PARTHASARADHI MUTUALLY AIDED CO-OPERATIVE THRIFT SOCIETY LIMITED,HYDERABAD vs. INCOME-TAX OFFICER, WARD-17(1), HYDERABAD

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ITA 2322/HYD/2026Status: HeardITAT Hyderabad16 October 20268 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal condoned the delay of 171 days in filing the appeal, being satisfied that the assessee was prevented by sufficient cause due to communication issues. Regarding the main issue of Section 80P deduction, the Tribunal admitted the additional evidence (English translations of bye-laws and financial statements) under Rule 29 of the ITAT Rules, 1963, as it was relevant to the assessee's activities and income source. However, it held that the entries in the translated financial statements and the claim that interest was solely from members required verification with original records, books of account, membership records, and supporting documents. Such factual verification could not be dispensed with. Consequently, the Tribunal set aside the order of the Ld. CIT(A) on this issue and restored the matter to the file of the AO for fresh adjudication. The AO was directed to examine the additional evidence, verify the nature and source of interest income, and determine its eligibility for deduction under Section 80P, considering the principles laid down in Totgars Co-operative Sale Society Ltd. Vs. ITO (supra). The Tribunal expressed no opinion on the merits of the claim. The issue of interest under Sections 234A and 234B was not explicitly decided as the matter was remanded.

What were the facts?

The assessee, Parthasaradhi Mutually Aided Co-operative Thrift Society Ltd, filed an appeal before the Income Tax Appellate Tribunal (ITAT) challenging the order of the Learned Commissioner of Income Tax (Appeals) (NFAC) Delhi for Assessment Year 2016-17. The appeal was filed with a delay of 171 days, attributed by the assessee to a communication lapse involving its part-time accountant and tax consultant. The revenue did not seriously object to the condonation of delay. The core dispute revolves around the disallowance of a deduction of Rs. 18,83,980/- claimed under Section 80P(2)(a)(i) of the Income Tax Act, 1961. The Assessing Officer (AO) initiated reassessment proceedings under Section 147 as the assessee had not filed its return of income. The AO disallowed the deduction, holding that the interest income was received from persons other than the society's members.

What were the issues?

1. Whether the delay of 171 days in filing the appeal before the Tribunal should be condoned, considering the explanation provided by the assessee regarding communication failure. 2. Whether the denial of deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961, amounting to Rs. 18,83,980/-, by the AO and confirmed by the Ld. CIT(A) is justified, on the grounds that the interest income was earned from credit facilities provided to members and declared under 'Profits and gains from business or profession' and not 'Income from Other Sources'. 3. Whether the AO/NFAC/CIT(A) erred in levying interest under Section 234A and Section 234B of the Act. Assessee's Arguments: - The delay was due to a communication breakdown and not deliberate, praying for condonation. (Ground 1, Para 2) - The entire interest income was earned from credit facilities provided to its members, making it eligible for deduction under Section 80P(2)(a)(i). (Grounds 2, 3, 4, Para 8) - The financial statements were in Telugu, which might have led to misinterpretation by the AO. English translations of bye-laws and financial statements are now submitted as additional evidence. (Para 8) - Relied on Totgars Co-operative Sale Society Ltd. Vs. ITO [2010] 322 ITR 283 (SC). (Para 8) Revenue's Arguments: - Did not seriously object to the condonation of delay. (Para 3) - The English translations of bye-laws and financial statements are being furnished for the first time, requiring factual verification by the AO. (Para 9) - Prayed for the issue to be restored to the AO for examination of additional evidence. (Para 9)

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 139,Section 144B,Section 250,Section 80P(2)(a)(i),Section 80P,Section 234A,Section 234B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Hyderabad ‘ B ‘ Bench, Hyderabad

Before: Shri Ravish SoodShri Madhusudan Sawdia

Hearing: 12/10/2026

आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ B ‘ Bench, Hyderabad �ी रिवश सूद,�ाियक सद� एवं �ी मधुसूदन साविड़या लेखा सद� सम� | Before Shri Ravish Sood, Judicial Member A N D Shri Madhusudan Sawdia, Accountant Member आ.अपी.सं /ITA No. 2322/Hyd/2026 (िनधा�रण वष�/Assessment Year: 2016-17) Parthasaradhi Mutually Vs. Income Tax Officer Aided Co-operative Thrift Ward 17(1) Society Ltd, HYDERABAD Hyderabad PAN:AACAP2696N (Appellant) (Respondent) िनधा��रती �ारा/Assessee by: Shri Abhiroop Bhargav, CA राज� व �ारा/Revenue by: Shri P Sai Krishna, Sr. AR सुनवाई की तारीख/Date of hearing: 12/10/2026 घोषणा की तारीख/Pronouncement: 16/10/2026 ORDER Per Madhusudhan Sawdia, A.M.: This appeal is filed by Parthasaradhi Mutually Aided Co-operative Thrift Society Ltd (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) Delhi (“Ld. CIT(A)”) dated 18.11.2025 for the A.Y. 2016-17.

2.

At the outset, it is observed that there is a delay of 171 days in filing the present appeal before this Tribunal. The assessee has filed a petition along with an affidavit explaining the reasons for the delay. The Learned Authorised Representative (“Ld. AR”) submitted that the assessee’s part- time accountant was entrusted with coordinating with the tax consultant and monitoring the registered email account and the income-tax portal in relation to tax matters. However, the tax consultant failed to inform the management about the passing of the order by the Ld. CIT(A). Subsequently, when the assessee’s counsel enquired with the accountant about the order, the part-time accountant informed the management about its passing. Immediately upon acquiring knowledge of the order, the management took steps to file the appeal before this Tribunal. In this process, a delay of 171 days occurred. The Ld. AR submitted that the delay was neither deliberate nor intentional and prayed that the same be condoned and the appeal be admitted for adjudication on merits. 3. Per contra, the Learned Departmental Representative (“Ld. DR”) did not seriously object to the condonation of the delay and admission of the appeal for adjudication on merits. 4. We have heard the rival submissions and perused the material available on record. The substance of the submission of the Ld. AR is that the delay arose from a failure to communicate the order of the Ld. CIT(A) to the management, as the income-tax matters were being coordinated through the part-time accountant and the tax consultant. It was further submitted that the management took immediate steps to file the appeal upon becoming aware of the order and that the delay was neither deliberate nor intentional. The Ld. DR did not raise any serious objection to the prayer for condonation. Having considered these submissions and the explanation furnished in the petition and the accompanying affidavit, we are satisfied that the assessee was prevented by sufficient cause from filing the appeal within the prescribed period. The prompt action taken by the management upon acquiring knowledge of the order supports the explanation furnished by the assessee. Accordingly, we condone the delay of 171 days and admit the appeal for adjudication on merits.

5.

The assessee has raised the following grounds of appeal: “1. That on facts and circumstances of the case and in law, the Order under Section 147 rws 144B as well as the Order u/s 250 of the Income-tax Act, 1961 (Act) is bad in law; 2. That on the facts and circumstances of the case and in law, the Ld. AO has erred in disallowing and the NFAC/CIT(A) have erred in confirming the denial of claim of deduction under Section 80P(2)(a) (i) of the Act amounting to Rs. 18,83,980/-. 3. That on the facts and circumstances of the case and in law, the Ld. AO has erred in disallowing and the NFAC/CIT(A) have erred in confirming the denial of claim of deduction under Section 80P(2)(a) (i) of the Act amounting to Rs. 18,83,980 without appreciating the fact that the Appellant is a co-operative credit society engaged in carrying out the eligible business specified under Section 80P of the Act and had declared the interest income under the head “Profits and gains from business or profession” and Not under the head “ Income from Other Sources”. 4. That on the facts and circumstances of the case and in law, the Ld. AO has erred in disallowing and the NFAC/CIT(A) have erred in confirming the denial of claim of deduction under Section 80P(2)(a) (i) of the Act amounting to Rs. 18,83,980 presuming that the interest income has been received from deposits in co-operative banks and financial institutions other than the 'co-operative societies. 5. That on the facts and circumstances of the case, the Ld.AO/ NFAC/CIT(A) erred in levying interest under Section 234A and Section 234B of the Act; 6. The Appellant craves leave to add, amend, alter, vary and /or withdraw any or all the above grounds of appeal. Each of the Grounds are without prejudice to each other

6.

The brief facts of the case are that the assessee is a co-operative society which had not filed its return of income for the Assessment Year 2016-17 under section 139 of the Income-tax Act, 1961 (“the Act”). The Assessing Officer (“AO”) initiated reassessment proceedings under section 147 of the Act and issued a notice under section 148 of the Act dated 24.03.2023. In response thereto, the assessee filed its return of income on 13.05.2023, claiming deduction of Rs.18,83,982/- under section 80P(2) of the Act. During the assessment proceedings, the AO observed that the deduction claimed under section 80P(2)(a) of the Act was available in respect of income attributable to the business of providing credit facilities to the members of the assessee-society. However, according to the AO, the interest income in question had been received from persons other than its members and was, therefore, not eligible for the deduction claimed.

Accordingly, the AO disallowed the deduction of Rs.18,83,982/- and completed the assessment under section 147 read with section 144B of the Act, vide order dated 09.03.2024, assessing the total income of the assessee at Rs.18,83,982/-. 7. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A), who confirmed the disallowance and dismissed the appeal of the assessee. 8. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before this Tribunal. At the outset, the Ld. AR submitted that the solitary issue arising from the grounds of appeal is the denial of deduction of Rs.18,83,982/- under section 80P of the Act. He submitted that the AO had denied the deduction on an erroneous appreciation of the facts that the interest income was received from persons other than the members of the assessee-society. According to the Ld. AR, the entire interest income was earned from credit facilities provided to its members only. The Ld. AR further submitted that the assessee had furnished its financial statements before the AO in Telugu but could not furnish their English translation during the assessment proceedings. He submitted that this might have resulted in an incorrect appreciation of the nature and source of the income. The assessee has now furnished English translations of its bye- laws and financial statements before this Tribunal as additional evidence, along with a petition seeking their admission. Inviting our attention to the English translation of the income and expenditure account, the Ld. AR submitted that the entire income was earned from members and that no income was received from non-members. Relying upon the decision of the Hon’ble Supreme Court in Totgars Co- operative Sale Society Ltd. Vs. ITO [2010] 322 ITR 283 (SC), he prayed that the deduction claimed under section 80P(2)(a) of the Act be allowed. 9. Per contra, the Ld. DR submitted that the English translations of the bye-laws and financial statements were being furnished for the first time before this Tribunal. He submitted that the assessee’s contention regarding the source of its interest income required factual verification with reference to its books of account and supporting records. Accordingly, he prayed that the issue be restored to the file of the AO for examination of the additional evidence and adjudication in accordance with law. 10. We have heard the rival submissions and perused the material available on record including the case law relied upon. The dispute concerning the deduction claimed under section 80P of the Act arises from the differing positions regarding the nature and source of the interest income earned by the assessee-society. While the AO proceeded on the basis that the interest was received from persons other than its members, the assessee contends that the entire interest income arose from credit facilities provided to its members. Thus, verification of the source of the interest income is necessary for determining the assessee’s eligibility for deduction. The assessee has furnished English translations of its bye-laws and financial statements as additional evidence and explained that the financial statements furnished before the AO were in Telugu. The additional evidence is relevant to the examination of the activities of the assessee-society and the nature and source of its income. We, therefore, admit the additional evidence under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963. However, the entries in the translated financial statements and the contention that the entire interest income was received from members require verification with reference to the original records, books of account, membership records and supporting documents. Such factual verification cannot be dispensed with merely on the basis of the translated income and expenditure account. Accordingly, we set aside the order of the Ld. CIT(A) on this issue and restore the matter to the file of the AO for fresh adjudication. The AO shall examine the additional evidence, verify the nature and source of the interest income and determine whether, and to what extent, such income is attributable to the business of providing credit facilities to the members of the assessee-society. Thereafter, the AO shall consider the assessee’s claim for deduction under section 80P of the Act in accordance with law, having regard to the principles laid down by the Hon’ble Supreme Court in Totgars Co-operative Sale Society Ltd. Vs. ITO (supra), relied upon by the assessee, and their applicability to the facts established upon verification.

11.

The AO shall afford the assessee a reasonable opportunity of being heard and of furnishing the necessary evidence in support of its claim. The assessee shall co-operate with the proceedings and furnish the relevant records as required by the AO. We express no opinion on the merits of the claim, which shall be determined independently by the AO in accordance with law.

12.

In the result, the appeal of the assessee is allowed for statistical purposes.

Order pronounced in the Open Court on 16th October, 2026. Sd/- Sd/- (RAVISH SOOD) (MADHUSUDAN SAWDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, dated 16th October, 2026. Vinodan/sps Copy to: S.No Addresses 1 PARTHASARADHI MUTUALLY AIDED CO-OPERATIVE THRIFT SOCIETY LIMITED,HYDERABAD, 8-7-133/1 Padmashalipuram, Kesavagiri, Ranga Reddy 500005 2 Income Tax Officer, Ward-7(1) Signature Towers, Gachibowli- Miyapur Road, Kondapur, Venkat Enclave, Whitefields, Gachibowli, Hyderabad 500084 3 Pr. CIT, Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File

By Order Digitally signed by TUMMALACHARLA TUMMALACHARLA LAKSHMI NARAYANA DN: cn=TUMMALACHARLA LAKSHMI LAKSHMI NARAYANA, c=IN, o=INCOME TAX APPELLATE TRIBUNAL, ou=INCOME TAX NARAYANA APPELLATE TRIBUNAL, CHENNAI BENCH Date: 2026.10.16 14:45:59 +05'30'

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