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Facts
The assessee, a cooperative society, filed a return declaring 'Nil' income after claiming a deduction of Rs. 65,81,336/- under Section 80P(2)(a)(i). The Assessing Officer (AO) disallowed this deduction and made an addition of Rs. 3,57,44,782/- under Section 68 for undisclosed income, assessing total income at Rs. 4,23,26,118/-.
Held
The Tribunal noted that the AO made two additions: disallowance of Section 80P deduction and addition under Section 68. The CIT(A) had erroneously decided the Section 68 issue as allowable under Section 80P. Considering the facts and interest of justice, the Tribunal set aside the CIT(A)'s order and remanded the matter back to the AO for a de novo assessment.
Key Issues
Whether the disallowance of deduction under Section 80P and the addition of Rs. 3,57,44,782/- under Section 68 were justified and whether the CIT(A) erred in its decision.
Sections Cited
80P, 80P(2)(a)(i), 68, 143(2), 142(1), 80P(2)(d)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI R. K. PANDA & SHRI VINAY BHAMORE
Assessment Year : 2018-19 Indraprastha Nagari Sahakari Vs. ITO, Ward-5, Sangli. Patsanstha Ltd., Islampur, Walwa, Sangli- 415409. PAN : AAAAI0626B Appellant Respondent Assessee by : Shri Sarang Gudhate Revenue by : Shri Uma Shankar Prasad Date of hearing : 21.11.2024 Date of pronouncement : 30.01.2025 आदेश / ORDER PER VINAY BHAMORE, JM: It is a recalled matter. This appeal filed by the assessee is directed against the order dated 14.03.2022 passed by Ld. CIT(A)/NFAC for the assessment year 2018-19.
The appellant has raised the following modified grounds of appeal :- “Ground No. 1: Under the facts and circumstances of the case and in law, Ld. CIT(A) / NFAC is erred in disallowing deduction u/s 80P of Rs. 65,81,336/-.
Ground No. 2: Under the facts and circumstances of the case and in law, Ld. CIT(A) / NFAC erred in making addition u/s 68 of Rs. 3,57,44,782/-. Ground No. 3: Under the facts and circumstances of the case and in law, Ld. CIT(A) / NFAC erred in making an addition u/s 68 of Rs. 3,57,44,782/-, whereas same is already considered in Net profit and in gross total income. This addition is resulting as a double taxation. Ground No. 4: The appellant craves the permission to add, amend, modify, revise, substitute, delete or alter any/all of the above grounds of appeal if deemed necessary at the time of hearing of the appeal.”
3. The facts of the case, in brief, are that the assessee is a cooperative society engaged in accepting deposits and providing credit facilities to its members. The return of income was furnished on 22.10.2018 declaring total taxable income at Rs.Nil after claiming deduction of Rs.65,81,336/- u/s 80P(2)(a)(i) of the IT Act. The case was selected for scrutiny through CASS for the reason to verify investments/advances/loans/ verification of transactions and deduction from total income under Chapter VI-A. Notices u/s 143(2) and 142(1) respectively were issued along with questionnaire. After considering the submission of the assessee, the assessment was completed by determining the total income at Rs.4,23,26,118/- as against the income returned by the assessee at Rs.Nil. The above assessed income includes addition of Rs.65,81,336/- on account of disallowance of deduction claimed u/s 80P(2)(a)(i) of the IT Act and Rs.3,57,44,782/- undisclosed income u/s 68 of the IT Act, being the entire credit entries as per the AO.
4. In first appeal, after considering the reply of the assessee, Ld. CIT(A)/NFAC dismissed the appeal by relying on the judgement of Hon’ble Supreme Court in the case of CIT vs. The Totagars Co- Operative Sale Society order dated 16.06.2017 wherein it was held that the assessee is not entitled to claim deduction u/s 80P of the IT Act. It is this order against which the assessee is in appeal before this Tribunal.
5. Ld. AR appearing from the side of the assessee submitted before us that the order passed by Ld. CIT(A)/NFAC is not justified. Ld. AR submitted before the Bench that the issue of taxability of interest income earned from other nationalized banks in the hands of cooperative society is no more res integra in the light of various decisions including the decisions of Pune Benches of the Tribunal, wherein it has been held that the interest income which is derived during the course of business i.e. providing credit facilities to its members is deductible u/s 80P(2)(a)(i) of the IT Act 80P(2)(d) of the IT Act. Accordingly, it was requested before the Bench to set-aside the order passed by Ld. CIT(A)/NFAC and allow the deduction of Rs.65,81,336/- claimed by the assessee u/s 80P(2)(a)(i) of the IT Act.
6. Ld. AR further submitted that the Assessing Officer issued notice to the assessee to explain the credit of Rs.3,57,44,782/-, but the assessee could not reply to that notice and the Assessing Officer made addition of Rs.3,57,44,782/- u/s 68 to the income of the assessee which is the entire credit entries as per the AO. In this regard, Ld. AR in his written submission stated that the above figure is not appearing in his financial statements but it appears that the same figure is gathered by the AO from cash transaction reported by Rajaram Sahkari Bank Ltd., Sangli DCCB Ltd. & RBL Bank which were disclosed in Form 26AS. It was further submitted by Ld. AR that the assessee cooperative society derived interest & other income from the business of providing credit facilities and after deducting allowable expenditure, net income of Rs.65,81,336/- was arrived and the same was claimed as deduction 80P(2)(a)(i) of the IT Act. It was contended before the Bench that in the light of various Coordinate Bench decisions the income of the assessee co-operative society is subject to deduction u/s 80P(2)(a)(i) & 80P(2)(d) of the IT Act and it will be double taxation if the whole of the credit entry is added back in the income of the assessee.
7. Ld. DR appearing from the side of the Revenue relied on the orders passed by the sub-ordinates authorities and requested to confirm the same.
We have heard Ld. Counsels from both the sides and perused the material available on record. We find that the Assessing Officer has made two additions, first addition of Rs.65,81,336/- by disallowing the deduction claimed u/s 80P(2)(a)(i) of the IT Act & another addition of Rs.3,57,44,782/- u/s 68 of the IT Act as undisclosed income. However, from perusal of the impugned order of Ld. CIT(A), we find that the assessee in the first appellate proceedings has only challenged the addition of Rs.3,57,44,782/- u/s 80P(2)(a)(i) of the IT Act, which was made by the AO under the provisions of section 68 of the IT Act and which was confirmed by Ld. CIT(A)/NFAC. We find the Tribunal allowed 80P(2)(a)(i) and thereafter the Assessing Officer also passed consequential order giving effect to the order of the Tribunal. However, we find that the Tribunal subsequently recalled the order on account of some factual errors which is being decided now. Since the Assessing Officer has made two additions i.e. disallowance of deduction u/s 80P(2)(a)(i) and addition u/s 68 and since Ld. CIT(A)/NFAC erroneously decided the issue of addition u/s 68 as allowable u/s 80P(2)(a)(i) and since the Assessing Officer has also given appeal effect, therefore, considering the totality of the facts of the case, and in the interest of justice, we deem it proper to set-aside the impugned order of Ld. CIT(A) and the matter is remanded back to the file of the AO to pass de novo assessment as per fact and law after providing reasonable opportunity of hearing to the assessee. The assessee is also hereby directed to respond to the notices issued by Ld. AO in this regard and produce relevant documents, if any, desired by the AO without taking any adjournment under any pretext, otherwise the AO shall be at liberty to pass assessment order as per law.