The Prudential Co-operative Bank Ltd, Rep. by its Official Liquidator, Smt. K Anitha V. Deputy Commissioner of Income Tax, Circle - 2(3), Hyderabad

ITTA/250/2022

AI Insights

The case involves the Prudential Co-operative Bank Ltd, which, under the management of its official liquidator, faced a series of income tax assessments and appeals concerning the assessment year 2005-06. The bank, after its banking license was canceled by the RBI, underwent liquidation and subsequently, various assessments were made by the Income Tax Department, leading to disputes over the taxable income and deductions claimed under the Income Tax Act, particularly concerning Non-Performing Assets (NPA) and deductions under Section 80P. The bank's appeals at different levels were met with procedural and substantive dismissals, leading to the significant delay in filing an appeal against the Income Tax Appellate Tribunal's decision, which was eventually condoned by the High Court.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 816025 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 31-08-2023
• Assessment Year: misc
• Other Referred Cases: Surya General Traders vs. Commercial Tax Officer, Collector, Land Acquisition vs. MST. Katiji, Esha Bhattacharjee vs. Mg. Comdt. of Raghunathpur Nafar
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: SUNDARI R PISUPATI
• Assessee Lawyers: A V RAGHURAM MURTHY
• Keywords: Assessment Year 2005-06; Condonation of delay; Delay in filing; Income Tax Tribunal Appeal; Liquidation; Non-performing asset; Banking License Cancellation
• Section: 147; 148; 143(3); 154; 143(1); 260-A

Judgement Text

"II IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD THURSDAY, THE THIRTY FIRST DAY OF AUGUST TWO THOUSAND AND TWENTY THREE PRESENT THE HON'BLE SRI JUSTICE P.SAM KOSHY AND THE HON'BLE SRI JUSTICE LAXMI NARAYANA ALISHETTY INCOME TAX TRIBUNAL APPEAL No:25O of 2022 lncome Tax Tribunal Appeal Under Section 260 of the lncome Tax Act,1961 against the order of the lncome Tax Appellate Tribunal, Hyderabad Bench ' B', Hyderabad in ITA No.101/Hydl2018, for assessment Year 2005-06 dated 17-08- 2O22, preferrd against the Order of the Deputy Commissioner of lncome Tax Circle- 2(3), Hyderabad, ITA No.DC-2(3yAABCT7077Jl2013-14, dated 17-O2-2O14, preferred against the Order of the Assistant Commissioner of lncome Tax, Circle- 2(3), Hyderabad, PAN/GIR No. AABCT 7077 J I f -17 8, dated: 29-1 2-2008. Between: The Prudential Co-operative Bank Ltd, Rep., by its Official Liquidator, Smt. K Anitha, 8-1-381, R.P. Road, Secunderabad - 500003. ...Appellant AND Deputy Commissioner of lncome Tax, Circle - 2(3), Signature Towers, Opp Botanical Gardens, Kondapur, Hyderabad - 500084. ...Respondent Counsel for the Respondent: SRI SUNDARI R PISUPATI, Sr.SC FOR INCOME TAX DEPARTMENT The Court delivered the following: JUDGMENT [ 3386 I Counsel for the Appellant: SRI A\"V. RAGHURAM MURTHY I I,ONOT'RABLE SRI JUSTICE P.SAIII KOSM' AND HON'BI,E SRI JUSTICE LIU(III NARAYANA ALISIIE]\"TY INCC I{E TAX TRIBUNAL APPEAL NO.250 OF 2O2i\" .IJDGMENT: (p r Hon'ble Si Justice Lotmi Naragaaa Alisha'ttA) The pre.;ent appeal has been liled under se,:tjon 260-A of Income Tax I ct, 1961 (for short, the \"Act\") assailing the order passed by Inc< me Tax Appellate Tribunal, Benc,h-B, H5de:abad (for short \"Tribunel\") in ITA No.101/Hyd/2O18, dated -.7.O8.2O22 for the Assessme nt Year 2005-06. Vide impugned orde,r, dated L7.O8.2O22, t re Tribunal dismissed the appeal filed by the petitioner by o l;serving that there is no suflicicnt cause made out by ttre assesset to condone the delay and the reasons s lated for the delay are not at. all relevant in so far as the apl)eal ci:ra.llenging ttre order dated 1..08.2013 is concerned and dismissr:d the appeal without going t rrough the merits of the appeal. 2. We have heard the learned counsel Sri .A.. '.Raghuram Murthy for the lppellant and the learned senior starrding counsel for the respondt'n t. 3. The brief ftrcts leading to hling of pres,:nt aopreal are as under: PSK,J & LNA,J ITTA No.250 of2022 2 4. The appellant is a Co-operative Society, registered under Mutually Aided Co-operative Societies Act, 1995 and is engaged in the business of banking as licensed by Reserve Bank of India. The appellant frled its returns for the Assessment Year 2O05-06 on 2a.1O.2015, by admitting loss of Rs.9,O6,34,836/-. The return of income of the appellant was processed under Section 143(1) of the Income Tax Act, 1961 (for short, 'the Act') on 31.12.2OO5 by accepting the loss returned. Subsequently, the assessment was reopened on the ground that tJle Reserve Bank of India (RBI) cancelled the appellant's banking license w.e.f. O4.12.2OO4 and accordingly, notice under Section 148 of the Act was issued. Thereafter, the assessment proceedings were completed by the respondent under Section 143(3) read with Section 147 of the Act, on 29.l2.2OO8 by determining the income of the appellant at Rs. 1O,48, 16,318/- and disallowed the claim of deduction under Non-Performing Asset (NPA) provision and further disallowed the claim of under Section 8OP of the Act on the ground of cancellation of license of the appellant by RBI. 5. Th.e appellant hled Appeal before the Commissioner of [ncome Tax (Appeals) (for short, the Appellate CommissionerJ against the assessment order, dated 29.12.2OOa. The appellant contended that appqJlant being a Co-operative Society engaged in the business of PSK,J & LNA,J l7-l A Na.250 of2022 3 banking and :arned the entire income up to 06. l2.2OO.l and after O7.12.2OO4, ,tre appellant did not carry any banking activity. Therefore, de luction u/s. 80P of the Act is zrllowable tr t]re total income of co operative society engaged in the bushess ,rf banking or of a co-rjperative society providing crt'dit facilitles to its members. 6. The Ap6 ellate Commissioner vide his orcier daterl 27.01.2o10 did not accep r- the contentions of appellant rvith r<:sp,:ct to the claim of NPA Ceduction u/s. 8OP of the Act and rrk;o .ralidit5r of issuance of notice u/s. 148 of the Act and dismissed *re a,ppeal. 7, Aggrieve l by the same, the appellant filt'd ap1>e,el lrcfore the Income Tax Al.,pellate Tribunal (ITAT) and the ITAT vide its order dated 26. 1 1. ,)013 quashed the order of the Appellate Commissioner and allor'r,ed the appeal on the issue of validity of issuance of no ice u/s. 148 of the Act. Aggrievt:d by th.e same, the Deputy Commi:;sioner of Income Tax (DCIT) hled app.:al before this Court vide ITTI No.4a7/2O14 and the same is pending. 8. In the meanwhile, the assessment of the appellant for Assessment Ye,:r 20O5-O6 was reopened by the Departrnent and notice under Se ,:tion 148 of thc Act was issued ,tn 27.O3.2O12 and qrvd on the Official Liquidator of the appellant since t.Ile appellant was ur:tder liquidation and the respon(lent cornpleted the I t i l PSK,J & LNA,J ITTA No.250 of2022 4 assessment by determining the income of the appellant at Rs.32,66,86,90/ - and also disallowed interest expenditure of Rs.22,18,70,1751- by invoking provisions of Section 40a(ia) of the Act, on the ground that tax was not deducted at source. 9. The appellant before the Appellate Commissioner submitted that the respondent disallowed the entire interest for the whole year and submitted upto the date of cancellation of banking license by RBI, the appellant was not required to deduct tax at source on payment of interest. The Appellate Commissioner, uide order dated 14.O8.2O 13 partly allowed the appeal with a direction to respondent to calculate the interest paid till 03.12.2OO4 . Thereafter, the Appellate Commissioner passed consequential order on 14.02.2014 observing that the appellant did not lile necessary evidence as per the directions of the Appellant Commissioner and therefore, interest paid until 03.12.20O4 could not be calculated. Subsequently, the respondent passed the consequential order on L7.O2.2O14 by determining tlte income of the appellant at 'NIL'. Thereafter, the respondent passed order on 15.03.2017 under section 154 of the Act by rectirying the consequential order, dated 14.02.2014, by determining the total income at Rs. 13,14,33,731l- and tax at Rs. 6,26,6O,7651-. PSK,J & LNA,J Ifi rt No 250 of2022 5 10. After il came to know about the order oassel under Section 154 of the , ct on 07.11.2017 and after seekinl3 advice of the Commissione : of Co-operative Societies and Tax '3ons':ltant, the appellant frle,1 Appeal before the Appellate Tribuna. cn I1.01.2018 against the rrder of Appellate Commission,-'r dale(l I4.08.2013 with a delay application. The Appellate Trii:unal, vidt: its order dated 17.08.1',O22 in ITA No. 101/Hyd/2O18, rlismir;sr:d the appeal on the groun( I of delay in filing the appeal. Aggriev,:d by the above said order, dated 17.O8.2O22, appellant f-rled the present appeal. 11. lean red counsel for the appellant submits that despite explaining pL rusible reasons, the Tribunal d id nc,t condone the delay and the:'eby dismissed the appeal. He lurther sutrmits that the Tribunal c rght not to have dismissed the appeal on the ground of technicalitir,s in spite of binding judgments in thr casr: of Surya General Tradr r,rs va. Conmercial Tax OIIicer and othersl, order dated 03.07.2(.04, as well as Honble Supreme Cour, in the case of Collector, Lal rrd Acquisition vs. MST. Katiji and others2. The appeal ought not to have becn dismissed on the: ground of limitation, sinr'e the appellant has very good case on mr:rits. He further submj :s that Appeltate Tribunal m sdire(tr(:d itsetf by incorrectly app lying the judgment of Hon'ble Sr rprerr e Corrrt in the ' rgsz (:)arr rro -'? 987) 167 trR 471 ( c) I' I t t I PSK,J & LNA,J ITTA No.250 of2022 6 case of Esha Bhattacharjee vs. Mg.ComEit. of Raghunathpur Nafara. 12. The learned counsel for the appellant submits that appellant was under liquidation and the offrcial liquidator has been operating the Appellant Bank. In view of the order d,ated 17.O2.2O14, wherein the tax stated to be 'T,{|L\", they were under impression that no further action is required to be taken in the matter. The appellant, however, subsequently noticed that in the order dated L7.O2.2OL4, there was no reference to the earlier order, but received a letter dated 18.O3.2O17 directing the oflicial liquidator to pay outstanding amounts. [n response to the same, the ollicial Iiquidator addressed a letter dated i7.03.2O17 to Assessing Officer requesting to clarify as to how there was a demand for Assessment Year 2OO5-O6 when as per the order, dated 17 .O2.2O14 the demand was \"NIL'. 13. The learned counsel for the appellant further submits that it appears that the Assessing Officer addressed a letter dated 15.03.2017, but the same was not available in the records of appellant. When the official liquidator appeared before the Assessing Officer on O7.ll.2ol7 in connection with notices for Assessment Years 20 14-15 and 2015-16, it came to light from the ---.. '(zor*)lzsccoqs I 7 PSK.J & LNA,J ITl A No.250 of 202 2 7 records of As:;essing Officer that in fact, a letter w:rs ad,lressed on 15.03.2017 a:rd was served in the appellant rffice or1 11.O7.2017. Thereafter, tl:.e oflicial liquidator had obtairLed legz:l e.dvice and after consulti:rg Commissioner of Co-operativt: Societies an appeal was filed on I 1..01.2O18 with delay of 1529 days. 14. l.earnec counsel for the appellant further submitted that the appellant is r r Co-operative bank under liqtLidation arrd as the official liquidalor was not conversant with the tax nra:ters and did not take notr: of letter dated 15.03.2017 addressect by the Assessing Oflir:er and therefore could not take stel)s in time. He would further submit that a lenient view may be take n, since the appellant is bling officiated by ofhcial liquidalor and furlher, the appellalt has',ery good case on merits. He fur,.her contended that if the appeal ir; rejected on technicalities of celay, the irppellant would be depri,ed from contesting the matter on merit:;, urhich are clearly in favor rr of appellant. He also submits that the .rmounts payable to the lepositors of appellant bank are beinli 1;airl in pro- rata basis from the amounts that are being re< eived flom time to time and if the appeal is rejected at the threshold rvit.ho.:t going into the merits, it will have serious effect on the barrk as well as depositors, who will be ultimate sufferers. I I i I I I I I I I I 1 I i I t PSK.J & LNA,J lTT,l No.250 of2022 8 15. Per contra, learned standing counsel for respondent would submit that the impugned order is proper, sustainable as much as ttre appellant failed to make out any case and also did not show valid, proper reasons for condonation of inordinate delay of 1529 days in frling the appeal. He further submitted tJlat there are clear latches, default on the part of appellant and further, no case is made out for condonation of delay and thus prayed for dismissal of the appeal. Coasideration: 16. It is an admitted fact that the license of appellant was cancelled by the RBI on 74.02.2014 and the appellant was under liquidation and is being operated by official liquidator and is responsible for administrative and other activities concerning the appellant bank. The averments made in the allidavit that the oflicial liquidator did not notice the letter dated 15.O3.2O17 addressed by Assessing Officer and that due to lack of knowledge of income tax proceedings, the appeal could not be filed and thus, a delay of L529 days occurred in preferring the appeal, does not inspAe the confidence of this Bench. 17 . However, this Bench is concerned with the difficulty, injustice that may result to the depositors of the appellant-bank. To a query of this Bench u'ith regard to refund of the amounts to I l PSK.J & LNA.J ITI 1 lt'o 250 of2022 9 the depositor s, the learned counsel for appellant infrrrmed the Bench that tt e depositors are being paid their amorlnts in pro-rata basis from th:: amounts that are being received by the i:alk from time to time. . n the above factual matrix, if tht: delay ,epplication is dismissed on the technicalities, the depositors woutd be put to further hardship for no fault of ttrem. On the olht:r hand, the consequence ,f condone the delay would result in dec:iding the appeal on mer its by the Appellate Tribunal on its ou'n rnerits and no prejudice wrruld be caused to the respondents. 19. In the ab rve factual matrix and circumstances, tfris Bench is inclined to con( one the delay of 1529 days in preferring the appeal subject to pa:,ment of costs of Rs.15,OOO/ - (Rupees hlteen thousand only) payable to the Secretary, S<e Lr:g,el Services Authority, withi:r a period of four weeks from today e.n,i nratter is remanded back to the Respondent for adjudicettion rr' merits in accordance with law in expeditious manner. , I 18. Consider ing the ordeal, plight of the depc,sitors and the huge impact that mrry have on the depositors, in consider,:d vir:w of this Bench, a syml,atJretic view has to be taken while cor-rsid':ring the delay in prefen rng appeal. Conclusion: i t PSK.J & LNA,J ITTA No.250 of2022 20. Accordingly, the present appeal is disposed of No order as to costs. Pending miscellaneous applications, if any, shall stand Sd/. K. SRINIVASA RAO JOINT REGISTRAR //TRUE COPY// SEC OFFICER '1. The lncome Tax Appellate Tribunal, Hyderabad Bench ' B', Hyderabad 2. The Deputy Commissioner of lncome Tax Circle-2(3), Hyderabad, 3. The Assistant Commissioner of lncome Tax, Circle-2(3), Hyderabad, 4. One CC to SRI A.V. RAGHURAM MURTHY, Advocate [OPUC] 5. One CC to SRI SUNDARI R PISUPATI, Sr.SC FOR INCOME TAX DEPARTMENT [OPUC] 6. Two CD Copies To, kam 0 closed. l0 HIGH COUIRT DATED:31 ll$l2023 JUDGMENT ITTA.No.25(t of 2022 DISPOSING OF THE APPEAL I .4 l.' SiTAT€ ,, |:) ! ) c $1 sti u0 + '' - O,;p'6lC)' GJ+, w-- ilt*W Qr "