Electro Urban Co-Operative Credit Society Ltd. Vs PCIT (ITAT Kolkata)
If AO taken One possible view out of Many Options, Notice u/s 263 for Revision of AO’s order Not Sustainable
The issue under consideration is whether notice u/s 263 issued by PCIT for disclosing the income from holiday homes under head Income from House property and not under Income from Other Sources is justified in Law?
In the instant case, the Principal Commissioner of Income Tax has proposed to revise the original assessment concluded by the Assessing Officer wherein he admitted the claim of the assessee that the above income comes under the head “other income.” According to him, the assessee’s income derived from holiday homes under its owner has to be assessed as income from house property and that from the other holiday homes is to be treated as income from “other” sources followed by the corresponding consequential computation.
ITAT states that such an income from holiday homes is not eligible for Section 80P(2)(i) deduction being not business income. It is crystal clear therefore that the head of assessee’s income derived from its holiday homes i.e. whether it is income from house property as per the PCIT, business income going by the Assessing Officer in assessment and the CIT(A) and the residuary had of “other” sources in its computation; respectively, is purely a debatable issue. It thus could not be held that that the Assessing Officer’s action sought to be revised as erroneous and causing prejudice to interest of the Revenue. Hon’ble apex court’s landmark decision in Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) holds that both these conditions need to simultaneously exist before Section 263 revision is set in motion. ITAT conclude in these facts and circumstances that the PCIT’s action under challenge is not sustainable since the Assessing Officer had taken one of the possible views only in this factual backdrop. It is reversed therefore. The Assessing Officer’s regular assessment is restored as a necessary corollary.
FULL TEXT OF THE ITAT JUDGEMENT
This assessee’s appeal for AY 2014-15 arises against the order dated 20.03.2019 passed by the Pr. Commissioner of Income Tax, Kolkata-12, Kolkata in M. No. PCIT-12/Kol/263/2018-19/ in proceedings u/s 263 of the Income tax Act, 1961 (in short the “Act”).
Heard both the parties. Case file(s) perused.
2. We advert to the relevant facts in the instant case. This assessee is a cooperative credit society. Apart from carrying out co-operative credit activity, it owns four holiday homes on its own and also maintains/runs similar other holiday homes which are provided to its members in lieu of charging concessional maintenance charges. The assessee had filed is return on 21.11.2014 declaring NIL income. The Assessing Officer completed his regular assessment on 03.06.2016 assessing its taxable income at ₹3,67,94,200/-.
3. Case file suggests that the PCIT thereafter issued his Section 263 notice dated 11.04.2018 proposing to invoke his revision jurisdiction for the following reason(s):
“From the assessment order as well as records & information received for the A.Y. 2014-15, it has been noticed that the following aspects of the return of income/computation of income were not properly looked into by the A.O. concerned which are as follows:-
The case was selected for scrutiny through CASS. The reasons for selection were:-
i) “Large Deduction claimed under chapter VI-A ii) Large Deduction claimed U/s.57”.iii) Low income in comparison to high loans/advances/Investment in shares iv) High interest expenditure against new capital added in work in progress or addition made to fixed assets & v) Mismatch in sales turnover reported in Audit report and ITR.
The assessment for the A.Y. 2014-15 was completed U/s.143(3) on 03/06/2016 determining the total income at Rs.3,67,94,200/-.
On perusal of the assessment records, it was seen that the assessee was an employees’ Co-operative Society having the area of its membership confined to the permanent employees of CESC Ltd. It had income from the activity of providing credit facilities to its members and interest on deposit with the The West Bengal State Co- operative Bank Ltd. as well as income from interest on deposit with commercial bank.
From the details available on the record it was observed that in the Income & Expenditure Account, assessee had declared Gross receipt of Rs.30,19,125/- under the head “Income from Other Sources” on account of maintenance of Holiday Homes and claimed expenses of Rs. 32,18,553/- as well as depreciation of Rs.l,49,456/-aggregating to Net Loss of Rs.3,48,884/-. As per Balance Sheet, Fixed assets include the following Holiday Homes which were owned by the assessee. Maintenance charges received as well as payments made in respect of these properties were as under:-
