VADAKKEVILA SERVICE CO-OPERATIVE BANK LTD., vs. UNION OF INDIA

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WP(C)/20473/2023HC KeralaKLHC01044788202320 July 2023Bench: HONOURABLE MR.JUSTICE C.S.DIAS7 pages
AI SummaryRemanded

What did the High Court hold?

The High Court allowed the writ petition. It set aside the impugned order (Ext P4) passed by the Commissioner of Income Tax (Appeals). The Court directed the fourth respondent (Commissioner of Income Tax (Appeals)) to re-consider and dispose of the petitioner's appeal (Ext P3) in accordance with law. Crucially, this reconsideration must include affording the petitioner an opportunity of being heard. The Court also ordered that all further proceedings pursuant to the Assessing Authority's intimation (Ext P2) would stand deferred until a final order is passed on the petitioner's appeal. The reasoning was based on the fair submission by the revenue that the appeal could be re-examined given the extension of time for filing returns.

What were the facts?

The petitioner, Vadakevila Service Co-operative Bank Ltd., is a co-operative society engaged in providing credit facilities to its members. For assessment year 2019-20, it filed a return of income declaring 'Nil' total income, claiming a deduction of Rs. 4,69,44,263/- under Section 80(P) of the Income Tax Act, 1961. The Assessing Authority, via an intimation under Section 143(1), declined the deduction without assigning reasons. The petitioner appealed this order. The appellate authority, the Commissioner of Income Tax (Appeals), rejected the appeal by Ext P4 order, citing the petitioner's absence for hearing and stating the petitioner was not entitled to deduction under Section 80(P)(2)(a)(i). The petitioner filed a writ petition challenging Ext P4.

What were the issues?

1. Whether the Commissioner of Income Tax (Appeals) erred in rejecting the appeal solely on the ground of the petitioner's non-appearance without considering the merits of the case, especially when the Assessing Authority had not provided reasons for disallowing the deduction under Section 80(P)? (Mixed question of law and fact, concerning principles of natural justice and appellate procedure). Assessee's Contention: The petitioner argued that Ext P4 order is erroneous and wrong, implying the appellate authority failed to properly adjudicate the appeal on its merits. The petitioner sought to quash the order. Revenue's Contention: The revenue, through its counsel, fairly submitted that the appellate authority rejected the appeal primarily because the petitioner filed its return of income after the due date under Section 139(1). However, it was acknowledged that the time for filing returns had been extended till 30.09.2023, and therefore, the appeal could be reconsidered.

Which sections of the Income-tax Act were involved?

Section 80(P),Section 80(P)(2)(a)(i),Section 80(P)(2)(d),Section 143(1),Section 139(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE C.S.DIAS THURSDAY, THE 20TH DAY OF JULY 2023 / 29TH ASHADHA, 1945 WP(C) NO. 20473 OF 2023 PETITIONER: VADAKKEVILA SERVICE CO-OPERATIVE BANK LTD., BHODHINAGAR, THATTAMALA, KOLLAM- 691 020 REPRESENTED BY ITS SECRETARY RAJI L. BY ADVS. K.P.PRADEEP SANAND RAMAKRISHNAN HAREESH M.R. T.T.BIJU T.THASMI M.J.ANOOPA RESPONDENTS: 1 UNION OF INDIA REPRESENTED BY ITS SECRETARY, MINISTRY OF FINANCE, SANSAD MARG, NEW DELHI, PIN – 110001 2 THE CENTRAL BOARD OF DIRECT TAXES DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, NORTH BLOCK, NEW DELHI- 110001, REPRESENTED BY ITS CHAIRMAN 3 ASSISTANT DIRECTOR OF INCOME TAX, CENTRALIZED PROCESSING CENTRE, INCOME TAX DEPARTMENT, BENGALURU, KARNATAKA 4 COMMISSIONER OF INCOME TAX (APPEALS) NATIONAL FACELESS APPEAL CENTRE (NFAC), DELHI, ROOM NO. 401, 2ND FLOOR, E-RAMP, JAWAHARLAL NEHRU STADIUM, DELHI, PIN – 110003 5 STATE OF KERALA REPRESENTED BY ITS PRINCIPAL SECRETARY, DEPARTMENT OF CO-OPERATION, GOVERNMENT SECRETARIATE, THIRUVANANTHAPURAM, PIN – 695001 BY ADVS. VISHNU RAJAGOPAL CHRISTOPHER ABRAHAM THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 20.07.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

W.P.(C)No.20473/2023 -:2:- Dated this the 20th day of July,2023 J U D G M E N T The writ petition is filed, inter alia, to quash Ext P4 order passed by the fourth respondent. 2. The brief relevant facts leading to Ext P4 order are: (i) The petitioner is a Co-operative society registered under the Kerala Co-operative Societies Act, 1969. The petitioner is engaged in providing credit facility to its members. (ii) As per Section 80(P) of the Income Tax Act, 1961(in short, ‘Act’), the income of Co-operative Societies is eligible for deduction and is not liable to levy of income tax under Section 80(P) (2)(a)(i) of the Act, with respect to credit activities with its members, and Section 80(P)(2) (d) of the Act, with respect to interest earned from the deposits maintained in other Co-operative societies. (iii) For the assessment year 2019-20, the petitioner

W.P.(C)No.20473/2023 -:3:- had filed its return of income disclosing the total income as ‘Nil’ and claimed deduction for the entire income of Rs.4,69,44,263/-. However, the third respondent – the Assessing Authority – as per Ext P2 intimation issued under Section 143(1) of the Act, declined to grant deduction under Section 80(P), without assigning any reason. (iv)Challenging Ext P2 order, the petitioner preferred Ext P3 appeal before the fourth respondent. Yet, the fourth respondent, by the impugned Ext P4 order, has rejected the appeal on the sole ground that the petitioner did not turn up for hearing. It is also observed that the petitioner is not entitled for getting any deduction under Section 80(P)(2)(a)(i) of the Act. Dis-allowance made by the third respondent has been confirmed by dismissing the appeal by Ext P4 order. (v) Ext P4 is erroneous and wrong. Hence, the writ petition.

W.P.(C)No.20473/2023 -:4:- 3. Heard; Sri. K.P.Pradeep, the learned counsel appearing for the petitioner, Sri. Christopher Abraham, the learned Standing Counsel appearing for the respondents 1 to 4 and learned Government Pleader appearing for the fifth respondent. 4. Sri. Christopher Abraham very fairly submitted that the fourth respondent has rejected Ext P3 appeal, by the impugned Ext P4 order, principally on the ground that the petitioner has filed the return of income after the expiry of the due date mentioned under Section 139(1) of the Act. But, the time period for filing return has been extended till 30.09.2023. Thus, the fourth respondent can be directed to re-consider Ext P3 appeal, in accordance with law. The said submission is recorded. 5. Having considered the pleadings and materials on record, and after appreciating the rival submissions made across the Bar, I am inclined to

W.P.(C)No.20473/2023 -:5:- allow the writ petition. Resultantly, I order the writ petition as follows: (i) Ext P4 order is set aside. (ii) The fourth respondent is directed to re-consider and dispose of Ext P3 appeal, in accordance with law, after affording the petitioner an opportunity of being heard. (iii) Until such time orders are passed on Ext P3 appeal, all further proceedings pursuant to Ext P2 shall stand deferred. Sd/- C.S.DIAS,JUDGE DST/20.07.23 //True copy// P.A.To Judge

W.P.(C)No.20473/2023 -:6:- APPENDIX PETITIONER EXHIBITS EXHIBIT P1 TRUE COPY OF THE RETURN OF INCOME DATED 26- 05-2020 FILED UNDER SECTION 139 (4) OF THE INCOME TAX ACT, FOR THE ASSESSMENT YEAR 2019-20 EXHIBIT P2 TRUE COPY OF THE INTIMATION U/S 143(1) OF THE INCOME TAX ACT, 1961 WITH DIN NO CPC/1920/A5/2003506228 DATED 30-09-2020 ISSUED FOR THE YEAR 2019-20 BY THE 3RD RESPONDENT EXHIBIT P3 TRUE COPY OF THE APPEAL DATED 16-1-2021 FILED FOR THE YEAR 2019-20 BEFORE THE 4TH RESPONDENT BY THE PETITIONER EXHIBIT P4 TRUE COPY OF THE ORDER UNDER SECTION 250 OF THE INCOME TAX, ACT DATED 15-05-2023 ISSUED FOR THE YEAR 2019-20 BY THE 4TH RESPONDENT EXHIBIT P5 TRUE COPY OF THE NOTIFICATION SO 5429 (E ) DATED 28-12-2021 ISSUED BY THE 2ND RESPONDENT EXHIBIT P6 TRUE

COPY

THE

NOTICE ITBA/NFAC/F/APL_1/2022-23/1042774627(1) DATED 19-4-2022 EXHIBIT P6(A) TRUE

COPY

THE

NOTICE

DIN: ITBA/NFAC/F/APL_1/2022-23/1043749917(1) DATED 06/7/2022 EXHIBIT P6(B) TRUE

COPY

THE

NOTICE ITBA/NFAC/F/APL_1/2022-23/1049488052(1) DATED 07-02-2023 EXHIBIT P6(C) TRUE

COPY

THE

NOTICE

DIN: ITBA/NFAC/F/APL_1/2023-24/1052548896(1) DATED 03-05-2023

W.P.(C)No.20473/2023 -:7:- EXHIBIT P7 TRUE COPY OF THE REQUEST UPLOADED IN RESPONSE TO EXT P6 EXHIBIT P7(A) TRUE COPY OF THE REQUEST UPLOADED IN RESPONSE TO EXT P6(A) EXHIBIT P7(B) TRUE COPY OF THE REQUEST UPLOADED IN RESPONSE TO EXT P6(B) EXHIBIT P7(C) TRUE COPY OF THE REQUEST UPLOADED IN RESPONSE TO EXT P6 (C) EXHIBIT P8 TRUE COPY OF THE ORDER NO F. NO. 225/1 50/2020-ITA-U DATED 30-09-2020 ISSUED BY THE 2ND RESPONDENT EXHIBIT P9 TRUE COPY OF THE ORDER DATED 10-2-2023 OF THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH IN AMBARADI SEVA SAHKARI MANDALI LTD. VS DCIT (CPC) RESPONDENT EXHIBITS: NIL

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