T.A No. 499/Ahd/2022 A.Y. 2017-18 Page No The Khedbrahma Taluka Primary Teachers Co.Op. Credit Society Ltd. vs. ITO 6 5.2. We therefore respectfully following the above decisions of the Co- ordinate Bench of this Tribunal, which has followed jurisdictional High Court judgment and we hereby quash the impugned order passed by the Ld. PCIT u/s. 263 of the Act and restore the assessment order passed by the Assessing Officer u/s. 143(3) of the Act. Thus, the grounds raised by the assessee are hereby allowed.” 6.1. In another Co-ordinate Bench of This Tribunal in the case of Laxmi Bachat Sharafi Sahkari Mandali Ltd. (cited supra) held as follows: “... 9. The next contention that the order of the Ld.PCIT needs to set aside being passed without giving opportunity of hearing to the assessee, we find, merits consideration. The contention of the Ld.Counsel for the assessee in this regard was that the specific ground on which the assesses claim of deduction u/s 80P of interest income earned from FD’s etc in Banks was found incorrect, being not allowable as per section 80P(2)(a)(i) of the Act, was never confronted to the assessee. 10. A perusal of the order of the ld.Pr.CIT does not reveal any such opportunity being given to the assessee. The show cause notice issued by the Ld.PCIT to the assessee while assuming jurisdiction u/s 263 of the Act mentions the disallowability of the claim of deduction as per a different provision i.e 80P(2)(d) of the Act. The ld.DR was unable to demonstrate that the assessee was issued notice prior to holding the assessment order being erroneous on account of allowing deduction of interest income u/s 80P(2)(a)(i) of the Act. We have noted that the assessee in his reply filed to the Ld.PCIT in response to notice issued under section 263 of the Act had pointed out that the Ld.PCIT had wrongly found the deduction claimed by the assessee u/s 80P(2)(d) of the Act and it was clarified that the assessee had claimed deduction u/s 80P(2)(a)(i) of the Act. ........................................... 11. Considering the fact that the Ld.PCIT had analysed certain facts relating to the issue while arriving at his finding, it was imperative upon him to have confronted the facts and analysis to the assessee for his rebuttal thereon. Not doing so tantamount to taking an adverse view on facts at the back of the assessee, which is in clear violation of the principles of natural justice. The suo moto submissions made by the assessee regarding his eligibility to claim deduction on this ground cannot by any stretch be said to tantamount to having heard the assessee on this premise, more particularly when the Ld.PCIT brushed aside this contention on the basis of certain facts which the assessee was not even put to notice. Any submissions made without putting the assessee to notice relation to. The order passed by the Ld.PCIT is in clear violation of the principles of natural justice and needs to be set aside for this reason alone we hold. “ 6.2. Thus keeping in view of the decisions of Hon’ble Jurisdictional High Court wherein it was held that the assessee co-operative society is eligible for deduction u/s. 80P(2)(d) in respect of gross interest received from co-operative banks, without adjusting interest paid to said bank. We are of the considered opinion, the assessment order passed by the Assessing Officer is not an erroneous order, I.T.A No. 499/Ahd/2022 A.Y. 2017-18 Page No The Khedbrahma Taluka Primary Teachers Co.Op. Credit Society Ltd. vs. ITO 7 which does not require Revision u/s. 263 of the Act. Therefore, we hereby quash the impugned Revision order passed by the PCIT u/s. 263 of the Act and restore the assessment order passed by the Assessing Officer u/s. 143(3) of the Act. Thus the grounds raised by the Assesse are hereby allowed. 8.2. Further the Jurisdictional High Court in the case of CIT Vs. Sabarkantha District Cooperative Milk Producers Union Ltd. (cited supra) held as follows: “....4.0. Now, so far as proposed question no. B i.e. whether the Appellate Tribunal has substantially erred in upholding the order of the CIT(A) in deleting the disallowances of Rs.1,42,19,515/- under Section 80 (P) (2) (d) of the Act is concerned, it is required to be noted that the assessee claimed deduction under Section 80(P) (2) (d) of the Act on the interest earned on the fixed deposit with Cooperative Bank and the Societies and it has been found that as such the income was received from the investment in Cooperative Societies and Cooperative Bank. Considering Section 80 (P) (2) (d) of the Act when the only requirement was that the income should be received from investment in Cooperative Societies and the Cooperative Bank which in the present case has been fulfilled, it cannot be said that the learned Tribunal has committed any error in deleting disallowance of Rs. 1,42,19,515/- under Section 80(P(2) (d) of the Act. We are in complete agreement with the view taken by the learned Tribunal. Under the circumstances, proposed question B is also answered against the revenue. 5.0.In view of the above and for the reasons stated above, present Tax Appeal fail and same deserve to be dismissed and is accordingly dismissed. 9. Respectfully following the above decisions, we hereby allow the grounds of the assessee and delete the addition made by the Assessing Officer. 10. In the result, the appeal filed by the Assessee is hereby allowed. Order pronounced in the open court on 27-10-2023 Sd/- Sd/- (WASEEM AHMED) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 27/10/2023 I.T.A No. 499/Ahd/2022 A.Y. 2017-18 Page No The Khedbrahma Taluka Primary Teachers Co.Op. Credit Society Ltd. vs. ITO 8 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद