UZHUVA SERVICE CO-OPERATIVE BANK LTD vs. INCOME TAX OFFICER

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WP(C)/33413/2022HC KeralaKLHC01071148202228 November 2022Bench: HONOURABLE MR. JUSTICE GOPINATH P.9 pages
AI SummaryAllowed

What did the High Court hold?

The High Court allowed the writ petitions. It held that an erroneous assessment occasioned by ignoring a binding judgment of the Supreme Court cannot be dismissed as a matter solely for appellate remedy. The Court noted that the Supreme Court judgment in Mavilayi Service Co-operative Bank Ltd. was not considered for WP(C) No. 34334/2022, and the judgment in Peroorkada Service Co-Operative Bank Ltd. was not considered for denying the deduction under Section 80P(ii)(d) in WP(C) Nos. 34316/2022 and 33413/2022. Citing its own Division Bench judgment in M/s. Poonjar Service Co-operative Bank Ltd. v. Income Tax Officer, the Court stated that such an error cannot be trivialized. Consequently, the assessment orders were quashed and the matters were remanded to the National Faceless Assessment Centre for fresh consideration after affording the petitioners an opportunity of being heard and taking into account the aforementioned judgments. The Court did not expressly leave any issue undecided.

What were the facts?

The petitioners, Cherthala Taluk Agricultural Credit Co-operative Society, Uzhuva Service Co-operative Bank Ltd., and Muttom Service Co-operative Bank Ltd., filed writ petitions challenging assessment orders for the assessment year 2020-21. In two petitions (WP(C) Nos. 34316/2022 and 33413/2022), the assessing officer allegedly denied deduction under Section 80P(ii)(d) of the Income Tax Act, 1961, without considering the judgment in PCIT v. Peroorkada Service Co-Operative Bank Ltd. In WP(C) No. 34334/2022, the petitioner contended that the assessing officer denied deductions under Section 80P and Section 80P(ii)(d) without considering the Supreme Court judgment in Mavilayi Service Co-operative Bank Ltd. The Revenue argued that these issues should be raised through appeals rather than writ petitions.

What were the issues?

1. Whether the assessment orders, which allegedly failed to consider binding judgments of the Supreme Court and High Court while denying deductions under Section 80P and Section 80P(ii)(d), can be challenged by way of a writ petition under Article 226 of the Constitution of India, or if the assessee is relegated to the appellate remedy. Assessee's Contentions: - The petitioners argued that the assessing officers erred by not considering the binding judgments of the Supreme Court in Mavilayi Service Co-operative Bank Ltd. (431 ITR 1) and the High Court in PCIT v. Peroorkada Service Co-Operative Bank Ltd. (442 ITR 141) while finalizing the assessments. - They contended that the denial of deductions under Section 80P and Section 80P(ii)(d) was erroneous due to this oversight. Revenue's Contentions: - The Revenue argued that the entitlement to deduction under Section 80P(ii)(d) is a matter of fact to be determined with reference to the specific facts of the case. - Therefore, the Revenue contended that the assessment orders should not be challenged directly through a writ petition under Article 226, and the petitioners should pursue their appellate remedies.

Which sections of the Income-tax Act were involved?

Section 80P,Section 80P(ii)(d)

AI-generated summary — verify with the full judgment below

Heard together (3 matters)

WP(C) NO.34316 OF 2022
WP(C).33413/2022
WP(C) NO. 34334 OF 2022

Read from the judgment's own cause title. This page is filed under one of them.

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE GOPINATH P. MONDAY, THE 28TH DAY OF NOVEMBER 2022 / 7TH AGRAHAYANA, 1944 WP(C) NO.34316 OF 2022 PETITIONER: CHERTHALA TALUK AGRICULTURAL CREDIT CO-OPERATIVE SOCIETY H.W 11, CHERTHALA P.O, ALAPPUZHA-688524 REPRESENTED BY ITS SECRETARY , PIN - 688524 BY ADV C.A.JOJO RESPONDENTS: 1 INCOME TAX OFFICER WARD-1 &TPS, ALAPPUZHA ALAPPUZHA – 688011. 2 INCOME TAX OFFICER NATIONAL FACELESS ASSESSMENT CENTRE, NORTH BLOCK, NEW DELHI-110001. 3 THE COMMISSIONER OF INCOME TAX (APPEALS) OFFICE OF THE COMMISSIONER OF INCOME TAX, KOTTAYAM- 686002, PIN - 686002 OTHER PRESENT: ADV. JOSE JOSEPH (SC) THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 28.11.2022, ALONG WITH WP(C).33413/2022, 34334/2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

W.P (C) Nos.34316, 33413 and 34334/2022 -2- IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE GOPINATH P. MONDAY, THE 28TH DAY OF NOVEMBER 2022 / 7TH AGRAHAYANA, 1944 WP(C) NO. 33413 OF 2022 PETITIONER: UZHUVA SERVICE CO-OPERATIVE BANK LTD NO.A 305 PATTANAKKAD P.O, CHERTHALA, ALAPPUZHA-688531 REPRESENTED BY ITS SECRETARY , PIN - 688531 BY ADV C.A.JOJO RESPONDENTS: 1 INCOME TAX OFFICER WARD-4, ALAPPUZHA ALAPPUZHA - 688011 2 INCOME TAX OFFICER NATIONAL FACELESS ASSESSMENT CENTRE, NORTH BLOCK, NEW DELHI-110001. 3 THE COMMISSIONER OF INCOME TAX (APPEALS) OFFICE OF THE COMMISSIONER OF INCOME TAX, KOTTAYAM- 686002, PIN - 686002 ADV. JOSE JOSEPH (SC) THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 28.11.2022, ALONG WITH WP(C).34316/2022 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

W.P (C) Nos.34316, 33413 and 34334/2022 -3- IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE GOPINATH P. MONDAY, THE 28TH DAY OF NOVEMBER 2022 / 7TH AGRAHAYANA, 1944 WP(C) NO. 34334 OF 2022 PETITIONER: MUTTOM SERVICE CO-OPERATIVE BANK LTD., NO.1165, MAIN ROAD CHERTHALA P.O, ALAPPUZHA-688524 REPRESENTED BY ITS SECRETARY , PIN - 688524 BY ADV C.A.JOJO RESPONDENTS: 1 INCOME TAX OFFICER, WARD-1 &TPS, ALAPPUZHA ALAPPUZHA - 688011 2 INCOME TAX OFFICER NATIONAL FACELESS ASSESSMENT CENTRE, NORTH BLOCK, NEW DELHI-110001 3 THE COMMISSIONER OF INCOME TAX (APPEALS) OFFICE OF THE COMMISSIONER OF INCOME TAX, KOTTAYAM- 686002, PIN - 686002 ADV. JOSE JOSEPH (SC) THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 28.11.2022, ALONG WITH WP(C).34316/2022 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

W.P (C) Nos.34316, 33413 and 34334/2022 -4- J U D G M E N T [WP(C) Nos.34316/2022, 33413/2022, 34334/2022] The petitioners in these cases suffered orders of assessment under the provisions of the Income Tax Act, 1961 for the assessment year 2020-21. In W.P (C) Nos.34316/2022 and 33413/2022 the assessing officer appears to have denied deduction in respect of interest income under Section 80 P (ii) (d) of the Income Tax Act. It is the case of the petitioner that the issue stands covered in favour of the petitioner by the judgment in PCIT v. Peroorkada Service Co-Operative Bank Ltd.; 442 ITR 141 and that the assessing officer has failed to consider the said judgment while finalizing the assessment against the petitioner. 2. The learned standing counsel appearing for the respondent Department states that the issue raised by the petitioner is to be agitated by by filing an appeal against the order of assessment and not by way of a writ petition under Article 226 of the Constitution of India. It is submitted that the question as to whether the petitioner was actually entitled to deduction under Section 80 P (ii) (d) of the Income Tax Act is a matter to be determined with reference to the facts and therefore the petitioner cannot challenge the assessment order directly by filing a writ petition under Article 226 of the Constitution of India. 3. In W.P (C) No.34334/2022 the petitioner challenges the order of assessment for assessment year 2020-21 on the ground that the assessing officer denied the deduction under Section 80 P as well as under Section 80 P (ii) (d) without considering the judgment of the Supreme Court reported in 431 ITR 1. It is submitted that the deduction under Section 80 P (ii) (d) was denied by discarding

W.P (C) Nos.34316, 33413 and 34334/2022 -5- the judgment in Peroorkada (supra). 4. Having heard the learned counsel appearing for the petitioner and the learned standing counsel appearing for the respondent bank, I am of the view that since it is admitted that the judgment of the Supreme Court reported in Mavilayi Service Co-operative Bank Ltd. and others v. Commissioner of Income Tax and another; 431 ITR 1 and was not considered while finalizing the assessment which was subject matter of challenge in W.P (C) No.34334/2022 and since the decision in Peroorkada (supra) [442 ITR 141] was not considered while denying the benefit of deduction under Section 80P (ii) (d), the assessment orders which are impugned are liable to be set aside and the matter remanded to the respective assessing authorities for reconsideration after taking into consideration of the judgments referred to above. A Division Bench of this court to which I was also a party has by judgment in M/s. Poonjar Service Co-operative Bank Ltd., v. Income Tax officer (judgment dated 28-06-2022 in WA No.753/2021) concluded as follows; “An erroneous assessment occasioned by ignoring a binding judgment of the Supreme Court cannot be trivialized as an order against which an appellate remedy lies that would provide justice to an assessee.” Having regard to the above and taking into consideration of the judgment of the Division Bench in M/s. Poonjar Service Co-operative Bank Ltd., (supra) these writ petitions are allowed. Accordingly orders of assessment produced as Ext.P1 in all these writ petitions are quashed and the assessments are remanded to the National Faceless Assessment Centre for fresh consideration in accordance with law after affording to the petitioner an opportunity of being heard and taking into

W.P (C) Nos.34316, 33413 and 34334/2022 -6- consideration the law laid down in the judgments referred to above. The needful shall be done as expeditiously as possible and without any undue delay. Sd/- GOPINATH P. JUDGE AMG

W.P (C) Nos.34316, 33413 and 34334/2022 -7- APPENDIX OF WP(C) 33413/2022 PETITIONER EXHIBITS Exhibit P1 EXHIBIT-P1: A TRUE COPY OF THE ASSESSMENT ORDER U/S 143(1) WITH NIL INCOME FOR AY 2019-20 DATED 12.02.2020 ISSUED BY THE 2ND RESPONDENT Exhibit P2 A TRUE COPY OF THE DEMAND NOTICE U/S 156 WITH RS.5/-AY 2018-19 DATED 25.02.2021 ISSUED BY THE SECOND RESPONDENT. Exhibit P3 EXHIBIT P3 A TRUE COPY OF THE ALLOWED APPELLATE ORDER IN ITA NO.A.71/CIT(A)/KTM/2016-17 FOR AY 2014-15 DATED 28.02.2018 ISSUED BY THE THIRD RESPONDENT. Exhibit P4 EXHIBIT P4: A TRUE COPY OF THE ASSESSMENT ORDER U/S 143(3) FOR AY 2020-21 DATED 20.09.2022 ISSUED BY THE SECOND RESPONDENT Exhibit P5 EXHIBIT P5: A TRUE COPY OF THE DEMAND NOTICE U/S 156 FOR AY 2020-21 DATED 20.09.2022 ISSUED BY THE SECOND RESPONDENT.

W.P (C) Nos.34316, 33413 and 34334/2022 -8- APPENDIX OF WP(C) 34334/2022 PETITIONER EXHIBITS Exhibit P1 A TRUE COPY OF THE ASSESSMENT ORDER U/S 143(3) WITH NIL INCOME FOR AY 2016-17 DATED 17.12.2018 ISSUED BY THE SECOND RESPONDENT Exhibit P2 EXHIBIT P2: A TRUE COPY OF THE ALLOWED APPELLATE ORDER IN ITA NO.A.38/CIT(A)/KTM/2017-18 FOR AY 2015- 16 DATED 17.07.2018 ISSUED BY THE THIRD RESPONDENT. Exhibit P3 EXHIBIT P3: A TRUE COPY OF THE ASSESSMENT ORDER U/S 143(3) FOR AY 2020-21 DATED 27.09.2022 ISSUED BY THE SECOND RESPONDENT Exhibit P4 EXHIBIT P4: A TRUE COPY OF THE DEMAND NOTICE U/S 156 FOR AY 2020-21 DATED 27.09.2022 ISSUED BY THE SECOND RESPONDENT Exhibit P5 EXHIBIT P5: A TRUE COPY OF THE STAY ORDER IN WP (C ) NO.33413/2022 DATED 20.10.2022

W.P (C) Nos.34316, 33413 and 34334/2022 -9- APPENDIX OF WP(C) 34316/2022 PETITIONER EXHIBITS Exhibit P1 EXHIBIT-P1: A TRUE COPY OF THE RELEVANT PAGES OF INTIMATION U/S 143(1) WITH NIL DEMAND FOR AY 2019-20 DATED 12.02.2020 ISSUED BY THE CPC BANGALORE Exhibit P2 EXHIBIT P2: A TRUE COPY OF THE ASSESSMENT ORDER U/S 143(3) FOR AY 2020-21 DATED 27.09.2022 ISSUED BY THE SECOND RESPONDENT Exhibit P3 EXHIBIT P3: A TRUE COPY OF THE DEMAND NOTICE U/S 156 FOR AY 2020-21 DATED 27.09.2022 ISSUED BY THE SECOND RESPONDENT Exhibit P4 EXHIBIT P4: A TRUE COPY OF THE STAY ORDER IN WP (C ) NO.33413/2022 DATED 20.10.2022

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