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Income Tax Appellate Tribunal, BANGALORE BENCHES “A”, BANGALORE
Before: Shri George George K, JM & Ms.Padmavathy S, AM
Assessee by : Sri.Madhukar G.Hegde, CA Respondent by : Sri.K.Sankar Ganesh, JCIT-DR Date of Pronouncement : 04.01.2023 Date of Hearing : 04.01.2023 O R D E R Per Bench : These appeals at the instance of the assessee are directed against four orders of the CIT(A), all dated 10.10.2022. The relevant assessment years are 2012-2013, 2016-2017 to 2018-2019. Common issues are raised in the appeals, hence, they were heard together and are being disposed of by this consolidated order.
Identical grounds are raised and they read as follows:-
“1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case. 2. The learned CIT(A)-NFAC, Delhi erred in not giving sufficient opportunity of being heard as per the principle of natural justice as the adjournment request made due to the fact that the appellant was pre occupied with income tax return filing has not been considered while passing the order.
3. The order of the CIT(A)-NFAC, Delhi against the Act and Jurisidctional Honourable High Court order in the case of Swabhimani Souharda Credit co-operative Limited vide WA No.378/2020 (T-IT) and others dated 20th December 2021 wherein it is held that co-operatives registered under Karnataka Souharda Sahakari Act, 1997 are also eligible for deduction u/s 80P(2) of the Income Tax Act, 1991.
The orders of the authorities below are against the Act and order of the Co-ordinate Bench of Hon’ble ITAT, Bengaluru in the case of Pavagada Souharda Multi Purpose Co-operative Limited vide dated 16.09.2021 for A.Y. 2016-17 wherein it is held that co-operatives registered under Karnataka Souharda Sahakari Act, 1997 are also eligible for deduction u/s 80P(2) of the Income Tax Act, 1961.
The impugned orders passed by the authorities are illegal and are liable to be set aside in view of the judgment of the Hon’ble High Court of Karnataka in ITA 29/2015 in the case of M/s.Guttigedarara Credit Co-op. Society Ltd. Mysore v. ITO Ward 2(2), Mysore and IT 307/2014 – M/s.Tumkur Merchants Souharda Credit Co-op. Ltd. v. ITO, Ward-1, Tumkur.
6. For these and other grounds that may be urged at the time of hearing of the appeal the appellant prays that the appeal may be allowed.
7. The appellant craves leave to add, alter, amend and / or delete any of the grounds mentioned above.”
The brief facts of the case are as follows: The assessee is a Co-operative Society, registered under the Karnataka Souharda Sahakari Act, 1997. The assessee is engaged in the business of providing credit facilities to its members. For the assessment years 2012-2013, 2016-2017, 2017-2018 and 2018-2019, the assessments were completed by denying the claim of deduction u/s 80P of the I.T.Act. The Assessing Officer’s primary reason for denial of deduction u/s 80P of the I.T.Act was that the assessee-society was registered under the Karnataka Souharda Sahakari Act, 1997 and it is not a co-operative society. The A.O. also held that the interest income earned on investments with Scheduled Banks and Co- operative Societies is not entitled to deduction u/s 80P of the I.T.Act. In this context, the A.O. relied on the judgment of the Hon’ble jurisdictional High Court in the case of Pr.CIT & Anr. v. Totagars Co-operative Sale Society reported in (2017) 395 ITR 611 (Kar.) and also the judgment of the Hon’ble Apex Court in the case of Totagar’s Co-operative Sale Society Ltd. v. ITO reported in (2010) 322 ITR 283 (SC). However, the A.O. did not add the interest income, since the claim of deduction u/s 80P of the I.T.Act was entirely denied.
4. Aggrieved by the denial of deduction u/s 80P of the I.T.Act, for the assessment years 2012-2013, 2016-2017 to 2018-2019, the assessee preferred appeals before the first appellate authority. The CIT(A) accepted the contention of the assessee that it would be entitled to deduction u/s 80P of the I.T.Act though registered under the Karnataka Souharda Sahakari Act, 1997 (refer para 4.3 of the CIT(A)’s order for Asst.Year 2012-2013). However, the CIT(A) confirmed the disallowance u/s 80P of the I.T.Act by holding that no details /evidences of co-operative activities of the assessee society were furnished. Therefore, it was concluded by the CIT(A) that the claim of deduction u/s 80P of the I.T.Act cannot be allowed without such factual verification.
5. Aggrieved by the orders of the CIT(A) for assessment years 2012-2013, 2016-2017 to 2018-2019, the assessee has filed the present appeals before the Tribunal. The learned AR’s primarily contention was that CIT(A) did not give sufficient opportunity of hearing. It was stated that the CIT(A) decided the case ex parte, inspite of the adjournment application submitted by the assessee. The learned AR submitted that the assessee is eligible for deduction u/s 80P of the I.T.Act in view of the judgments of the Hon’ble jurisdictional High Court in the case of Swabhimani Souharda Credit Co-operative Limited, Bengaluru v. ITO vide Write Petition No.48414 of 2018 (judgment dated 16.01.2020) and in the case of Karnataka State Shoharda Federal Co-operative Limited, Bengaluru and Others v. GOI vide Write Application No.378/2020 (judgment dated 20.12.2021). As regards the claim of interest income earned, the learned AR relied on the judgment of the Hon’ble Karnataka High Court in the case of Guttigedara Credit Co-operative Society Ltd. v. ITO, Mysore in (judgment dated 09.06.2015).
The learned Departmental Representative, on the other hand, supported the orders of the Income Tax Authorities.
We have heard rival submissions and perused the material on record. The assessee-society has been registered under the Karnataka Souharda Sahakari Act, 1997. The A.O. denied the benefit of deduction u/s 80P of the I.T.Act primarily for the reason that the assessee is not a co-operative society, since it was registered under the Karnataka Souharda Sahakari Act, 1997. The first appellate authority accepted the plea of the assessee that inspite of it being registered under the Karnataka Souharda Sahakari Act, 1997, the assessee- society would be entitled to the benefit of deduction u/s 80P of the I.T.Act, However, the CIT(A) denied the claim of deduction u/s 80P of the I.T.Act for the reason that the assessee has not been able to prove / furnish the evidences as regards the details of co-operative activities of the assessee- society for the relevant assessment years. It is claimed by the assessee that when the case was posted for hearing, the assessee has sought for adjournment, since the assessee’s Chartered Accountant was pre-occupied with Income Tax return filing. However, the adjournment request was not heeded to and the appeal before the first appellate authority was decided ex parte. The claim of deduction u/s 80P of the I.T.Act has been denied by the first appellate authority by observing as under:-
“4.10 No details of cooperative activities of the society during the year, and evidences of the same has been provided. In such a situation the claim of deduction under section 80P cannot be allowed at this stage without verification. Hence the disallowance under section 80P is confirmed. The assessee needs to explain before the income tax authority and during the appellant proceeding the exact / specific sources of its income only then any view can be taken regarding deduction or exemption of income. In absence of such explanation and audit report only on the basis of sole written submission the claim of the appellant cannot be allowed hence dismissed.”
From the above finding of the CIT(A), it is clear that the issue of deduction u/s 80P of the I.T.Act was decided against the assessee on account of it not furnishing the necessary details / evidences as regards the cooperative activities of the assessee-society. In the interest of justice and equity and since the assessee was not heard during the course of first appellate proceedings, we deem it appropriate to restore the issue of claim of deduction u/s 80P of the I.T.Act to the files of the CIT(A) and we do so. The assessee is directed to cooperate with the CIT(A) and shall not seek unnecessary adjournment. The CIT(A) is directed to afford a reasonable opportunity of hearing to the assessee. It is ordered accordingly.
In the result, the appeals filed by the assessee-society are allowed for statistical purposes.
Order pronounced on this 04th day of January, 2023.