The assessee, Versova Shanti Co.op. Housing Soc. Ltd. was assessed for the year under consideration under section 143(3) accepting revised return of income filed at Rs.28.30 Lakhs. In the assessment order, while computing assessee’s income, Ld. AO has allowed deduction under section 80-P for Rs.14.52 Lakhs.
Subsequently, Pr. CIT, upon perusal of case records, opined that the order would require revision under section 263 since the deduction under section 80P(2)(d) granted by AO on account of interest received by assessee from Saraswat Co-op Bank Ltd. as well as from Maharashtra State Co-operative Bank was required to be denied. Subsequently, a show cause notice was issued to the assessee proposing revision of the order.
The assessee defended the assessment order by submitting that the co-operative banks from which the assessee earned interest income were also cooperative societies and therefore the deduction was rightly allowed.
However, the PCIT was not convinced with assessee’s submissions as well as explanations and opined that deduction could not be extended to income earned from any co-operative bank.
Therefore, the assessment order was held to be erroneous and prejudicial to the interest of the revenue. Accordingly, AO was directed to redo the assessment in the light of observation made in the revision order.
The Tribunal bench consisting of Amarjit Singh and Manoj Kumar Aggarwal took into consideration the decision of the Apex Court in the case of Malabar Industrial Co. Ltd. V/s CIT wherein it was held that the phrase ‘prejudicial to the interests of the 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 interests of the revenue.
“For instance, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue, unless the view taken by the Income-tax Officer is unsustainable in law,” the Tribunal said.
Therefore, the ITAT held that if an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as “erroneous” by the Commissioner simply because, according to him, the order should have been written differently or more elaborately. The Section does not visualize the substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is not in accordance with law.Subscribe Taxscan AdFree to view the Judgment