THE EZHOME SERVICE CO-OPERATIVE BANK LTD NO.C - 1508 vs. INCOME TAX OFFICER

Petitioner is a primary agricultural credit co-operative society registered under the Kerala Co-operative Societies Act 1967. Relying upon the decision of the Supreme Court in Mavilayi Service Co- operative Bank Ltd. and Others v. Commissioner of Income Tax, Calicut and Others [2021] 431 ITR 1 (SC), petitioner claimed deduction under section 80P of the Income Tax Act 1963 (for short the Act) when Ext. P2, draft assessment order was issued to the petitioner. However, ignoring the objection dated 28.07.2021 filed by the petitioner to the draft assessment order, the first respondent completed the assessment as proposed in the draft assessment order. According to the petitioner, the assessing officer had erroneously held that petitioner had not filed its objection. It was also alleged that the procedure adopted was contrary to WP(C) NO. 17730 OF 2021 3 the provisions contained under section 144B of the Act. It was further pleaded that recently, a Division Bench of this court had, in W.A. No.753 of 2021, set aside the order of a learned single Judge refusing to quash an assessment order on almost identical grounds pleaded. According to the counsel for the petitioner, the present case squarely falls within the category of cases where this Court can interfere in exercise of the discretionary juri iction under Article 226 Constitution of India.

I have heard Adv. Arun Raj S., the learned counsel for the petitioner as well as Adv. Christopher Abraham, the learned standing counsel for the respondents.

As per the decision in Mavilayi Service Co-operative Bank and Others v. Commissioner of Income Tax, Calicut and Others [2021] 431 ITR 1 (SC) : (2021 (1) KLT 485), the income tax authority cannot go behind the classification accorded to the society under the Co- operative Societies Act and merely because the word ‘bank’ is included in the name of the society, the same would not be sufficient to deprive a primary agricultural credit society of the benefits of deduction under Section 80P of the Act.

In the impugned assessment order, the assessing officer proceeded to find that the assessee had not produced any relevant documentary evidence relating to the objects of the Society as a service

Further, it is seen from a reading of paragraph 4 of the impugned assessment order that the assessing officer proceeded to consider the case of the assessee on an assumption that the assessee had not filed any reply to the show cause notice issued to it. Petitioner claims that it had filed Ext.P3 objection dated 26-07-2021 to the draft assessment order dated 23-07-2021, which is produced as Ext.P2. A reading of Ext.P2 reveals that the assessing officer directed the petitioner to submit its response by 23.59 hours on 28-07-2021. Contrary to the findings in the assessment order mentioned earlier, it is seen from Ext. P4 acknowledgement from the Income tax department itself that the Department received petitioner’s reply along with relevant case law as a response on 28-07-2021. Thus there is merit in the petitioner’s contention that the impugned order is bad on account of violation of the principles of natural justice.

In this context, it is relevant to refer to the Division Bench Judgment of this Court in W.A. No. 753 of 2021 (Poonjar Service Co- operative Bank Ltd. v. Income Tax Officer). In the afore cited judgment, the learned single Judge had refused to interfere with an order of assessment and relegated the assessee to the remedy of a statutory appeal. However in appeal, noticing that the assessing officer had failed to apply the law laid down by the Supreme Court in Mavilayi’s Case, the Division Bench set aside the order of the learned single Judge and quashed the assessment order and directed the assessing authority to redo the assessment. The assessment order is liable to be set aside on the aforesaid reason also since the assessing officer had clearly failed to apply the dictum laid down Mavilayi’s Case.

In view of the above, Ext.P5 order of assessment for the year 2018-19 is quashed and the first respondent is directed to re-do the assessment of the petitioner society for the said assessment year afresh after issuing notice to the petitioner and after affording him an opportunity of being heard. It is made clear that this Court has not rendered any opinion on the merits of the matter and that all contentions on merits are left open to the assessee to be canvassed before the assessing authority at the time of the hearing. Needless to say the assessing authority shall take steps to complete the assessment order as directed above taking