INDRAPRASTHA NAGARI SAHAKARI PATSANSTHA LTD.,,SANGLI vs. INCOME-TAX OFFICER, WARD -5,, SANGLI

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 3 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 4 and the interest income earned from investments with other co- operative banks is also deductible u/s 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 5 u/s 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. 8. 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 6 the appeal of the assessee on the ground that assessee is entitled to claim deduction u/s 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. 7 Thus, the grounds of appeal raised by the assessee are partly allowed. 9. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced on this 30th day of January, 2025. (R. K. PANDA) JUDICIAL MEMBER

गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER,