THE CITIZEN CO-OP-SOCIETY LIMITED,HYDERABAD V. DCIT., CIRCLE-9(1), HYDERABAD

ITA 388/HYD/2025

AI Insights

The case revolves around the appeal by the Citizen Cooperative Society Ltd against the revision order passed by the Pr. CIT under section 263 of the Income Tax Act, which was directed at the assessment year 2020-21. The Pr. CIT had set aside the assessment order, claiming it was erroneous and prejudicial to the interest of the Revenue as the Assessing Officer had not properly verified the allowability of deduction under section 80P. The Tribunal examined the thorough inquiries made by the Assessing Officer and the detailed submissions by the assessee, leading to the conclusion that the Assessing Officer's decision was neither erroneous nor prejudicial to the Revenue's interests.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712441 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2020-2021
• Other Referred Cases: Spectra Shares & Scrips (P) Ltd vs. CIT, CIT vs. Vijay Kumar Koganti, Pr. CIT vs. Kansara Poptlal Tribhuvan Metal (P) Ltd, Pr.CIT vs. Clix Finance India (P) Ltd, Pr.CIT vs. Sampark Management Consultancy LLP, LYCOS Internet Ltd vs. ACIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAVI BHARADWAJ; GIVING A DETAILED REPLY EXPLAINING
• Keywords: Set aside; Business income; Earning of tax free income; Revision of order
• Section: 143(3); 142(1); 263

Judgement Text

" ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 1 of 32 आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ DB-B ‘ Bench, Hyderabad Before Shri Vijay Pal Rao, Vice-President A N D Shri Manjunatha, G. Accountant Member आ.अपी.सं /ITA No.388/Hyd/2025 (िनधाŊरण वषŊ/Assessment Year: 2020-21) The Citizen Cooperative Society Limited, Hyderabad PAN:AAAAT3952F Vs. Dy.CIT Circle 9 (1) Hyderabad (Appellant) (Respondent) िनधाŊįरती Ȫारा/Assessee by: Shri Ravi Bharadwaj, CA राज̾ व Ȫारा/Revenue by:: Shri Narender Kumar Naik, CIT (DR) सुनवाई की तारीख/Date of hearing: 07/07/2025 घोषणा की तारीख/Pronouncement: 30/07/2025 आदेश/ORDER Per Vijay Pal Rao, Vice President This appeal filed by the assessee is directed against the revision order dated 13/02/2025 of the learned Pr. CIT passed u/s 263 of the Act for the A.Y.2020-21. 2. The assessee has raised the following grounds of appeal: “1. The order passed by the Learned Principal Commissioner of Income Tax (PCIT) - IV u/s 263 of the Act is erroneous both in law and facts of the case. 2. The Order passed by the Learned Principal Commissioner of Income Tax (PCIT) u/s 263 of the Act is bad in law and need to be quashed. Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 2 of 32 3. The Learned PCIT has wrongly invoked Section 263 without appreciating the fact that the Ld. AO had duly examined the eligibility of deduction claimed under Section 80P of the Act during the course of assessment proceedings r.w.s 143 of the Act. 4. The Learned PCIT has erred in concluding that the Ld. AO has failed to verify the allowability of deduction under Section 80P, without appreciating the fact that the Ld. AO had issued a notice under Section 142(1) regarding the specific deduction and had examined the same. 5. The Learned PCIT has failed to appreciate that the deduction under Section 80P was allowed by the Ld. AO after due examination, and mere disagreement with the Ld. AO's order does not constitute the assessment order erroneous or prejudicial to the interest of revenue. 6. The Ld PCIT has failed to appreciate the fact that he has no jurisdiction u/s 263 of the Act in a case where the AO has taken a view after considering the submissions of the Appellant. 7. The Learned PCIT has incorrectly set aside the assessment order and directed the Ld. AO to conduct a fresh assessment without demonstrating any specific error in the AO's findings. 8. The appellant craves to consider each of the above grounds of appeal without prejudice to each other and craves leave to add, alter, amend, modify, omit, delete, substitute and or rescind all or any of the grounds of appeal on or before the final hearing.” 3. The assessee is a cooperative society initially registered on 31/05/1997 and thereafter, it was converted into a Multi-State Cooperative Society w.e.f. 26/07/2005. For the A.Y under consideration, the assessee filed its return of income on 26/11/2020 declaring total income of Rs.1,20,22,790/-. The case of the assessee was selected under CASS for scrutiny of various issues and claims including the claim of deduction u/s 80P of the Act. The Assessing Officer completed the assessment u/s 143(3) r.w.s. 144 on 26/09/2022 at a total income of Rs.1,40,94,840/- as against the returned income of Rs.1,20,22,790/-. Thereafter, Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 3 of 32 on perusal of the record, the Pr. CIT noted that the Assessing Officer has allowed the claim of deduction u/s 80P of the Act without conducting inquiry and verifying the issue. Accordingly, a show-cause notice u/s 263 of the Act was issued on 27/01/2025 and thereafter, the impugned order u/s 263 of the Act was passed whereby the order passed by the Assessing Officer is held as erroneous in so far as it is prejudicial to the interest of the Revenue as the Assessing Officer did not apply the correct legal provisions and did not appreciate the fact that the claim of deductions u/s 80P of the Act was disallowed in the earlier A.Ys. Accordingly, the Assessing Officer was directed to pass a fresh assessment order after giving a reasonable opportunity of hearing to the assessee. 4. Aggrieved by the impugned order, the assessee has filed the present appeal. 5. Before the Tribunal, the learned AR of the assessee has submitted that in the earlier assessment, the claim of deduction u/s 80P was disallowed and even for the A.Y 2009-10, the matter was carried up to the Hon'ble Supreme Court whereby the Hon'ble Supreme Court has also confirmed the disallowance u/s 80P of the Act. However, the disallowance made by the Assessing Officer and confirmed by the Hon'ble Supreme Court for the A.Y 2009-10 is based on the fact that the assessee was doing the business with the nominal members as against the regular members and therefore, the Hon'ble Supreme Court has upheld the disallowance of claim of deduction u/s 80P of the Act by holding that the business of providing loan to the nominal Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 4 of 32 members cannot be termed as an activity of a cooperative society. Thus, the learned AR has submitted that the disallowance of claim of deduction u/s 80P in the earlier year was based on the specific fact that the assessee was doing the business activity of finance with the nominal members and not restricted the activity with its regular members which is held in violation of the cooperative societies Act and therefore, the society was not entitled to the deduction u/s 80P of the Act. However, in the year under consideration, the assessee has not carried out any business with the nominal members and therefore, the order of the denial of deduction u/s 80P in the earlier year cannot be held as a precedent for the year under consideration. Thus, the learned AR has submitted that after the judgment of the Hon'ble Supreme Court, the assessee revised its business and now doing the business activities only with the regular members of the society. The Pr. CIT has stated in the impugned order that the Assessing Officer failed to verify the availability of deduction u/s 80P during the assessment proceedings and also not applied the correct legal provision while passing the impugned order and allowing the claim of deduction u/s 80P. This finding of the Pr. CIT is contrary to the record as the Assessing Officer has specifically raised the queries about the allowability of the claim u/s 80P of the Act. He has referred to the show cause notice issued by the Assessing Officer u/s 142(1) of the Act dated 01/12/2021 and referred to the questionnaire No.VIII whereby the Assessing Officer has asked the assessee to submit the detailed note on the nature of the business activities carried out by the assessee society during the year as well as during the last 3 years, calculation of deduction and note on eligibility of deduction u/s 80P as well as all relevant Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 5 of 32 details to establish that the society is eligible for deduction u/s 80P of the Act. The learned AR of the assessee has submitted that the assessee filed its reply to the queries raised by the Assessing Officer vide letter dated 4/11/2021 and submitted all the relevant details as well as explained how the assessee society is eligible for deduction u/s 80P of the Act for the year under consideration. He has then referred to the show-cause notice issued by the Assessing Officer u/s 142(1) dated 16/08/2022 and submitted that the Assessing Officer has again raised the specific query about the claim of deduction u/s 80P of the Act and asked the assessee to furnish the relevant details of deposits in respect of regular members and nominal members from the A.Y 2016-17 to 2020-21. The said details were also furnished by the assessee as placed at page Nos. 37 to 40 of the Paper Book. Thus, the learned AR has submitted that the assessee has brought the fact that there was a distinction in the business activity for the year under consideration in comparison to the earlier year as the assessee has revised the business activity and confined the same to provide the loan and other facilities of the society only to the regular members of the assessee society. Thus, the learned AR has submitted that for the year under consideration, the assessee has not done any business with so called nominal members and therefore, the income earned by the assessee from the business activity with the ordinary members of the assessee society is eligible for deduction u/s 80P of the Act. Thus, the learned AR has submitted that the Assessing Officer has conducted a thorough inquiry on this issue and then allowed the claim of the assessee as he was satisfied with the claim of the assessee u/s 80P of the I.T. Act. He has thus contended that the impugned Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 6 of 32 order passed by the Assessing Officer conducting a proper inquiry cannot be held to be erroneous for want of any inquiry. 6. The learned AR has further submitted that once the Assessing Officer has conducted inquiry on the issue, it is also a subject matter of the scrutiny undertaken under CASS, then the order of the Assessing Officer cannot be held as erroneous on the ground of lack of inquiry. The learned Pr. CIT, while passing the revision order u/s 263 of the Act ought to have given a concluding finding as to how the order passed by the Assessing Officer is erroneous, being contrary to the provisions of the I.T. Act. The learned AR has submitted that once the Assessing Officer has taken a view after conducting an inquiry, then the order cannot be held as erroneous on the ground of lack of inquiry and further the Pr. CIT cannot remand the matter back to the Assessing Officer for reconsideration of the same issue which were already decided by the Assessing Officer while passing the assessment order. In support of his contention, he has relied upon the following decisions: i) Hon'ble A.P High Court in the case of Spectra Shares & Scrips (P) Ltd vs. CIT (354 ITR 35) A.P ii) Hon'ble Madras High Court in the case of CIT vs. Vijay Kumar Koganti (275 Taxman 394 (Mad). iii) Hon'ble Gujarat High Court in the case of Pr. CIT vs. Kansara Poptlal Tribhuvan Metal (P) Ltd (156 Taxmann.com 433) (Guj.) iv) Hon'ble Delhi High Court in the case of Pr.CIT vs. Clix Finance India (P) Ltd (160 Taxmann.com 357)(Del.) v) Hon'ble Allahabad High Court in the case of Pr.CIT vs. Sampark Management Consultancy LLP (170 Taxmann.com 49) vi) Coordinate Bench of the Tribunal in the case of LYCOS Internet Ltd vs. ACIT in ITA No.1769/Hyd/2018, dated 22/01/2025. Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 7 of 32 7. He has also referred to the decision of the Tribunal dated 22/01/2025 in the case of Lycos Internet Ltd vs. ACIT (Supra) and submitted that this Tribunal has held that the order of the Assessing Officer cannot be treated as erroneous and prejudicial to the interest of the Revenue unless the view taken by the Assessing Officer is unsustainable in law. The setting aside the order for doing fresh exercise on the part of the Assessing Officer reveals that the Pr.CIT was not sure about the correctness of the claim of the assessee and errors in the order passed by the Assessing Officer. 8. On the other hand, the learned DR has submitted that the Assessing Officer has allowed the claim of the assessee u/s 80P of the Act without specifying under which sub-section and clause of Section 80P, the assessee is eligible for deduction. Further, the assessment order is completely silent, which shows that there is no application of mind on the part of the Assessing Officer which renders the assessment order erroneous so far as it is prejudicial to the interest of the Revenue. The learned DR has further submitted that the learned Pr. CIT has clearly made out this point in the impugned order that for the A.Y 2017-18, the claim of the assessee was disallowed, and the assessee has settled the dispute under Vivad-se-Vishwas-Scheme. Further, for the A.Y 2018-19, the Assessing Officer disallowed the claim of deduction u/s 80P which has been accepted by the assessee as no appeal was filed by the assessee against the said disallowance of deduction u/s 80P. Thus, the learned DR has submitted that when the claim of the assessee was disallowed in earlier years, then the Assessing Officer ought to have given a finding before Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 8 of 32 allowing the claim of the deduction u/s 80P for the year under consideration. The assessment order is completely silent as how the assessee is eligible for deduction u/s 80P and therefore, the learned Pr. CIT has rightly held that the order passed by the Assessing Officer without application of mind is erroneous in so far it is prejudicial to the interest of the Revenue. He has relied upon the impugned order of the Pr. CIT as well as the judgment of the Hon'ble Delhi High Court in the case of CIT vs. M/s. Celebi Delhi Cargo Management India Pvt Ltd reported in [2025] 172 taxmann.com 3 (Delhi) dated 30th January 2025. 9. We have considered the rival contentions as well as the relevant material available on record. The assessee is a Cooperative Society registered under the Multi State Cooperative Act, 2002 w.e.f. 26/07/2005. Prior to that, the assessee was formed under the Andhra Pradesh Mutually Aided Cooperative Society Act w.e.f. 31/05/1997. The assessee filed its return of income on 26/11/2020 declaring total income of Rs.1,20,22,790/- after claiming deduction u/s 80P of the Act. The case of the assessee was selected for scrutiny under the e- assessment scheme, 2019 on the following issues: i) Expenses Incurred for Earning Exempt Income ii) Verification of Genuineness of Expenses iii) Deduction from Total Income under Chapter VI-A iv) Refund Claim v) High interest expenditure/finance costs vi) Deduction u/s 80P (vii) Expenditure of Personal Nature 10. Therefore, the deduction claimed by the assessee under Chapter VII-A and particularly, the deduction u/s 80P was very much the subject matter of the scrutiny undertaken by the Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 9 of 32 Assessing Officer. The Assessing Officer issued notice u/s 143(2) and 142(1) of the Act, the details of which are given in para 2 of the assessment order as under: 11. Thus, it is clear that the show cause notices issued by the Assessing Officer u/s 142(1) dated, 01/12/2021 and 16/08/2022 were replied by the assessee and the response of the assessee to the notice issued u/s 142(1) dated 16/08/2022 is stated as full by the Assessing Officer. After considering the reply of the assessee, the Assessing Officer accepted the total income as computed by the CPC while processing the return of income u/s 143(a) of the I.T. Act and thus, no addition was made by the Assessing Officer while completing the scrutiny assessment u/s 143(3) r.w.s. 144B of the Act on 16/09/2022. Thereafter, the Principal CIT initiated proceedings u/s 263 of the Act by issuing a show cause notice dated 27/01/2025 which is reproduced in para 3 of the impugned order as under: Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 10 of 32 Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 11 of 32 12. The Principal CIT in the show cause notice has given the reasons for invoking the provisions of section 263 that the claim of deduction u/s 80P for the A.Y under consideration need to be disallowed in the absence of principle of mutuality. It is further stated in the show cause notice that the Assessing Officer completed the assessment without verifying the issue of allowability of deduction u/s 80P. In response, the assessee filed the reply/submissions on 08/02/2025 and explained that during the course of assessment proceedings, the Assessing Officer has raised specific query about the deduction u/s 80P of the Act and Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 12 of 32 therefore, the claim of the deduction u/s 80P was allowed as the Assessing Officer was satisfied that the assessee is eligible for the deduction u/s 80P of the Act. The assessee has also raised the objection against the show cause notice that the Assessing Officer has taken one of the possible and permissible view in law and therefore, the Principal CIT cannot invoke the provisions of section 263 of the Act merely, because he does not agree with the view of the Assessing Officer. After considering the reply of the assessee, the Principal CIT has held that the Assessing Officer has failed to properly verify the deduction u/s 80P during the assessment proceedings and also observation that the deduction u/s 80P was disallowed in the earlier A.Y and therefore, allowing the same for the year under consideration renders the assessment order as erroneous so far as it is prejudicial to the interest of the Revenue. He has finally directed the Assessing Officer to pass a fresh assessment order after affording reasonable opportunity to the assessee. Apart from issuing the directions for the year under consideration, the Principal CIT also directed the Assessing Officer to verify the claim of deduction u/s 80P, if any, in the return of income for the A.Y 2019-20 and initiated suitable remedial action in the concluding paras 7 & 8 of the impugned order as under: Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 13 of 32 13. So far as the directions given by the Principal CIT to verify the claim of deduction u/s 80P for the A.Y 2019-20 is concerned, the same are beyond the jurisdiction of the Principal CIT u/s 263 of the Act being barred by limitation as well as beyond the scope of show cause notice dated 27/01/2025 issued u/s 263 of the Act. Therefore, the said direction issued in para 8 of the impugned order is completely illegal and liable to be quashed. 14. So far as the revision order passed u/s 263 of the Act for the year under consideration on the ground that the Assessing Officer has not conducted a proper inquiry on the allowability of the deduction u/s 80P of the Act is concerned, we find that the Assessing Officer has issued a show cause notice u/s 142(1) of the Act dated 1/12/2021 as well as 16/08/2022 as under: Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 14 of 32 Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 15 of 32 Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 16 of 32 Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 17 of 32 Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 18 of 32 15. In query No. VIII of the questionnaire, the Assessing Officer has specifically asked the assessee to submit (i) the specified details/note on the nature of the business activities carried out by the assessee during the year as well as during the last 3 years (ii) details of computation of total income (iii) calculation of amount of deduction and note on allowability of deduction u/s 80P of the Act (iv) reply whether the assessee falls under the category of cooperative bank or was constituted under part V of the Banking Regulations Act, 1994 (v) detailed note on objection of the assessee (vi) bifurcation of income earned under different heads (vii) details of other deductions claimed, if any and Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 19 of 32 (viii) justification of interest income earned from banking company is eligible for deduction u/s 80P of the Act. The assessee filed the reply dated 04/01/2021 which is reproduced at page Nos. 27 to 31 of the paper book and the relevant part of the reply to query No.(viii) is as under: Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 20 of 32 16. Thus, the Assessing Officer has raised a detailed queries on the claim of deduction u/s 80P of the Act which was responded by the assessee by giving a detailed reply explaining the nature of activities of the assessee and income earned from providing the financial activities/credit facilities of the Members. The assessee has clearly stated in the reply that the assessee is Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 21 of 32 not a cooperative bank which is not entitled to deduction u/s 80P and is only a Cooperative Society engaged in the business of providing credit facilities to the Members, which is in the nature of business of banking. The Assessing Officer again issued a show cause notice u/s 142(1) dated 16/08/2022 as under: Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 22 of 32 17. In this show cause notice, the Assessing Officer has asked the assessee to furnish further reply on certain points which are specified as to furnish (i) statements showing the total Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 23 of 32 number of members state-wise in the last 5 financial years including the break up of regular members and nominal members from A.Y 2016-17 to 2020-21 (ii) provide details of deposits in respect of regular and nominal members from A.Y 2016-17 to 2020-21. Thus, it is clear that vide show cause notice dated 16/08/2022, the Assessing Officer has conducted a special inquiry about the business activities of the assessee with the regular and nominal members only for the year under consideration but for last 3 to 5 years. In response to the said notice, the assessee filed year-wise and state-wise details of regular and nominal members placed at page No.37 as under: 18. The assessee has also provided the details of deposits of regular members and nominal members from the A.Y 2016-17 Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 24 of 32 to 2020-21 placed at page Nos. 39 and 40 of the paper book as under: Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 25 of 32 19. From these comparative details, it is clear that there is a change in the status of the members of the assessee particularly, nominal members during the A.Y 2019-20 and 2020- 21 and therefore, the assessee has explained this fact that after the judgment of the Hon'ble Supreme Court in assessee’s own case for the A.Y 2009-10, the assessee has changed the business model and started the business activity only with the regular members/shareholders. It is pertinent to note that for the A.Y 2009-10, the claim of the assessee u/s 80P of the Act was disallowed by Assessing Officer which also confirmed by the Hon'ble Supreme Court on the ground that the assessee is doing the business not only with its members but to outsiders as well which is the nominal members and therefore, this business activity of the assessee was found to be against the Cooperative Societies Act and consequently the Hon'ble Supreme Court upheld the disallowance of deduction u/s 80P by the Assessing Officer. For the year under consideration, the Assessing Officer has specifically conducted the inquiry about the status of the membership of the assessee and business activities of the assessee with its members with comparative details of earlier Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 26 of 32 years. Once the assessee has not carried out any business other than the regular members, then the income generated by the assessee from the credit/banking facility provided to the members is eligible for deduction u/s 80P(1) of the Act. From all these details as reproduced above in the shape of show cause notice & questionnaire issued by the Assessing Officer and the replies filed by the assessee, it is evident that the Assessing Officer has conducted the inquiry by issuing the exhaustive queries in the show cause notice and called all the relevant details and record including preceding years from the assessee which were filed by the assessee. Therefore, it is not a case of lack of inquiry on the part of the Assessing Officer on the issue of allowability of deduction u/s 80P of the Act. The Assessing Officer has allowed the claim only when he was satisfied that the reply and the record filed by the assessee established that the income earned by the assessee from the business activities with its Members is eligible for deduction u/s 80P of the Act. 20. We find that the view taken by the Assessing Officer in allowing the deduction u/s 80P is a plausible and permissible view under the law. Once the Assessing Officer has taken one of the possible views and adopted one of the permissible course under law, then the order of the Assessing Officer cannot be held as erroneous merely because the Principal CIT does not agree with the view of the Assessing Officer. Further, the disallowance of the claim of the assessee in the earlier years is based on the different business activities of the assessee providing the credit facility and banking facility to the outsiders as considered by the Hon'ble Supreme Court for the year under consideration and Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 27 of 32 thereby no business activity was carried out by the assessee with the outsiders or non-members for the year under consideration. Once this fact has been brought by the assessee on record which was very much available with the Assessing Officer as well as with the Principal CIT, then holding the assessment order as erroneous for want of inquiry on the part of the Assessing Officer and remanding the matter to the record of the Assessing Officer is not sustainable in law as laid down in various judgments of the Hon'ble High Courts relied upon by the learned Counsel for the assessee. It is also a settled proposition of law that if a proper inquiry is conducted by the Assessing Officer and after considering the reply as well as the evidence furnished by the assessee, the Assessing Officer is satisfied with the claim of the assessee, then the Assessing Officer is not required to give a detailed reasons for allowing the claim of the assessee. The Hon'ble jurisdictional High Court in the case of Spectra Shares & Scrips (P) Ltd vs. CIT (354 ITR 35) has held in para 59 of the judgment as under: “59. The contention of the counsel for Revenue that the assessee had not raised any submission before the respondent as to the justification for high frequency of transactions in March, 2006 on account of the provisions of the Finance Bill, 2006 is not tenable because the respondent, in his show cause notice dated 20.01.2010 or revised show cause notice dated 21.02.2011 did not indicate that he is going to focus on that period. Consequently, the assessee had no opportunity to highlight this fact in his replies to the respondent. The fact remains that this contention was not only raised in the written submissions before the Tribunal but also argued before it, but it did not deal with it. The contention of the Revenue that the Assessing Officer had not applied his mind to the material on record cannot be accepted because the respondent in his order dated 31.03.2011 specifically records a finding at Para 5.1 that there is application of mind by the Assessing Officer. The Revenue cannot raise a plea which is not contained in the order of the respondent and is contrary to it and to the record. The contention of the Revenue that there are no reasons given by Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 28 of 32 the Assessing Officer about the nature of activity of the assessee cannot be accepted because a query was raised by him in the course of the assessment proceedings and was replied by the assessee. Obviously, he was satisfied with the explanation of the assessee and therefore did not think that the issue needs to be specifically mentioned. It is settled law that the Assessing Officer in the assessment order is not required to give detailed reasons and once it is clear that there was application of mind by an enquiry, the respondent, merely because he entertains a different opinion in the matter, cannot invoke his powers u/s. 263 of the Act. It is therefore not correct to say that there was no proper enquiry by the Assessing Officer.” 21. This Tribunal in case of Lycos Internet Ltd vs. ACIT in ITA No.1769/Hyd/2018 vide order dated 22/01/2025 has considered an identical issue in para 22 to 24 as under: “22. Once the Assessing Officer has conducted an inquiry, then the case does not fall in the category of complete lack of inquiry on the part of the Assessing Officer while passing the assessment order and therefore, the order of the Assessing Officer cannot be set aside on the ground of lack of inquiry. It is a settled proposition of law that when the Assessing Officer has conducted an inquiry and accepted the claim of the assessee, then it is not mandatory for the Assessing Officer to give a finding on each and every issue he has undertaken during the scrutiny proceedings. The Hon'ble jurisdictional High Court in the case of Spectra Shares & Scrips (P) Ltd vs. CIT (Supra) has held in para 34 and 35 as under: “34. It may be that in the Assessment Order, the Assessing Officer has not made an elaborate discussion on the issue as to the nature of activity of the assessee i.e. whether it is an investment or whether it is business income and did not refer to his query on the issue to the assessee before passing the order (in his letter dt.4.8.2008) or the reply given by the assessee to his query (vide it's letter dt.29.8.2008). As held in Vikas Polymers (supra), Sunbeam Auto (supra) and Gabriel India Ltd. (supra), when it is not incumbent on the Assessing Officer to pass a detailed order, merely because the order does not contain reasons as to why he accepted that the assessee is a trading company, his order does not become susceptible for revision. The Assessing Officer while making an assessment had examined the accounts, made inquiries, applied his mind to the facts and circumstances of the case and determined the income of the assessee. Therefore, it is not open to the Commissioner, on the ground that a different view is possible, to reopen the assessment on the ground that the Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 29 of 32 Assessing Officer did not make an elaborate discussion in that regard. 35. Admittedly, the assessee had given full details of these transactions in its letter/reply dated 29.08.2008 to the Assessing Officers letter dated 04.08.2008, giving details of dates of acquisition of the shares in question and dates of sale of shares. As such this material was available before the Assessing Officer. In its reply dt. 09-03-2011 to the revised show cause notice issued by the respondent also, the appellant had enclosed the list of transactions in relation to the scrips of M/s. Amara Raja Battery, M/s. Reliance Industries, M/s. Gujarat NRE Coke and M/s. Andhra Sugars Limited contending that having purchased the shares of the said companies, it had retained them for periods ranging from 1 year 2 months to 3 years 6 months before selling them. The counsel for the appellants has taken us through the said statements/list of transactions.” 23. Therefore, merely because, the Assessing Officer has not given an elaborate reasoning and findings does not lead to the conclusion that the order of the Assessing Officer is erroneous for want of an inquiry. A similar view has been taken by the Hon'ble Bombay High Court in the case of CIT vs. Development Credit Bank (Supra). The Hon'ble Delhi High Court in the case of Income Tax Officer vs. DG Housing Projects Ltd (Supra) has discussed this issue of not giving the conclusive findings on the part of the Commissioner in Para 16 to 19 as under: “16. Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under Section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases, possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation, but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under Section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 30 of 32 17. This distinction must be kept in mind by the CIT while exercising jurisdiction under Section 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged \"inadequate investigation\", it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/ inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore, CIT must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. We may notice that the material which the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record as it stands at the time of examination by the CIT [see CIT v. Shree Manjunathesware Packing & Products Camphor Works [1998] 231 ITR 53 / 98 Taxman 1 (SC)]. Nothing bars/prohibits the CIT from collecting and relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous. 18. It is in this context that the Supreme Court in Malabar Industrial Co. Ltd. v. Commissioner of Income Tax, [2000] 243 ITR 83 / 109 Taxman 66 (SC), had observed that the phrase 'prejudicial to the interest of Revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of Revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of Revenue. Thus, when the Assessing Officer had adopted one of the courses permissible and available to him, and this has resulted in loss to Revenue; or two views were possible, and the Assessing Officer has taken one view with which the CIT may not agree; the said orders cannot be treated as an erroneous order prejudicial to the interest of Revenue unless the view taken by the Assessing Officer is unsustainable in law. In such matters, the CIT must give a finding that the view taken by the Assessing Officer is unsustainable in law and, therefore, the order is erroneous. He must also show that prejudice is caused to the interest of the Revenue. 19. In the present case, the findings recorded by the Tribunal are correct as the CIT has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that \"order passed by the Assessing Officer may be erroneous\". The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent's computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is \"erroneous\". The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits, or the decision taken by the Assessing Officer Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 31 of 32 on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not.” 24. Therefore, once the Assessing Officer has adopted one of the courses permissible and available to him, and this has resulted in loss to the Revenue to which the learned Pr. CIT may not agree, the said order cannot be treated as an erroneous order prejudice to the interest of the Revenue unless the view taken by the Assessing Officer is unsustainable in law. In setting aside the matter, the learned Pr. CIT must give a finding that the view taken by the Assessing Officer is unsustainable in law and therefore, the order is erroneous. The setting aside the order for doing fresh exercise on the part of the Assessing Officer reveals that the learned Pr. CIT was not sure about the correctness of the claim of the assessee and therefore, the learned Pr. CIT must be not sure about the correctness and erroneousness of the order passed by the Assessing Officer. Accordingly, in view of the facts and circumstances as discussed above, we are of the considered opinion that once the Assessing Officer has conducted an inquiry and the case of the assessee does not fall in the category of complete lack of inquiry, the learned Pr. CIT while passing the revision impugned order u/s 263 ought to have given a conclusive findings about the taxability of the income in India as well as the loss of revenue for not including the said income as part of the P&L declared in the ITR. Hence, the impugned order is not sustainable and liable to be quashed. We order accordingly. “ 22. Therefore, merely because the Assessing Officer has not given an elaborate reasoning and finding would not lead to the conclusion that the order of the Assessing Officer is erroneous for want of any inquiry. The Principal CIT has set aside the matter to the record of the Assessing Officer for fresh adjudication, which is also not sustainable in law, particularly when the Assessing Officer has taken a plausible and permissible view after conducting a due inquiry. Thus, remanding the matter for fresh exercise on the part of the Assessing Officer reveals that the Principal CIT himself was not sure about the correctness or the erroneous order passed by the Assessing Officer. Accordingly, in Printed from counselvise.com ITA No 388 of 2025 Citizen Cooperative Society Ltd Hyderabad Page 32 of 32 the facts and circumstances as discussed above when the assessee has brought on record all the relevant details and evidence to show that the income of the assessee from doing business with its Members is eligible deduction u/s 80P of the Act, then in the absence of any concluding finding by the Principal CIT that the claim of the assessee for deduction u/s 80P is impermissible under law, the order of the Assessing Officer allowing the said claim cannot be held as erroneous and hence, the impugned order of the Principal CIT is set aside. 23. In the result, appeal filed by the assessee is allowed. Order pronounced in the Open Court on 30th July 2025. Sd/- Sd/- (MANJUNATHA, G.) ACCOUNTANT MEMBER (VIJAY PAL RAO) VICE-PRESIDENT Hyderabad, dated 30th July 2025 Vinodan/sps Copy to: S.No Addresses 1 The Citizen Coop. Society Ltd, 11-7-194 Citizen House, Huda Colony, Hyderabad 500035 2 Dy. CIT, Circle 9(1) Hyderabad 3 Pr. CIT - Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File By Order Printed from counselvise.com "