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Facts
The assessee, a credit co-operative society, filed its return for AY 2013-14. The original assessment u/s 143(3) was completed, allowing a deduction u/s 80P(2)(a)(i). Subsequently, reassessment proceedings were initiated u/s 147. The AO disallowed a deduction u/s 80P(2)(d) and passed an order u/s 144B. The CIT(A) set aside the assessment order and remanded it back to the AO.
Held
The Tribunal held that the CIT(A)'s decision to set aside the assessment order was not in accordance with the law as the assessment order was passed u/s 147 r.w.s. 144B and not u/s 144. The Tribunal set aside the CIT(A)'s order and restored the matter to the CIT(A) for adjudication on merits.
Key Issues
Whether the CIT(A) was justified in setting aside the assessment order passed u/s 147 r.w.s. 144B instead of adjudicating the issues on merits, especially when the AO had disallowed deduction u/s 80P(2)(d).
Sections Cited
80P(2)(a)(i), 80P(2)(d), 149(1)(b), 143(3), 148A, 147, 144, 148, 144B, 251(1)(a), 250(6)
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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI R.K. PANDA & MS. ASTHA CHANDRA
आयकर अपील सं. / & 391/PUN/2025 धििाारण वर्ा / Assessment Years : 2013-14 & 2014-15 Kamal Nagari Sahakari Patsanstha Ltd., Income Tax Officer, Kamal Bhavan, Shivaji Road, Alibag, Ward – 3, Panvel Dist. Raigad-402201 Vs. PAN : AAAJK0269P अपीलार्थी / Appellant प्रत्यर्थी / Respondent Assessee by : Shri Ajinkya Vaishampayan Department by : Shri Ramnath P Murkunde Date of hearing : 14-07-2025 Date of 26-08-2025 Pronouncement : आदेश / ORDER PER ASTHA CHANDRA, JM : Two appeals filed by the assessee are directed against the separate orders both dated 18.12.2024 of the Ld. Commissioner of Income Tax (Appeals),NFAC, Delhi [“CIT(A)/NFAC”] pertaining to Assessment Years (“AYs”) 2013-14 and 2014-15. Since the issue(s) involved are identical, these were heard together and are being disposed of by this common order.
The assessee has raised the following grounds of appeal:- “On facts and in law,
1. The learned CIT(A) erred in not adjudicating the grounds no. 2 and 4, wherein the Assessee Society claimed the deduction u/s 80P(2)(a)(i) and or alternatively u/s 80P(2)(d) which was consistent claim from the stage of original assessment proceedings.
2. The Ld. CIT(A)-NFAC has erred in not adjudicating the validity of initiation of re-assessment proceedings in terms of section 149(1)(b) as amended by the Finance Act, 2021 w.e.f. 01/04/2021.
3. There was no failure to disclose to form an opinion about escapement of income if unamended provisions are applicable as facts were borne on record of the Ld. AO since the original assessment proceedings. AYs 2013-14 & 2014-15
The Ld. CIT(A)-NFAC has failed to follow the judicial precedence in the case of Co-operative Societies with respect to allowability of deduction u/s 80P(2)(d) as well as in not following decision of Hon'ble ITAT Pune Bench's view in the Assessee Societies own case for A.Y. 2017-18.
5. The Ld. AO erred in not allowing the proportionate deduction of expenses u/s 57 while making an addition u/s 56 of the Act. 6. The notice issued u/s 148A is invalid and covered by the decision of Hon'ble Supreme Court in the case of Union of India Vs. Rajeev Bansal [2024] 167 taxmann.com 70 (SC), thereby making the re-assessment notice as well as assessment order void and liable to be quashed. 7. The Ld. CIT(A) NFAC erred in setting aside the assessment order which was not passed u/s 144 r.w.s. 147 and not adjudicating in regular manner. The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.”
3. Briefly stated, the facts as culled out from the statement of facts filed along with Form 35 are that the assessee society is engaged in the business of providing credit facilities to its members. For AY 2013-14, it filed its return of income on 29.09.2013 declaring total income at Rs. Nil. The case of the assessee was selected for scrutiny under CASS and assessment u/s 143(3) of the Income Tax Act, 1961 (the “Act”) was completed on 29.02.2016. In the return of income, the assessee claimed deduction u/s 80P(2)(a)(i) at Rs.55,16,236/-. During the course of assessment, various documents including Profit and Loss Account, Balance Sheet, Interest income workings were furnished. While completing the assessment, the Ld. Assessing Officer (“AO”) added back the net income earned from MSEB as Commission for collecting electricity bills, after giving effect of proportionate expenses incurred to earn such an income. Rest of the income was allowed as deduction u/s 80P(2)(a)(i) and income was determined at Rs.4,91,080/-by scaling down the deduction u/s 80P(2)(a)(i) of the Act. Thereafter, the Ld. AO issued notice u/s 148 under old provisions of the Act i.e. before introduction of Section 148A. On pronouncement of Hon'ble Supreme Court's decision in the case of UOI Vs. Ashish Agarwal, new notice u/s 148A(b) was issued. Against such a notice, the objections were raised regarding applicability of new provisions u/s 148A r.w.s. 149(1)(b) and old provisions u/s 148 of the Act. Also, it was brought to the notice of the Ld. AO that, without prejudice to the stand about eligibility of deduction u/s 80P(2)(a)(i)/80P(2)(d) for full amount, after giving effect of proportionate expenses, the income stands at Rs.10,62,911/-, which is well below Rs.50,00,000/- limit as prescribed u/s 149(1)(b). A working was also provided in this regard. Additionally, it was objected and brought to the notice of the Ld. AO that the income alleged to have escaped the assessment is not in AYs 2013-14 & 2014-15 form of the asset as envisaged u/s 149(1)(b) of the Act. While disposing the objections raised, the Ld. AO did not properly consider and discuss about the proportionate deduction available and also did not properly rebut the objection about the fact that income alleged to have escaped assessment was not in the nature of Asset. Accordingly, the Ld. AO proceeded to pass the order u/s 148A(d) of the Act. While completing the original assessment u/s 143(3) of the Act, the Ld. AO accepted and allowed the deduction u/s 80P(2)(a)(i) as business income. During re-assessment proceedings, the Ld AO rejected the assessee’s contention that the assessee is eligible for deduction under section 80P(2)(a)(i)/ 80P(2)(d) in respect of interest income earned from cooperative banks, which is duly supported by catena of judicial precedents pronounced in favour of the assessee and proceeded to pass the impugned order under section 147 read with section 144B of the Act on 09.04.2023 disallowing the deduction claimed u/s 80P(2)(d) at Rs. 1,33,53,021/- .
4. Aggrieved, the assessee filed an appeal before the Ld. CIT(A)/NFAC. There was non-compliance of notices of hearing. By applying the amended provisions of section 251(1)(a) of the Act, the Ld. CIT(A)/NFAC set aside the assessment order and remanded the matter back to the file of the Ld. AO for making a fresh assessment observing as under: “5.2 The assessment order in this case was passed under section 144 of the Income Tax Act, i.e., the order was passed ex-party in absence of necessary compliance and submission from the appellant. From the perusal of the assessment order, it is clear that the appellant was granted various opportunities to present and submit documents in support of his claims and his submissions on questions and issues under consideration and examination in the assessment proceedings. The table below shows the various notices issued to the appellant and the status of compliance made, if any, by the appellant. As is clear from the table below, it seems reasonable to believe that the AO was left with no other option but to pass an assessment order ex-party u/s 144 based on the facts and documents available on record, due to the non-compliance on the part of the appellant. Date of fixing/notice by the AO Section and nature of notice/compliance made, if any/Remarks 17/04/2021 Notice U/s 148 25/07/2022 Notice U/s 148A(d), No Compliance 30/12/2022 Notice U/s 143(2), Compliance Partly 13/01/2023 Notice 142(1), Compliance Partly 30/03/2023 Show Cause Notice, Compliance Partly 5.3 During the appellate proceedings too, the appellant was granted opportunities for presenting his case and filing detailed submission in support of various grounds of appeal taken by him. The appellant was issued notices on07/10/2024, 06/11/2024, 21/11/2024. It may be noted that the appellant filed the present appeal before the than jurisdictional CIT(Appeal). Subsequently, with the introduction of the faceless appeal scheme in 2020 and its revision in 2021, the appeal was transferred to the NFAC and then allocated to a faceless appeal unit. Subsequently, notices were issued from the faceless appeal units as per the scheme. It may be noted that in the faceless appeal environment, all the AYs 2013-14 & 2014-15 notices are issued to the appellant at the email address provided by him, and also, all the submission are supposed to be filed online through the appeal module available to the appellant online in his e-filing portal. 5.4 Having noted thus, the matter has been considered carefully in totality of facts, context and circumstances. Though it is a fact that the appellant failed to make necessary and sufficient submission in defense of his case before the AO thereby leaving hardly any other option before the AO than to make an ex-party order, it is also a concomitant fact that in the ex-party order u/s 144 made by the AO, the issues under examination and dispute could not be examined, investigated and analyzed on merits and in detail. As such, the order passed by the AO is not based on proper examination of facts and documents and is not based on required investigation and on consideration of the various facts, submission and other points that could have been raised by the appellant. As such, on the face of it, although the appellant has failed to complied with the various notices issues by the AO, the fact remains that his (appellant's) side has not been heard and examined. 5.5 The section 251(1)(a) of the Income Tax Act, enumerating powers of the Commissioner (Appeals) and Joint Commissioner (Appeals), has been modified w.e.f. 1/10/2024 by the introduction of the Proviso, which states:
1.
In disposing of an appeal, the Commissioner (Appeals) shall have the following powers- (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment: Provided that where such appeal is against an order of assessment made under section 144, he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment; ………” 5.6 By the introduction of this proviso, an option of setting aside the ex-party order passed by AO under section 144 has been made available to the Commissioner (Appeals). Clearly, this change in the provisions has been brought about with an eye to make it possible to grant another opportunity to the appellant to present and defend his case before the AO, even if in the first instance, he has failed to do so, or has not done so as per satisfaction of the AO, and accordingly an order u/s 144 was passed in his case. 5.7 After careful consideration, I am of the considered view that the present case is suitable for application of this new provision of setting aside an assessment order. Therefore, in light of the amendments made in section 251(1)(a) and as discussed above, the assessment order in this case is hereby set aside and is referred back to the file of the AO for making a fresh assessment.
6. In the result, the appeal is set aside.”
Dissatisfied, the assessee is in appeal before the Tribunal and all the grounds of appeal relate thereto.
The Ld. AR submitted that the Ld. CIT(A)/NFCA has not dealt with the legal grounds raised by the assessee. He further submitted the Ld. CIT(A)/NFAC has not decided the assessee’s grounds even on merits. He has remanded the matter to the file of the Ld. AO for fresh assessment which is not in accordance with the amended provisions of section 251(1)(a) of the Act. He, AYs 2013-14 & 2014-15 therefore, prayed that the matter may be set aside to the file of the Ld. CIT(A)/NFAC to adjudicate the legal ground as well as the other grounds on merits raised by the assessee before him.
The Ld. DR, on the other hand, supported the order of the Ld. CIT(A)/ NFAC and Ld. AO.
We have heard the Ld. Representatives of the parties and perused the material available on record. Admittedly, before the Ld. CIT(A)/NFAC there was non-compliance of notice(s) of hearing. We observe that the assessee is a credit co-operative society and assessment for AY 2013-14 has been framed on 09.04.2023 u/s 147 r.w.s. 144B of the Act wherein the Ld. AO had disallowed the assessee’s claim of deduction u/s 80P(2)(d) of the Act which has challenged by the assessee before the Ld. CIT(A)/NFAC along with certain other legal grounds raised by the assessee. The Ld. CIT(A)/NFAC has held that the assessment order deserves to be set aside and referred it back to the Ld. AO for making afresh assessment for the reasons recorded in the preceding paragraphs. This decision of the Ld. CIT(A)/NFAC is based upon the amendment brought to section 251 by the Finance Act, 2024 effective from 01.10.2024. As per the proviso to section 251(1)(a) of the Act, the Ld. CIT(A)/NFAC may set aside the orders passed by the Ld. AO u/s 144 of the Act. However, in the instant case, the assessment order has been passed u/s 147 r.w.s.144B of the Act and therefore, in our view, the Ld. CIT(A)/NFAC was required to adjudicate the issues raised on merits and pass a speaking order as contemplated u/s 250(6) of the Act.
Considering the totality of facts and in the circumstances of the case enumerated above, without going into the merits of the appeal, we deem it proper, in the interest of justice, to set aside the order of the Ld. CIT(A)/NFAC and restore the matter back to his file for adjudication afresh and pass speaking order on merits as per fact and law after allowing one final opportunity of being heard to the assessee. The assessee is also hereby directed to provide the requisite support in terms of submitting the relevant documents/ evidence as may be required/called upon on the appointed date and make his submissions without seeking any adjournment under any pretext, failing which the Ld. CIT(A)/NFAC shall be at liberty to pass appropriate order as per law. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes. AYs 2013-14 & 2014-15
In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.
ITA No. 391/PUN/2025, AY 2014-15 11. Both the sides are unanimous in stating that the facts and the grounds of appeal in for AY 2014-15 are identical to the grounds raised in AY 2013-14 except for the variance in amounts. Thus, in view of the fact that the issue raised in both the appeals are identical and are arising from same set of facts, the finding given by us while adjudicating the appeal in ITA No. 390/PUN/2025 would mutatis mutandis apply to the appeal in ITA No. 391/PUN/2025 as well. Accordingly, the grounds of appeal raised by the assessee in ITA No. 391/PUN/2025 are allowed for statistical purposes in the same terms.
To sum up, both the appeals of the assessee in & 391/PUN/2025 for AYs 2013-14 & 2014-15 are allowed for statistical purposes.