The Ahmedabad bench of ITAT quashed the revision passed under Section 263 of the Income Tax Act, 1961, observing that the Assessing Officer had conducted a proper enquiry.
In this case, the assessee, Posun Credit Co.Op. Society Limited had filed an income tax return (ITR) declaring its income at nil on 03.08.2018 for the assessment year (FY) 2018-19. The assessee’s case was selected for assessment, and the assessment order was passed by the assessing officer (AO) after making an addition of Rs. 11,58,473/- on account of interest received from nationalized banks.
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The Principal Commissioner of Income Tax (PCIT) observed that the assessee declared a net profit of Rs. 41,09,258 under the heading income from business or profession and provided revenue from advances to Members as well as interest earned from Nationalized Banks and Co-operative Banks totaling Rs. 48,84,758.
The PCIT observed that the assessee had claimed a total deduction under Section 80P(2)(d) of the Income Tax Act, amounting to Rs. 36,18,006/-.
Later on, an assessment order was passed by PCIT by directing the AO to pass a fresh assessment order as the PCIT was of the view that, in accordance to the explanation-2 to Section 263(1) of the Income Tax Act, the AO passed the assessment order, allowing relief without enquiring into the claim.
The assessee being aggrieved by the above order of PCIT had approached the ITAT for relief.
The counsel on behalf of the assessee contended that the AO considered the deduction under Section 80P(2)(d) of the Income Tax Act during the assessment proceedings and disallowed interest income from nationalized banks. It was further submitted that the invocation of explanation 2 of Section 263 of the Income Tax Act is unjustifiable, as the verification of the proper enquiry was made by the AO at the assessment stage.
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The ITAT bench, comprising of Suchitra Kamble (Judicial Member) and Narendra Prasad Sinha (Accountant Member), allowed the appeal filed by the assessee and held that the PCIT cannot be justified for invoking explanation 2 to Section 263 of the Income Tax Act 1961, as a proper enquiry was made by the AO.
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