Arya Vysya Co-Operative Society Ltd., Arsikere V. DCIT, Hassan

ITA 1189/BANG/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8702 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 23-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 27-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR AGARWALA JT
• Assessee Lawyers: R E BALASUBRAMANYAM
• Keywords: Bonafide belief; Reasonable cause
• Section: 12AA; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC C BENCH : BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.1189/BANG/2015 ASSESSMENT YEAR : 2007-08 M/S. ARYA VYSYA CO-OPERATIVE SOCIETY LTD., SAINATH ROAD, ARASIKERE, C/O. BALU & ANAND, CHARTERED ACCOUNTANTS, 46/2, 4 TH CROSS, MALLESWARAM, BANGALORE 560 003. PAN: AABFA 9108N VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1, HASSAN. APPELLANT RESPONDENT APPELLANT BY : SHRI R.E. BALASUBRAMANYAM, CA RESPONDENT BY : SHRI SUNIL KUMAR AGARWALA, JT. CIT(DR) DATE OF HEARING : 23.12.2015 DATE OF PRONOUNCEMENT : 14.01.2016 O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 08.11.2013 OF THE CIT(APPEALS), MYSORE RELATING TO ASSESSMENT YEAR 2007- 08. ITA NO.1189/BANG/2015 PAGE 2 OF 9 2. THE ASSESSEE IS A CO-OPERATIVE SOCIETY ENGAGED I N PROVIDING FINANCIAL SERVICES LIKE ACCEPTING DEPOSITS AND LEND ING MONEY TO ITS MEMBERS. 3. THERE IS A DELAY OF ABOUT 578 DAYS IN FILING THE APPEAL BY THE ASSESSEE. THE ASSESSEE HAS FILED PETITION FOR COND ONATION OF DELAY IN FILING THE APPEALS WHEREIN IT IS STATED THAT THE RETURN FO R AY 2007-08 FILED BY THE ASSESSEE WAS PROCESSED U/S. 143(1). THE ASSESSEE, H OWEVER, INADVERTENTLY FAILED TO CLAIM DEDUCTION U/S. 80P IN THE RETURN OF INCOME. ACCORDINGLY APPLICATION U/S. 154 WAS FILED BEFORE T HE AO CLAIMING DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT WHICH WAS REJECTED BY THE AO ON THE GROUND THAT THE CLAIM WAS NOT MADE IN THE ORIGINAL RETURN. 4. THE ASSESSEE FURTHER PREFERRED AN APPEAL BEFORE THE CIT(APPEALS) AGAINST THE ORDER OF THE AO REJECTING THE ASSESSEE S APPLICATION U/S. 154. THE CIT(A) RELYING ON THE DECISIONS OF KERALA CO-OPERATIVE CONSUMERS FEDERATION LTD. V. CIT, 170 ITR 455 (KER) AND ADDL. CIT V. UP CO-OPERATIVE CANE UNION, 114 ITR 70, HELD THAT PROVIDING CREDIT FACILITIES TO THE MEMBER S WAS PART OF BANKING BUSINESS. THE CIT(A) WAS OF T HE FURTHER VIEW THAT THE ISSUE WAS HIGHLY DEBATABLE AND CANNOT BE A SUBJECT MATTER OF RECTIFICATION U/S. 154 AND HE THEREFORE UPHELD THE ORDER OF AO AN D DISMISSED THE APPEAL OF THE ASSESSEE. 5. THE ORDER OF THE CIT(A) WAS RECEIVED BY THE ASSE SSEE ON 08.11.2013 AND AN APPEAL BEFORE THE ITAT OUGHT TO H AVE BEEN FILED ON OR ITA NO.1189/BANG/2015 PAGE 3 OF 9 BEFORE 6.1.2014. IT IS STATED THAT THE ASSESSEE I S LOCATED IN A RURAL AREA AND DOES NOT HAVE ACCESS TO ADVICE OF PROFESSIONALS , THE BOARD MEMBERS WERE AT DIFFERENT PLACES AND WERE OF THE BONAFIDE B ELIEF THAT THERE WAS NO SCOPE FOR FURTHER APPEAL. THIS FACT HAS ALSO BEEN SWORN TO BY SHRI S.C. NAVALGUND, CA OF THE ASSESSEE, THAT HE HAD ADVISED THE ASSESSEE THAT IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT I N THE CASE OF GOETZE INDIA LTD. THE CLAIM OF SECTION 80P MAY NOT BE MAINTAINABLE A T THAT STAGE AND A SECOND OPINION IN THE MATTER MAY BE OBTAINED. IT WAS ONLY ON BASIS OF A SECOND OPINION THAT APPEAL OUGHT TO HAVE BEEN FILED BEFORE THE ITAT, THAT THE ASSESSEE FORTHWITH FILED AN APPEAL ON 27.0 8.2015 WHICH RESULTED IN DELAY OF 578 DAYS. IN THE ABOVE CIRCUMSTANCES, IT IS STATED THAT THE DELAY IN FILING THE APPEAL BEFORE THE ITAT WAS DUE TO A BONAFIDE BELIEF AND NOT DELIBERATE. ON THE ABOVE FACTS, AN AFFIDAVIT SWORN TO BY THE MANAGER OF THE ASSESSEE SOCIETY HAS ALSO BEEN FILED ALONG WITH THE PETITION FOR CONDONATION FOR DELAY. PLACING RELIANCE ON THE DECISIONS OF THE HONBLE SUPREME COURT IN MST. KATIJI & ORS. REPORTED IN 167 ITR 471; HONBLE JURISDICTIONAL HIG H COURT DECISION IN ISRO SATELLITE CENTRE IN ITA NO.532/208 AND THE DECISION OF THE TRIBUNAL IN SAVAYAVA KRUSHI PARIVARA KRISHINIVASA IN ITA NO.1055(BNG)2013 DATED 4.4.2014 , IT IS PRAYED THAT THE DELAY MAY BE CONDONED AND APPEAL ADMITTED FOR ADJUDICATION. 6. HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THIS TRIBUNAL DEALT WITH AN IDENTICAL ISSUE IN THE CASE OF SAVAYAVA KRUSHI PARIVARA KRISHINIVASA IN ITA NO.1055(BNG)2013 DATED 4.4.2014, WHEREIN ITA NO.1189/BANG/2015 PAGE 4 OF 9 THE ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT APPEA L AGAINST DENIAL OF REGISTRATION U/S. 12AA BY THE CIT HAS TO BE FILED O NLY AFTER THE ASSESSING OFFICERS ORDER. LATER ON RECEIPT OF PROPER ADVIC E THAT APPEAL AGAINST THE ORDER OF CIT OUGHT TO BE FILED BEFORE THE ITAT, THE ASSESSEE ACCORDINGLY FILED APPEAL BEFORE THE ITAT WHICH LED TO A DELAY O F 980 DAYS IN FILING THE APPEAL. THE TRIBUNAL FOLLOWING THE DECISIONS OF MST. KATIJI & ORS. (SUPRA) AND CIT V. ISRO SATELLITE CENTRE (SUPRA) CAME TO TH E CONCLUSION THAT IN THE FACTS OF THE CASE THERE WAS NO WILFUL DELAY ON THE PART OF THE ASSESSEE AND CONDONED THE DELAY OF 980 DAYS IN FILING THE APPEAL . 7. IN THE PRESENT CASE, THE DELAY OF 578 DAYS HAS O CCASIONED DUE TO BONAFIDE BELIEF ON THE BASIS OF THE ADVICE OF FIRST TAX CONSULTANT THAT THERE WAS NO SCOPE FOR FURTHER APPEAL AND ON RECEIPT OF A SECOND OPINION THAT APPEAL WAS MAINTAINABLE FOR THE CLAIM OF DEDUCTION U/S. 80P, THE APPEAL CAME TO BE FILED BY THE ASSESSEE BEFORE THE TRIBUNA L. I AM SATISFIED THAT THE DELAY IS DUE TO A REASONABLE CAUSE AND THEREFOR E THE DELAY OF 578 DAYS IN FILING THE APPEAL BEFORE THE TRIBUNAL IS CONDONE D AND THE APPEAL IS ADMITTED FOR ADJUDICATION. 8. ON MERITS, THE LD. COUNSEL FOR THE ASSESSEE REIT ERATED THE SUBMISSIONS MADE BEFORE THE CIT(APPEALS) AND SUBMIT TED THAT THE ASSESSEE SOCIETY IS RIGHTLY ELIGIBLE FOR DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT AND THE SAME HAD BEEN CLAIMED UNDER RECTIFICATION A PPLICATION WHICH WAS WRONGLY REJECTED BY THE AO. HE RELIED ON THE DECI SIONS IN THE CASE OF ITA NO.1189/BANG/2015 PAGE 5 OF 9 DEVINDER PRAKASH KALRA V. ACIT (2006) B(II)ITCL 106 DEL TRIB, ( 2005) 97 TTJ DEL TRIB 372 AND RAMCO CEMENT DISTRIBUTION CO. PVT. LTD. V. DY. CTO (1974) 33 STC 180 (MADRAS) WHEREIN IT WAS HELD THAT ANY BENEFICIAL LEGISLATION APPLICABLE TO THE ASSESSEE CAN BE CONSI DERED UNDER SECTION 154, THOUGH NOT DONE UNDER THE ORIGINAL RETURN. H E FURTHER CONTENDED THAT THE CIT(A) HAD DECIDED ON THE ISSUE OF ELIGIBILITY U/S. 80P(2)(A)(I) BASED ON CASE LAWS WHICH ARE AGAINST THE ASSESSEE, WITHOUT C ONSIDERING THOSE DECISIONS IN FAVOUR OF THE ASSESSEE. HE STATED THA T THE CIT(A) ERRED IN STATING THAT IT IS A DEBATABLE ISSUE AND CANNOT BE RECTIFIED U/S. 154. 9. THE LD. DR, ON THE OTHER HAND, PLACED RELIANCE O N TWO DECISIONS VIZ., PAWAN KUMAR AGGRAWAL V. ACIT, 50 TAXMANN.COM 489 (D ELHI TRIB.) AND AGRA BENCH OF THE TRIBUNALS DECISION IN JHANSI DEVELOPMENT AUTHORITY V. DCIT IN ITA NO.73/AGRA/2013 , ORDER DATED 24.05.2013 WHEREIN IT WAS HELD THAT THE MISTAKE, IF ANY, WAS IN THE RETURN OF INCO ME FILED BY THE ASSESSEE AND SECTION 154 CANNOT BE UTILIZED FOR RECTIFYING T HE ASSESSEES MISTAKE IN FILLING OF THE RETURN. 10. PER CONTRA , THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DE CISION OF THE ITAT PUNE BENCH IN THE CASE OF ITO V. MSEB EMPLOYEES CO-OP. CREDIT SOCIETY LTD., 50 TAXMANN.COM 210 (PUNE TRIB.) . 11. HEARD BOTH THE PARTIES AND THE PERUSED THE MATE RIAL ON RECORD. THE LD. CIT(A) HAS MERELY STATED THAT SECTION 154 WILL NOT LIE IN THE CASE OF A DEBATABLE ISSUE AS THERE IS NO ERROR APPARENT ON RE CORD. THE CIT(A) HAS ITA NO.1189/BANG/2015 PAGE 6 OF 9 FAILED TO CONSIDER THE DECISIONS OF THE JURISDICTIO NAL TRIBUNAL IN A PLETHORA OF CASES WHEREIN DEDUCTION U/S. SECTION 80P(2)(A)(I) O F THE ACT HAS BEEN CLAIMED BY THE CO-OPERATIVE SOCIETIES AND DEDUCTION HAS BEEN ALLOWED FOLLOWING THE JUDGMENT OF THE HONBLE HIGH COURT OF KARNATAKA IN CIT VS. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAM ITHA, BAGALKOT , 369 ITR 86 (KARN) . HENCE, THE CIT(A) ERRED IN NOT FOLLOWING THE JU DICIAL DISCIPLINE. 12. THE PUNE BENCH OF THE TRIBUNAL IN ITO V. MSEB EMPLOYEES CO-OP. CREDIT SOCIETY LTD., 50 TAXMANN.COM 210 (PUNE TRIB.) HAD CONSIDERED SIMILAR ISSUE. IN THAT CASE, THE ASSESSEE WAS A CR EDIT CO-OPERATIVE SOCIETY, REGISTERED UNDER THE MAHARASHTRA CO-OPERATIVE SOCIE TIES ACT, 1960. THE ASSESSEE FILED ITS RETURN OF INCOME WITHOUT CLAIMIN G DEDUCTION U/S. 80P(2)(A)(I). THE RETURN WAS PROCESSED AND ACCEPTE D. SUBSEQUENTLY, THE ASSESSEE FILED AN APPLICATION U/S. 154 CLAIMING DED UCTION U/S. 80P(2)(A)(I). THE AO REJECTED THE ASSESSEES CLAIM BY ORDER U/S. 154. ON APPEAL, THE CIT(A) ON THE POINT OF RECTIFICATION, OBSERVED THAT THE TAX BASE SOFTWARE HAD BEEN RECENTLY DEVELOPED AND USAGE OF THE SAME REQUI RED LOT OF EXPERTISE AND ANY SMALL CLERICAL MISTAKE IN THE DATA ENTRY WO ULD RESULT INTO INCORRECT FILING OF E-RETURN. FURTHER, THE CIT(A) OBSERVED T HAT AS THE SOFTWARE WAS RECENTLY DEVELOPED, THERE WERE BOUND TO BE SOME TEC HNICAL ERRORS IN PROGRAMMING OF THE SAME AND THOUGH THE DEDUCTION WA S NOT ALLOWED IN THE E-RETURN FILED RESULTING INTO TAX DEMAND, IN THE AC KNOWLEDGMENT OF E-RETURN GENERATED BY THE SOFTWARE RESULTED INTO NIL DEMAND AS THE DEDUCTION HAD ITA NO.1189/BANG/2015 PAGE 7 OF 9 BEEN ALLOWED. ACCORDINGLY, THE CIT(APPEALS) HELD THAT SUCH MISTAKES ARE TO BE RECTIFIED U/S. 154 AND EVEN ON MERIT, THE ASS ESSEE SOCIETY WAS ELIGIBLE FOR DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT. 13. ON FURTHER APPEAL, THE TRIBUNAL HELD THAT HE CI T(APPEALS) WAS JUSTIFIED IN HOLDING THAT ASSESSEE IS ENTITLED FOR DEDUCTION U/S. 80P(2)(A)(I), THOUGH THE SAME HAS NOT BEEN CLAIMED BY THE ASSESSE E IN RETURN OF INCOME. THE TRIBUNAL OBSERVED THAT IT IS SETTLED L AW THAT CORRECT INCOME OF THE ASSESSEE IS TO BE ASSESSED AS PER PROVISIONS OF THE ACT, IN SPITE OF HIGHER INCOME INCORRECTLY DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME. IF AN ASSESSEE, UNDER A MISTAKE, MISCONCEPTIONS OR ON BEING NOT PROPERLY INSTRUCTED IS OVER ASSESSED, THE CONCERNED AUTHORIT Y IS OBLIGED, REQUIRED TO ASSIST SUCH AN ASSESSEE BY ENSURING THAT ONLY LEGIT IMATE TAXES ARE DETERMINED AS COLLECTIBLE. 14. FOLLOWING THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF MSEB EMPLOYEES CO-OP. CREDIT SOCIETY LTD. (SUPRA) , THE ORDER OF THE CIT(APPEALS) IS SET ASIDE AND IT IS HELD THAT ASSES SEES CLAIM FOR DEDUCTION U/S. 80P(2)(A)(I) OUGHT TO HAVE BEEN CONSIDERED BY THE LOWER AUTHORITIES IN THE RECTIFICATION PROCEEDINGS U/S. 154, THOUGH SUCH CLAIM WAS OMITTED TO BE CLAIMED IN THE ORIGINAL RETURN OF INCOME. 15. ON MERITS, I FIND THAT THE ASSESSEE IS A CO-OPE RATIVE SOCIETY ENGAGED IN COLLECTING DEPOSITS AND PROVIDING CREDIT FACILIT IES TO ITS MEMBERS. THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT, CIRCLE 3(1), ITA NO.1189/BANG/2015 PAGE 8 OF 9 BANGALORE V. M/S. BANGALORE COMMERCIAL TRANSPORT CR EDIT CO-OPERATIVE SOCIETY LTD. IN ITA NO.1069/BANG/2010 DT. 8.4.2011 , HELD THAT SECTION 80P(4) IS APPLICABLE ONLY TO COOPERATIVE BANKS AND NOT TO CREDIT COOPERATIVE SOCIETIES. THE INTENTION OF THE LEGISLATURE OF BRI NGING IN COOPERATIVE BANKS INTO THE TAXATION STRUCTURE WAS MAINLY TO BRING IN PAR WITH COMMERCIAL BANKS. SINCE THE ASSESSEE IS A COOPERATIVE SOCIETY AND NOT A COOPERATIVE BANK, THE PROVISIONS OF SECTION 80P(4) WILL NOT HAV E APPLICATION IN THE ASSESSEES CASE AND THEREFORE, IT IS ENTITLED TO DE DUCTION U/S 80P(2)(A)(I) OF THE ACT. IN COMING TO THE AFORESAID CONCLUSION, TH E TRIBUNAL ALSO FOLLOWED THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT IN CIT VS. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA, BAGAL KOT , 369 ITR 86 (KARN) AND OTHER DECISIONS. FOLLOWING THE AFORESAID DECI SION OF THE TRIBUNAL, IT IS HELD THAT THE ASSESSEE SOCIETY IS E LIGIBLE TO DEDUCTION U/S. 80(P)(2)(A)(I) OF THE ACT AND ALLOW THE APPEAL OF T HE ASSESSEE. 16. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF JANUARY, 2016. SD/- (ASHA VIJAYARAGHAVAN ) JUDICIAL MEMBER BANGALORE, DATED, THE 14 TH JANUARY, 2016. /D S/ ITA NO.1189/BANG/2015 PAGE 9 OF 9 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.