PRIMARY AGRICULTURAL CREDIT CO OPERATIVE SOCIETY LTD vs. COMMISSIONER OF INCOME TAX (APPEALS)

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WP/7492/2026HC KarnatakaKAHC01017006202610 March 2026Bench: S SUNIL DUTT YADAV5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court set aside the impugned assessment order, demand notice, and the appellate order. The matter was remitted back to the stage of filing a reply to the show-cause notice. The Court noted the petitioner's assertion that much of the income was eligible for deduction under Section 80P of the Income Tax Act and that the deposits were repayments of loans by farmers under Kissan Cash Credit schemes. The Court found that setting aside the impugned orders and remitting the matter to the stage of reply to the show-cause notice would meet the ends of justice. All other contentions were kept open. The ratio decidendi is that where an assessee provides bonafide reasons for non-participation in assessment proceedings and asserts that the disputed amounts are loan repayments eligible for deduction, and has also withdrawn a subsequent appeal, remitting the matter for a fresh consideration at the reply stage is appropriate.

What were the facts?

The petitioner, Primary Agricultural Credit Co-operative Society Ltd., challenged an assessment order dated March 17, 2023, and a demand notice of the same date, both issued by the Assessing Officer (National Faceless Assessment Centre). The petitioner also challenged an order dated December 8, 2024, passed by the Commissioner of Income Tax (Appeals). The petitioner contended that the assessment order was an ex-parte 'Best Judgment Assessment' due to bonafide reasons preventing participation in proceedings. The Assessing Officer had noted unexplained credits in the bank account. The petitioner asserted these were loan repayments by farmers and that their income was below taxable limits, negating the need for returns. The appeal against the assessment order was rejected on merits, with the Appellate Authority noting the lack of material before the Assessing Officer. The petitioner then withdrew their second appeal.

What were the issues?

1. Whether the assessment order passed under the 'Best Judgment Assessment' principle is valid, considering the petitioner's alleged inability to participate in proceedings due to bonafide reasons? 2. Whether the deposits noted by the Assessing Officer were indeed repayments of loans and should be considered as such? 3. Whether the petitioner's income was below the taxable limit, thus not requiring the filing of returns? Assessee's contentions: The assessment order was ex-parte and passed on 'Best Judgment Assessment' due to bonafide reasons for non-participation. The deposits in question were loan repayments by farmers under Kissan Cash Credit loans. The petitioner's income was below taxable limits, so filing returns was not required. The Appellate Authority could not set aside the assessment order as no material was placed before the Assessing Officer. Revenue's contentions: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 80P

AI-generated summary — verify with the full judgment below

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HC-KAR NC: 2026:KHC:14341 WP No. 7492 of 2026

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 10TH DAY OF MARCH, 2026 BEFORE THE HON'BLE MR. JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 7492 OF 2026 (T-IT) BETWEEN:

1.

PRIMARY AGRICULTURAL CREDIT CO-OPERATIVE SOCIETY LTD (A SOCIETY REGISTERED UNDER KCS ACT, 1959), MADENUR, HASSAN TALUK, HASSAN DISTRICT - 573 225. REPRESENTED BY ITS C.E.O MR. KRISHNA KUMAR C. J. AGE: 59 YRS. … PETITIONER (BY SRI. MAHESH R UPPIN., ADVOCATE) AND:

1.

COMMISSIONER OF INCOME TAX (APPEALS) NATIONAL FACELESS APPEAL CENTRE, DELHI-110 001.

2.

ASSESSING OFFICER, NATIONAL FACELESS ASSESSMENT CENTRE, DELHI-110 001

3.

INCOME TAX OFFICER, WARD - 1 AND TPS, AAYAKAR BHAVAN, 2ND STAGE, BELUR ROAD, HASSAN - 573 201.

Digitally signed by PRAKASH N Location: HIGH COURT OF KARNATAKA

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HC-KAR NC: 2026:KHC:14341 WP No. 7492 of 2026

4.

THE BRANCH MANAGER, HASAN DISTRICT CENTRAL CO-OP. BANK LTD "UNNATHI", B. M. ROAD, HASSAN - 573 201. … RESPONDENTS (BY SRI. M. THIRUMALESH., ADVOCATE FOR R1 TO R3)

THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE ASSESSMENT ORDER DT 17-03-2023 BEARING DIN NO. ITBA/AST/S/147/2022-23/1050887036(1) PASSED BY THE SECOND RESPONDENT MARKED AS ANNEXURE-C AND THE DEMAND NOTICE DT 17-03-2023 BEARING DIN AND NOTICE NO. ITBA/AST/S/156/2022-23/1050887092(1) ISSUED BY THE SECOND RESPONDENT MARKED AS ANNEXURE-D AND THE ORDER DT 08-12-2024 BEARING DIN AND ORDER NO. ITBA/NFAC/S/250/2024-25/1070999792(1) MARKED AS ANNEXURE-E ISSUED BY THE FIRST RESPONDENT BY ISSUING A WRIT IN THE NATURE OF CERTIORARI AND ETC.

THIS PETITION COMING ON FOR PRELIMINARY HEARING THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE S SUNIL DUTT YADAV

ORAL ORDER

The petitioner has called in question the validity of Assessment Order at Annexure-C dated 17.03.2023 and Demand notice dated 17.03.2023 at Annexure-D.

2.

Petitioner submits that the assessment order passed is an exparte order and passed on the principle of

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HC-KAR NC: 2026:KHC:14341 WP No. 7492 of 2026

'Best Judgment Assessment'. It is submitted that due to bonafide reasons, petitioner could not make out any reply or participate in the assessment proceedings.

3.

It is submitted that the authority had initiated proceedings with specific reference to credits in the bank account which the assessee allegedly has failed to explain through documentary evidence.

4.

It is specifically asserted that deposits taken note of by the authority were in fact payments made to discharge the loans and accordingly, such aspect requires to be demonstrated before the authority.

5.

It is submitted that the income of the petitioner being below the taxable limits, the question of filing returns did not arise.

6.

It is noticed that the assessment order is passed on the principle of 'Best Judgment Assessment' in light of petitioner not having participated in the proceedings. As

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HC-KAR NC: 2026:KHC:14341 WP No. 7492 of 2026

against the assessment order, petitioner had filed an appeal, which appeal also came to be rejected on merits.

7.

It is the case of the petitioner that the Appellate Authority was not in a position to set aside the assessment order in light of petitioner not having placed any material before the Assessing Officer.

8.

Learned counsel for petitioner has brought to the notice of this court that second appeal has been withdrawn. The said submission is taken note of.

9.

Taking note of the assertion of the petitioner that much of the income is eligible for deduction under Section 80P of the Act, and also the petitioner's assertion that deposits were in fact repayment of loans by the farmers under the Kissan Cash Credit loans, it would meet the ends of justice by setting aside the impugned order and remitting the matter back to the stage of reply to the show-cause notice.

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HC-KAR NC: 2026:KHC:14341 WP No. 7492 of 2026

10.

Accordingly, the order at Annexure-C, D and E are set aside. The matter is remitted to the stage of reply to the show-cause notice. All other contentions are kept open.

SD/- (S SUNIL DUTT YADAV) JUDGE

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