PRABHAT GRAMIN BIGARSHETI SAHAKARI PATNSANSTHA MARYADIT TADWADI,RAIGAD V. ITO, WARD 3, PANVEL

ITA 1433/PUN/2024

AI Insights

The case involves Prabhat Gramin Bigarsheti Sahakari Patsanstha Maryadit, a cooperative society, which appealed against the order of the Commissioner of Income Tax (Appeals) at the National Faceless Appeal Centre, Delhi. The appeal pertained to the disallowance of a deduction of Rs. 7,79,718 under section 80P(2) of the Income Tax Act, 1961 for the Assessment Year 2017-18. The deduction was initially disallowed by the Central Processing Centre, Bengaluru, due to the deduction being claimed under the wrong section (80-LA instead of 80P) due to an oversight by the society's accountant. The Income Tax Officer rejected the rectification application under section 154, leading to the appeal before the CIT(A), which was dismissed. The Tribunal found that the CIT(A) had not considered the rectification proceedings under section 154 while adjudicating the issue and thus set aside the matter for a fresh decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 633123 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Other Referred Cases: Nileshwar Rangekallu Chethu Vyavasaya Thozhilali Sahakarana Sangham v. Commissioner of Income-tax, AA520 Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd. vs. DCIT, Peroorkkada Service Co-operative Bank Ltd. V ITO Ward 2(1), Trivandrum
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VISHAL MAKAWANE
• Assessee Lawyers: AKASH KUMAR; . CONCLUSION
• Keywords: Set aside; Opportunity of being heard; Reasonable cause
• Section: 143(3); 154; 44AD

Judgement Text

" आयकर अपीलीय अधिकरण “एक सदस्य मामला” न्यायपीठ पुणे में । IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, PUNE BEFORE SHRI R.K. PANDA, VICE PRESIDENT AND MS. ASTHA CHANDRA, JUDICIAL MEMBER आयकर अपील सं. / ITA No.1433/PUN/2024 निर्धारण वर्ा / Assessment Year : 2017-18 Prabhat Gramin Bigarsheti Sahakari Patsanstha Maryadit, At-Tadwadi, Post-Chirdhe, Tal-Murud, Dist.-Raigad, Murud, Maharashtra-402109 PAN : AAFAP2554G Vs. ITO, Ward – 3, Panvel अपीलधर्थी / Appellant प्रत्यर्थी / Respondent Assessee by : Shri Akash Kumar Department by : Shri Vishal Makawane Date of hearing : 29-04-2025 Date of Pronouncement : 12-06-2025 आदेश / ORDER PER ASTHA CHANDRA, JM : The appeal filed by the assessee is directed against the order dated 17.05.2024 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [“CIT(A)”] pertaining to Assessment Year (“AY”) 2017-18. 2. The assessee has raised the following grounds of appeal :- “The Commissioner of Income-tax (Appeals) at the National Faceless Appeal Centre (hereinafter referred to as the CIT(A)) erred in upholding the action of the Income-tax Officer, Ward-3, Panvel (hereinafter referred to as the Assessing Officer) in rejecting the application under section 154 and not allowing deduction of Rs 7,79,718 under section 80P(2) of the Act. The appellants contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have upheld the action of the Assessing Officer in rejecting the application under section 154 and ought to have allowed the deduction under section 80P(2) in as much as the same is a mistake apparent from record and hence, the deduction of Rs 7,79,718 claimed under section 80P(2) needs to be allowed. The appellants further, contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have rejected the claim of deduction under section 80P(2) in as much has he has not correctly 2 ITA No.1433/PUN/2024, A.Y. 2017-18 appreciated the facts of the case in its entirety and hence, the deduction of Rs 7,79,718 under section 80P(2) needs to be allowed. The appellants crave leave to add to, alter or amend the aforestated ground of appeal.” 3. Briefly stated, the facts of the case are that the assessee is Co- operative Society registered under the Co-operative Societies Act, 1960. It engaged in accepting deposits and providing credit facilities to its members. It filed its return of income on 31.03.2018 declaring total income at Rs.11,080/-. The return was processed by Central Processing Centre Bengaluru, (“CPC”) u/s 143(1)(a) of the Income Tax Act, 1961 (the “Act”) on 17.07.2018 disallowing the deduction of Rs.7,79,718/- claimed u/s 80P(2)(a)(i) of the Act and determining tax liability of Rs.3,32,430. The demand arose on account of deduction being wrongly claimed u/s 80-LA instead of section 80P of the Act due to oversight by the Accountant of the assessee trust while filing the income tax return. In order to correct its mistake, the assessee filed rectification application u/s 154 which was rejected by the Ld. Assessing Officer (“AO”) vide order dated 25.04.2024 observing that the disallowance made by the CPC under section 80P is not a mistake apparent from record. 4. Aggrieved by such order of the Ld. AO passed u/s 154 for not allowing the eligible deduction u/s 80P while processing of intimation u/s 143(1)(a) by CPC, the assessee filed appeal before the Ld. CIT(A) who dismissed the appeal of the assessee by observing as under: “5. निष्कर्ष/ Conclusion: I have carefully considered the grounds of appeal and submissions placed by the Appellant. It is observed that the A.O. has disallowed the deduction u/s 80P. it is seen that the due date of filing return for the assessee was 31.10.2017 whereas the return was filed on 31.03.2018. The assessee is registered under Maharashtra Co-operative Act 1960, having total receipts of Rs.44,88,175/-only. The provisions of section 44AB of the IT Act 1961 for the AY 2018-19 are as follows- Audit of accounts of certain persons carrying on business or profession. 44AB. Every person, - (a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year; or (b) carrying on profession shall, if his gross receipts in profession exceed [fifty] lakh rupees in any previous year; or (c) carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AE or 3 ITA No.1433/PUN/2024, A.Y. 2017-18 section 44BB or section 44BBB, as the case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any previous year; or (d) carrying on the [profession] shall, if the profits and gains from the [profession] are deemed to be the profits and gains of such person under [section 44ADA] and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his [profession) and his income exceeds the maximum amount which is not chargeable to income-tax in any [previous year; or] [(e) carrying on the business shall, if the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year,] get his accounts of such previous year audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed: [Provided that this section shall not apply to the person, who declares profits and gains for the previous year in accordance with the provisions of sub- section (1) of section 44AD and his total sales, turnover or gross receipts, as the case may be, in business does not exceed two crore rupees in such previous year:] Provided [further] that this section shall not apply to the person, who derives income of the nature referred to in section 44B or section 44BBA, on and from the 1st day of April, 1985 or, as the case may be, the date on which the relevant section came into force, whichever is later : Provided [also] that in a case where such person is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this section if such person gets the accounts of such business or profession audited under such law before the specified date and furnishes by that date the report of the audit as required under such other law and a further report by an accountant in the form prescribed under this section. Explanation. -For the purposes of this section, (i) \"accountant\" shall have the same meaning as in the Explanation below sub-section (2) of section 288; (ii) \"specified date\", in relation to the accounts of the assessee of the previous year relevant to an assessment year, means the due date for furnishing the return of income under sub-section (1) of section 139. The turnover of the assessee is below the specified limit. As such the specified due date for the assessee for AY 2017-18 was 31.10.2017 and not 31.03.2018. Under such circumstances, it has to be found out -\"Whether deduction u/s 80P should be allowed if the return of income was filed beyond the due date permitted under section 139(1) for the AY 2017-18\"? The AO disallowed the claim of deduction u/s.80P of the appellant co- operative society for the AY 2018-19 on account of the failure of the appellant to file the return of income within the due date prescribed u/s.139(1) of the Act. The appellant being a credit co-operative society has to get its accounts audited u/s.58(1) of the said Act. However, the concerned 'statutory authority' failed to complete the audit within the due date, which may be the reason for belated filing the return of income. 4 ITA No.1433/PUN/2024, A.Y. 2017-18 The Income-tax Department contemplated such a situation where an assessee is required under any other law to get his accounts audited and ordained that such assessee should get the accounts audited under such law before the \"Specified date\" and furnish the audit report by that date. Explanation (ii) to section 44AB explains that the \"specified date\", in relation to the accounts of the assessee of the previous year relevant to an assessment year, means date one month prior to the due date for furnishing the return of income under sub-section (1) of section 139. By reviewing the entire law and the legal position on the issue, I have held that the claim of deduction u/s 80P of the Act for the impugned A.Y.2017-18 cannot be allowed because of the following reasons : (i) As held by Hon'ble Kerala High Court in the Nileshwar Rangekallu Chethu Vyavasaya Thozhilali Sahakarana Sangham v. Commissioner of Income-tax [2023] 152 taxmann.com 347 (Kerala), the return of income filed belatedly by the appellant becomes 'invalid' and as it is hit by the provisions of both 80A(5) and 80AC(ii) of the Act. (ii) The scope of section 143(3) is wide enough to disallow the claim of deduction u/s 80P of the Act at the time of completing the assessment and it is not an adjustment contemplated u/s 143(1)(a)(v) of the Act. (iii) There is no need for again giving an opportunity of being heard as regards the disallowance of deduction u/s 80P of the Act, as this is mechanical exercise as held by Hon'ble Madras High Court in AA520 Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd. vs. DCIT [2022] 138 taxmann.com 571 (Madras). (iv) Further Hon'ble Kerela High Court in the case of Peroorkkada Service Co-operative Bank Ltd. V ITO Ward 2(1), Trivandrum, [2020] 114 taxmann.com 18 (Kerala) has held that- Mere fact that audit of assessee was conducted under provisions of Co-operative Societies Act, would not be sufficient for such compliance under section 44AB, unless report of audit is furnished in prescribed form accompanied with a further report by an accountant in prescribed form परिणाम स्वरूप अपील आंनिक रूप से स्वीक ृत / स्वीक ृत / \"खारिज\" की जाती हैं। As a result, the appeal is \"dismissed\". 5. Dissatisfied, the assessee is in appeal before the Tribunal and all the grounds of appeal relate thereto. 6. The Ld. AR submitted that during the relevant AY 2017-18, the assessee earned interest income from temporary deposits with Co-operative Banks/ Nationalized Banks and is eligible to claim deduction under section 80P(2) of the Act in respect of the said interest income which is a settled law now by catena of decisions of various judicial forums. He contended that the assessee’s claim of deduction under section 80P has been rejected by the CPC for the reason that the assessee inadvertently claimed the deduction under wrong section. Referring to page 49 of the Paper Book, he submitted that the assessee’s accountant while filing the 5 ITA No.1433/PUN/2024, A.Y. 2017-18 return of income filled the amount of deduction of Rs. 7,79,718 wrongly under section 80-LA instead of 80P due to which the CPC disallowed the claim of the assessee. This being a mistake apparent from record, the assessee filed an application for rectification under section 154 of the Act before the Ld. AO who rejected the assessee’s application without giving any reasons for such rejection (pages 95 to 98 of the Paper Book refers). The Ld. CIT(A) dismissed the appeal of the assessee observing that since the assessee has not filed the return of income for AY 2017-18 under consideration within the specified due date, it is not eligible for claim of deduction under section 80P of the Act. He submitted that this finding of the Ld. CIT(A) is contrary to facts of the case which is well supported by the documentary evidence and other material available on record. The Ld. CIT(A) while adjudicating upon the impugned issue has not at all taken into account the rectification application and order of the Ld AO passed under section 154 of the Act and dismissed the appeal of the assessee without correctly appreciating the facts of the case. 7. The Ld. DR, on the other hand, supported the order of the Ld. AO and submitted that the assessee’s claim has rightly been disallowed by the CPC/AO as it has caused due to the negligence on the part of the assessee. 8. We have heard the Ld. Representatives of the parties, perused the record and paper book filed by the Ld. AR on behalf of the assessee. The facts of the case are not disputed. Admittedly, the assessee inadvertently claimed the deduction in respect of interest income earned during the relevant AY 2017-18 under dispute under wrong section i.e. section 80-LA instead of section 80P of the Act. We find that the Ld. AO has passed the order under section 154 of the Act without making any inquiry and investigation by simply stating in his order that the said issue does not fall within the purview of section 154 of the Act. The Ld. CIT(A) dismissed the appeal of the assessee for the reasons reproduced in the preceding paragraph. Perusal of the order of the Ld. CIT(A) reveals that the Ld. CIT(A) has not considered the rectification proceedings under section 154 of the Act while adjudicating upon the impugned issue in hand. We, therefore find some force in the arguments of the Ld. Counsel for the assessee that the Ld. CIT(A)’s order is not based on correct set of facts under consideration. Considering the totality of facts and in the circumstances of 6 ITA No.1433/PUN/2024, A.Y. 2017-18 the case, we deem it fit in the interest of justice, to set aside the matter to the file of the Ld. CIT(A) to decide the issue afresh on merits, as per fact and law after affording due opportunity of hearing to the parties. The assessee is also hereby directed to make further submissions, if any, before the Ld. CIT(A) to substantiate its case on the appointed date without seeking adjournment under any pretext unless otherwise required for the reasonable cause, failing which the Ld. CIT(A)/NFAC shall be at liberty to pass appropriate order as per law. The grounds No. 1 to 3 raised by the assessee are accordingly allowed for statistical purposes. 9. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 12th June, 2025. Sd/- Sd/- (R.K. Panda) (Astha Chandra) VICE PRESIDENT JUDICIAL MEMBER पुणे / Pune; ददन ांक / Dated : 12th June, 2025. रदि आदेश की प्रनिनलनप अग्रेनर्ि / Copy of the Order forwarded to : 1. अपील थी / The Appellant. 2. प्रत्यथी / The Respondent. 3. The Pr. CIT concerned. 4. धिभागीय प्रधिधिधि, आयकर अपीलीय अधिकरण, “एक सदस्य मामला” बेंच, पुणे / DR, ITAT, “SMC” Bench, Pune. 5. ग र्ड फ़ इल / Guard File. //सत्य दपत प्रदत// True Copy// आदेश नुस र / BY ORDER, िररष्ठ दनजी सदिि / Sr. Private Secretary आयकर अपीलीय अदधकरण ,पुणे / ITAT, Pune "