Income Tax Officer, Ambedkar Nagar V. M/s Sahkari Ganna Vikas Samiti, Akbarpur, Ambedkar Nagar

ITA 93/ALLD/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 7033 (ITAT-ALLAHABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 24-08-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Source of fund; Corroborative evidences; Competent authority; Set aside
• Section: 6; 56; 143(3); 80P; 44AB; 145(3); 2(19)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, ALLAHABAD BENCH, ALLAHABAD BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA No.92/Alld./2020 & ITA. No. 93/Alld/2020 Assessment Year: 2014-15 and 2015-16 Income Tax Officer, Tanda Road, Patel Nagar, Akbarpur, Ambedkar Nagar-224122, U.P. v. M/s. Sahkari Ganna Vikas Samiti, Akbarpur, Ambedkar Nagar- 224122, U.P. PAN:AABAS9278A (Appellant) (Respondent) Appellant by: Sh. A.K. Singh, Sr. DR Respondent by: Sh. J.N. Shukla Advocate Date of hearing: 10.03.2022 Date of pronouncement: 11.03.2022 O R D E R PER Bench: These two appeals, filed by Revenue, being ITA No. 92/Alld./2020 and 93/Alld/2020 for assessment year(s)(ay’s): 2014-15 and 2015-16 respectively, are directed against two separate appellate order(s)both dated 20.05.2020, firstly in Appeal No. CIT(A)/Faizabad/16-17/10097 for ay: 2014-15 and secondly in Appeal No. CIT(A), Lucknow-1/11010/19-20 for ay: 2015-16 respectively, passed ITA No.92/ALLD/2020 And ITA No. 93/ALLD/2020 SahkariGannaVikasSamiti, Akbarpur, Ambedkarnagar,U.P. Assessment Year: 2014-15 and 2015-16 2 by learned Commissioner of Income Tax (Appeals)-1, Lucknow, U.P. (hereinafter called "the CIT(A)"),for assessment year’s(ay’s):2014-15 and 2015-16 respectively, the appellate proceedings had arisen before learned CIT(A) from two separate assessment order(s), firstly assessment order dated 30.12.2016 passed u/s 143(3) of the Income-tax Act, 1961(hereinafter called “ the Act”) by learned Assessing Officer (hereinafter called “ the AO”) for ay: 2014-15 and secondly assessment order dated 29.12.2017 passed u/s 143(3) of the 1961 Act by AO for ay: 2015-16. Since both these appeals filed by Revenue involves common issues, both these appeals were heard together and are now adjudicated by this common order. Both these appeals were heard by Division Bench of the Income Tax Appellate Tribunal, Allahabad Bench, Allahabad , U.P, in Open Court through physical hearing of the appeals. 2. The Revenue has raised following grounds of appeal in memo of appeal filed with Income Tax Appellate Tribunal, Allahabad Bench, Allahabad, U.P. (hereinafter called “ the tribunal”), in ITA no. 92/Alld./2020 for ay; 2014-15 (similar grounds of appeals are raised by Revenue in memo of appeal filed with tribunal in ITA no. 93/Alld/2020 for ay: 2015-16) :- “ 1. Whether the learned CIT(A) was right, without giving a finding of facts, of efforts made in earning, “ commission” from sugar mills on sugarcane independently supplied made by sugarcane growers in catchment area to sugar mills at rates determined by the State Government, to conclude that such receipts were “ business’ receipts. 2. Whether the learned CIT (A) was right in directing deduction under section 80P in respect of such gross receipts from sugar mills, especially without giving finding of fact that such receipt were duly earned as business receipts. 3. That the appellant also craves to modify, amend, change and revise the above grounds of appeal and add further grounds of appeal, if necessary. “ ITA No.92/ALLD/2020 And ITA No. 93/ALLD/2020 SahkariGannaVikasSamiti, Akbarpur, Ambedkarnagar,U.P. Assessment Year: 2014-15 and 2015-16 3 2.2 The Revenue has also raised additional ground of appeal, vide application Dated 17.11.2021 for ay: 2014-15 (similar additional ground of appeal has been raised by Revenue for ay:2015-16 by same application, dated 17.11.2021) filed with tribunal, which is reproduced as hereunder: “The Ld. CIT(A) has erred in law in partially allowing the claim of deduction u/s 80P in respect of commission income of the assesseewithout recording any finding as to whether in the absence of registration under the Societies Registration Act, 1912, its status could be regarded as a co-operative society within the meaning of section 2(19).” Since, the aforesaid additional ground of appeal goes to the root of the matter in adjudicating the appeals filed by Revenue , this additional ground was admitted by the Division Bench after hearing both the rival parties, and is now adjudicated vide this appellate order. 3. The brief facts of the case are that the assessee has claimed that it is a Co- operative Society engaged in marketing of crops and providing fertilizers, seeds and agricultural equipment’s to farmers who are claimed to be its members. The assessee has claimed deduction u/s 80P of the 1961 Act. The case of the assessee was selected by Revenue for framing scrutiny assessment under the provisions of the 1961 Act and during the course of the assessment proceedings, the AO observed that the assessee was not registered by the Competent Authority being Registrar of Co-operative Societies , rather on the other hand the AO observed that the assessee has got registration from the ‘Registrar , Cane Co-operative Societies , U.P.’ who in the opinion of the AO was not a Competent Authority as prescribed u/s 2(19) of the 1961 Act read with Section 80P of the 1961 Act and the Societies Registration Act. Thus, the AO did not accept the status of the assessee as ‘Co-operative Society’ rather, the AO held that the assessee is an ‘Association of Person’ ‘(AOP)’ and hence in the opinion of the AO , the assessee ITA No.92/ALLD/2020 And ITA No. 93/ALLD/2020 SahkariGannaVikasSamiti, Akbarpur, Ambedkarnagar,U.P. Assessment Year: 2014-15 and 2015-16 4 is not entitled for deduction u/s 80P of the 1961 Act because deduction u/s 80P is only allowable to Co-operative Societies. The assessee on its part contended that it is registered as a Co-operative Society being registered under the provisions of Section 8 of U.P. Sahkari Samiti Adhiniyam ,1912. The assessee submitted before the AO that the assessee being a society is engaged in providing services to the farmers of territorial jurisdiction of the District Ambedkar Nagar who claimed to be the members of the society for marketing of their crops, and in providing them with the needs of fertilizers , seeds, pesticides and agricultural equipment’s at subsidized rates , which are obtained directly by purchasing from companies on no profit or loss basis, and thus it was claimed that the assessee society is entitled for deduction u/s 80P of the 1961 Act. The AO being dissatisfied with the above assessee’s submissions on the ground that the assessee got itself registered from the Registrar of Cane Co-operative Societies, U.P. who is departmental authority of Cane department of U.P. and not a competent authority under the Societies Registration Act, and hence the deduction under Section 80P was denied by the AO to the assessee, while passing assessment order u/s 143(3) of the 1961 Act against the assessee. 3.2 Further , the AO also observed while framing assessment for ay: 2015-16, that the assessee despite being asked several times to substantiate by an evidences as to its nature of sources of income , had failed to substantiate by evidences as to gross receipts , commission received or investments or payments made by it , which led AO to hold that the reliability and genuineness of the books of accounts have become doubtful in the absence of supporting evidences. The AO proceeded to invoke provisions of Section 145(3) of the 1961 Act and rejected books of accounts of the assessee. The AO further observed that the assessee’s accounts are subject to tax-audit u/s 44AB of the 1961 Act, but the assessee has failed to get its accounts audited as well the assessee failed to furnish tax-audit report. ITA No.92/ALLD/2020 And ITA No. 93/ALLD/2020 SahkariGannaVikasSamiti, Akbarpur, Ambedkarnagar,U.P. Assessment Year: 2014-15 and 2015-16 5 This , led to denial by AO to the assessee deduction u/s 80P on the commission income to the tune of Rs. 1,83,70,934/- claimed to be earned by assessee from marketing of agricultural produce for ay: 2015-16. The AO similarly had earlier disallowed deduction u/s 80P on the commission income claimed to be earned by assessee from marketing of agricultural produce for ay: 2014-15. 3.3 Further, the AO brought to tax interest income earned by the assessee on investing surplus funds kept by assessee with banks in FDR’s and other investments. This issue of chargeability of interest income was agitated by assessee before ld. CIT(A) by filing first appeal , for both the assesssment years viz ay(s) 2014-15 and 2015-16, and the ld. CIT(A) decided this issue against the assessee. The assessee has not filed any appeal/C.O. before tribunal challenging the upholding of the additions by ld. CIT(A) on account of interest income and hence this issue has attained finality. 3.4 Coming back to the issue of disallowance of deduction u/s 80P by the AO, the assessee filed first appeal with ld. CIT(A) challenging the denial of deduction u/s 80P by the AO. The ld. CIT(A) granted relief to the assessee by allowing deduction u/s 80P of the 1961 Act, by holding as under:- “6. However, nature of commission Income is different from the Interest Income and this income has been clearly derived by the assessee Society from the above activity i.e. marketing of agricultural produces of members. It is pertinent to mention that the appellant society has received commission in lieu of sale of sugar made by the cane growers to the sugar mills but for carrying out the developmental activities as specified under U.P. Sugar Cane (Regulation of Supply and Purchases) Act 1953 r/w the U.P. Sugar Cane (Regulation of Supply and Purchases) Rules, 1954. 7.In view of the above facts and above binding judgments of the Hon’ble Apex Court, it is held that the Interest Income are liable to be taxed u/s 56 as income ITA No.92/ALLD/2020 And ITA No. 93/ALLD/2020 SahkariGannaVikasSamiti, Akbarpur, Ambedkarnagar,U.P. Assessment Year: 2014-15 and 2015-16 6 from Other sources and the appellant is not entitled to get deduction u/s 80P(2) on the above incomes. It is further held that the assessee Society is entitled to claim deduction u/s 80P(2) on the Commission Income which it derived from the marketing of agricultural produces of members. 8. The appeal of the appellant is thus partly allowed.” 4. Aggrieved by the decision of ld. CIT(A) granting relief to the assessee by grant of deduction u/s 80P of the 1961 Act, the Revenue has filed an appeal before the tribunal . The ld. Sr. DR brought to the notice of the Bench, the grievances of the Revenue by drawing our attention to the grounds of appeal including additional ground of appeal raised by Revenue before the tribunal, the assessment order passed by the AO and appellate order passed by ld. CIT(A). The ld. Sr. DR submitted that the ld. CIT(A) has not adjudicated the issue of status of assessee, as to whether the assessee is a ‘Co-operative Society’ or it is an ‘AOP’. Our attention was drawn to the provisions of Section 2(19) of the 1961 Act, 80P of the 1961 Act and the orders passed by authorities below and it was submitted that the Certificate of Registration was not granted to the assessee by ‘Registrar , Co- operative Societies’, but the same was granted by ‘Registrar , Cane Co-operative Societies, U.P.’ who is not a Competent Authority to grant registration to Co- operative Societies. It was submitted that once the assessee is not a validly constituted Co-operative Society, there is no question of allowing deduction u/s 80P. The ld. Sr. DR submitted that ld. CIT(A) also did not also addressed to grievance of the AO as to non submission of the explanation by the assessee about sources of income of the assessee as to whether the sources of gross receipt or commission income were from the marketing of agricultural produce or are otherwise from some other sources . There is no evidence submitted by assessee to substantiate the same. The ld. Sr. DR submitted that ld. CIT(A) even did not look into the grievance of the AO that even tax-audit report has not been filed by the ITA No.92/ALLD/2020 And ITA No. 93/ALLD/2020 SahkariGannaVikasSamiti, Akbarpur, Ambedkarnagar,U.P. Assessment Year: 2014-15 and 2015-16 7 assessee despite being covered by the provisions of Section 44AB of the 1961 Act, rather ld. CIT(A) proceeded to grant relief to the assessee by allowing deduction u/s 80P of the 1961 Act. 4.2 The Ld. Counsel for the assessee , however, submitted that the assessee is a Cooperative Societies duly registered under the Societies Registration Act , and hence it is entitled for deduction under Section 80P and our attention was drawn by ld. Counsel for the assessee to the provision of Section 80P and Section 2(19) of the Act. 5. We have considered rival contentions and perused the material on record. We are presently concerned with ay(s): 2014-15 and 2015-16, and the solitary issue involved in these two appeals filed by Revenue is with respect to denial by AO of deduction claimed by the assessee u/s 80P of the 1961 Act while framing assessment order, which deduction u/s 80P stood allowed later by ld. CIT(A) to the assessee while adjudicating first appeal filed by the assessee . The assessee has claimed itself to be Co-operative society engaged in marketing of crops and providing fertilizers, seeds and agricultural equipment’s to farmers who are claimed to be its members. The assessee has claimed deduction u/s 80P of the 1961 Act (the relevant applicable clauses being Section 80P(2)(a)(iii) and(iv) of the 1961 Act), on the grounds that it is Co-operative Society and is engaged in marketing of agricultural produce of the members and purchase of fertilizers, seeds etc. intended for agriculture for the purposes of supplying to its members . Before proceeding further, it will be useful to refer to the provisions of Section 2(19) and 80P of the 1961 Act as it stood at the relevant point of time, which reads as under: “Definitions. 2. In this Act, unless the context otherwise requires,— ITA No.92/ALLD/2020 And ITA No. 93/ALLD/2020 SahkariGannaVikasSamiti, Akbarpur, Ambedkarnagar,U.P. Assessment Year: 2014-15 and 2015-16 8 *** *** (19) "co-operative society" means a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies ; *** *** Deduction in respect of income of co-operative societies. 80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely :— (a) in the case of a co-operative society engaged in— (i) carrying on the business of banking or providing credit facilities to its members, or (ii) a cottage industry, or [(iii) the marketing of agricultural produce grown by its members, or] (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or (v) the processing, without the aid of power, of the agricultural produce of its members, [or] [(vi) the collective disposal of the labour of its members, or (vii) fishing or allied activities, that is to say, the catching, curing, processing, preserving, storing or marketing of fish or the purchase of materials and equipment in connection therewith for the purpose of supplying them to its members,] the whole of the amount of profits and gains of business attributable to any one or more of such activities: [Provided that in the case of a co-operative society falling under sub-clause (vi), or sub-clause (vii), the rules and bye-laws of the society restrict the voting rights to the following classes of its members, namely:— (1) the individuals who contribute their labour or, as the case may be, carry on the fishing or allied activities; (2) the co-operative credit societies which provide financial assistance to the society; ITA No.92/ALLD/2020 And ITA No. 93/ALLD/2020 SahkariGannaVikasSamiti, Akbarpur, Ambedkarnagar,U.P. Assessment Year: 2014-15 and 2015-16 9 (3) the State Government;] [(b) in the case of a co-operative society, being a primary society engaged in supplying milk, oilseeds, fruits or vegetables raised or grown by its members to— (i) a federal co-operative society, being a society engaged in the business of supplying milk, oilseeds, fruits, or vegetables, as the case may be; or (ii) the Government or a local authority; or (iii) a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956), or a corporation established by or under a Central, State or Provincial Act (being a company or corporation engaged in supplying milk, oilseeds, fruits or vegetables, as the case may be, to the public), the whole of the amount of profits and gains of such business;] (c) in the case of a co-operative society engaged in activities other than those specified in clause (a) or clause (b) (either independently of, or in addition to, all or any of the activities so specified), so much of its profits and gains attributable to such activities as [does not exceed,— (i) where such co-operative society is a consumers’ co-operative society, [one hundred] thousand rupees; and (ii) in any other case, [fifty] thousand rupees. Explanation.—In this clause, “consumers” co-operative society” means a society for the benefit of the consumers;] (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income; (e) in respect of any income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities 3 , the whole of such income; (f) in the case of a co-operative society, not being a housing society or an urban consumers’ society or a society carrying on transport business or a society engaged in the performance of any manufacturing operations with the aid of power, where the gross total income does not exceed twenty thousand rupees, the amount of any income by way of interest on securities [***] or any income from house property chargeable under section 22. Explanation.—For the purposes of this section, an “urban consumers” co-operative society” means a society for the benefit of the consumers within the limits of a municipal corporation, municipality, municipal committee, notified area committee, town area or cantonment. (3) In a case where the assessee is entitled also to the deduction under [***] [section 80HH] [or section 80HHA] [or section 80HHB] [or section 80HHC] [or section 80HHD] [or section 80-I] [or section 80-IA] or section 80J[***] [***], the deduction under sub-section (1) of this section, in relation to the sums specified in clause (a) or clause (b) or clause (c) of sub-section (2), shall be allowed with reference to the income, if any, as referred to in those clauses included in the gross total income as reduced by the deductions ITA No.92/ALLD/2020 And ITA No. 93/ALLD/2020 SahkariGannaVikasSamiti, Akbarpur, Ambedkarnagar,U.P. Assessment Year: 2014-15 and 2015-16 10 under [***] [section 80HH,] [section 80HHA,] [section 80HHB,] [section 80HHC,] [section 80HHD,] [section 80-I,] [section 80-IA,] [ 5 [section 80J and section 80JJ]].] [(4) The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Explanation.—For the purposes of this sub-section,— (a) “co-operative bank” and “primary agricultural credit society” shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949); (b) “primary co-operative agricultural and rural development bank” means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities.] As could be seen from statutory provisions that for the purposes of eligibility for deduction u/s 80P, the assessee must be a "co-operative society". A co-operative society is defined in Section 2(19) of the 1961 Act, as being a co-operative society registered either under the Co-operative Societies Act, 1912 or under any other law for the time being in force in any State for the registration of co- operative societies. This, therefore, refers only to the factum of a co-operative society being registered under the 1912 Act or under the State law. Then, there are several other conditions which are stipulated in Section 80P of the 1961 Act which are to be met by the tax-payer, before any deduction from the income of the Co-operative Societies can be allowed u/s 80P of the 1961 Act . The assessee has claimed that it was registered under the Co-operative Societies Registration Act as is enacted under the State Law in the State of Uttar Pradesh being U.P. Sahkari Samiti Adhiniyam ,1912, which the AO is disputing as we would see in this order. The relevant statute is The U.P. co-operative Societies Act, 1965 (U.P. Act No. 11 of 1966) read with The Uttar Pradesh Co-operative Societies Rules, 1968 . Section 2(f) of the 1965 State Act provides that ‘Co-operative Society’ means a society registered or deemed to be registered under the 1965 Act. The provisions of Section 1(2) of the 1965 State Act stipulates that it extends to the whole of the ITA No.92/ALLD/2020 And ITA No. 93/ALLD/2020 SahkariGannaVikasSamiti, Akbarpur, Ambedkarnagar,U.P. Assessment Year: 2014-15 and 2015-16 11 State of Uttar Pradesh. The provision of Section 2(q-1) of the 1965 State Act reads as under: “2. Definitions. - In this Act, unless the context otherwise requires – *** *** (q-1) 'primary society' means a co-operative society's ordinary membership whereof is not open to any other co-operative society: Provided that- (i) a co-operative marketing society, the area of operation whereof only a part of a district or part of more than one district shall be deemed to be a primary society whether or not any other co-operative society is its ordinary member; (ii) a primary co-operative society any share where of has been purchased under Chapter VI, by a central or apex society shall continue to be a primary society notwithstanding the purchase of such shares; (iii) a co-operative society, the area of operation whereof is only a part of a district and the primary object whereof is to arrange for the storage and distribution of seeds, fertilizers, pesticides, agricultural appliances or consumers goods to its ordinary members and the membership whereof includes any other co-operative society as its ordinary member, shall be deemed to be primary society notwithstanding the membership of other co-operative society in it;] “ The provision of Section 2(r) of the 1965 State Act reads as under: “(r) "Registrar" means the person for the time being appointed as Registrar of Co- operative Societies under sub-section(1) of Section 3 and includes any person appointed under sub-section (2) of that section when exercising all or any of the power of the Registrar; The provision of Section 2(t) of the 1965 State Act reads as under: “(t) "State Government" means the Government of Uttar Pradesh;” Further, provision of Section 3 and 4 of the 1965 State Act reads as under: “ CHAPTER II Registration of Co-Operative Societies 3. Registrar. - (1) The State Government may appoint a person to be the Registrar of Co-operative Societies for the State. ITA No.92/ALLD/2020 And ITA No. 93/ALLD/2020 SahkariGannaVikasSamiti, Akbarpur, Ambedkarnagar,U.P. Assessment Year: 2014-15 and 2015-16 12 (2) The State Government may for the purposes of this Act, also appoint other persons to assist the Registrar and by general or special order confer on any such person all or any of the powers of the Registrar. (3) Where any order has been made under sub-section (2) conferring on any person all or any of the powers of the Registrar under any provision of this Act, such order shall be deemed to confer on him all the powers under that provision as may be amended from time to time. 4. Societies which may be registered. - Subject to the provisions of this Act, a society which has as its object the promotion of the economic interests of its members in accordance with co-operative principles or a society established with the object of facilitating the operations of such a society, may be registered under this Act. Explanation. - Co-operative principles shall include - (a) advancement of economic interest of the members in accordance with public morals, decency and the relevant directive principles of State policy enunciated in the Constitution of India; (b) regulation and restriction of profit motive; (c) promotion of thrift, mutual aid and self-help; (d) voluntary membership; and (e) democratic constitution of the society” The provisions of Section 6 to 9 of the 1965 State Act deals with Registration of the Co-operative Society are relevant, which reads as under:- “6. Application for registration. - (1) An application for the registration of a society shall be made in the manner prescribed to the Registrar in such forms as the Registrar may from time to time specify; and the applicants shall furnish to him all such informations about the society as he may require. (2) Every such application shall conform to the following requirements, namely, - (a) that it is accompanied by three copies of the proposed bye-laws of the society; (b) that the applicants are eligible for membership under Section 17; (c) that the application is duly signed by every applicant himself, if he is an individual, and by a duly authorised person if the applicant is any of the persons mentioned in any of the clauses (b) to (f) of Section 17; (d) that the number of applicants, who are to be ordinary members of the society, is not less than ten, if all the applicants are individuals, and is not less than five in all other cases; (e) that where the objects of the society include the creation of funds to be lent to its members, all the applicants who are to be the ordinary members of society, if individuals reside in the same town or Village or a group of contiguous Village, or belong to the same class. Explanation. - For the purposes of this clause any two or more persons shall be deemed to belong to the same class, if they pursue the same occupation or are under a common employer. ITA No.92/ALLD/2020 And ITA No. 93/ALLD/2020 SahkariGannaVikasSamiti, Akbarpur, Ambedkarnagar,U.P. Assessment Year: 2014-15 and 2015-16 13 7. Registration. - (1) If the Registrar is satisfied- (a) that the application complies with the provisions of this Act and the rules; (b) that the objects of the proposed society are in accordance with Section 4; (c) that the proposed bye-laws are not inconsistent with the provisions of this Act and the rules; and (d) that the proposed society complies with the requirements of rules in regard to the existence of any conditions in general or for the class of societies to which the particular society belongs and with the requirements of sound business and has reasonable chances of success, the Registrar shall register the society and its bye-laws: Provided that where the bye-laws accompanying the application for registration are such as have, after the enforcement of this Act, already been approved by the Registrar for the type or class of co-operative societies to which the proposed society belongs, the Registrar shall pass final orders thereon either registering the society or refusing its registration within three months from the date of the receipt of the application by him and if he fails to do so, the applicants may make a representation to the authority competent to hear under Section 98 appeals against Registrar's order of refusal to register a society and if such authority, after calling for a report from the Registrar, passes an order for registration of society, the society shall be deemed to have been duly registered from the date of communication of such order to the Registrar. (2) Where the Registrar refuses to register a society he shall communicate the order of refusal together with the reasons therefore to such applicant as has been named in the application for this purpose and in default of such naming to any one of the applicants. 8. Registration certificate. - (1) Where a society is registered under this Act or deemed to be registered under the proviso to sub-section (1) of Section 7, the Registrar shall issue a certificate of registration signed by him which, unless the registration is proved to have been cancelled, shall be conclusive evidence that the society therein mentioned is a co-operative society duly registered under this Act. (2) No person or society shall commence business in the name of, or professing to be, a co-operative society unless a certificate of registration has been obtained under sub- section (1) for such society and every person or member of society carrying on business in contravention of this sub-section shall be personally liable for all liabilities incurred in such business. 9. Co-operative societies to be bodies corporate. - The registration of a society shall render it a body corporate by the name under which it is registered, having perpetual succession and a common seal, and with power to hold property, enter into contracts, institute and defend suits and other legal proceedings and to do all things necessary for the purpose for which it was constituted.” 5.2 Now, coming back, the case of the assessee was selected by Revenue for framing scrutiny assessment u/s 143(3) read with Section 143(2). The AO while ITA No.92/ALLD/2020 And ITA No. 93/ALLD/2020 SahkariGannaVikasSamiti, Akbarpur, Ambedkarnagar,U.P. Assessment Year: 2014-15 and 2015-16 14 framing assessment , inter-alia , held that interest income earned by assessee from investments in FDR’s and other investments is chargeable to income-tax. The ld. CIT(A) while adjudicating first appeal filed by assessee upheld the chargeablity to income-tax of the interest income earned by assessee, by following the judgment and order of Hon’ble Supreme Court in the case of Totgars Co-operative Sale Society Limited v. ITO (2010) 188 Taxman 282(SC). This issue has attained finality as the assessee has not filed any appeal and/or cross objections(CO) with tribunal. 5.3 So, far as the claim of the assessee for deduction of income claimed to be commission from marketing of agricultural produce of members, the ld. AO denied deduction u/s 80P of the 1961 Act, by referring to the definition of Co-operative Society as is contained in Section 2(19) of the 1961 Act and the requirement of registration of Co-operative Society by Registrar appointed under the Societies Registration Act, and holding that the Certificate of Registration produced by the assessee is not from Registrar of Co-operative Societies appointed by Central or State Government under the Societies Registration Act, but the Certificate of Registration produced by assessee was issued by ‘Registrar, Cane Co-operative , U.P.’ who is merely a departmental authority under the Cane Department, U.P. and is not a Competent Authority to issue Registration Certificate to Co- operative Societies under the authority of law. The AO treated assessee as an ‘AOP’ and not ‘Co-operative Society’ and since deduction u/s 80P of the 1961 Act is only available to Co-operative Societies, the assessee, was accordingly denied the deduction u/s 80P by the AO while framing assessment u/s 143(3) of the 1961 Act. The AO while framing assessment for ay: 2015-16 observed that the assessee has not explained the sources of gross receipts or income claimed as marketing commission as are found credited in its books of accounts nor any explanation was furnished as to payments made or investments made, and also ITA No.92/ALLD/2020 And ITA No. 93/ALLD/2020 SahkariGannaVikasSamiti, Akbarpur, Ambedkarnagar,U.P. Assessment Year: 2014-15 and 2015-16 15 that the assessee did not get its accounts audited as are required u/s 44AB of the 1961 Act and no tax-audit report was furnished by the assessee. The AO held the assessee’s accounts to be not reliable as no evidence to substantiate the nature of gross receipts or income claimed as marketing commission income nor any details as to payments or investments made by the assessee, were furnished by the assessee before the AO during the course of assessment proceedings, despite being called upon by AO to submit the same during the course of assessment proceedings. The assessee being aggrieved filed first appeal with ld. CIT(A), who was pleased to grant deduction u/s 80P to the assessee on the income so claimed to be from marketing commission. The relevant paragraphs of the ld. CIT(A) appellate order are reproduced in the preceding para’s of this order. The ld. CIT(A) simplicitor granted relief to the assessee by allowing deduction u/s 80P of the 1961 Act on the marketing commission claimed to be earned by the assessee from marketing of agricultural produce of its members. However, the ld.CIT(A) did not adjudicated the status of the assessee as to whether the assessee is to be treated as ‘Co-operative society’ while assessing its income or the assessee is to be assessed as an ‘AOP’ as there is no discussion whatsoever in the appellate order passed by ld. CIT(A) on this issue which is infact is an issue which goes to the root of the matter as the assessee will only be entitled for deduction u/s 80P if the assessee is held to be ‘Co-operative Society’ as is defined u/s 2(19) of the 1961 Act , rather on the contrary the ld. CIT(A) proceeded to grant relief to the assessee by allowing deduction u/s 80P of the Act without adjudicating on this issue . The ld. CIT(A) also did not addressed the grievance of the AO while granting relief to the assessee as to non furnishing of the explanation by assessee before the AO about nature of sources of gross receipt or commission income as were claimed by assessee to be earned from the marketing of agricultural produce grown by its members , before allowing relief to the assessee u/s 80P of the 1961 Act . The ld. CIT(A) even did not look into the grievance of the AO that accounts of the assessee were not audited ITA No.92/ALLD/2020 And ITA No. 93/ALLD/2020 SahkariGannaVikasSamiti, Akbarpur, Ambedkarnagar,U.P. Assessment Year: 2014-15 and 2015-16 16 and even tax-audit report has not been filed by the assessee despite the assessee being covered by the provisions of Section 44AB of the 1961 Act, rather ld. CIT(A) proceeded to grant relief to the assessee by simplicitor allowing deduction u/s 80P of the 1961 Act.The ld. CIT(A) also did not addressed the issue that the books of accounts were held to be unreliable by the AO as no evidence to substantiate the entries in books of accounts were furnished by the assessee, despite being called upon by the AO to substantiate the same , and rather the books of accounts of the assessee for ay: 2015-16 were rejected by AO by invoking provisions of Section 145(3) of the 1961 Act, but the ld. CIT(A) proceeded to grant relief to the assessee u/s 80P of the 1961 Act without addressing on these issues. The provisions of Section 80P are benevolent provisions which must be construed with the object of furthering the co-operative movement generally , but the onus is primarily on the assessee to produce all necessary facts before the authorities to satisfy the authorities that it is entitled for claim of deduction u/s 80P of the 1961 Act. Then it is for the authorities to conduct fact finding enquiry to arrive at conclusion as to the eligibility of the assessee to deduction u/s 80P of the 1961 Act. There is a real distinction between the eligibility of the taxpayer for claim of deduction u/s 80P and the attributability of profits and gains to activities of marketing of produce grown by its members to ascertain the quantum of deduction allowable u/s 80P, as there could be some dealings of the tax-payer with non members or with respect to produce not grown by member which will have bearing on quantification of deduction u/s 80P . At this stage , we could usefully refer to recent judgment and order of Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Limited v. CIT , reported in (2021) 123 taxmann.com 161(SC), albeit the decision was rendered in context of Section 80P(4) of the 1961 Act. Under these facts and circumstances of the case and in the interest of substantial justice and fairness to both the rival parties, as also that adjudication of this issue will require enquiries and verification of the facts, we are ITA No.92/ALLD/2020 And ITA No. 93/ALLD/2020 SahkariGannaVikasSamiti, Akbarpur, Ambedkarnagar,U.P. Assessment Year: 2014-15 and 2015-16 17 inclined to set aside the appellate order passed by ld. CIT(A) on this issue of allowability of deduction u/s 80P of the 1961 Act and restore the matter back to the file of ld. CIT(A) for fresh adjudication on merits and in accordance with law. The ld. CIT(A) is directed to pass detailed , reasoned and speaking order after making such enquiries and verifications as he may deem fit. The ld. CIT(A) shall give proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law, and evidences/explanations submitted by assessee in its defense shall be admitted by ld. CIT(A) in the interest of justice , which shall then be adjudicated by ld. CIT(A) on merits in accordance with law. We clarify that we have not commented on the merits of the issue and all the contentions are kept open. Both the appeal(s) filed by Revenue are allowed for statistical purposes. We order accordingly. 6. In the result, both these appeal(s) filed by Revenue in ITA no. 92 & 93/Alld/2020 for ay: 2014-15 and 2015-16 respectively are allowed for statistical purposes. Order pronounced on 11/03/2022 at Allahabad. Sd/- S- Sd/- [VIJAY PAL RAO] [RAMIT KOCHAR] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 11/03/2022 KD. Copy forwarded to: 1. Appellant – The Income-Tax Officer, Tanda Road, Patel Nagar, Akbarpur, Ambedkar Nagar- 224122, U.P. ITA No.92/ALLD/2020 And ITA No. 93/ALLD/2020 SahkariGannaVikasSamiti, Akbarpur, Ambedkarnagar,U.P. Assessment Year: 2014-15 and 2015-16 18 2. Respondent – Sahkari Ganna Vikas Samiti, Akbarpur, Ambedkar Nagar-224122, U.P. 3. CIT(A) – The CIT(A)-1, Lucknow, U.P. 4. CIT, Aayakar Bhawan, 38, M G Marg, Civil Lines, Allahabad, U.P. 5. The DR (ITAT), Aayakar Bhawan, 38, M G Marg, Civil Lines, Allahabad, U.P. By order Assistant Registrar