NO. 19722 INDUSTRIALISTS AND PROFESSIONALS MULTIPURPOSE CO-OP SOCIETY LIMITED ,KODAGU V. INCOME TAX OFFICER, WARD-1, , MADIKERI

ITA 1820/BANG/2025

AI Insights

The case involves the No. 19722 Industrialists & Professionals Multipurpose Co-op. Society Ltd., which appealed against the order of the National Faceless Appeal Centre (NFAC) that dismissed their appeal due to a 319-day delay in filing. The original assessment by the AO disallowed deductions under section 80P(2)(a)(i) of the Income-tax Act, 1961, and added the entire amount of unsecured loans as income under section 68. The Tribunal noted the impact of COVID-19 and technical issues on the delay and directed a re-examination of the deductions and the addition under section 68, emphasizing the need for proper KYC documentation.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 778854 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2018-2019
• Appeal Filed On: 20-08-2025
• Other Referred Cases: Citizen Co-operative Society Ltd. v. ACIT, Mavilayi Service Co-operative Bank Ltd. v. CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAVISHANKAR
• Section: 143(3); 142(1); 68

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH : BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER ITA No.1820/Bang/2025 Assessment year : 2018-19 No. 19722 Industrialists & Professionals Multipurpose Co-op. Society Ltd., Nethaji Subhash Chandra Bose Road, Bypass Road, Somwarpet Taluk, Kushalnagar, Kodagu – 571 234. PAN: AABAN 6823G Vs. The Income Tax Officer, Ward 1, Madikeri. APPELLANT RESPONDENT Appellant by : Shri Ravishankar, Advocate Respondent by : Shri Subramanian S., Jt. CIT(DR)(ITAT), Bengaluru. Date of hearing : 17.09.2025 Date of Pronouncement : 16.10.2025 O R D E R Per Prashant Maharishi, Vice President 1. This appeal is filed by No. 19722 Industrialists & Professionals Multipurpose Co- op. Society Ltd. (the assessee/appellant) for the assessment year 2018-19 against the appellate order passed by the National Faceless Appeal Centre, Delhi (NFAC) [ld. CIT(A)] dated 28.3.2025 wherein the appeal filed by the assessee against the assessment order passed by the National e-Assessment Centre, Delhi u/s. 143(3) r.w.s. 143(3A) & 143(3B) of the Income-tax Act, 1961 [the Act] dated 13.4.2021 was dismissed in limine and not decided the same on the merits of the case. The reason being that there was a delay of 319 days in filing of appeal before the ld. CIT(A) which was not condoned. 2. The brief facts of the case show that assessee is a members’ cooperative society, filed its return of income for AY 2018-19 on 31.12.2018 declaring total income of Printed from counselvise.com ITA No.1820/Bang/2025 Page 2 of 6 Rs.41,100. The case of the assessee was selected for limited scrutiny for verification of unsecured loans and deduction under Chapter VIA of the Act. Notice u/s. 143(2) of the Act was issued on 22.9.2019 and notice u/s. 142(1) was also issued on 17.11.2020. 3. On verification of the details, it was found that assessee has claimed deduction u/s. 80P(2)(a)(i) of the Act wherein the assessee has interest income from members of Rs.3,27,46,074, commission income of Rs.9,01,672 and other income of Rs.15,57,900 from Others and Rs.13,00,838 from Chit Fund income. After deduction of the expenses, the assessee has earned a profit of Rs.77,60,581 which was claimed as deduction u/s. 80P(2)(a)(i) of the Act. The ld. AO stated that as the assessee has received all the income not from its members and therefore deduction u/s. 80P(2)(a)(i) of the Act is not allowable. He relied upon the decision of the Hon’ble Supreme Court in the case of Citizen Co-operative Society Ltd. v. ACIT, 397 ITR 1 (SC). Therefore he disallowed the deduction of Rs.77,10,438. 4. The ld. AO found that assessee has shown unsecured loan as on 31.3.2018 of Rs.21.90 crores and assessee was asked to furnish the complete details along with requisite documentary evidences. Assessee failed to do so and therefore the ld. AO held that onus lies upon the assessee to furnish the complete details such as name, address & PAN of unsecured loan received, which is not furnished and therefore he invoked the provisions of section 68 and made the addition of the entire unsecured loan outstanding at the end of the year of Rs. 21,90,91,483. By an order dated 13.4.2021 the total income of the assessee was assessed at Rs.22,68,43,021. 5. The assessee preferred appeal before the ld. CIT(A) wherein it was stated that there is a delay in filing of the appeal and it was submitted that there was a COVID-19 second wave lockdown during the last week of April and May months of 2021. Further, the income tax website was also upgraded and the forms were not working properly, which itself is shown as there was extension of date for filing return of income on account of glitches in the software. Due to this there was a delay in filing of the appeal. These facts were mentioned in Form 35. Printed from counselvise.com ITA No.1820/Bang/2025 Page 3 of 6 6. The ld. CIT(A) perused the statement of facts and grounds of appeal and noted that appeal was to be filed within a period of 30 days from the date of service of the assessment order which is 13.4.2021 whereas the appeal was filed on 25.2.2022 which has caused delay of 319 days. He did not admit the appeal of the assessee stating that the reasons stated by the assessee are not sufficient cause and therefore he did not admit the appeal and dismissed it in limine. The appellate order was passed on 28.3.2025. 7. The assessee is aggrieved with the appellate order and submitted that there is no delay in filing of the appeal in view of the suo motu order passed by the Hon’ble Supreme Court in granting extension due to COVID pandemic and further the delay was also on account of the glitches in the website of the Income Tax Department. It is submitted that the ld. CIT(A) has not accepted the order of the Hon’ble Supreme Court which is stated in the statement of facts and Form 35 and without considering the same, he has dismissed the appeal without admitting it. It was submitted that there is no delay in filing of the appeal without sufficient cause. 8. On the merits of the case, it was submitted that with respect to the disallowance of deduction u/s. 80P of Rs.77,10,438 that the nominal members are also members of the assessee society as per section 2(f) of the Karnataka Co-operative Societies, Act, 1959. Accordingly no disallowance of deduction u/s. 80P is warranted. He submits that the ld. AO has relied upon the decision of Citizen Co-operative Society Ltd. (supra), but this decision has also been discussed in the later decision of the Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. v. CIT, 123 taxmann.com 161 and therefore the issue needs to be decided now based on the decision in the case of Mavilayi Service Co-operative Bank Ltd. 9. With respect to the second addition u/s. 68 of the Act, he submitted that the amount is deposited by the members on account of voluntary deposits and further the complete KYC details are available with the assessee which could be verified by the ld. AO and therefore there is no application of the provisions of section 68 of the Act. Printed from counselvise.com ITA No.1820/Bang/2025 Page 4 of 6 10. The ld. DR vehemently submitted that the assessee has not submitted the details with respect to amount of Rs.29,90,91,483 before the AO. Now if the assessee can substantiate it by submitting the KYC details, matter is required to be restored to the file of the AO. With respect to the disallowance u/s. 80P(2)(a)(i) of the Act of Rs.77,10,438, it was submitted that the decision of Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. (supra) was not considered by the ld. AO as the decision was available on 12.1.2021 and the order u/s. 143(3) was passed on 13.4.2021, therefore the order may be passed in compliance with the decision of the Hon’ble Supreme Court. With respect to not condoning the delay of 319 days, it was submitted that the ld. CIT(A) was not shown that the delay was caused because of the decision of Hon’ble Supreme Court due to COVID. 11. We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. We find that there is an addition of Rs.21,90,91,483 in the hands of the assessee of the entire unsecured loan outstanding as on 31.3.2018. The above deposit may also include the opening balance as on 1.4.2017. During the course of assessment proceedings the assessee was asked to furnish the requisite details, But the assessee did not furnish. Undoubtedly the onus lies on the assessee to substantiate that assessee has received these unsecured loans from its members and their KYC are in order. The ld. AO in his order has also not mentioned that what details are furnished before him and what details were not furnished. Even otherwise the total addition of outstanding unsecured loan as on 31.3.2018 is not justified. Only those credits which are received during the year and further for which the assessee does not have proper KYC, only those additions could have been made. 12. Further with respect to the deduction claimed by the assessee u/s. 80P(2)(a)(i) of the Act, it is apparent that assessee is a cooperative society providing credit facilities to its members. It is the claim of the assessee that all the receipts are from its members and income derived from the business of providing credit to its members is eligible for deduction u/s. 80P(2)(a)(i) of the Act. The ld. AO without Printed from counselvise.com ITA No.1820/Bang/2025 Page 5 of 6 examining the details has applied the decision of Hon’ble Supreme Court in the case of Citizen Co-operative Society Ltd. (supra). The above decision has been considered by the Larger Bench of Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. (supra) wherein it has been held that where the assessee was registered as cooperative society is entitled to the benefit of deduction u/s. 80P(2)(a)(i) of the Act, notwithstanding the fact that it was also giving loan to non-members, which was not related to agriculture. Further, the Hon’ble Supreme Court has categorically upheld the findings in the case of Citizen Co-operative Society Ltd. is not against the assessee. Further in para no. 20, the decision of the Hon’ble Supreme Court in the case of Citizen Co-operative Society Ltd. was considered and further in para 21 the principle laid down by that judgment was also shown. In view of the above facts and as both the parties have agreed that now this issue of deduction u/s. 80P(2)(a)(i) of the Act is required to be decided by the ld. AO following the decision of the Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. (supra), afresh. 13. In view of above facts, on both these issues, we restore those back to the file of the ld. AO to decide the issue of deduction u/s. 80P(2)(a)(i) of the Act accordingly, With respect to the deduction u/s. 68, the assessee is directed to produce the details of sundry creditors outstanding as on 31.3.2018 before the ld. AO, who will verify the facts and basic details of KYC of those members and then decide the issue on addition u/s. 68 of the Act. Therefore, on merits, both the issues are restored back to the file of the ld. AO. 14. Coming back to the issue of not condoning the delay of 319 days in filing of appeal by the ld. CIT(A), we find that the ld. CIT(A) has not at all considered the reasons given by the assessee. When the reasons itself are not considered, whether those are sufficient or not could not have been decided by him. Therefore, the order passed the ld. CIT(A) of not condoning the delay of 319 days and not admitting the appeal of the assessee is not sustainable. As we have already restored the matter Printed from counselvise.com ITA No.1820/Bang/2025 Page 6 of 6 back to the ld. AO, all the grounds of appeal of the assessee are allowed as indicated above and required to be adjudicated afresh. 15. In the result, the appeal by the assessee is allowed for statistical purposes. Pronounced in the open court on this 16th day of October, 2025. Sd/- Sd/- ( SOUNDARARAJAN K. ) ( PRASHANT MAHARISHI ) JUDICIAL MEMBER VICE PRESIDENT Bangalore, Dated, the 16th October, 2025. /Desai S Murthy / Copy to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore. Printed from counselvise.com "