POOMANGALAM SERVICE COOPERATIVE BANK LTD,THRISSUR V. ITO, WARD 2(4), THRISSUR

ITA 307/COCH/2025

AI Insights

The case involves the Poomangalam Service Cooperative Bank Ltd, which appealed against the order of the Commissioner of Income Tax (Appeals) regarding the assessment year 2022-23. The primary issues were the denial of deduction under Section 80P and the addition of Rs. 82,57,94,715 as unexplained cash credit under Section 68. The appellant argued that it is not a cooperative bank and thus not subject to the restrictions of Section 80P(4), and that the deposits in question were genuine and properly documented. The Tribunal found that the issue of the appellant's status as a cooperative bank needed further examination and remanded it back to the Assessing Authority. However, the Tribunal upheld the addition under Section 68 due to insufficient proof of the genuineness of the deposits.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 711836 (ITAT-COCHIN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2022-2023
• Other Referred Cases: Mavilayi Service Co-operative Bank Ltd vs. CIT, 431 ITR 1 (SC), Kerala State Cooperative Agricultural and Rural Development Bank Ltd vs. AO, Civil Appeal No. 10069 of 2016, PCIT vs. Annasaheb Patil Mathadi Kamagar Sahakari Pathpedi Ltd, Civil Appeal No. 8719/2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SURESH SIVANANDAN
• Assessee Lawyers: JOJO
• Keywords: Business income; Opportunity of being heard
• Section: 143(3); 68

Judgement Text

"1 ITA No.307/Coch/2025 Poomangalam Service Cooperative Bank Ltd vs.ITO IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH BEFORE SHRI INTURI RAMA RAO, AM AND SONJOY SARMA, JM ITA No.307/Coch/2025 Assessment Year: 2022-23 Poomangalam Service Cooperative Bank Ltd .......... Appellant No. R.712, H.O Aripalam, Poomangalam, Kerala-680688. PAN: AABAP6092P vs. Income Tax Officer .......... Respondent Ward-2(4), Thrissur, Kerala. Appellant by: Shri C.A. Jojo, Advocate Respondent by: Shri Suresh Sivanandan, CIT-DR Date of Hearing: 05.06.2025 Date of Pronouncement: 22.07.2025 O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (in short “CIT(A)”), dated 03/03/2025 for Assessment Year (AY) 2022- 23. Printed from counselvise.com 2 ITA No.307/Coch/2025 Poomangalam Service Cooperative Bank Ltd vs.ITO 2. Briefly the facts of the case are that the appellant is a Cooperative Society duly registered under the Kerala Cooperative Societies Act, 1969. It is qualified as Primary Agricultural Credit Society. It is engaged in the business of accepting deposits from members and providing loans to its members. The Return of Income for the AY 2022-23 was filed 05/11/2022 disclosing NIL income after claiming deduction of Rs. 3,95,72,011/-. Against the said return of income, the assessment was completed by the AO vide order dated 08/03/2024 passed U/s. 143(3) r.w.s 144B of the Income Tax Act, 1961 (in short “the Act”) at a total income of Rs. 86,53,66,726/-. While doing so, the National Faceless Assessment Centre (hereinafter referred to as “Assessing Authority”) denied the claim for deduction U/s. 80P of the Act on the ground that the appellant had not filed the return of income within the due date specified U/s. 139(1) of the Act placing reliance on the provisions of section 80AC of the Act. Further, the Assessing Authority brought to tax the unsecured loans of Rs. 82,57,94,715/- received during the year by holding that the appellant cooperative society had failed to discharge the onus of proving the genuineness of these loans despite several opportunities afforded to the appellant society. 3. Being aggrieved, an appeal was filed before the CIT(A) contending that the unsecured loans represents various types of deposits including Fixed Deposits, Recurring Deposits, Savings Accounts, Current Accounts from the members of the appellant society. Further, it was submitted that the details of Printed from counselvise.com 3 ITA No.307/Coch/2025 Poomangalam Service Cooperative Bank Ltd vs.ITO the unsecured loans on deposits are duly reflected in the Balance Sheet etc., and further contended that the appellant had filed all the details before the Assessing Authority. It was further submitted that the due date for filing the return of income for the AY 2022-23 was extended up to 07/11/2022 vide CBDT Circular No. 20/2022, dated 26/10/2022. The return of income was submitted on 05/11/2022 itself and therefore, it is within well within the due date prescribed U/s. 139(1) of the Act. However, the CIT(A) confirmed the disallowance of claim for deduction U/s. 80P of the Act by holding that the appellant bank is a cooperative bank and hit by the provisions of sub-section (4) of section 80P of the Act. Thus, confirmed the disallowance of claim for deduction U/s. 80P of the Act. As regards the addition of Rs. 82,57,94,715/- U/s. 68 of the Act, the CIT(A) confirmed the addition by holding that the appellant has failed to prove the genuineness of the unsecured loans. 4. Being aggrieved, the appellant is in appeal before us in the present appeal. 5. It is submitted that the appellant does not enjoy the licence from the Reserve Bank of India to carry on the business of banking. Therefore, in the light of the judgment of the Hon'ble Supreme Court in the case of Mavilayi Service Co-operative BankLtd vs.CIT, 431 ITR 1 (SC); Kerala State Cooperative Agricultural and Rural Development Bank Ltd vs. AO, Civil Appeal No. 10069 of 2016 and in PCIT vs. Annasaheb Patil Mathadi Kamagar Sahakari Pathpedi Ltd, Civil Appeal No. 8719/2022, dated Printed from counselvise.com 4 ITA No.307/Coch/2025 Poomangalam Service Cooperative Bank Ltd vs.ITO 20/04/2023, the appellant cannot be treated as a cooperative bank. Further submitted that the entire cash credit represents deposits received from members and their deposits were accepted after duly complying with the KYC norms. 7. Without prejudice to the above, it is submitted that the addition made U/s. 68 qualifies for deduction U/s. 80P of the Act as the same partakes the character of business income. Further, asserted that the appellant society had duly explained the sources of the money before the Assessing Authority and the information as called for by the Assessing Authority was furnished therefore, no addition can be made. 8. On the other hand, the CIT-DR submits that the Assessing Authority rightly made the addition U/s. 68 of the Act and had rightly disallowed the deduction U/s. 80P of the Act as the appellant did not file the return of income within the due date specified Us. 139(1) of the Act. He further submitted that the appellant had failed to discharge the onus of proving the genuineness of the deposits received from the members in terms of the provisions of section 68 of the Act. Even before the First Appellate Authority also, the appellant never attempted to discharge its onus. In these circumstances, no interference is warranted in the orders of the lower authorities. Printed from counselvise.com 5 ITA No.307/Coch/2025 Poomangalam Service Cooperative Bank Ltd vs.ITO 9. We heard the rival submissions and perused the material available on record. The Grounds of Appeal No.1 challenges the disallowance of claim for deduction U/s.80P of the Act. On a perusal of the assessment order it would reveal that the Assessing Authority denied the claim for deduction U/s. 80P of the Act merely on the ground that the appellant did not file the return of income for the year under consideration within the due date specified U/s.139(1) of the Act. In this case, the return of income was filed on 5/11/2022 whereas the due date for filing the return of income was extended up to 07/11/2022 vide CBDT Circular No. 20/2022, dated 26/10/2022. The appellant had made a detailed submission before the CIT(A)/NFAC, who in turn without dealing with the reasoning of the Assessing Authority as well as the submission made by the appellant, proceeded to hold that the appellant is cooperative bank, therefore hit by the provisions of section 80P(4) of the Act. Thus, the order passed by the CIT(A)/NFAC travelled beyond the reasons of the Assessing Authority and therefore, the findings of the CIT(A)/NFAC on this issue are remitted back to the file of the Assessing Authority to decide the issue of eligibility for deduction U/s. 80P of the Act keeping in view the ratio laid down in the judgment of the Hon'ble Supreme Court in the case of Mavilayi Service Co-operative BankLtd vs.CIT, 431 ITR 1 (SC); Kerala State Cooperative Agricultural and Rural Development Bank Ltd vs. AO, Civil Appeal No. 10069 of 2016 and in PCIT vs. Annasaheb Patil Mathadi Kamagar Sahakari Pathpedi Ltd, Civil Appeal No. 8719/2022, dated 20/04/2023 (supra). Thus, this Ground of Appeal stands partly allowed. Printed from counselvise.com 6 ITA No.307/Coch/2025 Poomangalam Service Cooperative Bank Ltd vs.ITO 10. As regards to the Ground of Appeal Nos.2, 3 and 4 challenge the addition of Rs.82,57,94,715/- U/s.68 of the Act. On a reading of the orders of the lower authorities it would be evident that the appellant had not discharged the onus of proving the three essential ingredients ie., identity, creditworthiness and genuineness of the transactions of the deposits received from the members. The appellant was only asserting that all the loans are nothing but the deposits received from the members / customers and reflected in the books of account and therefore no addition is called for. The Hon'ble jurisdictional High Court in the case of Mundala Service Cooperative Bank Limited vs. ITO (2018) 258 Taxmann 233 (Kerala) held that the provisions of section 68 of the Act have application even in respect of the cooperative society in respect of the deposits received. In the light of these facts, we are of the considered opinion, in the interest of justice, the matter be remanded to the file of the Assessing Authority to frame a de novo assessment order after affording a reasonable opportunity of being heard to the appellant-society. 11. In the result, appeal of the assessee stands partly allowed. Order pronounced in the open court on 22nd July, 2025. Sd/- Sd/- (SONJOY SARMA) JUDICIAL MEMBER (INTURI RAMA RAO) ACCOUNTANT MEMBER Cochin, Dated: 22nd July, 2025 okk sps Printed from counselvise.com 7 ITA No.307/Coch/2025 Poomangalam Service Cooperative Bank Ltd vs.ITO Copy to: 1. The Appellant 2. The Respondent 3. The Pr. CIT concerned 4. The Sr. DR, ITAT, Cochin 5. Guard File Assistant Registrar ITAT, Cochin Printed from counselvise.com "