JUDGMENT
G.S. Singhvi, J.
1. In this appeal under Section 260A of the Income-tax Act, 1961, the Revenue has prayed for determination of the following questions of law :
“(i) Whether, on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in law in adjudicating upon an issue which did not arise out of the order of appeal and thereby holding that the income of the assessee is exempt under Section 80P of the Act ?
(ii) Whether, on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in law in deleting the disallowance of Rs. 7,74,883 made out of the secretary pay fund ?”
2. The assessee is a co-operative society deriving income from commission, interest, dividend, etc. For the assessment year 1992-93, it filed a return on December 23, 1992, declaring a loss of Rs. 32,60,260. The same was processed under Section 143(1)(a) of the Act at a loss of Rs. 32,42,910 after deducting income-tax at Rs. 17,350. Subsequently, the case was taken up for scrutiny and vide order dated December 28, 1993 passed under Section 143(3) of the Act, the Assessing Officer computed the loss at Rs. 15,74,180 after making disallowance of Rs. 16,41,094 out of the secretary pay fund and bonus payable to the secretaries, Rs. 15,285 towards entertainment allowance under Section 37(2A) and Rs. 17,350 towards tax debited to the profit and loss account. Before doing that, the Assessing Officer issued notice to the society to explain the increase under the head of the secretary pay fund from Rs. 3,56,714 in the assessment year 1991-92 to Rs. 12,54,053 in the assessment year 1992-93. The assessee explained its position vide letter dated December 24, 1993, in the following terms :
“In this connection, your good self has desired clarification regarding secretary pay fund shown in the profit and loss account as on March 31, 1991, at Rs. 3,56,714 which was arrived at Rs. 12,54,053.70 as on March 31, 1992. In this connection, it is clarified that deficit for the year 1990-91 amounting to Rs. 10,33,110 has been debited to the secretary pay fund account on June 29, 1991. This amount of deficit was actually pertaining to the year 1990-91, but according to the practice in vogue the deficit was debited to the profit and loss account on June 29, 1991, when the closing of account for the co-operative year 1990-91 took place. This was the first year when the bank prepared the balance-sheet and profit and loss account twice in a year on March 31, 1991, and June 30, 1991, and deficit as per practice came to be known at the end of the co-operative year because the secretary pay fund from societies was charged at the end of the year.”
4. The assessee challenged the order passed by the Assessing Officer on various grounds including the one that its income was exempt under Section 80P of the Act and that deletion of disallowance of Rs. 7,74,830 made by the Assessing Officer was legally unsustainable. The Assessing Officer opposed the assessee’s plea for exemption under Section 80P by contending that such a plea had not been raised before him. He further pleaded that the method of accounting adopted by the assessee was rightly not accepted for making disallowance of Rs. 7,74,830.
On a consideration of the rival contentions, the Commissioner of Income-tax (Appeals), Faridabad (for short, “the CIT (Appeals)”), partly allowed the appeal of the assessee and deleted the disallowance of Rs. 7,74,830. He further held that the assessee was entitled to exemption under Section 80P of the Act.
5. The Revenue challenged the order of the Commissioner of Income-tax (Appeals) before the Income-tax Appellate Tribunal, Delhi Bench, Delhi (for short, “the Tribunal”). The Tribunal confirmed the order passed by the Commissioner of Income-tax (Appeals) and dismissed the appeal filed by the Revenue. Paragraphs 5 and 10 of the order passed by the Tribunal which contain reasons for dismissing the appeal filed by the Revenue are reproduced below :
“5. After considering the rival submissions and the materials on the file, we are of the view that on the facts and in the circumstances of the case and for the reasons given in the impugned appellate order, the learned Commissioner of Income-tax (Appeals) was justified in allowing the claim of exemption under Section 80P of the Act. No material was brought on record by the learned Departmental Representative before us to show that the exemption under Section 80P was not admissible in the case. We, therefore, see no reason to interfere in the order of the learned Commissioner of Income-tax (Appeals). Accordingly, we uphold the order of the learned Commissioner of Income-tax (Appeals) and dismiss the Revenue’s ground.
10. We have heard both the sides and considered the materials on the file. We are of the view that on the facts and in the circumstances of the case and in view of the detailed explanation submitted by the assessee before him as mentioned in paras, (ii) and (iii) at pages 5 and 6 of the impugned appellate order, the learned Commissioner of Income-tax (Appeals) was justified in deleting the addition of Rs. 7,74,830. The Assessing Officer had disallowed the claim as he was not satisfied with the assessee’s reply regarding the increase in the amount of the claim as compared to the claim of the earlier year. The assessee satisfactorily explained the reasons before the learned Commissioner of Income-tax (Appeals) as mentioned above. We are of the view that the reasons given by the assessee for the increase in the claim were convincing and satisfactory and the learned Commissioner of Income-tax (Appeals) was justified in deleting the addition. We, therefore, uphold the order of the learned Commissioner of Income-tax (Appeals) and dismiss the Revenue’s ground.”
6. Shri R. P. Sawhney, learned senior counsel appearing for the Revenue, could not put forward any tangible argument to convince us that the assessee is not entitled to exemption under Section 80P of the Act. That apart, we are satisfied that failure of the assessee to raise the plea of exemption before the Assessing Officer cannot disentitle it to the benefit of statutory exemption. Therefore, the first question raised by the Revenue cannot be treated as substantial question of law requiring determination by this court.
7. We are further of the view that the reasons assigned by the Commissioner of Income-tax (Appeals) and the Tribunal for deleting the disallowance of Rs. 7,74,883 keeping in view the method of accounting followed by the assessee do not suffer from any legal infirmity requiring reconsideration of the issue by this court. Therefore, even the second question framed by the Revenue cannot be treated as substantial question of law within the meaning of Section 260A of the Act.
8. For the reasons stated above, the appeal is allowed (sic)