Narimogru Primary Agriculture Credit Cooperative Society V. National E Assessment Centre

WP/16379/2022

AI Insights

The case involves the Narimogru Primary Agriculture Credit Cooperative Society, represented by its CEO, challenging an assessment order issued by the National E Assessment Centre (NEAC) under the Income Tax Act, 1961. The petitioner sought to quash the assessment order and the subsequent notice of demand, arguing that the Assessing Authority failed to consider the directions of the Income Tax Appellate Tribunal (ITAT) and the relevant Supreme Court judgment while passing the order. The High Court found that the Assessing Authority did not adhere to the ITAT's directions nor consider the documents and submissions made by the petitioner, leading to the decision to set aside the assessment order and remit the matter back for fresh consideration.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 798787 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 08-09-2022
• Assessment Year: misc
• Other Referred Cases: Mavilayi Service Co-operative Bank Ltd. Vs. Commissioner of Income Tax, Calicut
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: E I SANMATHI
• Assessee Lawyers: SHREEHARI KUTSA
• Keywords: Assessment Order; Co-operative Society; Income Tax; Mutuality Test; Writ of Certiorari
• Section: 144; 254; 144B; 80P(2)(a)(i); 156

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 8TH DAY OF SEPTEMBER, 2022 BEFORE THE HON'BLE MR.JUSTICE S.R.KRISHNA KUMAR WRIT PETITION No.16379 OF 2022 (T-IT) BETWEEN: NARIMOGRU PRIMARY AGRICULTURE CREDIT COOPERATIVE SOCIETY REP BY CEO H MADHUKARA AGED 52 YEARS NO.01, NARIMOGRU POST PUTTUR TALUKA DAKSHINA KANNADA DIST. – 574202 …PETITIONER (BY SRI. SHREEHARI KUTSA, ADVOCATE) AND: NATIONAL E ASSESSMENT CENTRE REP BY PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX (NEAC) ROOM NO.401, 2ND FLOOR E-RAMP, JAWAHARLAL NEHRU STADIUM DELHI 110003. …RESPONDENT (BY SRI. E.I.SANMATHI, ADVOCATE) THIS W.P. 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. 254 R.W.S. 144B OF THE INCOME TAX ACT, 1961 DTD 29.03.2022 ISSUED BY THE R-1 FOR THE ASSESSMENT YEAR 2016-17 WHICH BEARS THE DIN VIZ., ITBA/AST/S/144/2021-22/1041908056(1) VIDE ANNX-F. THIS W.P. COMING ON FOR ORDERS, THIS DAY, THE COURT MADE THE FOLLOWING:- 2 ORDER In this petition, petitioner has sought 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. 254 r.w.s. 144B of the Income Tax Act, 1961 dated 29.03.2022 issued by the respondent No.1 for the Assessment year 2016-17 which bears the DIN viz., ITBA/AST/S/144/2021-22/ 1041908056(1) which is enclosed as Annexure F. b. Issue a writ of certiorari or direction in the nature of writ of certiorari quashing the notice of demand under Section 156 of the Income Tax Act, 1961 dated 29.03.2022 issued by the respondent No.1 for the Assessment year 2016- 17 which bears the DIN viz., ITBA/AST/S/156/2021-22/1041908183(1) which is enclosed as Annexure G. c. And pass such other orders as this Hon’ble Court deems fit and proper in the interest of justice and equity. 2. Heard learned counsel for the petitioner and learned counsel for the respondents and perused the material on record. 3 3. In addition to reiterating the various contentions urged in the memorandum of petition and referring to the documents produced thereto, learned counsel for the petitioner invites my attention to the order at Annexure – B dated 01.09.2020 passed by the Income Tax Appellate Tribunal in order to point out that specific directions were issued to the Assessing Authority to reconsider the claim of the petitioner afresh after considering documents and material submitted by the petitioner and the law on the aspect as can be seen from the said order. It is submitted that pursuant thereto, the petitioner submitted a detailed reply along with the documents on 26.03.2022 including judgment of the Apex Court in the case of Mavilayi Service Co-operative Bank Ltd., Vs. Commissioner of Income Tax, Calicut – (2021) 123 Taxmann.com 161(SC) and pointed out that the same was applicable insofar as the petitioner was concerned. It is the grievance of the petitioner that despite the aforesaid facts and circumstances and the specific directions issued by the ITAT while remanding the matter back to the 4 Assessing Authority coupled with the detailed objections and the submissions by the petitioner along with documents and the judgment of the Apex Court as stated supra, the Assessing Authority has proceeded to pass the impugned order on the erroneous presumption that the petitioner had not filed any documents as directed by the ITAT and without reference to the aforesaid directions issued by the ITAT as well as the law laid down by the Apex Court as stated supra and as such, the petitioner is before this Court by way of the present petition. 4. Per contra, learned counsel for the respondent submits that there is no merit in the petition and the same is liable to be dismissed. 5. As rightly contented by the learned counsel for the petitioner, in its order dated 01.09.2020, the ITAT set aside the order passed by the Assessing Authority and remitted the matter back to the Assessing Authority by issuing the following directions: “ 8.1 Grievance of assesses is that, in its case test of mutuality is satisfied, however, Ld.CIT(A) did not spell out as to how the said test 5 fails. WE are of the view that, such grievance of assesses would be addressed by setting aside issue of deduction u/s. 80P(2) (a) (i) of Assesses to produce certificate from RBI, that it does not possess license from it for doing banking business, and further that, business carried on by assessee is not akin to business of a co-operative bank. Further, first part of Sec.80P(2) (a) (i) of the Act, Hon’ble Supreme Court in Case of Citizen Co-operative Society Ltd., 9supra) has held that, it is also important to ascertain as to what is the nature of income which is claimed as exempt, and as to how principle of mutuality is not violated in respect of such income. 8.2. An examination of (i) memorandum of association, articles of association, (ii) byelaws and other documents explaining rules and regulations of the society is necessary, so as to clearly understand the purpose and the nature of business done by it. An examination of different categories of members of a society and what are the conditions attached to their being admitted as members and their rights as contributors of funds to the society and participants in surplus and the byelaws of the society is necessary. Deduction u/S. 80p2(a) (i) is allowed only in respect of income arising out of transactions with members. The relevant law governing co- operative Society of State providing status of difference categories of members, in so far as affairs of co-operative Society are concerned, is also 6 required to be examined. It is only income which arises from dealing with members and which is either in the nature of banking or providing credit facilities to members that would be allowed as deduction. All these aspects requires examination. Ld.AO will allow opportunity of being heard to the Assessee and filing appropriate evidence, if desired, by the Assessee to substantiate its case, before deciding the issue.” 6. If one were to peruse the impugned order, it is clear that despite referring to the said order of the ITAT, the Assessing Authority has proceeded to pass the impugned order without considering the said directions issued by the ITAT and consequently, the impugned order deserves to be quashed on this ground alone. So also, learned counsel for the petitioner is right in his submissions that despite the petitioner submitting a detailed reply along with the documents on 26.03.2022, subsequent to the order passed by the ITAT enclosing copy of the judgment of the Apex Court in the Mavilayi’s case supra, the same has not been considered by the Assessing Authority, which has proceeded to pass the impugned order, which deserves to be quashed on this ground also. 7 7. In the result, I pass the following: ORDER (i) Petition is hereby allowed. (ii) The impugned Assessment Order at Annexure – F dated 29.03.2022 is hereby set aside. (iii) Matter is remitted back to the respondent for reconsideration afresh strictly in accordance with the directions issued by the ITAT in its order dated 01.09.2020 and after considering the pleadings and documents submitted by the petitioner and bearing in mind the law laid down by the Hon’ble Apex Court in the case of Mavilayi Service Co- operative Bank Ltd., Vs. Commissioner of Income Tax, Calicut – (2021) 123 Taxmann.com 161(SC), referred to supra and in accordance with law. Sd/- JUDGE SV "