THE VALANCHERY SERVICE CO-OPERATIVE BANK LTD. NO. M728 vs. THE INCOME TAX OFFICER

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WP(C)/9582/2020HC KeralaKLHC01024467202028 April 2020Author: HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court found merit in the petitioner's contention that proceeding with coercive steps while the statutory appeal is pending would render the appeal redundant and cause severe hardship. Consequently, the Court directed the Commissioner of Income Tax (Appeals) (3rd respondent) to consider and dispose of the petitioner's appeal (Ext. P2) within six months. Crucially, the Court ordered that no portion of the disputed tax should be insisted upon for deposit as a condition for stay, and no recovery proceedings should be initiated until the appeal is disposed of. The specific issue of the tenability of the Section 80P deduction disallowance was not decided on merits by the High Court, as the matter was disposed of on procedural grounds related to the pending appeal.

What were the facts?

The petitioner, Valanchery Service Co-operative Bank Ltd., is an income tax assessee. For the assessment year 2017-18, the Income Tax Officer (1st respondent) disallowed the petitioner's claim for deduction under Section 80P of the Income Tax Act, demanding Rs. 82,25,653/- as tax. The petitioner filed an appeal (Ext. P2) before the Commissioner of Income Tax (Appeals) (3rd respondent), challenging the disallowance. While the appeal was pending, the 1st respondent initiated recovery proceedings. Subsequently, an order (Ext. P3) was issued directing the deposit of 20% of the disputed tax as a condition for staying further recovery proceedings.

What were the issues?

1. Whether the Income Tax Officer's disallowance of the petitioner's claim for deduction under Section 80P of the Income Tax Act for the assessment year 2017-18 is tenable. Assessee's contention: The reason for disallowing the deduction under Section 80P is not tenable. The petitioner argues that coercive steps for recovery pending the statutory appeal would render the appeal redundant and cause severe difficulties. Revenue's contention: The judgment does not record specific contentions from the revenue regarding the tenability of the disallowance or the recovery proceedings. The revenue's counsel appeared and took notice.

Which sections of the Income-tax Act were involved?

Section 80P

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE BECHU KURIAN THOMAS TUESDAY, THE 28TH DAY OF APRIL, 2020/8TH VAISAKHA, 1942 W.P(C) NO.9582 OF 2020 PETITIONER: THE VALANCHERY SERVICE CO-OPERATIVE BANK LTD. NO. M728, VALANCHERY, MALAPPURAM – 676 552, REPRESENTED BY ITS SECRETARY, V. SASIKUMAR. BY ADVS. SRI. HARISANKAR. V. MENON SMT.MEERA. V. MENON SMT.KRISHNA.K. RESPONDENT/RESPONDENTS: 1. THE INCOME TAX OFFICER, WARD 1 & TPS, TARIFF BAZAAR, TOWN HALL ROAD, TIRUR – 676 101. 2. THE INCOME TAX OFFICER (TECH) FOR THE PRINCIPAL COMMISSIONER OF INCOME TAX, AAYKAR BHAVAN, NORTH BLOCK, MANNANCHIRA, KOZHIKODE – 673 001. 3. THE COMMISSIONER OF INCOME TAX (APPEALS), AAYKAR BHAVAN, NORTH BLOCK, MANNANCHIRA, KOZHIKODE – 673 001. BY SRI.K.P.HARISH, GOVT. PLEADER SRI. JOSE JOSEPH, SC THIS WRIT PETITION HAVING COME UP FOR ADMISSION ON 28.04.2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: 2 W.P.(C) NO. 9582/2020

JUDGMENT

I have heard the counsel for the petitioner through video conferencing. I have also heard the standing counsel for income tax who has taken notice on behalf of respondents. In the nature of the facts and circumstances of the case, this writ petition can be disposed of.

2.

Petitioner is an income tax assessee and the issue relates to the assessment year 2017-18. By Ext. P1, the 1st respondent disallowed petitioner’s claim for deduction under Section 80P of the Income Tax Act and demanded an amount of Rs.82,25,653/- as tax.

3.

Challenging the said assessment, petitioner has preferred Ext. P2 appeal contending that the reason for disallowing petitioner’s claim for deduction under section 80P is not tenable. While the appeal is pending, the 1st respondent is initiating recovery proceedings to recover the tax allegedly due. While so, Ext. P3 has been issued directing deposit of 20% of the disputed tax as a condition for stay of further proceedings.

4.

I find force in the contention of the counsel for the petitioner that if the respondents proceed with coercive steps pending consideration of the statutory appeal, the same will be rendered redundant and petitioner will be put to severe difficulties especially in the light of the nature of contentions taken up in the appeal. In such circumstances, I direct the 3rd respondent to consider and dispose of Ext.P2 appeal within a period of six months without insisting upon deposit of any portion of the disputed tax. No recovery proceedings shall be initiated for recovering the tax demanded till the disposal of such appeal. BECHU KURIAN THOMAS, JUDGE csl APPENDIX PETITIONERS EXTS: EXT. P1. COPY OF ASSESSMENT ORDER ISSUED BY THE 1ST RESPONDENT FOR THE YEAR 2017-18. 19-12-2019

EXT. P2. COPY OF THE APPEAL FILED BEFORE THE 3RD RESPONDENT DATED 06-01-2020

EXT. P3. COPY OF ORDER ISSUED BY THE 2ND RESPONDENT. 13-03-2020

EXT. P4.COPY OF RECEIPT ISSUED BY THE STATE BANK OF INDIA, VALANCHERY. 31-03-2020

EXT. P5. COPY OF LETTER SUBMITTED BY THE PETITIONER BEFORE THE 2ND RESPONDENT. 03-04-2020

EXT. P6. COPY OF JUDGMENT OF THIS HON’BLE COURT IN W.P. (C) NO. 3525/2020. 10-02-2020

EXT. P6(A). COPY OF JUDGMENT OF THIS HON’BLE COURT IN W.P.(C) NO. 5027/2020. 25-02-2020

EXT. P6(B). COPY OF JUDGMENT OF THIS HON’BLE COURT IN W.P. (C) NO. 9162/2020. 23-03-2020

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