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Facts
The assessee, a Primary Cooperative Society engaged in milk supply, failed to file its Return of Income for AY 2020-21. The assessment was reopened under Section 148, and due to non-compliance, the Assessing Officer estimated its net income at 1% of the total turnover of Rs. 6,32,19,719/-, which was confirmed by the CIT(A).
Held
The Tribunal dismissed the assessee's appeal, affirming that the 1% estimation of net profit by the AO was legally valid due to the assessee's non-compliance in filing the original or timely belated return and failure to provide required details. It further held that the assessee was not eligible for the deduction under Section 80P due to the non-filing of the return as mandated by Section 80AC.
Key Issues
Whether the estimation of income at 1% of turnover by the AO for a non-compliant cooperative society is justified, and whether deduction under Section 80P is allowable if the return of income is not filed as per Section 80AC.
Sections Cited
147, 144, 139(1), 148, 133(6), 80P, 80AC
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH
Before: DR. BRR Kumar & Shri T. R. Senthil Kumar
ITA No: 1749/Ahd/2025 Assessment Year: 2020-21 The Nanol Dudh Utpadak The ITO, Sahkari Mandali Ltd. Ward-1, AT & PO. Nanol, Vs Palanpur TAL. Tharad Dist: Banaskantha-385565 PAN: AAAAT1906H (Appellant) (Respondent) Assessee Represented: Shri Kunal Shangvi, A.R. Revenue Represented: Shri Rohit Aasudani, Sr. D.R. Date of hearing : 12-11-2025 Date of pronouncement : 19-12-2025 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
This appeal is filed by the Assessee as against appellate order dated 30-07-2025 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the reassessment order passed under section 147 r.w.s. 144 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2020-21.
A.Y. 2020-21 Page No 2 The Nanol Dudh Utpadak Sahakari Mandli Ltd. vs. ITO
Brief facts of the case is that the assessee is a Cooperative Bank has not filed the Return of Income for the Asst. Year 2020-21. The assessee had made total sales as reported under GSTR-1 and GSTR-3B of Rs.6,32,19,719/- and also made cash withdrawal amounting to Rs.2,38,60,796/- from the Banaskantha District Central Co Op Bank Ltd. Therefore the assessment was reopened by issuing a notice u/s. 148 of the Act. The assessee filed the return on 15-02-2025 which is beyond 30 days time given to the assessee. The assessing officer called for details u/s. 133(6) from the banks and a final show cause notice dated 11-02-2025 requesting that assessee to submit the information, details regarding the cash deposits and why not to estimate 8% of the business activity amounting to Rs.50,57,577/- as the net income of the assessee.
2.1. The assessee explained that it is working as Primary Co- operative Society (i.e. Animal Keepers) engaged in Supply of Milk produced by them. The assessee worked under the Banaskantha District Milk Producers Co-operative Union Ltd., Palanpur (hereinafter referred as Banas Dairy) as Member. The management of the Society is run by the committee and the said committee is appointed by the members of Co-operative Society and worked on the basis of Cooperative method. They collect the milk from members (Animal Keepers) and sell the whole milk to the Banas Dairy. Further the society also provides various goods to members at very nominal cost like cattle-feeds, Ghee, butter milk, Tea, etc. All the goods which are sold to members are on cash basis or against the Milk Bill payable of that member. Therefore considering A.Y. 2020-21 Page No 3 The Nanol Dudh Utpadak Sahakari Mandli Ltd. vs. ITO the above facts on record and the profitability of the said business activities, the net profit has been determined at 1% of the total turnover of 6,32,19,719/- amounting to Rs. 6,32,197/- as its net profit for the Asst. Year 2020-21. The Assessing Officer considering the above facts on record on profitability of the said business activities carried out by the assessee Society and accepted the 1% of the total turnover as the net profit for the Asst. Year 2020-21 and demanded tax thereon.
Aggrieved against the assessment order, assessee filed an appeal before Ld. CIT(A), who considered the submissions of the assessee, however confirmed the order passed by the assessing officer by observing as follows: “7.1 At the very outset, it is important to note that in this case the appellant had neither filed return of income as per the provisions of section 139(1) of Income Tax Act nor the return of income was filed in response to notice issued under section 148 of Income Tax Act. Moreover, even during the course of assessment proceedings, absolutely no details were filed by the appellant before the AO. Accordingly, it is very important to note that appellant has been totally non-compliant with the law. 7.2 As far as the estimation of income by the AO in the assessment order is concerned, suffice it to say that if the appellant chose not to comply with none of the notices issued by the AO, then as per the provisions of section 144 of the Income Tax Act, AO was left with no other option but to estimate the income of appellant. Needless to mention that AO had computed the income of appellant at 1% of total turnover owing to the fact that it is a Co- operative Society. It is pertinent to mention that being a Co-operative Society, appellant was eligible to claim deduction under section 80P of Income Tax Act but owing to the fact that it did not file its return of income as per the provisions of section 139(1) of Income Tax Act, it could not have claim the same as per the provisions of section 80AC of Income Tax Act. 7.3 Keeping in view the fact that appellant did not file any audited accounts before the AO and the fact the same was filed with a delay of quite a few years, surely confirms the impression of the AO that the same is nothing but an afterthought. It is really reprehensible to note that appellant had furnished its computation of profit and requested the undersigned being FAA to consider the same as income of the appellant.
A.Y. 2020-21 Page No 4 The Nanol Dudh Utpadak Sahakari Mandli Ltd. vs. ITO
Needless to mention that it is trite law that no one can approach the equity with unclean hands and therefore, the contention of the appellant that its computation of profit at Rs.2,59,829.90 should be adopted as income of the appellant for the year under consideration is hereby rejected. 7.4 It is incumbent upon the appellant to follow the law of land and it chose to not to follow the law at its own peril. Therefore, I confirm the conclusion drawn by the AO that audited accounts furnished by the appellant is nothing but an afterthought. Consequently, the estimate of income of the appellant at Rs.6,32,197/- being 1% off the turnover is upheld.”
Aggrieved against the appellate order, the assessee is in appeal before us raising the following Grounds of Appeal:
[1] The Ld. CIT(A), NFAC. Delhi was grievously in upholding the addition made by the Ld. AO of Rs. 6,32,197/- being 1% as net profit of total turnover of Rs. 6,32,19,719/- which is an estimate and it is submitted that the appellant has filed the return with audited accounts. It is submitted that Books of Accounts are not rejected and therefore it should be considered as they are final one. [2] The appellant has filed Return of Income u/s. 148 vide acknowledgement No.871507611150225 dated 15.02.2025 which has not been considered by the Ld. CIT(A) as well as Ld. A.O. [3] The appellant therefore requests your goodself to kindly delete the above mentioned addition made by the Ld. A.O. which was confirmed by the Hon. CIT(A) looking to the merits of the case. [4] The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.
5. Heard rival submissions at length and perused the materials available on record including the Paper Book filed by the assessee. It is undisputed fact that the assessee has not filed the Return of Income u/s. 139 of the Act and filed belated return in response to the 148 notice issued by the A.O. However in response to 148 notice dated 21-03-2024, assessee filed the Return of Income on 15-02-2025 wherein the assessment was getting time barred on 31- A.Y. 2020-21 Page No 5 The Nanol Dudh Utpadak Sahakari Mandli Ltd. vs. ITO 03-2025. Though the assessing officer propose to make addition of Rs. 50,57,577/- being 8% of the turnover of the assessee in the show cause notice, however restricted the addition to 1% of the total turnover of Rs.6,32,19,719/- i.e. amount of Rs.6,32,197/- as the net profit for the Asst. Year 2020-21. The observation of the assessing officer is reproduced as follows: “On perusal of submission of the assessee, it has been noted that The Assessee was worked as Primary Co-operative Society (i.e. Animal Keepers) engaged in Supply of Milk produced by them. The said Co- operative Society is worked under The Banaskantha District Milk Producers Co-Operative Union Ltd, Palanpur in short called as Banas Dairy (Union) as member. The management of the said Co-operative Society is run by the committee and said committee is appointed by the members of Co-operative Society and Co-operative Society is worked on basis of Co-operative method. They collects the milk from members (Animal Keepers) and sell the whole milk to Union (The Banaskantha District Milk Producers Co-Operative Union Ltd, Palanpur in short called as Banas Dairy). Further, Co-operative Society is also member of the said Union (i.e. The Banaskantha District Milk Producers Co-Operative Union Ltd, Palanpur). Further, the society also provide the various goods to members at very nominal cost like cattle-feeds, Ghee, butter milk, Tea etc. All the goods which are sold to members are on cash basis or Against the Milk Bill Payable of that member. The said goods are purchased from the said Union (i.e. The Banaskantha District Milk Producers Co-Operative Union Ltd, Palanpur) in most of cases. Therefore, considering the above facts on record and the profitability of the said business activities, net profit has been determined as 1 percent of total turn-over of Rs. 6,32,19,719/- i.e. an amount of Rs.6,32,197/- as its net profit during AY 2020-21.”
5.1. On perusal of the same makes it clear, the estimation of 1% as net profit is legally valid when the assessee has not filed the original Return of Income as well as filed the Return of Income belatedly just before finalization of assessments. Further the audited accounts are said to be signed on 30-09-2020, but no return filed by the assessee will not get the benefit as provided A.Y. 2020-21 Page No 6 The Nanol Dudh Utpadak Sahakari Mandli Ltd. vs. ITO under section 80AC of the Act. Thus the Grounds raised by the assessee are devoid of merits and liable to be rejected.
In the result, the appeal filed by the Assessee is hereby dismissed.