CHOKKADI VYAVASAYA SEVA SAHAKARI BANK V. INCOME TAX OFFICER, WARD1, PUTTUR

WP/26534/2023

AI Insights

The case involves Chokkadi Vyavasaya Seva Sahakari Bank Niyamitha, a primary agricultural credit cooperative society, challenging the assessment order and related notices issued by the Income Tax Department for the assessment year 2018-19. The petitioner argued that the failure to respond to the notices was due to genuine lapses and unfamiliarity with the online proceedings introduced by the e-assessment scheme in 2019. The court considered the petitioner's circumstances and the procedural history, including the late engagement of an auditor and consultant, which led to the ex parte assessment order. The respondents contended that the petitioner had sufficient opportunity to respond but failed to do so, necessitating the impugned order.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 759428 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 12-01-2024
• Assessment Year: misc
• Other Referred Cases: Principal Commissioner of Income-tax Vs. Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd., Kerala State Co-Operative Agricultural & Rural Development Bank Ltd. Vs. Assessing Officer, Mavilayi Service Co-operative Bank Ltd. Vs. Commissioner of Income Tax, Calicut
• Laws Referred To: Income Tax Act 1961, Cooperative Societies Act 1962, Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: M DILIP
• Assessee Lawyers: SHREEHARI KUTSA
• Keywords: Assessment Order; E-assessment Scheme; Penalty proceedings; Unsecured loans; Writ of Certiorari
• Section: 144; 270A; 271AAC(1); 143(3A); 143(3B); 272A(1)(d); 156

Judgement Text

" - 1 - NC: 2024:KHC:1744 WP No. 26534 of 2023 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 12TH DAY OF JANUARY, 2024 BEFORE THE HON'BLE MR JUSTICE S.R.KRISHNA KUMAR WRIT PETITION NO. 26534 OF 2023 (T-IT) BETWEEN: CHOKKADI VYAVASAYA SEVA SAHAKARI BANK NIYAMITHA A PRIMARY AGRICULTURAL CREDIT COOPERATIVE SOCIETY REGISTERED UNDER THE COOPERATIVE SOCIETIES ACT 1962 HAVING REGISTERED OFFICE AT KUKKJUADKA POST, SULLIA TLAUKA DAKSHINA KANNADA - 574 218 REP BY ITS CEO SRI MOHAN KUMAR P SON OF SRI MAHABALA GOWDA AGED ABOUT 42 YEARS …PETITIONER (BY SRI. SHREEHARI KUTSA, ADVOCATE) AND: 1. INCOME TAX OFFICER, WARD1, PUTTUR THE ASSESSING OFFICER UNDER THE INCOME TAX ACT 1961 INCOME TAX OFFICE, RADHIKA COMPLEX COURT ROAD, PUTTUR- 574201 2. NATIONAL FACELESS ASSESSMENT CENTRE NOW KNOWN AS NATIONAL E-ASSESSMENT CENTRE REP BY PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX (NEAC) ROOM NO. 401, 2ND FLOOR, E-RAMP, Digitally signed by ANAND N Location: HIGH COURT OF KARNATAKA - 2 - NC: 2024:KHC:1744 WP No. 26534 of 2023 JAWAHARLAL NEHRU STADIUM DELHI - 110 003 3. PRINCIPAL COMMISSIONER OF INCOME TAX PANAJI -GOA AAYKAR BHAVAN PLOT NO 5, EDC COMPLEX PATTO PLAZA PANAJI GOA- 403001 …RESPONDENTS (BY SRI. M.DILIP, ADVOCATE) THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER OF ASSESSMENT UNDER SECTION 144 R.W.S. 143(3A) AND 143(3B) DATED 31/03/2022 FOR THE A.Y. 2018- 19 ISSUED BY THE R2 BEARING DIN VIZ., ITBA/AST/S/144/2020-21/1032006980(1) WHICH IS ENCLOSED AS ANNEXURE-B1 AND ETC. THIS PETITION, COMING ON FOR ORDERS, THIS DAY, THE COURT MADE THE FOLLOWING: ORDER In this petition, the petitioner seeks for the following reliefs: a Issue a Writ of Certiorari or direction in the nature of writ of certiorari quashing the order of assessment under section 144 r.w.s. 143(3A) & 143(3B) dated 31/03/2022 for the A.Y. 2018-19 issued by the Respondent No. 2 bearing DIN viz., ITBA/AST/S/144/2020- 21/1032006980(1) which Is enclosed as Annexure B1. - 3 - NC: 2024:KHC:1744 WP No. 26534 of 2023 b Issue a Writ of Certiorari or direction in the nature of writ of certiorari quashing the notice of demand issued under section 156 of the Income Tax Act 1961 dated 31/03/2022 for the A.Υ. 2018-19 issued by the Respondent No.2 bearing DIN viz., ITBA/AST/S/156/2020- 21/1032007145(1) which is enclosed as Annexure B2. c Issue a Writ of Certiorari or direction in the nature of writ of certiorari quashing the notice initiating penalty proceedings issued under section 274 r.w.s 270A of the Income Tax Act 1961 dated 31/03/2022 for the A.Y. 2018-19 issued by the Respondent No. 2 bearing DIN viz.,ITBA/PNL/S/270A/2020-21/1032007206(1) which is enclosed as Annexure B3. d Issue a Writ of Certiorari or direction in the nature of writ of certiorari quashing the notice initiating penalty proceedings issued under section 274 r.w.s 271AAC(1) of the Income Tax Act 1961 dated 31/03/2022 for the A.Y. 2018-19 Issued by the Respondent No. 2 bearing DIN viz., ITBA/PNL/S/271AAC(1)/2020- 21/1032007186(1) which is enclosed as Annexure B4. e Issue a Writ of Certiorari or direction in the nature of writ of certiorari quashing the notice - 4 - NC: 2024:KHC:1744 WP No. 26534 of 2023 initiating penalty proceedings issued under section 274 r.w.s 272A(1)(d) of the Income Tax Act 1961 dated 31/03/2022 for the A.Y. 2018-19 issued by the Respondent No. 2 bearing DIN viz.,ITBA/PNL/S/272A(1)(D)_FL/2020- 21/1031731732(1) which is enclosed as Annexure B5. f Issue a Writ of Certiorari or direction in the writ of certiorari quashing the nature of writ of communication directing the Petitioner to remit Rs. 1.50 crores on or before 30/11/2023 issued by the Respondent No. 3 bearing DIN viz.,ITBA/COM/M/17/2023-24/1057808286(1) which is enclosed as Annexure D. 2. The material on record discloses that the challenge in the present petition is to the impugned Assessment Order dated 31.03.2021 in relation to the assessment year 2018-19 issued to the petitioner [which is a Primary Agricultural Credit Co-operative Society]. It is contended that the inability and omission on the part of the petitioner to file its response/reply to the notices and to appear before the respondents and contest the - 5 - NC: 2024:KHC:1744 WP No. 26534 of 2023 proceedings was due to bonafide reasons, unavoidable circumstances and sufficient cause, which are pleaded in paragraph Nos.3 to 7 of the Memorandum of Writ Petition, which read as under: “3. The case of the Petitioner was selected for scrutiny assessment by the Respondent No. 2 and statutory notices were issued online. The Petitioner submits that as the accountant of the bank was not used to the online proceedings of the income tax department and further as the year 2019 was the first year of introduction of conduct of electronic mode of conduct of the Income tax proceedings by way of introduction of E- assessment Scheme 2019 vide Notification No. S.O. 3264(E) [No. 61/2019 (F.NO. 370149/154/2019-TPL)], DATED 12-9-2019, therefore there was a genuine lapse on the part of the Petitioner in not exercising complete diligence in attending the proceeding. 4. The Petitioner submits that proceedings were taken into consideration only in the month of January 2021 after the Petitioner learnt about the notices being related to income tax proceeding for the A.Y. 2018-19 and immediately informed its auditor. However, the auditor too later informed that as he was not familiar with income tax online - 6 - NC: 2024:KHC:1744 WP No. 26534 of 2023 proceedings, he in turn engaged another professional in Bengaluru for making submissions in the month of March but due to delay in collating and supplying the details by the Petitioner to its Auditor and by Its Auditor to the consultant, the Respondent No. 2 passed the assessment order ex parte on 31/03/2021. Copy of the assessment order dated 31/03/2021 for the A.Y. 2018-19 is enclosed as Annexure B1. Copy of the notice of demand under section 156 for the A.Y. 2018-19 is enclosed as Annexure B2. The Respondent No. 2 also issued penalty notices under section 270A, 271AAC and 272A(1)(d) which are enclosed as Annexure B3, B4 and B5 respectively. 5. The Petitioner submits that in the income tax return form filed by the Petitioner, the Petitioner had erroneously filled all its financial liabilities totalling to Rs.29,17,94,194/- under a single head 'others' under the head 'unsecured loans'. The break up of the said figure is as under- Particulars Amount Members Deposits Savings Deposit 3,35,34,702.12 Shree Nidhi Deposit 41,08,754.00 Fixed Deposit 6,24,35,860.00 Permanent Deposit 3,02,183.00 Staff Deposits Staff Security Deposit 2,05,160.00 - 7 - NC: 2024:KHC:1744 WP No. 26534 of 2023 Staff FP deposit 62,24,922.00 Other Deposits S.D.Reliance BTS- Doddathota 10,000.00 Building Security Deposit 50,000.00 S.C.D.C.Bank Loan-Short term DC Bank-MKCC Loan 14,92,18,000.00 NABARD Building Loan 87,50,000.00 S.C.D.C.Bank loan-Long term Loan 2,69,54,613.00 Total 29,17,94,194.12 6. The Petitioner submits that the above sum has been mistaken by the Respondent No. 2 as the unsecured loans for the year and by comparing the same with previous year's unsecured loan figure reflecting in the ITR of Rs. 9,17,54,224/- the Respondent No. 2 determined the difference between the unsecured loans value for the two years of Rs. 20,00,40,570/- as unexplained cash credit and added the same to the income declared in the income tax returned. The Respondent further made additions in respect of provision for doubtful debts of Rs. 2,77,82,422/- and disallowed the deduction under section 80P of the Act. The Respondent No. 2 determined the total income of Rs. 23,10,75,340/- as against the declared total income of Rs. NIL. It is noteworthy that the total income determined of Rs. 23.10 - 8 - NC: 2024:KHC:1744 WP No. 26534 of 2023 crores is over 4.5 times the total interest receipts earned by the Petitioner and nearly 8 times the capital of the Petitioner society. Therefore, the recovery of the demand would lead to closure of the Petitioner's society and unbearable legal issues on behalf of the depositors. 7. The Petitioner Immediately consulted a new professional who advised them to prefer statutory appeal and advised that there Is no alternative remedy available under the law. The Petitioner accepted the advised and preferred the statutory appeal on 08/11/2021. Copy of the acknowledgment of filing the statutory appeal is enclosed as Annexure C.” 3. The learned counsel for the petitioner places reliance on the following judgments passed by the Hon’ble Apex Court: i Principal Commissioner of Income-tax Vs. Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd., reported in [2023] 150 taxmann.com 173(SC); ii Kerala State Co-Operative Agricultural & Rural Development Bank Ltd. Vs. Assessing Officer reported in [2023] 154 taxmann.com 305 (SC); - 9 - NC: 2024:KHC:1744 WP No. 26534 of 2023 iii Mavilayi Service Co-operative Bank Ltd., Vs. Commissioner of Income Tax, Calicut reported in [2021] 123 taxmann.com 161 (SC). 4. Per contra, the learned counsel for the respondents, submits that despite sufficient opportunity, the petitioner did not submit its response to the Show Cause Notice and as such, the respondents were left with no option but to proceed to pass the impugned order which does not warrant interference in the present petition. 5. I have given my anxious consideration to the rival submissions and perused the material on record. 6. A perusal of the material on record will indicate that the respondents have noted that the petitioner has not submitted its reply to the Show Cause Notice nor filed any documents in support of its claim. In my opinion, the grounds, facts and the reasons set out at paragraph Nos.3 to 7 of the Memorandum of Writ Petition for the purpose of contending that the inability and omission on the part of the - 10 - NC: 2024:KHC:1744 WP No. 26534 of 2023 petitioner to submit its reply and contest the proceedings, are valid and sufficient. Under these circumstances, adopting a justice oriented approach and in order to provide one more opportunity to the petitioner, without expressing any opinion on the merits/demerits of the rival contentions, I deem it just and appropriate to show last indulgence in favour of the petitioner by setting aside the impugned order and remitting the matter back to the respondent No.2 for reconsideration afresh and proceed further in accordance with law. 7. In the result, the following: ORDER a) The petition is hereby allowed. b) The impugned order dated 31.03.2021 [Annexure-B1] is set aside. c) The matter is remitted back to the respondent No.2 – the National Faceless Assessment Centre [Now known as National e-Assessment - 11 - NC: 2024:KHC:1744 WP No. 26534 of 2023 Centre] for reconsideration afresh in accordance with law. d) The respondent No.2 is directed to issue notice to the petitioner and proceed further in accordance with law. e) Immediately upon receipt of a notice from the respondent No.2, the petitioner shall submit its response, documents etc., within fifteen [15] days pursuant to which, the respondent No.2 shall proceed further to pass appropriate orders in accordance with law. SD/- JUDGE RB "