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Facts
The assessee, a Co-operative Society, filed its return of income declaring NIL income after claiming deduction u/s. 80P(2)(a)(i) of the Income Tax Act, 1961. The AO denied the exemption and determined total income based on two grounds: (i) non-filing of ROI before due date and (ii) fault with the membership types. The assessee's appeal was dismissed by the CIT(A).
Held
The Tribunal held that the AO passed the order without hearing the assessee and that the assessee's assertion that its claim is valid and needs to be examined by the AO. Therefore, the Tribunal set aside the order of the CIT(A) and restored the assessment back to the AO for de novo assessment.
Key Issues
Whether the assessment order passed without providing the assessee a proper opportunity of being heard is valid, and if the deduction claim u/s. 80P was rightly denied.
Sections Cited
80P(2)(a)(i), 144, 139(1), 142(1), 80P(2)
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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI JAGADISH
आदेश / O R D E R
PER ABY T. VARKEY, JM:
1. This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/Addl./JCIT(A)-3, (hereinafter referred to as “the Ld.CIT(A)”), Kolkata, dated 30.08.2025 for the Assessment Year (hereinafter referred to as "AY”) 2017-18.
2. At the outset, the Ld.AR of the assessee brought to our notice that the assessee is a Co-operative Society registered under the Tamil Nadu Co-operative Societies Act, 1983 and filed its return of income (RoI) on 25.09.2019 after getting its accounts audited by the State Audit Team by declaring ‘NIL’ income after duly claiming deduction u/s.80P(2)(a)(i) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act‘) of Rs.8,86,878/-. However, according to the Ld.AR, the ITO, Ward-1(8), Salem, completed the assessment u/s.144 of the Act by order dated 11.12.2019 denying the exemption claimed u/s.80P of the Act and consequently determined total income at Rs.8,86,878/- on two (2)
1. grounds i.e. (i) non-filing of RoI before due-date u/s.139(1) of the Act because of which deduction can’t be allowed in view of insertion of sub- section (4) in Section 80P of the Act and (ii) by finding fault with the two kinds of Membership [‘regular members’ or ‘A’ Class Members & ‘associate members’ (or ‘B’ Class Members)]. Aggrieved, the assessee challenged the ex parte order passed by the AO before the Ld.CIT(A), but the Ld.CIT(A) concurred with the view of the AO. According to the Ld.AR, since the assessment has been framed without hearing the assessee relying on the decision of the Hon’ble Supreme Court in the case of TIN Box Co. v. CIT reported in [2001] 249 ITR 216 (SC), he pleaded that the assessment may be restored to the file of the AO for de novo assessment.
3. Per contra, the Ld.DR submitted that the assessee didn’t file the RoI even after completion of the Audit by the Co-operative Audit Team on 21.08.2017 and had filed the ITR only on 25.09.2019 and therefore, the Ld.CIT(A) held it to be an invalid return/non-est return; and hence, the AO has righty denied the deduction u/s.80P(2)(a)(i) of the Act. Further, according to him, since assessee provided credit facilities to not only ‘regular members’ (or ‘A’ Class Members) but also to ‘associate members’ (or ‘B’ Class Members), therefore, according to the Ld.DR, no purpose would be served by giving one more opportunity to the assessee before the AO.
4. In his rejoinder, the Ld.AR submitted that the AO is the primary authority to assess the income of the assessee as per the scheme of the Act and acknowledging this important duty of the AO, the Hon’ble Supreme Court in a similar case of TIN Box Co. (supra) has overturned even the decision of the Hon’ble High Court, ITAT and the Ld.CIT(A), and restored the assessment back to the file of the AO, since the assessee didn’t get proper opportunity before the AO. Moreover, according to the Ld.AR, the AO/Ld.CIT(A) has not correctly appreciated the facts and has not dealt with the binding decision of the jurisdictional High Court while adjudicating the claim of the assessee u/s.80P of the Act. Therefore, the Ld.AR pleaded that one more opportunity may be granted to the assessee and undertakes to appear and present the relevant documents as well as file the case laws to assist the AO in investigating and adjudicating the claim of the assessee.
5. Having heard both the parties and after perusal of the records, we note that assessee is a Co-operative Society registered under the Tamil Nadu Co-operative Societies Act, 1983 for AY 2017-18, and the assessee had filed its RoI on 25.09.2019. According to the Ld.AR, the belated filing of return was due to delay in completion of statutory Audit of its accounts. Meanwhile, the AO issued notice u/s.142(1) of the Act asking the assessee to file the RoI on or before 31.03.2018 and finding that the assessee didn’t file the return and taking note that the same was filed on 25.09.2019 treated it as invalid/non-est return and thereafter, the AO has denied the claim u/s.80P(2)(a)(i) of the Act by passing the ex parte order u/s.144 of the Act on 11.12.2019 denying the claim of deduction u/s.80P(2) of the Act. On appeal, the Ld.CIT(A) concurred with the view of the AO. The main grievance of the assessee is that the assessee didn’t get proper opportunity before the AO and has relied on the decision of the TIN Box Co. wherein the Hon’ble Supreme Court finding that the assessee didn’t get proper opportunity before the AO has reversed the Hon’ble High Court Order, ITAT order and the Ld.CIT(A)’s order and restored the assessment back to the file of the AO for de novo assessment. The order of the Hon’ble Supreme Court in the case of TIN Box Co. is reproduced as under:
It is unnecessary to go into great detail in these matters for there is a statement in the order of the Tribunal, the fact-finding authority, that reads thus :
"We will straightaway agree with the assessee's submission that the Income-tax Officer had not given to the assessee proper opportunity of being heard."
That the assessee could have placed evidence before the first appellate authority or before the Tribunal is really of no consequence for it is the assessment order that counts. That order must be made after the assessee has been given a reasonable opportunity of selling out his case. We, therefore, do not agree with the Tribunal and the High Court that it was not necessary to set aside the order of assessment and remand the matter to the assessing authority for fresh assessment after giving to the assessee a proper opportunity of being heard.
Two questions were placed before the High Court, of which the second question is not pressed.
The first question reads thus:
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not setting aside the assessment order in spite of a finding arrived at by it that the Income-tax Officer had not given a proper opportunity of hearing to the assessee?"
In our opinion, there can only be one answer to this question which is inherent in the question itself: in the negative and in favour of the asses- see.
The appeals are allowed. The order under challenge is set aside. The assessment order, that of the Commissioner (Appeals) and of the Tribunal are also set aside. The matter shall now be remanded to the assessing authority for fresh consideration, as aforestated. No order as to costs.
We find that in the instant case in hand, the AO has passed the order without hearing the assessee and the assessee’s assertion before the Ld.CIT(A) that the AO’s action is erroneous for not following the decision of the Hon’ble Madras High Court in the case of PCIT, Salem v.
M/s. S-1308 Ammapet PACCS Ltd., in Tax Appeal Nos.882 & 891 of 2018, was not appreciated in the correct spirit. Be that as it may, we are not commenting on the merits of the action taken by both the AO as well as the Ld.CIT(A). However, we find that the AO has passed the order without hearing the assessee and the assessee’s assertion that its claim is valid (AY 2017-18) S 355 Tharamangalam PACCS by relying on the decision of the jurisdictional High Court needs to be properly examined by the AO before disallowing the claim. Therefore, we set aside the impugned order of the Ld.CIT(A) and restore the assessment back to the file of the AO for de novo assessment after hearing the assessee. The assessee is directed to file all the relevant documents/written submissions before the AO and any omission on the part of the assessee would be adversely viewed and the assessment to be farmed in accordance to law.
In the result, appeal filed by the assessee is allowed for statistical purposes.