THE EZHOME SERVICE CO-OPERATIVE BANK LTD NO.C - 1508 V. INCOME TAX OFFICER

WP(C)/17730/2021

AI Insights

The case involves The Ezhome Service Co-operative Bank Ltd., which challenged the assessment order for the year 2018-19 issued by the Income Tax Officer. The petitioner argued that the assessment was completed without considering their objections to the draft assessment order and was contrary to the Supreme Court's decision in Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax. The court found that the Income Tax Officer had not properly acknowledged the petitioner's objections and had not applied the relevant Supreme Court decision, leading to a violation of natural justice.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 751788 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 10-09-2021
• Assessment Year: misc
• Other Referred Cases: Mavilayi Service Co-operative Bank Ltd. and Others v. Commissioner of Income Tax, Calicut and Others [2021] 431 ITR 1 (SC), W.A. No.753 of 2021, Poonjar Service Co-operative Bank Ltd. v. Income Tax Officer
• Laws Referred To: Income Tax Act 1963, Kerala Co-operative Societies Act 1967, Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: CHRISTOPHER ABRAHAM
• Assessee Lawyers: S RAJ
• Keywords: Agricultural Credit; Assessment Order; Co-operative Society; Deduction; Natural Justice
• Section: 80P; 144B

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS FRIDAY, THE 10TH DAY OF SEPTEMBER 2021 / 19TH BHADRA, 1943 WP(C) NO. 17730 OF 2021 PETITIONER : THE EZHOME SERVICE CO-OPERATIVE BANK LTD NO.C – 1508, P.O.EZHOME, KANNUR-670 334, REPRESENTED BY ITS SECRETARY VENU.E. BY ADV S.ARUN RAJ RESPONDENTS : 1 INCOME TAX OFFICER, NATIONAL FACELESS ASSESSMENT CENTRE, INCOME TAX DEPARTMENT, 2ND FLOOR, E-RAMP, JAWAHARLAL NEHRU STADIUM, NEW DELHI-110 002 2 THE PRINCIPAL COMMISSIONER OF INCOME TAX, AAYAKAR BHAVAN, NORTH BLOCK, MANANCHIRA, KOZHIKODE-673 001 SRI.CHRISTOPHER ABRAHAM, SC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 10.09.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) NO. 17730 OF 2021 2 BECHU KURIAN THOMAS, J. ------------------------------------ W.P.(C) No.17730 of 2021 -------------------------------------- Dated this the 10th day of September, 2021 JUDGMENT Petitioner challenges the order of assessment for the year 2018-19. The reasons for invoking the jurisdiction of this Court under Article 226 of the Constitution of India for challenging an order of assessment is twofold- violation of the principles of natural justice and failure to apply the law laid down by the Supreme Court. 2. Petitioner is a primary agricultural credit co-operative society registered under the Kerala Co-operative Societies Act 1967. Relying upon the decision of the Supreme Court in Mavilayi Service Co- operative Bank Ltd. and Others v. Commissioner of Income Tax, Calicut and Others [2021] 431 ITR 1 (SC), petitioner claimed deduction under section 80P of the Income Tax Act 1963 (for short the Act) when Ext. P2, draft assessment order was issued to the petitioner. However, ignoring the objection dated 28.07.2021 filed by the petitioner to the draft assessment order, the first respondent completed the assessment as proposed in the draft assessment order. According to the petitioner, the assessing officer had erroneously held that petitioner had not filed its objection. It was also alleged that the procedure adopted was contrary to WP(C) NO. 17730 OF 2021 3 the provisions contained under section 144B of the Act. It was further pleaded that recently, a Division Bench of this court had, in W.A. No.753 of 2021, set aside the order of a learned single Judge refusing to quash an assessment order on almost identical grounds pleaded. According to the counsel for the petitioner, the present case squarely falls within the category of cases where this Court can interfere in exercise of the discretionary jurisdiction under Article 226 Constitution of India. 3. I have heard Adv. Arun Raj S., the learned counsel for the petitioner as well as Adv. Christopher Abraham, the learned standing counsel for the respondents. 4. As per the decision in Mavilayi Service Co-operative Bank and Others v. Commissioner of Income Tax, Calicut and Others [2021] 431 ITR 1 (SC) : (2021 (1) KLT 485), the income tax authority cannot go behind the classification accorded to the society under the Co- operative Societies Act and merely because the word ‘bank’ is included in the name of the society, the same would not be sufficient to deprive a primary agricultural credit society of the benefits of deduction under Section 80P of the Act. 5. In the impugned assessment order, the assessing officer proceeded to find that the assessee had not produced any relevant documentary evidence relating to the objects of the Society as a service WP(C) NO. 17730 OF 2021 4 co-operative agricultural bank. It was also found that the assessee failed to discharge its primary onus to bring evidence in support of the claim about the fund deployment for the purpose of agricultural loan to its members to be a PACS in the light of Kerala Co-operative Societies Act, 1969. The aforesaid conclusion of the assessing officer is directly contradictory to the dictum laid down by the Supreme Court in Mavilayi’s Case. 6. Further, it is seen from a reading of paragraph 4 of the impugned assessment order that the assessing officer proceeded to consider the case of the assessee on an assumption that the assessee had not filed any reply to the show cause notice issued to it. Petitioner claims that it had filed Ext.P3 objection dated 26-07-2021 to the draft assessment order dated 23-07-2021, which is produced as Ext.P2. A reading of Ext.P2 reveals that the assessing officer directed the petitioner to submit its response by 23.59 hours on 28-07-2021. Contrary to the findings in the assessment order mentioned earlier, it is seen from Ext. P4 acknowledgement from the Income tax department itself that the Department received petitioner’s reply along with relevant case law as a response on 28-07-2021. Thus there is merit in the petitioner’s contention that the impugned order is bad on account of violation of the principles of natural justice. WP(C) NO. 17730 OF 2021 5 7. In this context, it is relevant to refer to the Division Bench Judgment of this Court in W.A. No. 753 of 2021 (Poonjar Service Co- operative Bank Ltd. v. Income Tax Officer). In the afore cited judgment, the learned single Judge had refused to interfere with an order of assessment and relegated the assessee to the remedy of a statutory appeal. However in appeal, noticing that the assessing officer had failed to apply the law laid down by the Supreme Court in Mavilayi’s Case, the Division Bench set aside the order of the learned single Judge and quashed the assessment order and directed the assessing authority to redo the assessment. The assessment order is liable to be set aside on the aforesaid reason also since the assessing officer had clearly failed to apply the dictum laid down Mavilayi’s Case. 8. In view of the above, Ext.P5 order of assessment for the year 2018-19 is quashed and the first respondent is directed to re-do the assessment of the petitioner society for the said assessment year afresh after issuing notice to the petitioner and after affording him an opportunity of being heard. It is made clear that this Court has not rendered any opinion on the merits of the matter and that all contentions on merits are left open to the assessee to be canvassed before the assessing authority at the time of the hearing. Needless to say the assessing authority shall take steps to complete the assessment order as directed above taking WP(C) NO. 17730 OF 2021 6 note of the judgment of the Supreme Court in Mavilayi’s Case within an outer time limit of six months from the date of receipt of a copy of this judgment. This writ petition is allowed as above. Sd/- BECHU KURIAN THOMAS JUDGE RKM WP(C) NO. 17730 OF 2021 7 APPENDIX OF WP(C) 17730/2021 PETITIONER'S EXHIBITS : Exhibit P1 TRUE COPY OF THE DETAILED REPLY ALONG WITH THE DOCUMENT E-FILED BY THE PETITIONER IN RESPONSE TO NOTICE U/S. 142(1) OF THE IT ACT WITH E-ACKNOWLEDGMENT Exhibit P2 TRUE COPY OF THE DRAFT ASSESSMENT ORDER DATED 23/7/2021 ISSUED U/S.144B OF THE ACT BY THE 1ST RESPONDENT FOR THE AY 2018-19 Exhibit P3 TRUE COPY OF THE REPLY/OBJECTION DATED 26.7.2021 TO THE DRAFT ASSESSMENT ORDER, E-FILED ON 28.7.2021 IN THE INCOME TAX WEBSITE Exhibit P4 TRUE COPY OF THE ACKNOWLEDGMENT AND RESPONSE SHEET EVIDENCING THE FILING OF REPLY/OBJECTION TO EXHIBIT P2 DRAFT ASSESSMENT ORDER E-FILED ON 28.7.2021 Exhibit P5 TRUE COPY OF THE ASSESSMENT ORDER DATED 30.7.2021 U/S. 143930 R.W.S. 144B OF THE IT ACT ISSUED BY THE 1ST RESPONDENT FOR THE AY 2018-19 Exhibit P6 TRUE COPY OF THE JUDGMENT DATED 28.6.2021 PASSED BY THE DIVISION BENCH OF THIS HONOURABLE COURT IN WA NO.753 OF 2021 "