J 305 KODAVALIVARIPALEM PRIMARY AGRICULTURAL CO- OP SOCIETY,BAPATLA vs. ITO, WARD-1, ONGOLE

It was further submitted that the delay in filing the appeals was neither willful nor deliberate but occurred due to unavoidable circumstances beyond the control of the assessee. The learned counsel for the assessee submitted that the Chief Executive Officer of the assessee-society had met with an accident while driving a scooter and suffered a fracture to his right leg, requiring hospitalization and continuous medical treatment. Therefore, the appeal could not be filed within the prescribed period. It was further submitted that, the delay had occurred due to bona fide any deliberate negligence or mala fide intention. Therefore, it was prayed that the delay of 7 days in filing the appeals may kindly be condoned in the interest of justice.

The learned Senior A.R. for the Revenue, Shri B. Laxmi Kanth, on the other hand, opposed the condonation petition filed by the assessee. He submitted that the assessee has failed to file the appeals within the prescribed period and, therefore, the delay may not be condoned. However, he fairly submitted that the issue may be decided in accordance with law on the basis of the facts and material available on record.

We have heard both the parties, perused the petition and affidavit filed by the assessee seeking condonation of delay of 7 days in filing the appeals before the Tribunal. We find that, the reasons explained by the assessee appear to be genuine and bona fide and come under 'sufficient cause'. We further find that, the Hon'ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji, reported in 167 ITR 471 (SC), has laid down certain principles for condoning the delay and directed that a lenient approach should be followed to avoid dismissal of meritorious cases on technical grounds. Going by the principles laid down in Mst. Katiji (supra), and also considering the submissions of the assessee, we condone the delay of 7 days in filing the appeals before the Tribunal and admit the appeals for adjudication.

The brief facts of the case are that the assessee is a Primary Agricultural Cooperative Society established under the Andhra Pradesh Cooperative Societies Act, 1964, and its predominant objective is to provide credit facilities to farmers for undertaking agricultural activity. The assessee had not filed the original return of income under section 139(1) of the Income-tax Act, 1961. In this case, specific information was flagged as per the Risk Management Strategy formulated by the CBDT through the Insight Portal. It was noticed that, the assessee had made various financial transactions, including cash deposits and cash withdrawals, in the current account maintained with the Prakasam District Central Cooperative Bank Limited. Therefore, the assessment was reopened under section 147 of the Act and, after following the due procedure provided under section 148A, notice under section 148 of the Act, dated 09.04.2022 was issued and served on the assessee. In response to the notice, the assessee had filed the return of income on 06.05.2022, declaring total income at Nil and claimed deduction under section 80P(2)(a)(i) of the Act, amounting to Rs.1,94,360/-.

The case was selected for scrutiny and, during the course of assessment proceedings, notices under section 142(1) of the Act, were issued on various dates, but there was no response from the assessee. Therefore, the A.O. passed a best judgment assessment order under section 144 r.w.s. 147 of the Act on 24.04.2024 and determined the total income at Rs.36,35,663/- by making an addition towards estimated profit at 5% on the total credits into the bank account, including cash deposits, and made an addition of Rs.34,04,295/-. The A.O. had also disallowed the deduction claimed under section 80P(2)(a)(i) of the Act, on the ground that the assessee had not satisfied the conditions prescribed for claiming such deduction by filing the return of income on or before the due date provided under section 139(1) of the Act.

Aggrieved by the assessment order, the assessee is now in appeal before the Ld. CIT(A). Before the Ld. CIT(A), despite providing a number of opportunities, the assessee neither appeared nor furnished any details. Therefore, the Ld. CIT(A), by the Hon'ble Supreme Court in the case of CIT v. B.N. Bhattacharjee & Another reported in (1979) 118 ITR 461 (SC), held that the appeal was liable to be dismissed for non- prosecution. The Ld. CIT(A), however, also proceeded to adjudicate the issues on merits. The Ld. CIT(A) noted the assessee's submission that, being a credit cooperative society and predominantly engaged in providing credit facilities out of the funds received from the District Central Cooperative Bank, the transactions in the bank account, including cash deposits, other credits and cash withdrawals, are out of normal business transactions, and the same have been accounted for in the books of account. Therefore, the A.O. erred in estimating 5% profit on the total credits, including cash deposits. The assessee has also challenged the disallowance of deduction under section 80P(2)(a)(i) of the Act. Although the assessee had not furnished the return of income under section 139(1) of the Act, it had filed the return of income in response to the notice under section 148 within the time provided in the said notice. Once the return of income is filed in response to the notice under section 148, then such return partakes the nature of the return filed under section 139(1) of the Act. Therefore, the assessee is entitled to claim deduction under section 80P(2)(a)(i) of the Act. The Ld. CIT(A), after considering the relevant submissions of the assessee, facts of the case and also taking note of various reasons given by the A.O., rejected the explanation of the assessee and upheld the addition made by the A.O. towards 5% profit estimated on the total credits, including cash deposits into the bank account. The Ld. CIT(A) had also rejected the explanation of the assessee with regard to the deduction claimed under section 80P(2)(a)(i) of the Act, and held that in order to claim deduction under section 80P(2) of the Act, it is mandatory to file the return of income on or before the due date provided under section 139(1) of the Act. Since the assessee had not filed the return of income within the due date prescribed under section 139(1) of the Act, the A.O. had rightly disallowed the deduction under section 80P(2)(a)(i) of the Act.

Aggrieved by the order of Ld. CIT(A), the assessee is now in appeal before us.

The learned counsel for the assessee, Shri Lakshmi Narasimha, C.A. submitted that the assessee, being a Primary Agricultural Credit Cooperative Society, is engaged in providing District Central Cooperative Bank. The source for credits into the bank account and cash withdrawals from the bank account is regular business transactions of the assessee out of funds advanced to the members and funds received from the members towards repayment of loans, etc. The A.O., having noted the fact that the assessee being a credit cooperative society, erred in estimating profit at 5% on the total credits, including cash deposits.

The learned counsel for the assessee further submitted that the A.O. has also erred in disallowing deduction under section 80P(2)(a)(i) of the Act, even though the assessee had filed the return of income within the due date provided in the notice issued under section 148 of the Act, and once such return is filed within the due date, then it is as good as the return of income filed under section 139(1) of the Act. The assessee satisfies the conditions prescribed for claiming deduction under section 80P(2)(a)(i) of the Act. Therefore, he submitted that the addition made by the A.O. towards cash deposits and the estimated profits should be deleted, and the A.O. may be directed to allow deduction under section 80P(2)(a)(i) of the Act.

The learned Senior A.R. for the Revenue, on the other hand, submitted that the assessment proceedings before the A.O. were ex parte. The Ld. CIT(A), after considering the relevant facts, has rightly upheld the addition made by the A.O. towards profit estimated at 5% on the total credits in the bank account, and also denial of deduction under section 80P(2)(a)(i) of the Act. Therefore, he submitted that the order of the Ld. CIT(A) should be upheld.

We have heard both the parties, perused the material available on record and had gone through the orders of the authorities below. There is no dispute with regard to the fact that the assessee is a Primary Agricultural Cooperative Society and predominantly engaged in providing credit facilities to its members out of the funds received from the District Central Cooperative Bank. The assessee also maintains regular books of account and is subjected to audit as per the laws of the State Government applicable for the cooperative societies. In fact, the assessee claims to have maintained the books of account and also obtained the audit report from the concerned authorities. The assessee had deduction under section 80P(2)(a)(i) of the Act. The A.O. assessed the total income at Rs.36,35,663/- by making an addition of Rs.34,04,295/- towards profits estimated at 5% on the total credits into the bank account. Further, the A.O. disallowed the deduction claimed under section 80P(2)(a)(i) of the Act on the ground that the assessee has not satisfied the conditions prescribed for claiming such deduction.

It is an admitted fact that the assessment proceedings before the A.O. were ex parte. The assessee neither furnished any explanation nor made out a case for claiming deduction under section 80P(2)(a)(i) of the Act. Before the Ld. CIT(A), despite being provided various opportunities, the assessee neither appeared nor filed any explanation. Although the assessee claims that it has maintained regular books of account and the credits in the bank account, including cash deposits and withdrawals, form part of the regular books of account maintained for providing credit facilities to its members, but the fact remains that neither the A.O. nor the Ld. CIT(A) has examined the books of account of the assessee maintained for its business. Further, the assessee has also not got an effective opportunity to justify its case for claiming deduction under section 80P(2)(a)(i) of the Act. Since the proceedings before the A.O. and the Ld. CIT(A) are ex parte, in our considered view, to give one more opportunity of hearing to the assessee to justify its case, the matter needs to be set aside to the file of the A.O. Thus, we set aside the order of the Ld. CIT(A) and restore the issue back to the file of the A.O. The A.O. is directed to reconsider the issue de novo after providing an opportunity of hearing to the assessee to explain its case and decide the issue of deduction under section 80P(2)(a)(i) of the Act as per law.

In the result, the appeal filed by the assessee for A.Y. 2018-19 is allowed for statistical purposes.

The facts and issues involved in this appeal filed by the assessee for A.Y. 2019-20 are exactly identical to the facts and issues which we have considered in the assessee's own case for A.Y. 2018-19 hereinabove, except change in figures. The reasons given by us in the preceding paragraph nos. 13 and 14 shall mutatis mutandis apply to this appeal, as well. Therefore, for similar reasons, we set aside the order of the Ld. CIT(A) and restore the issue back to the file of the A.O. The A.O. is directed to reconsider the issue de novo after providing an opportunity of hearing to the assessee to explain its case and decide the issue of deduction under section 80P(2)(a)(i) of the Act as per law.

In the result, the appeal filed by the assessee for A.Y. 2019- 20 is allowed for statistical purposes.

To sum up, both the appeals filed by the assessee are allowed for statistical purposes.

The Principal Commissioner of Income Tax, Guntur. 4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, हैदरधबधद / DR, ITAT, Hyderabad 5. गधर्ाफ़धईल / Guard file