Poona Post and Telecom Co. Op Credit Society Ltd., Pune V. Principal Commissioner of Income-Tax -4, Pune

ITA 931/PUN/2022

AI Insights

The case involves the Poona Post and Telecom Co. Op. Credit Society Ltd., Pune, which appealed against the order under section 263 of the Income Tax Act, 1961, issued by the Principal Commissioner of Income Tax-4, Pune. The appeal was directed against the assessment order for the Assessment Year 2017-18, which was initially passed under section 143(3) of the Act. The Principal Commissioner invoked section 263, arguing that the Assessing Officer had not properly verified the claim of deduction under section 80P, which is crucial for the society's tax calculations. The Tribunal found that the Assessing Officer had not conducted the necessary inquiries, thus upholding the revision order under section 263.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134351 (ITAT-PUNE)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-02-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 20-12-2022
• Other Referred Cases: Tolgar's Co-op Sale Society (2010) 188 taxmann.com 282 (SC), Mavilayi Services Co-operative Credit Society Ltd vs. CIT (2021) 431 ITR 1 (SC), Tumkur Merchants Suharda Credit Co-op Society Ltd. vs. CIT (2017) 396 ITR
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Revision of order; Set aside
• Section: 263; 143(3); 80P

Judgement Text

आयकर अपीलीय अिधकरण “बी” Ɋायपीठ पुणेमŐ। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “B” :: PUNE BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.931/PUN/2022 िनधाᭅरण वषᭅ / Assessment Year :2017-18 Poona Post and Telecom Co. Op. Credit Society Ltd., GPO Compound, Pune Station, Road, Pune – 411001. PAN: AAATP 1086 D Vs The Pr.Commissioner of Income Tax-4, Pune. Appellant/ Assessee Respondent /Revenue Assessee by Shri M.K.Kulkarani – AR Revenue by Shri Sardar Singh Meena – DR Date of hearing 07/02/2023 Date of pronouncement 30/03/2023 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This appeal filed by the Assessee is directed against the order u/s.263 of the Act passed by the ld.Principal Commissioner of Income Tax-4, Pune dated 29/03/2022 for AY 2017-18 emanating from assessment order dated 23.12.2019 under section 143(3) of the I.T.Act, 1961 for the A.Y.2017-18. The Assessee has raised the following grounds of appeal: “1. On the facts and in the circumstances of the case and in law and since assessment was selected for "Limited Scrutiny" under ITA No.931/PUN/2022 Poona Post and Telecom Co.Op Credit Society Ltd., Pune [A] 2 CASS System. The A.O. then cannot travel beyond the issues on which assessment was taken up for scrutiny. The action taken under section 263 by Pr. CIT is bad in law and is required to be annulled since A.O. was directed to travel beyond the issues assessment was selected for scrutiny. The order passed by the A.O. cannot be termed as erroneous and prejudicial to the interests of Revenue. The order passed under section 263 being illegal and without jurisdiction be quashed and set aside. 2. On the facts and in the circumstances of the case and in law the assessee was entitled to claim deduction under section 80P(2)(a)(l) of the Act as it satisfies all the conditions enumerated in it. It be held accordingly. 3. On the facts and in the circumstances of the case and in law the assessment cannot be termed as erroneous and prejudicial to the interests of Revenue since A.O. had no power to travel beyond the issues on which assessment has been taken up for scrutiny. The assessment has been taken made by the A.O. was within the four covners of law. The Pr. CIT was not justified to disturb the assessment which is finalised according to law. The order passed under section 263 be quashed and set aside. 4. On the facts and in the circumstances of the case and in law the reliance placed on the Supreme Court Judgment reported as Tolgar's Co-op Sale Society (2010) 188 taxmann.com 282 (SC) is misplaced as the same was decided on the facts of that case only. It had no presidential value. The order passed by Pr. CIT under section 263 of the Act being without jurisdiction be set aside. 5. On the facts and in the circumstances of the case and in law ITA No.931/PUN/2022 Poona Post and Telecom Co.Op Credit Society Ltd., Pune [A] 3 the appellant-assessee relies on the Hon'ble Supreme Court Judgment reported as Mavilayi Services Co-operative Credit society Ltd vs. CIT (2021) 431 ITR 1 (SC). The verdict is applicable to the facts of this case. 6. On the facts and in the circumstances of the case and in law and since Hon'ble Karnataka High Court in Tumkur Merchants Suharda Credit Co-op Society Ltd., vs. CIT (2017) 396 ITR rightly held that the deposits in bank made out of members deposits since assessee accepts deposits from members only. They are liable to be returned to members and hence are shown to be liability and is the income earned there from is the income of the appellant society. The Ld. Pr. CIT erred in holding otherwise. The claim be allowed to assessee. 7. On the facts and in the circumstances of the case and in law the assessee submits and prays for cancellation of the order passed by Pr. CIT under section 263 as illegal and without jurisdiction. The jurisdictional notice was not received as the same was collected from Deptt. On 16-03-2022. Therefore, S. 263 order be cancelled and set aside. 8. On the facts and in the circumstances of the case and in law the filing of the appeal is delayed by days. The appellant was prevented by sufficient cause. The application for condonation of delay along with sworn affidavit will be filed at the time of hearing. The delay be condoned and appeal be admitted for hearing. 9. The appellant craves to leave, add/amend or alter any of the above grounds of appeal.” ITA No.931/PUN/2022 Poona Post and Telecom Co.Op Credit Society Ltd., Pune [A] 4 Brief Facts of the case : 2. In this case, the assessee filed Return of Income for Assesment Year 2017-18 on 30/10/2017 declaring Total Income of Rs.14,55,320/-. The case of the assessee was selected for Limited Scrutiny to verify the Large Claim of deduction under Chapter-VIA of the Act. The Assessing Officer(AO) passed the assessment order accepting returned income. The Pr.CIT issued notice u/s.263 of the Act to the assessee. The Pr.CIT invoked jurisdiction u/s.263 on the ground that the AO has not verified properly the claim of deduction u/s. 80P of the Act. The relevant paragraphs of the order u/s.263 are reproduced here under : “As per provisions of section 80P(2)(a)(i), the Society is required to substantiate the principle of mutuality with respect to the loans taken from members to loan advanced/ investment made by it. To come to a conclusive discussion, the AO should have verified whether the loans/ deposit taken are given back to the members as loans/ advances or not. The assessment order does not indicate whether this exercise has been done or not. The non-verification of principle of mutuality by the Assessing Officer has rendered the view taken by him regarding allowability of deduction u/s 80P of the Act is legally unsustainable. Since the view taken by the Assessing Officer is unsustainable, the assessment order passed by the Assessing Officer is liable for revision u/s 263 of the Act........ b. Also, the assessee has claimed that it accept deposits from its members only. However, no requisite details were furnished by the ITA No.931/PUN/2022 Poona Post and Telecom Co.Op Credit Society Ltd., Pune [A] 5 assessee either before the Assessing Officer or during the present proceedings. The Assessing Officer also has not verified this aspect............ 10. Since the assessee’s large claim of deduction under chapter Vl-A was the reason of selection of its case for scrutiny; the Assessing Officer was required to conduct in-depth verification of the assessee’s claim. Since the above mentioned bank is not a cooperative society, the interest earned is not eligible for deduction under Section 80P(2)(a)(i) or 80P(2)(d). Hence, allowing of the deduction by the Assessing Officer under section 80P for the above amount is not as per the provisions of the Income Tax Act, 1961......” 3. We have heard both the parties and perused the records. The Assessing Officer(AO) has passed order under section 143(3) on 23.12.2019 without discussing how assessee is eligible for deduction under section 80P of the Act. The relevant parts of the assessment order are reproduced here as under : “3. In response to the said notices, the assessee has submitted that requisite details on ITBA system. 4. The assessee society is Co-operative Society and engaged in providing credit facilities to members and earns interest income from co-operative bank. 5. After considering the return of income filed by the assessee and various submissions made during the assessment proceeding, the return of income is computed as under : COMPUTATION OF TOTAL INCOME Total income as per return of income Rs.14,55,320/- ITA No.931/PUN/2022 Poona Post and Telecom Co.Op Credit Society Ltd., Pune [A] 6 Income assessee ..... Rs.14,55,320/- 6. Assessed u/s 143(3) of the Income Tax Act, 1961. Charge interest u/s 234A/B/C as applicable. Give credit for prepaid taxes. Issue DN / Challan accordingly.” 4. Thus, the AO in the assessment order has not even mentioned that assessee is eligible for deduction under section 80P of the Act. The ld.Authorised Representative(ld.AR) has merely relied on various case laws. However, the ld.AR has not filed a single document to establish that AO had inquired into eligibility of assessee for deduction under section 80P of the Act and assessee had submitted documents to prove its eligibility. Thus, the ld.AR has not filed a single document before us to show what was filed before the AO during the assessment proceedings. The ld.AR has not even filed copy of Profit and Loss Account, Computation of Income to demonstrate under which sub-section of the 80P deduction has been claimed by the assessee. The ld.AR could not answer any specific query regarding the nature of income. 5. In these facts and circumstances, we are of the considered opinion that ld.Pr.CIT has rightly invoked powers under section 263 of the Act, as the AO has not carried out any enquiry regarding eligibility of the assessee for deduction under section 80P of the Act. The ld.Pr.CIT in his order has specifically mentioned that assessee’s ITA No.931/PUN/2022 Poona Post and Telecom Co.Op Credit Society Ltd., Pune [A] 7 case was selected for verification of deduction under Chapter-VIA of the Act. Therefore, it was the duty of the AO to verify the deductions under Chapter-VIA claimed by assessee. However, as we have already mentioned AO has not carried out any enquiry. The relevant section 263 is reproduced here as under : “Revision of orders prejudicial to revenue. 263. (1) The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation 1.—For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,— (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include— (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income- tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief ITA No.931/PUN/2022 Poona Post and Telecom Co.Op Credit Society Ltd., Pune [A] 8 Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner authorised by the Board in this behalf under section 120; (b) "record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Commissioner or Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Principal Commissioner or Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,— (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. ITA No.931/PUN/2022 Poona Post and Telecom Co.Op Credit Society Ltd., Pune [A] 9 (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation.—In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded.” ....Emphasis supplied.” 6. Thus, section 263, Explanation 2 explains the meaning of the word “erroneous in so far as prejudicial to the interest of revenue”. As per Explanation-2, any order passed without making enquiry or any relief without inquiring into the claim, makes the order erroneous and prejudicial to the interest of the Revenue. 7. In this case, as discussed in earlier paragraphs, no enquiry has been made by the Assessing Officer during the assessment proceedings regarding the eligibility of the assessee for deduction under section 80P of the Act. Therefore, the assessment order is erroneous and prejudicial to the interest of the Revenue. Hence, we ITA No.931/PUN/2022 Poona Post and Telecom Co.Op Credit Society Ltd., Pune [A] 10 uphold the order under section 263 of the Act dated 29.03.2022. Accordingly, Ground No.1, 2 and 4 are dismissed. Ground No.1 and 3 : 8. The assessee in Ground No.1 and 3 has claimed that case was selected for limited scrutiny; hence, AO had no power to travel beyond the issues mentioned in limited scrutiny. In this case ld.Pr.CIT in the order under section 263 has specifically mentioned that the case was selected for limited scrutiny to verify assessee’s claim of deduction under Chapter-VIA. The ld.AR has not produced any document to rebut the findings given by ld.Pr.CIT that the case of assessee was selected to verify assessee’s claim of deduction under Chapter-VIA. Since the case of assessee was selected for verification of assessee’s claim of deduction under Chapter-VIA, as observed by us, the AO had not carried out any enquiries and ld.AR has not submitted any document to prove that AO had verified Chapter-VIA deductions, the ld.Pr.CIT had jurisdiction to invoke powers under section 263 of the Act. Therefore, Ground No.1 and 3 raised by the assessee are dismissed. Ground No.4, 5 and 6 : 9. The Assessee in Ground No.4, 5 and 6 has referred to the Hon’ble Supreme Court’s decision in the case of Tolgar’s Co-op Sale ITA No.931/PUN/2022 Poona Post and Telecom Co.Op Credit Society Ltd., Pune [A] 11 Society [2010] 188 taxmann.com 282 (SC); Mavilayi Services Co- operative Credit Society Ltd. Vs. CIT [2021] 431 ITR 1(SC) and the Hon’ble Karnataka High Court’s decision in Tumkur Merchants Suharda Credit Co-op Society Ltd., Vs. CIT [2017] 396 ITR. However, as mentioned in earlier paragraphs no factual details have been brought on records by ld.AR, therefore in the absence of factual details the assessee cannot plead applicability of the Hon’ble Supreme Court’s decision as mentioned above. Therefore, Ground No.4, 5 and 6 are dismissed. Ground No.7 : 10. The assessee has claimed that notice under section 263 was collected by him from the Income Tax Department. Therefore, the assessee claims that it was not served on assessee. It is an admitted position by the assessee that notice under section 263 has been received by assessee. Whether the Department sends the notice by post or whether assessee collects the notice, in both the scenario the service of notice is complete, when assessee receives it and in this case it is an admitted fact that the assessee had received the notice u/s.263 of the Act. In these facts and circumstances of the case, once valid notice under section 263 has been served on the assessee, the proceedings under section 263 cannot be held to be without jurisdiction. Therefore, the Ground No.7 is dismissed. ITA No.931/PUN/2022 Poona Post and Telecom Co.Op Credit Society Ltd., Pune [A] 12 Ground No.8 : 11. It is about delay in filing the appeal before the ITAT. We condone the delay. Ground No.9 : 12. The appellant has not craved for any additional ground or any amendment to the ground. Hence, Ground No.9 is dismissed. 13. To sum up, appeal of the assessee is dismissed. Order pronounced in the open Court on 30 th March, 2023. Sd/- Sd/- (S.S.GODARA) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 30 th Mar, 2023/ SGR* आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “बी” बᱶच, पुणे / DR, ITAT, “B” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.