Mere Difference Of Opinion With AO Is No Basis To Exercise Revisionary Power U/s 263: Chandigarh ITAT Confirms Sec 80P Deduction Granted By AO

Section 263 of the Income Tax Act is a provision that empowers the Commissioner of Income Tax to revise any order passed by an assessing officer if the Commissioner believes that the order is erroneous and prejudicial to the interests of the revenue. The objective of this provision is to ensure that the interests of the revenue are protected, and tax evasion is prevented.

The Division Bench comprising A.D. Jain (Vice-President) and Krinwant Sahay (Accountant Member) reiterated that “the satisfaction by the Commissioner must be one objectively justifiable and based on material either legal or factual, when available, it cannot be the mere ipse dixit of the Commissioner; that therefore, the Order of the Commissioner exercising jurisdiction under section 263 of the Act could not be held to be sustainable in law”. (Para 20)

The brief facts were that the Assessee is a cooperative society. Its main function is to provide short and medium term loans to its members for agricultural production, dairy farming, poultry and piggery, and to provide agricultural inputs like fertilizers and insecticides, etc. It had invested amounts with Central Cooperative Bank, Mullanpur and the Central Cooperative Bank, Parol. Both these Banks are members of the SAS Central Cooperative Bank and claimed deduction of the interest earned thereon u/s 80P(2)(d) which was allowed during assessment.

Subsequently, the CIT initiated proceedings under Section 263 and passed order holding that Assessee was not entitled to claim deduction under Section 80P as (i) Cooperative bank was not entitled to claim deduction under Section 80P due to the bar contained in Section 80P(4) (ii) the Assessee had invested with a cooperative bank and not with a cooperative society and hence, it was not eligible for deduction under section 80P(2)(d).

The Bench noted that during the original assessment proceedings, a specific query was raised calling for details regarding the deduction claimed under Chapter – VIA, in response to which Assessee furnished details regarding claim made under Section 80P along with reasons.

The Bench observed that the assessment order has recorded the details called for during the assessment proceedings and the order also states that “the books of account were examined and no adverse inference was drawn and the exemption claimed under Section 80P was allowed”.

The Bench found from the examination of the record that AO had examined the Section 80P claim before allowing the same.

The Bench relied upon Delhi High Court ruling in CIT Versus Anil Kumar Sharma', 335 ITR 83 (Delhi) wherein it was held that if the record showed that AO applied his mind, though the assessment order did not patently indicate that the issue in question had been considered, Section 263 proceedings on ground of lack of enquiry would only mean a case of different opinion and that even if the enquiry was termed as inadequate, it would not warrant invocation of Section 263 merely because CIT had a different opinion in the matter.

Finally, the ITAT concluded that the Assessee, being a cooperative society, is entitled to the deduction u/s 80P(2)(d) in respect of income by way of interest derived by it from its investments with the cooperative banks.

Hence, the ITAT set aside Section 263 order and consequently revived the original assessment order.

Counsel for Assessee: Advocate Tej Mohan Singh

Counsel for Revenue: Garima Singh

Case Title: Mullanpur Garibdas Co-operative Multipurpose Society Vs The PCIT

Case Number: ITA No. 515/CHD/2017 & ITA No. 569/CHD/2018

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