Principal Commissioner Of Income Tax Vadodara v. Bharuch District Co Op Milk Producers Union Ltd

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/TAX APPEAL NO. 522 of 2022 ==========================================================PRINCIPAL COMMISSIONER OF INCOME TAX VADODARA VersusBHARUCH DISTRICT CO OP MILK PRODUCERS UNION LTD ========================================================== Appearance: MR.VARUN K.PATEL(3802) for the Appellant(s) No. 1 for the Opponent(s) No. 1========================================================== CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIAand HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 19/09/2022 ORAL ORDER (PER : HONOURABLE MR. JUSTICE N.V.ANJARIA) Heard learned advocate Mr. Varun K. Patel forthe appellant. 2.The present appeal under section 260A of theIncome Tax Act, 1961arise out of order dated31.08.2021 passed by the Income Tax AppellateTribunal, 'C' Bench, Ahmedabad, in Income TAx AppealNo. 370 of 2020 in respect of Assessment Year 2014-15. 3.Noticing the facts, the respondent assessee-Bharuch District Cooperative Milk Producers UnionLtd. filed return of income on 20.11.2014 declaringtotal incomeat Rs. Nil. The assessee claimed deduction of Rs. 98,69,895/- under section 80P(2) ofthe Income Tax Act, 1961 (hereinafter referred to as'the Act'). The case of the assessee was taken inscrutiny assessment under section 143(3) of the Act.The said assessment was completed on 29.12.2017.Therein the total income was assessed at Rs.4,08,470/-. 3.1 Thereafter, the Principal Commissioner of IncomeTax, issued show-cause notice under section 263 ofthe Act on 19.03.2020. It was on the ground that theAssessing officer had failed to carry out inquiriesin respect of claim of deduction under section 80P(2)(d) of the Act. 3.2 The notice inter alia mentioned thus, "3. On scrutiny of Balance Sheet, Profit andLoss account and Computation of income. revealedthat the assessee had offered income of Rs.NILafter claiming deduction u/s.80P(2) amounting toRs. 98.69,895/- which included Rs.84,99,892/- asfixed deposit interest earned from The BharuchDistrict Central Co- operative Bank Ltd and thesame was allowed during the assessment. As persection 80P(2)(d) it was required to bedisallowed by the AO but by not doing so itresulted in under assessment of Rs.84.99,892/-.Therefore, the order passed u/s. 143(3) of theAct is both erroneous and prejudicial to theinterests of revenue." 3.3 The assessee replied to the said show-causenotice, relied on the definition of "Co-operativeSociety" under section 2(19) of the Co-operativeSocieties Act, 1912, to inter alia submit that co- operative society can be of different nature can canbe involved in different activities and that thecooperative society bank is species of cooperativesociety. It was submitted that the deduction undersection 80P(2)(d) of the Act was rightly claimed. 3.4 Ultimately, the Principal Commissioner of IncomeTAx, Vadodara, recorded that it was a fit case totake in revision under section 263 of the Act, theAssessing Officer was directed to examine the issue.The assessee preferred appeal, which culimated intothe impugned order. 4.Following questions is proposed by the appellantclaiming to be arisen as substantial question of law, Whether in the facts and circumstances of thecase, learned ITAT has erred in law and on factsin quashing the order under section 263 of theIncome Tax Act, 1961, after erroneouslyobserving that the Assessing Officer hasverified the claim of deduction under section80P and considered the submission anddocumentary evidence produced by the assessee,though the assessee's claim of deduction undersection 80P(2) regarding interest incomereceived on deposits with the Bharuch DistrictCentral Cooperative Bank Ltd. is not tenableunder section 80P(2)(a)(i) or section 80P(2)(d),but the Assessing officer has allowed the same without making inquiries or verification makinghis assessment order erroneous and prejudicialto the interest of revenue as per clause (1) ofExplanation 2 to Section 263(1)? Whether in the facts and circumstances of thecase, learned ITAT has erred in law and on factsin quashing the order under section 263 of theIncome Tax Act, 1961, after erroneouslyobserving that the Assessing Officer hasverified the claim of deduction under section80P and considered the submission anddocumentary evidence produced by the assessee,though the assessee's claim of deduction undersection 80P(2) regarding interest incomereceived on deposits with the Bharuch DistrictCentral Cooperative Bank Ltd. is not tenableunder section 80P(2)(a)(i) or section 80P(2)(d),but the Assessing officer has allowed the same without making inquiries or verification makinghis assessment order erroneous and prejudicialto the interest of revenue as per clause (1) ofExplanation 2 to Section 263(1)? 4.1 It was submitted by learned advocate for theappellant assailing the order of the Tribunal andhighlighting the question proposed as above, interalia that the assessee's claim of deduction undersection 80P(2) regarding interest income received ondeposits with the Bharuch District CentralCooperative Bank Ltd. is not tenable, yet theAssessing Officer allowed the same. Therefore, thepowers were rightly exercised under section 263(1). 5.While allowing the appeal of the assessee, theTribunal observed that the case was subjected toscrutiny assessment under section 143(3) of the Act,which was finalised on 29.12.2017 and it was the viewtaken that the allowance permitted in respect ofinterest was prejudicial to the interest of revenue.It was however observed that upon considering thenotice under section 142(1) dated 10.10.2017 andissued in course of the proceedings under section143(3) and the questionnaire enclosed, it asked theassessee as per the questionnaire 15 to furnish thedetails in respect of claim of deduction undersection 80P of the Act. The assessee had madedetailed submission on 18.12.2017 and explained thatit was not the first order of claiming deduction. Assessee pointed out that similar claims of deductionunder section 80(2)(d) of the Act were allowed by therevenue in the earlier year also. 5.1 Section 80P(2)(d) of the Act is in respect ofthe income received by interest or dividend derivedby the cooperative society. The Tribunal noted thatassesse had pointed out during original assessmentthat its claim for deduction was allowed by theCommissioner of Income Tax in respect of theAssessment Year 2011-12 to 2013-14 and that the samewas accepted by the Revenue. The Tribunal consideredthe detailed submission of the assessee in thatregard. The Tribunal accepted the submission thatCooperative Bank means a Cooperative Society havingprimary object or principal business of which thetransaction is of banking business. The deductionwas available under Section 80P of the Act in respectof interest earned by investment in such cooperativesociety. 5.2 The Tribunal referred to various decisions ofGujarat High Court and other High Courts. TheTribunal concluded, by allowing the appeal byrecording the findings as under, "Looking to the above facts and submission ofthe assessee, it is demonstrated that theAssessing Officer has categorically madespecific verification on the impugned issue ofclaim of deduction u/s. 80P of the Act which wasthe basis for an action under section 263 of theAct. The Assessing Officer has considered the submission and documentary evidences produced bythe assessee during the course of assessmentproceedings. In the light of the facts andfindings as elaborated supra in this order, weconsider that order passed under section 263 ofthe Act is not sustainable in law, therefore,order passed u/s. 263 is quashed." 6.This Court is in agreement with the reasonssupplied by the Tribunal. The findings could be saidto be properly recorded and tenable in law. Noquestion of law much less substantial question of lawarise in this appeal. 7.Appeal is therefore dismissed. (N.V.ANJARIA, J) BIJOY B. PILLAI (BHARGAV D. KARIA, J)