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Facts
The assessee, a co-operative society, filed returns declaring Nil income after claiming deduction under section 80P for AY 2017-18 and 2020-21. The Assessing Officer denied the deduction and treated interest income from co-operative banks as income from other sources, also levying penalty.
Held
The Tribunal held that the National Faceless Appeal Centre (NFAC) failed to provide reasonable opportunities to the assessee for hearing and proper adjudication, violating principles of natural justice. The NFAC also did not follow the prescribed procedure for adjudication.
Key Issues
Whether the NFAC's ex-parte decisions, made without providing sufficient opportunity to the assessee and without following prescribed procedures, were legally sustainable.
Sections Cited
80P, 143(3), 270A, 250, 246A, 249, 251(1)(a), 250(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PANAJI BENCH, GOA
Before: HON’BLE SHRI PAVAN KUMAR GADALE & SHRI G. D. PADMAHSHALI
V/s Income Tax Officer, Ward-1, Gokak. . . . . . . . Respondent Appearances Assessee by : None Revenue by : Ms Rijula Uniyal [‘Ld. DR’] Date of conclusive Hearing : 11/03/2026 Date of Pronouncement : 12/03/2026 ORDER PER G. D. PADMAHSHALI; The instant bunch of three appeals of the assessee are directed against DIN & Order No. ITBA/NFAC/S/250/2025- 26/1078412948(1), 1078412416(1) & 1078413545 all dt. 11/07/2025 passed u/s 250 of the Income-tax Act, 1961 [for short ‘the Act’] by the National Faceless Appeal Centre, Delhi [for short ‘NFAC’] which in turn ascended out of order of assessment/penalty passed u/s 143(3)/270A of the Act by the National Faceless e-Asstt. ITAT-Panaji Page 1 of 10
Shri Durdundeshwar Urban Credit Souhard Sahakari Niyamita Vs ITO 307 & 311/PAN/2025 Centre, Delhi [for short ‘AO’] in relation to two assessment years 2017-18 & 2020-21 [for short ‘AYs’]
These appeals were called up for hearing twice, none appeared at the behest of appellant assessee. The assessee vide email dt. 07/01/2026 communicated its inability to appoint counsel to attend the hearings on its behalf and thus requested for disposal of these appeals ex-parte. In view thereof, with the able assistance from the Revenue, in absence of the appellant we advanced the hearing ex-parte u/r 24 of ITAT-Rules, 1963.
Since facts involved in these appeals and issue dealt therein are common, identical & interwoven, on Ld. DR’s request these three appeals for the sake of brevity & convenience are heard together for being disposed of by this common & consolidated order. The is taken as lead case, therefore our adjudication laid in succeeding paragraphs shall mutatis-mutandis apply to remaining appeals. ITAT-Panaji Page 2 of 10
Shri Durdundeshwar Urban Credit Souhard Sahakari Niyamita Vs ITO 307 & 311/PAN/2025 4. Briefly stated common facts of the case are that; the assessee vide certificate dt. 22/03/2003 registered as a Souharda Co-operative Society registered under the provisions of Karnataka Souhard Sahakari Act, 1997 with main objective of providing credit facilities to its members.
ITA No. 311/PAN/2025, AY 2017-18.
The assessee filed its return of income for AY 2017- 18 on 05/10/2017 declaring ₹Nil income after claiming deduction u/s 80P of the Act of ₹86,26,206/-. The said return was selected for scrutiny & consequential assessment was completed u/s 143(3) of the Act whereby total income of the assessee owning to denial of deduction claimed u/s 80P of the Act was assessed at ₹86,26,206/-. While denying the claim for 80P(2) deduction, the Ld. AO placed his reliance on the decision of Ld. Co-ordinate bench in the case of ‘Athmashakti Multipurpose Co-op. Society Vs ITO’ [ITA No. ITAT-Panaji Page 3 of 10
Shri Durdundeshwar Urban Credit Souhard Sahakari Niyamita Vs ITO 307 & 311/PAN/2025 1220/Bang/2029 dt. 18/10/2019] for exceeding number of associate members above 15% of regular members of the society. In addition to above denial of 80(2) deduction, by placing reliance on catena of judicial precedents including the judgement of Hon’ble Apex Court in the case of ‘Totgar’s Co-op. Sale Society Ltd. Vs ITO’ [2010, 322 ITR 283 (SC)] the Ld. AO treated the total interest received by the assessee from its investment held with co-operative banks as income of the assessee under the head income from other sources.
AY 2020-21 6. Similarly for the year under consideration the assessee’s return filed on 08/12/2020 declaring an income of ₹Nil after claiming deduction u/s 80P of the Act of ₹94,82,295/- was also selected for complete scrutiny & consequential assessment therefore was completed u/s 143(3) of the Act whereby total income of the assessee owning to similar denial of deduction ITAT-Panaji Page 4 of 10
Shri Durdundeshwar Urban Credit Souhard Sahakari Niyamita Vs ITO 307 & 311/PAN/2025 claimed u/s 80P of the Act was assessed at ₹94,82,295/- While denying the deduction u/s 80P(2) of the Act the Ld. AO placed his reliance like decisions as were relied in the former case.
AY 2020-21 7. Against the immediately former assessment, the penalty proceedings were initiated for under reporting of income and in absence of any effective explanation from the assessee, a penalty equal to @50% of tax sought to be evaded was levied u/s 270A of the Act.
Aggrieved assessee in each of the cases approached the Ld. NFAC with separate appeals filed u/s 246A r.w.s. 249 of the Act. In the first appellate proceedings, the Ld. NFAC in each of these cases issued two notices dt. 11/06/2025 & 26/06/2025 which remained to be effectively replied or complied by the assessee. In the event of assessee’s effective failure to respond to former ITAT-Panaji Page 5 of 10
Shri Durdundeshwar Urban Credit Souhard Sahakari Niyamita Vs ITO 307 & 311/PAN/2025 twin notices, the Ld. NFAC proceeded ex-parte on the basis of material available on record and countenanced the action of Ld. AO thus confirmed 80P(2) denial, assessment and levy of penalty by separate orders as captioned hereinbefore.
Further aggrieved, the assessee came in present bunch of three appeals against each of the impugned orders passed u/s 250 of the Act alleging the dismissal of appeals by the Ld. NFAC was without considering the material & binding precedents and in violation of principle of natural justice.
Without touching merits & grounds, we noted that, in the course of such first appellate proceedings the Ld. NFAC issued two notices one after another mostly according less than fifteen ‘minimum/reasonable’ days to respond. We also note that, in these three cases, the twin notices in each case were issued for very same day ITAT-Panaji Page 6 of 10
Shri Durdundeshwar Urban Credit Souhard Sahakari Niyamita Vs ITO 307 & 311/PAN/2025 thus called upon the appellant to represent all three cases on a common day. In the event of failure on the part of appellant to respond former notices, the appeal was dismissed by the Ld. NFAC ex-parte reiterating rather reproducing the text/scan from order of assessment and penalty order with much less identification of issue, giving independent findings etc. This adjudication in our considered view not in accordance with law and we say so by placing reliance on the judgement of the Hon’ble Supreme Court rendered in ‘Chandra Kishore Jha Vs Mahavir Prasad’ [1999, 8 SCC 266 (SC)].
We note that, while dealing with the first appeal filed u/s 246A of the Act, the provisions of section 251(1)(a) of the Act mandates the Ld. NFAC to cease the first appeal conclusively either ‘confirming or reducing or enhancing or annulling’ the assessment. Further while doing so the Ld. NFAC in view of the mandatory provisions of section ITAT-Panaji Page 7 of 10
Shri Durdundeshwar Urban Credit Souhard Sahakari Niyamita Vs ITO 307 & 311/PAN/2025 250(6) was duty bound to identify the issues to be adjudicated in such appeal, to state in clear terms the decision arrived thereon and to provide the basis/support in forming such conclusion/decision. Thus, we note that, the statute clearly provided the manner, mechanism and the guidelines for adjudication of first appeal. Therefore, any adjudication which is not in consonance with such provided mechanism, per-se rendered itself irregular, however curable. It is trite law that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner’.
In the present appeals it is also noted that, in the course of first appellate proceedings, the Ld. NFAC provided much less reasonable opportunities to the appellant in each of these cases and we say so because undisputed facts that; (i) for all three appeals the appellant was called upon on very same twin days and ITAT-Panaji Page 8 of 10
Shri Durdundeshwar Urban Credit Souhard Sahakari Niyamita Vs ITO 307 & 311/PAN/2025 (ii) only two common dated notices of hearing were issued (for all three appeals) and (iii) these notices accorded less than a reasonable period of fifteen days to comply therewith. It shall be worthy to underline here that, the opportunity of being heard should be real, reasonable and effective and same should not be empty formalities, there should not be a paper opportunity. In this context of reasonable period to be granted as opportunity, the judgement of Hon’ble High court of Patna in ‘St. Paul’s Anglo Indian Education Society’ [2003, 262 ITR 377 (Pat)]’ apt for reference, wherein it was categorically held by their hon’ble lordships that, an adjudication is unjustified if an assessee was deprived of reasonable opportunity and reasonable time to produce all relevant documents to substantiate claims made in the return of income. Placing reliance on the same, the impugned orders in our considered view deserves to be set-aside for de-novo adjudication for effective opportunity.
ITAT-Panaji Page 9 of 10
Shri Durdundeshwar Urban Credit Souhard Sahakari Niyamita Vs ITO 307 & 311/PAN/2025 13. In summation, on one hand the appellant was deprived of reasonable opportunity and reasonable time to produce all relevant documents/evidence in support of grounds of appeal raised, and on the other hand the impugned adjudications suffered from compliance of provisions of s/s (6) of section 250 of the Act. For these stated twin reasons, we deem it fit to set-aside these impugned orders for their remand to the file of Ld. NFAC with a direction to adjudicate the same de-novo in accordance with law and pass a speaking order in terms of s/s (6) of section 250 of the Act, ergo ordered accordingly. The grounds are thus stands partly allowed for statistical purposes.
In result, these appeals are allowed for statistical purposes. In terms of rule 34 of ITAT Rules, the order pronounced in the open court on the date mentioned hereinbefore.