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Income Tax Appellate Tribunal, “C’’ BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI & SMT. BEENA PILLAI
Date of Hearing : 06.06.2023 Date of Pronouncement : 06.06.2023 O R D E R PER BEENA PILLAI, JUDICIAL MEMBER:
This appeal by assessee is directed against order of NFAC dated 25.2.2023 for the assessment year 2017-18. The assessee has raised following grounds of appeal:-
1. “That the order of the learned CIT(A) is bad and erroneous in law and against the facts and circumstances of the case.
2. That the learned CIT(A) erred in law and on facts in confirming the disallowance of deduction of Rs. 45,51,241/- claimed u/s. 80P(2)(a)(i) on the facts and circumstances of the case.
3. That the learned CIT(A) and the AO ought to have appreciated that the Karnataka Souhardha Sahakari Act, 1997 and Karnataka Co-operative Societies Act, 1959 allows the Co-operative Society to admit nominal and Saunshi Urban Co-operative Credit Society Ltd., Saunshi
Page 2 of 7 associate members and therefore, deduction u/s 80P(2)(a)(i) of the Act be allowed. 4. That the learned CIT(A) ought to have directed the AO to allow proportionate income earned from regular members and associate members as deduction u/s 80P(2)(a)(i) of the Act. 5. That the learned CIT(A) erred in law and on facts in confirming an addition of Rs. 1,90,40,500/- u/s. 68 of the Act and bringing to tax u/s. 115BBE of the Act even though the assessee had explained the source of income.
6. That the learned CIT(A) erred in law and on facts in confirming an addition of Rs. 1,90,40,500/- u/s 68 of the Act on the ground that the assessee transacted in demonetized notes.
7. That the learned CIT(A) has no right in confirming that the assessee cannot transact in demonetized notes since provisions of Income tax do not provide for addition u/s 68 of the Act for such transactions.
8. That the learned CIT(A) erred in law and on facts in confirming addition u/s 68 of the Act since the receipt of demonetized currency does not have any impact or attract penal provisions under Income tax Act until and unless it is disclosed in books of accounts.
That the learned CIT(A) erred in law and on facts in confirming addition u/s 68 of the Act for violation under some other statute.
Each of the above grounds is without prejudice to one another and the assessee craves leave of this hon'ble tribunal, to add, delete, amend or otherwise modify one or more of the above grounds either before or at the time of hearing of this appeal.”
The assessee has also raised additional grounds vide petition dated 3.4.2023, which are as follows: 1. “Without prejudice to the right to seek waiver with the Hon'ble Chief Commissioner of Income Tax/ Director General of Income Tax, the assessee denies itself liable to be charged to interest under section 234B since it is not in accordance with the law as the rate, amount and the method of calculating interest is not discernible from the order of assessment.
Saunshi Urban Co-operative Credit Society Ltd., Saunshi
Page 3 of 7 2. The assessee craves leave to add, alter, delete or substitute any of the grounds urged above.
3. In the view of the above grounds that may be urged at the time of hearing of the appeal, the Assessee prays that the appeal may allowed in the interest of justice and equity.”
The assessee further raised additional grounds vide letter dated 5.6.2023, which are as follows: 1. “That the learned Commissioner of Income Tax (Appeals)/NFAC erred in not granting adequate opportunity of hearing to the Assessee and thus the impugned order is violative of principles of natural justice on the facts and circumstances of the case.”
We have heard the both the parties on admission of additional grounds. In our opinion, all the facts are already on record and there is no necessity of investigation of any fresh facts for the purpose of adjudication of above ground. Accordingly, by placing reliance on the judgement of Hon’ble Supreme Court in the case of NTPC Vs. CIT 229 ITR 383 (SC) we inclined to admit the additional ground for the purpose of adjudication as there was no investigation of any fresh facts otherwise on record and the action of the assessee is bonafide.
Facts of the case are that the assessee is a credit co-operative society assessed to income tax by Income Tax Office, Ward — 1(1), Hubli. The assessee filed its return of income for the assessment year 2017-18 declaring total income as Nil after claiming a deduction of Rs.45,51,241/- u/s. 80P(2)(a)(i) of Act. The assessee's case was selected for scrutiny. Notices u/s 143(2) and 142(4) of the Act were served on the assessee. The learned assessing officer passed an order u/s. 143(3) of the Act dated 25.11.2019 by assessing the total income at Rs.2,35,91,741/-.
Saunshi Urban Co-operative Credit Society Ltd., Saunshi
Page 4 of 7 Brief facts about the disallowances/additions made by the learned assessing officer is given below — a. Disallowance of deduction claimed u/s 80P(2)(a)(i) of the Act - Rs. 45,51,241/- b. Addition u/s. 68 of the Act- Rs. 1,90,40,500/- Brief facts of the additions/disallowances being appealed:
5.1. Disallowance of deduction claimed u/s 80P(2)(a)(i) of the Act - Rs. 45,51,241/ 5.2. The learned assessing officer stated that the assessee is having three category of members namely regular/permanent members, associate members and nominal members. All these members are providing and utilizing the facilities provided by the society, however, the associate and nominal members do not have the same right and facilities as that of regular/normal members. Thus, they are contributors to the surpluses but are not participators in the business activity of the society. So, the principle of mutuality between the regular/normal members and nominal members is lost. Hence, the appellant society cannot be considered a co-operative society eligible for deduction u/s 80P(2)(a)(i) of the Act.
5.2 The learned assessing officer relied on the decision of the Hon'ble Supreme Court in the case of The Citizen Co-operative Society Ltd v. ACIT. C-9(1), Hyderabad and disallowed the deduction claimed u/s 80P(2)(a)(i) of the Act.
Saunshi Urban Co-operative Credit Society Ltd., Saunshi
Page 5 of 7 Addition u/s. 68 of the Act — Rs.1,90,40,500/- 5.3 During the assessment proceedings, the learned assessing officer sought for the explanation of cash deposits of Rs.1,90,40,500/- made in demonetized currencies in the denomination of Rs. 500/- and Rs.1000/-. The assessee explained that the above amounts were received from its members towards deposits in their respective accounts maintained with the assessee and repayment of loans taken from the assessee. The assessee furnished the complete details of the members from whom the above amounts were received and proved the sources of the same. After consideration of the submissions of the assessee, the learned assessing officer held that the assessee had deposited demonetized currencies in the denomination of Rs.500/- and Rs.1000/- to the extent of Rs.1,90,40,500/- where the assessee was not entitled to transact any business with such demonetized notes therefore, the same has to be brought to tax u/s. 68 of the Act as unexplained cash credits. Aggrieved by the aforesaid order, the assessee went in appeal before the ld. CIT(A), Hubli is moving this appeal before the learned Commissioner of Income Tax (Appeals), Hubli who has confirmed the assessment order. Against this assessee is in appeal before us.
Now the primary contention of the ld. A.R. in the second additional ground is that assessment order has been passed without giving proper opportunity of hearing. He submitted that notices for hearing have been given by the NFAC as follows:
Saunshi Urban Co-operative Credit Society Ltd., Saunshi
Notice issued Issued date Fixing for Remarks u/s 250 hearing ITBA/NFAC/F/APL- 23.01.2021 08.02.2021 Adjournment 1/2020- request filed. 21/1030042301(1) ITBA/NFAC/F/APL- 18.01.2023 25.01.2023 Uncomplied by 1/2022- appellant/assessee 23/1048886179(1)
In view of this non-compliance from the assessee’s side, the NFAC confirmed the order of AO.
The ld. D.R. submitted that assessee has not make use of opportunities given to it before NFAC. Hence, appeal be decided on merit only.
We have heard the rival submissions and perused the materials available on record. In this case, admittedly, assessee has not participated before NFAC by filing requisite information and the NFAC decided the issue ex-parte. In our opinion, in the interest of justice, it is appropriate to remit the entire issue in dispute to the file of NFAC to decide the issue afresh after giving an opportunity of hearing to the assessee.
8.1. Since we have allowed the additional ground with regard to non-providing proper opportunity of hearing to the assessee, we refrain from going into other grounds of appeal of the assessee at this stage.
Saunshi Urban Co-operative Credit Society Ltd., Saunshi
Page 7 of 7 9. The appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 6th June, 2023