Sankheda Jetpur Pavi Taluka Ginning Pressing Cotton Sale Co-op. Society Ltd Vs PCIT (ITAT Ahmedabad)
ITAT Ahmedabad held that AO allowed the deduction under section 80P(2)(a)(v) of the Income Tax Act without adequate inquire. Accordingly, revisionary jurisdiction u/s. 263 rightly invoked as order passed by AO was erroneous and prejudicial to interest of revenue.
Facts- The assessee, a cooperative society engaged in ginning and pressing raw cotton. The assessment was completed u/s. 143(3) of the Income Tax Act. However, upon reviewing the assessment records, Principal CIT was of the view that the assessment order was both erroneous and prejudicial to the interests of revenue. Firstly, it referred to the society’s annual report for the year 2014-15, which indicated that the assessee dealt with various entities, including The Cotton Corporation of India Ltd. and several private businesses. Furthermore, it was noted that the society had invested in fully automatic machinery to enhance its competitiveness against private ginning companies. This raised questions regarding compliance with Section 80(P)(2)(V) of the Act, which stipulates that processing must be conducted without the aid of power using members’ agricultural produce. The examination of records of the assessee also revealed that the assessee engaged in job work for private companies, leading to TDS deductions by these companies, which were subsequently claimed by the assessee. This deduction was deemed disallowable, resulting in an underassessment of income amounting to Rs. 24,51,022/-. Thus, the assessment order passed u/s. 143(3) was determined to be both erroneous and prejudicial to the interests of Revenue.
