The People Co-Op Credit Society Ltd. Vs. Income Tax Officer - (Income Tax Appellate Tribunal) (21 Feb 2022)

Once the issue verified by Assessing Officer and jurisdictional Court has allowed claim related to interest income earned from Co-operative Bank, PCIT cannot exercise Section 263 of IT Act

MANU/IB/0061/2022

Direct Taxation

The assessee is a Co-operative Society carrying on business of providing credit facilities to its members. The return of income was filed by the assessee declaring total income at Rs.3,18,490. The case was selected for scrutiny and the assessment under Section 143(3) of the Income Tax Act, 1961 (IT Act) was finalised thereby making addition of Rs.49,919 on account of undisclosed commission and interest income.

A proposal was received from the Assessing Officer for revision of the order passed by the Assessing Officer under Section 143(3) of the IT Act as the Assessing Officer has allowed the interest income from Co-operative Banks which was otherwise not allowable in the light of principles enunciated by Hon'ble Karnataka High Court in Totgars Co-operative Sales Society. It was found that, the assessee society earned interest income from Mehsana Urban Co-operative Bank amounting to Rs.8,05,041 and the net interest mount claimed under Section 80P was Rs.6,61,617 after deducting the interest paid on overdraft against Fixed Deposits.

The PCIT issued show cause notice under Section 263 of the IT Act for which the assessee filed its submission and objected the proceedings under Section 263 of the IT Act. The PCIT vide order set aside the Assessment Order passed under Section 143(3) of the Act and directed the Assessing Officer to reframe the assessment denovo.

The entire details called for during the assessment proceedings were submitted by the assessee at the time of assessment under Section 143(3) of the IT 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 submitted the details regarding deduction under Section 80P of the IT 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 of IT Act 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 IT Act. On the basis of Karnataka High Court decision in the case of Totgars Co-operative Sales Society, the PCIT cannot invoke provisions of Section 263 of the IT Act. Appeal allowed.

Tags : ASSESSMENT REFRAMING LEGALITY