KOYANA NAGRI SAHAKARI PATSANSTHA LTD, MUMBAI V. .DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1- K, KALYAN

ITA 1683/MUM/2024

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Koyana Nagri Sahakari Patsanstha Ltd., a cooperative credit society, appealed against the order of the CIT(A) which confirmed the disallowance of a deduction claimed under section 80P(2) of the Income Tax Act. The deduction was initially disallowed by the AO on the grounds that the return of income was not filed within the prescribed time under sections 139(1) and 139(4) of the Act. The Tribunal noted that the assessee had filed an application for condonation of delay in filing the return, which was still pending before the Principal Commissioner of Income Tax. The Tribunal decided to remit the matter back to the AO to consider the deduction once the application for condonation of delay is resolved.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 33570 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2018-2019
• Appeal Filed On: 05-04-2024
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRADNYA GHOLAP
• Assessee Lawyers: AJAY R. SINGH
• Keywords: Condonation of delay; Reassessment proceedings; TDS; Co-operative Credit Society
• Section: 148; 144; 119; 139(1); 139; 80P; 6; 119(2)(b); 10B; 10AA

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SMT BEENA PILLAI, JUDICIAL MEMBER ITA No.1683/M/2024 Assessment Year: 2018-19 Koyana Nagri Sahakari Patsanstha Ltd. Shivaji Nagar, Near Chintamani Ganesh Mandir, Ambernath (E.)-421501 PAN: AABAK7477P Vs. DCIT, Circle-1 Mohan Plaza, Wayale Nagar, Kalyan- 421301. Appellant : Respondent Present for: Assessee by : Shri Ajay R. Singh Revenue by : Ms. Pradnya Gholap (Sr. DR) Date of Hearing : 05.12.2024 Date of Pronouncement : 09.12.2024 O R D E R Per Beena Pillai, JM: Present appeal is filed by the assessee against order dated 11/03/2024 passed NFAC/CIT(A) daily for assessment year 2018- 19 on following grounds of appeal: I. “ Reopening is bad in law: 1. The learned CIT(A) failed to appreciate that the JAO have no jurisdiction to issue show cause notice u/s 148A(b) and notice u/s 148 and pass order u/s 148A(d) as after 29/03/2022 same can be done in a faceless manner, therefore the reassessment proceedings is bad in law. ITA No.1683/MUM/2024 Koyana Nagri Sahakari Patsanstha Ltd.; A. Y.2018-19 Page | 2 2. The Ld CIT(A) NFAC failed to appreciate that the JAO reopened the assessment on different issues ie Cash deposit in bank and TDS and addition confirmed on different issue i.e. sec 80P (2) deduction, therefore the reassessment proceedings is bad in law. II. Disallowance of section 80P deduction of Rs.4,66,484/-: 3. The CIT(A) NFAC has erred in confirming the disallowance of section 80P deduction of Rs.4,66,484/- on the ground that the return of income is filed late without appreciating that the appellant is a co-operative credit society i.e. patpedhi providing credit facilities to its members only and registered with Maharashtra State Registrar of Co-operative Society. 4. The Ld. CIT(A) failed to considered that appellant have filed application under section 119(2)(b) of the Act for condonation of delay in filing returns on 26/04/2023 but the Principle Commissioner Thane has not dispose of the said application till date mean while the CIT(A) passed the impugned order by rejecting the claim under section 80P(2) of the Act which is not justified. 5. Appellant craves leave to add, amend, omit any of the aforesaid grounds of appeal as the occasion may arise or demand.” Brief facts of the case are as under: 2. The assessee is registered Maharashtra State Registrar of Cooperative Society and the books of accounts are to be audited as per the auditor appointed by the Asst registrar since its inception in 2001-02. 2.1. It is submitted that assessee is credit cooperative society providing credit facility to its members only. Before the authorities below the assessee submitted that, the members are contributing their small savings periodically and the surplus amount that the society gets is given to its members by way of interest and that no credit or loans are given to non members. It is submitted that, the main source of income is interest and the society receives its interest income from the advances given to its members and also interest from bank in which the deposits are made for short-term. ITA No.1683/MUM/2024 Koyana Nagri Sahakari Patsanstha Ltd.; A. Y.2018-19 Page | 3 2.2. The assessing officer received information on incite portal, regarding cash deposits amounting to ₹1,03, 84, 000/-and that the assessee is a non-filer with potential tax liability. Accordingly the jurisdictional assessing officer issued notice under section 148A (a) of the act. 2.3. The Ld.AO after following the due procedure under the new provisions of section 148 A of the act, issued notice under section 148 of the act to the assessee on 29/03/2022 calling upon assessee to file its return of income within 1 month from the date of the issue of the notice under section 148. In view of the notice under section 148 of the act, assessee filed its return of income on 27/04/2022 declaring total income as ‘nil’ by claiming deduction of Rs.4,66,484/- under section 80 P (2) of the act, in respect of the interest earned out of the advances given to its members as well as from fixed deposits. 2.4. The assessee furnished response to the notice issued under section 142 (1) of the act providing the details of the exemption claimed by the assessee. 2.5. The Ld.AO after perusing the submissions of the assessee observed and held as under: “2.3 Summary of information/evidence collected which proposed to be used against it (attach documents if required).: The Society consists of 756 members, the cash deposits are the deposits that members of society are paying to the society as per the terms & conditions of their membership. In support of this the cashbook and bank statement was also uploaded which were perused and placed on records. As per section 80A(5) of the Income Tax Act, 1961 Where the assessee fails to make a claim in his return of income for any deduction under section 10A or section 10AA or section 10B or section 10BA or under any provision ITA No.1683/MUM/2024 Koyana Nagri Sahakari Patsanstha Ltd.; A. Y.2018-19 Page | 4 of this Chapter under the heading 'C-Deduction in respect of certain income\" no deduction shall be allowed to him there under.\" Hence the claim of the assessee is not allowable. 2.4 Variations proposed on the basis of inference drawn (specify the basis of inference and quantify the variation proposed, if possible): A show cause notice u/s 144 of the Income Tax Act, 1961 was issued to the assessee on 07-02-2023 fixing the date of hearing on 14-02- 2023. In response to the show cause notice the assessee furnished reply on 09-02-2023, the explanation furnished by the assessee is not acceptable. The assessee has not filed its return of income for the assessment year 2018-19 u/s.139 of the Income Tax Act, 1961 (hereinafter 'the Act'). Therefore, the assessment has been re-opened u/s.147 of the Act for the reasons recorded as per which income chargeable to tax had escaped the assessment and hence notice u/s.148 of the Act dated 29-03-2022 was served on the assessee. In response to notice, the assessee has filed its return of income on 27-04-2022 declaring total income of Rs. 4,66,484/- after claiming deduction u/s.80P(2)(a) of the Act to the tune of Rs. 4,66,484/-. (The case was selected for scrutiny and during the course of assessment proceedings, the AO noted that the claim of deduction u/s.80P(2)(a) of the Act is not eligible because the assessee has not filed its return of income u/s. 139(1) of u/s.139(4) of the Act or in response to notice u/s.148 within the prescribed time allowed under the Act and hence in view of specific provisions of Section 80A(5) of the Act, the deduction claimed u/s.80P(2)(a) of the Act cannot be allowed unless such deduction is claimed by filing the return within the prescribed time allowed under the Act. Accordingly, disallowed the deduction claimed u/s.80P(2)(a) of the Act and added back to total income. Penalty u/s 270A of the Income Tax Act, 1961 are being initiated separately for mis-reporting of income in consequence of under reporting of income. A Show Cause Notice dated 07.02.2022 incorporating the Draft Assessment Order with proposed variations to the total income of the assessee was duly issued and served on the assessee asking/calling as to why the above stated additions should not be made and added back to the total income of the assessee under the relevant provisions of the Act for the F.Y. 2017-18 relevant to A.Y. 2018-19. The assessee filed response on 09.02.2023 which is found not to be satisfactory. Hence, as discussed above the Rs. 4,66,484/- is disallowed and added to the total taxable income of the Assessee.” Aggrieved by the order of the Ld.AO, assessee preferred appeal before the Ld.CIT(A). ITA No.1683/MUM/2024 Koyana Nagri Sahakari Patsanstha Ltd.; A. Y.2018-19 Page | 5 3. The Ld.CIT(A) after considering the facts observed and held as under: “6. The only issue to be decided is the denial of deduction u/s 80P, for the reason that return of income was not furnished. The AO invoked section 80A(5). In my view section 80A(5) was the wrong section to invoke while denying deduction u/s 80P in this case. This section only provides that unless there is a claim of deduction in the return of income, no deduction shall be allowed. It may be noted that in the return filed in response to notice u/s 148, the appellant has claimed deduction u/s 80P. Therefore section 80A(5) does not come to the aid of revenue. 6.1 However the scope of section 80AC, (which mandates filing of return of income within the due date u/s 139(1), in order to claim deduction under chapter VIA,) was extended to cover section 80P with effect from AY 2018- 19. Therefore, since the appellant did not file return of income u/s 139(1), the appellant is not eligible for deduction u/s 80P. Therefore, I uphold the disallowance made by the AO.” Aggrieved by the order of the Ld.NFAC/CIT(A), the assessee is in appeal before this Tribunal. 4. At the outset, the Ld.AR submitted that Ground No.1-2 raised by the assessee challenging the jurisdiction assumed by the jurisdictional assessing officer in issuing notice under section 148A(b) of the act, notice under section 148 of the act and to pass order under section 148A(d) after 29/03/2022. He submitted that these issues will be treated as academic. Accordingly Ground Nos.1-2 are not adjudicated and dismissed the liberty to the assessee to raise these contentions in appropriate circumstances. 5. In respect of Ground 3-4, the Ld.AR submitted that, admittedly assessee had not filed original return of income for the year under consideration. He submitted that, it was in view of notice under ITA No.1683/MUM/2024 Koyana Nagri Sahakari Patsanstha Ltd.; A. Y.2018-19 Page | 6 section 148 of the act that the assessee filed return of income in which it claimed deduction under section 80 P (2) of the act. 5.1. The Ld.AR submitted that, the assessee filed application under section 119 (2) (b) of the act, on 24/03/2023 before the Ld. Principle Commissioner of Income Tax, Thane seeking condonation of delay in filing the return of income. Subsequently a reminder was also filed before the authority on 03/04/2024 requesting for necessary action to dispose of the petition seeking condemnation of delay. 5.2. The Ld.AR submitted that, for immediately preceding assessment year being assessment years 2016-17 and 2015-16 the assessee in similar circumstance filed return of income claiming exemption in view of notice under section 148 of the act which was processed by the Ld. AO and the assessment order was passed. The Ld.AR filed copies of the assessment order dated 19/03/2022 and 14/03/2022 for assessment year 2016-17 and 2015-16 respectively. 5.3. He further submitted that, the assessment order is so passed for the immediately preceding assessment years were during Covid. And therefore assessee could not make necessary representations. However the submissions of the assessee were accepted and the deduction under section 80 P was granted. In the present facts of the case, Ld.AR submitted that, the assessee for year under consideration was to filed its return of income on or before 30/06/2018 under section 139(1) of the act. He submitted that the ITA No.1683/MUM/2024 Koyana Nagri Sahakari Patsanstha Ltd.; A. Y.2018-19 Page | 7 assessee could have also filed its return of income before 31/03/2019 under section 139 (4) of the act. He submitted that, by the end of December 2019 Covid pandemic spread throughout and it was upon the issuance of notice under section 148 that assessee subsequently filed the return of income on 27/04/2022 thereby causing the delay. 5.4. The Ld.AR prayed that assessee having very small income located in rural areas near Ambarnath Taluka, was not in a position to comply with the procedural aspects of filing the return of income however assessee never had any intention of claiming any benefit by doing so. He the submitted that, the deduction claimed by the assessee is only out of the interest income earned by it through credit facilities to members alone and interest on from the fixed deposits that is mandatory to be made by the assessee with cooperative banks as per the Maharashtra copra societies act. 5.5. He thus prayed for deduction to be considered in the light of various judicial pronouncements by this Tribunal, Hon'ble Jurisdictional High Court, other High Court’s and Hon'ble Supreme Court in various cases. 5.6. On the contrary the Ld.DR relied on the orders passed by authorities below. He submitted that unlike the preceding assessment years, for the year under consideration, the Ld. AO invoked provisions of section 80A(5) of the act as assessee had not filed its original return of income either under section 139 (1) of the act or section 139 (4) of the act. He the submitted that unless the ITA No.1683/MUM/2024 Koyana Nagri Sahakari Patsanstha Ltd.; A. Y.2018-19 Page | 8 application furnished by the assessee seeking condonation of delay is considered by the appropriate authority, the deduction claimed by the assessee cannot be verified on merits. He thus pleased reliance on the orders passed by the authorities below on this aspect. We have perused the submissions advanced by both sides in the light of records placed before us. 6. We note that, the application seeking condonation of delay in filing the return of income is filed by the assessee before Ld.PCIT on 24/03/2023 and a reminder was filed on 03/04/2024. We also agree with the submissions of the Ld.DR that, there is an embargo on Ld.AO to consider the deduction, if the same is not claimed by way of the return of income filed either under section 139 (1) of the act or action 139 (4) of the act. 6.1. It is therefore necessary that the application dated 24/03/2023 seeking condonation of delay in filing the return of income is to be considered first. The Ld.AR filed before us a letter dated 27/09/2024 issued by the office of Ld.CIT-1, Thane, delegating the Ld.CIT Pune, to consider the application filed by the assessee. The Ld.AR submitted that the assessee is therefore to appear before the Ld.CIT Pune, as per the intimation dated 27/09/2024 issued by the office of Ld.CIT-1, a copy of which has been served upon the assessee. 6.2. We note that excluding the period available to the assessee to filed its return of income under section 139 (4) of the act, there is ITA No.1683/MUM/2024 Koyana Nagri Sahakari Patsanstha Ltd.; A. Y.2018-19 Page | 9 delay in claiming the deduction under section 80 P (2) of the act. Admittedly from 24/04/2020, Hon’ble Supreme Court suspended all limitations under statutes, in view of the Covid pandemic that was prevalent in the country. Such suspension of limitations continued till 30/06/2022. In the interest of justice, and and to render substantial justice, it may be appropriate if the Covid period is excluded while considering the application seeking condonation of delay in filing the return for the year under consideration by the appropriate authority. 6.3. With these observations we remit the issue to the Ld.AO to consider the claim of assessee after the appropriate authority passes necessary orders in respect of application dated 24/03/2023 seeking condemnation of delay in filing the return of income for year under consideration. Once the delay is condoned, the Ld.AO while considering the issue on merits may consider the decisions of this tribunal on this issue as well as the decision of honourable Supreme Court in accordance with law. Accordingly ground is 3-4 raised by the assessee stands partly allowed for statistical purposes. In the result the appeal filed by the assessee stands partly allowed for statistical purposes. Order pronounced in the open court on 09-12-2024. Sd/- BEENA PILLAI JUDICIAL MEMBER ITA No.1683/MUM/2024 Koyana Nagri Sahakari Patsanstha Ltd.; A. Y.2018-19 Page | 10 Place: Mumbai, Dated: 09.12.2024 Snehal C. Ayare, Stenographer Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. Ld.DR, ITAT, Mumbai 4. Guard File 5. CIT //True Copy// BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai "