Loading judgment…
Facts
The assessee, a co-operative credit society, had its assessment reopened for AY 2019-20 under Section 147 due to unexplained cash deposits and non-filing of ITR. The AO added Rs. 96.82 lakhs as unexplained cash credits under Section 68 and disallowed a deduction of Rs. 8.81 lakhs under Section 80P(2)(a)(i) due to lack of evidence and timely ITR filing. The CIT(A) upheld these additions and disallowances, dismissing the appeal ex parte due to the assessee's failure to provide submissions.
Held
The Tribunal noted that lower authorities concluded proceedings without a thorough examination of the assessee's records. Citing principles of natural justice and Supreme Court precedents, the Tribunal remanded the matter back to the Assessing Officer for de-novo consideration, directing that the assessee be given a proper opportunity to submit all necessary evidence regarding the source of deposits and eligibility for the Section 80P(2)(a)(i) deduction.
Key Issues
The key issues concern the validity of reopening under Section 148, the addition of unexplained cash credits under Section 68, and the disallowance of deduction under Section 80P(2)(a)(i), all in the context of the assessee's alleged lack of adequate opportunity of being heard.
Sections Cited
250, 148, 148A(d), 148A(b), 68, 80P(2)(a)(i), 234A, 234B, 234C, 234F, 272(1)(d), 271AAC(1), 270A, 147, 144B, 139(1), 80P
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “ B ” BENCH, AHMEDABAD
Before: DR. BRR KUMAR & SHRI SIDDHARTHA NAUTIYAL
आयकर अपीलीय अिधकरण, अहमदाबाद "ायपीठ “B“,अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “ B ” BENCH, AHMEDABAD ] ] BEFORE DR. BRR KUMAR, VICE PRESIDENT AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER आयकर अपील सं / Year : 2019-20 Savli Taluka Secondary and The Income Tax Officer बनाम/ Higher Secondary Employees Ward-1(2)(2) v/s. Co-op. Credit Society Ltd. Vadodara – 390 007 18, Rayakaka Park Savli Desar Road Vadodara – 391 770. "थायी लेखा सं./PAN: AAFAS 6647 D (अपीलाथ"/ Appellant) ("" यथ"/ Respondent) Assessee by : Shri Sanket Bakshi, AR Revenue by : Shri Abhijit Sr.DR सुनवाई की तारीख/Date of Hearing : 12/08/2025 घोषणा की तारीख /Date of Pronouncement: 04/11/2025 आदेश/O R D E R PER SIDDHARTHA NAUTIYAL, JM:
The present appeal has been preferred by the Assessee against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 28/08/2024 passed u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the Assessment Year (AY) 2019-2020.
The assessee has raised the following grounds of appeal: Savli Taluka Secondary and Higher Secondary Employees Co-op. Credit Society Ltd. vs. ITO Asst. Year : 2019-20 “All the grounds of appeal in this appeal are mutually exclusive and without prejudice to each other.
Reopening u/s, 148 of the Act.
The learned Commissioner of Income Tax (Appeals) ["the CIT(A)"] and the Assessment Unit, National Faceless Assessment Center ("the AO") erred in fact and in law in reopening the proceedings u/s. 148 of the Act.
2. The learned CIT(A) and the learned AO erred in fact and in law in reopening the proceedings u/s. 148 of the Act despite the fact that no income has escaped assessment.
The learned CIT(A) and the learned AO erred in fact and in law in issuing notice u/s. 148 of the Act without acknowledging the fact that the order u/s. 148A(d) and the notice u/s. 148A(b) of the Act were issued by the jurisdictional assessing officer ("JAO") and not the faceless assessing officer ("FAO").
Addition of Rs.96,82,541/- u/s. 68 of the Act.
The learned CIT(A) and the AO erred in fact and in law in making addition of Rs.96,82,541/- u/s. 68 of the Act.
5. The learned CIT(A) and the learned AO erred in fact and in law in making the addition u/s. 68 of the Act without considering the facts of the case in proper perspective.
6. The learned CIT(A) and the learned AD erred in fact und in law in making the addition u/s. 68 of the Act without considering the fact that the amount deposited to the bank account were the recovery of loans which were extended to the members of the society in the earlier years.
7. The learned CIT(A) and the learned AO erred in fact and in law in making the order without giving a proper opportunity of being heard.
Disallowance of Deduction u/s, 80P(2)(a)(i) of the Act
8. The learned CIT(A) and the learned AO erred in fact and in law not allowing deduction amounting to Rs.8,81,596/- u/s 80P(2)(a)(i) of the Act.
Other Grounds Savli Taluka Secondary and Higher Secondary Employees Co-op. Credit Society Ltd. vs. ITO Asst. Year : 2019-20
The learned CIT(A) and the learned AO erred in fact and in law in charging interest u/s. 234A of the Act.
The learned CIT(A) and the learned AO erred in fact and in law in charging interest u/s. 234B of the Act.
The learned CIT(A) and the learned AO erred in fact and in law in charging interest u/s. 234C of the Act.
The learned CIT(A) and the learned AO erred in fact and in law in charging interest u's. 234F of the Act.
The learned CIT(A) and the learned AO erred in fact and in law in initiating penalty proceedings u/s. 272(1)(d), 271AAC(1) and 270A of the Act.
The Appellant reserves the right to add, alter, amend, modify, delete all or any of the grounds of appeal either partially or completely.
3. The brief facts of the case are that the assessee, Savli Taluka Secondary & Higher Secondary Employees Co-operative Credit Society Limited, is a co-operative credit society engaged in providing credit facilities to its members. For the Assessment Year 2019-20, the Assessing Officer reopened the case of the assessee under section 147 of the Act on the ground that the assessee had not filed its return of income and that substantial cash deposits were found in its bank account, the source of which was unexplained. The reassessment proceedings were completed under section 147 read with section 144B of the Act, assessing the total income at Rs. 1,07,97,637/-. At the assessment stage, the Assessing Officer noted that the assessee had failed to furnish a return of income or to submit documentary evidence explaining the source of cash deposits amounting to Rs. 96,82,541/-. As per the Assessing Officer, the assessee’s contention that the deposits were sourced from recoveries of loans earlier advanced to members of the society was rejected, since no documentary corroboration such as loan ledgers, receipts, confirmations, or details of members was produced despite opportunities granted. The Savli Taluka Secondary and Higher Secondary Employees Co-op. Credit Society Ltd. vs. ITO Asst. Year : 2019-20 AO, therefore, treated the said sum as unexplained cash credits under section 68 of the Act. Further, the AO observed that the assessee claimed a deduction of Rs. 8,81,596/- under section 80P(2)(a)(i) of the Act on income earned from providing credit facilities to its members. However, since the assessee had failed to file a valid return of income under section 139(1) of the Act within the prescribed time and did not furnish any evidence to establish that its income was derived from transactions exclusively with its members, the deduction was disallowed.
4. Aggrieved by the said assessment order, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). The assessee raised multiple grounds, inter alia, challenging the validity of reopening under section 148 of the Act, the addition made under section 68, and the disallowance of deduction under section 80P(2)(a)(i) of the Act. The assessee contended that the reopening was unwarranted as no income had escaped assessment, that the cash deposits represented recoveries of loans advanced to members, and that the deduction under section 80P(2)(a)(i) of the Act was wrongly denied despite the society being a co-operative entity providing credit facilities to its members. During the appellate proceedings, the CIT(A) noted that the report of the AO in ITNS-51 had not been received and, therefore, the particulars furnished by the appellant in Form 35 regarding service of demand notice and payment of admitted tax were accepted as correct. The CIT(A) further noted that in the faceless appeal proceedings, online hearing notices were issued on several occasions. The first notice was issued on 16.04.2024, requiring submission of written submissions by 24.04.2024. On the assessee’s request, an adjournment was granted, and a second notice was issued on 16.05.2024, directing the assessee to respond by 22.05.2024. As no submissions were filed by the assessee, the CIT(Appeals) Savli Taluka Secondary and Higher Secondary Employees Co-op. Credit Society Ltd. vs. ITO Asst. Year : 2019-20 issued a final notice dated 06.08.2024 allowing the assessee time until 09.08.2024, but again no response or adjournment request was received. The CIT(A) therefore proceeded to decide the appeal ex parte based on material available on record. On the issue of reopening under section 148, the CIT(A) upheld the action of the AO, holding that since the assessee had not filed a return of income and substantial cash deposits had been made in its bank account, the AO had sufficient reason to believe that income had escaped assessment. The procedure prescribed under the Act for reopening of assessment was duly followed, and hence, the reopening was valid both in fact and in law. With respect to the addition under section 68, the CIT(A) agreed with the AO’s finding that the assessee failed to substantiate the source of cash deposits with credible evidence. The mere submission that the deposits were recoveries of loans advanced in earlier years was held to be unproven in the absence of supporting records such as members’ loan accounts, confirmations, or books of account. The CIT(Appeals) observed that the burden of proof under section 68 squarely lies on the assessee, which remained undischarged. Therefore, the addition of Rs. 96,82,541/- under section 68 of the Act was confirmed. As regards the disallowance of deduction under section 80P(2)(a)(i) of the Act, the CIT(A) noted that the assessee had failed to file its return of income within the due date under section 139(1) of the Act and had not produced any evidence to demonstrate that its income was attributable to providing credit facilities to its members. In the absence of such evidence, the AO was justified in denying the deduction. The CIT(Appeals) held that the exemption under section 80P of the Act is conditional upon the assessee establishing that its income arises from activities with members, which had not been substantiated in this case. Savli Taluka Secondary and Higher Secondary Employees Co-op. Credit Society Ltd. vs. ITO Asst. Year : 2019-20 Accordingly, the CIT(Appeals) found no merit in any of the grounds raised and dismissed the appeal.
The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. Before us, the ld. counsel for the assessee submitted that in the instant case, the assessee has a good case on merits and if given an opportunity of hearing, the assessee would be in a position to produce supporting evidence in support of it’s case. Further. The ld. counsel for the assessee submitted that that order of CIT(Appeals) was passed without giving adequate opportunity of hearing to the assessee. In response, Ld. DR placed reliance on the observations made by CIT(Appeals) in the appellate order. The Ld. DR submitted that that the assessee has not even a furnished a list of “members” from whom the advances were received back by the assessee and accordingly, the assessee has not made any case for itself. Accordingly, the order of the Assessing Officer / CIT(Appeals) does not call for any interference.
We have considered the submissions of both parties and examined the orders of the lower authorities. It is evident from the record that both the assessment and appellate proceedings were concluded without a detailed examination of the assessee’s primary books of account, loan records, and related documentary evidence. The CIT(Appeals) proceeded ex parte on the basis of material available on record after issuing online notices on three occasions. However, given that the assessee has expressed its willingness to furnish all necessary evidence in support of its claims and that the additions under section 68 of the Act as well as the disallowance under section 80P(2)(a)(i) of the Act are mixed questions of fact and law requiring proper Savli Taluka Secondary and Higher Secondary Employees Co-op. Credit Society Ltd. vs. ITO Asst. Year : 2019-20 verification, we are of the considered view that it would be in the interest of justice to restore the matter to the file of the Assessing Officer for de-novo consideration. It is a settled principle that no assessee should be condemned unheard and that an order passed in violation of the principles of natural justice cannot be sustained. In Tin Box Company v. CIT [(2001) 249 ITR 216 (SC)], the Hon’ble Supreme Court held that where the assessment was completed without providing the assessee an adequate opportunity of being heard, the proper course would be to set aside the assessment and direct the Assessing Officer to pass a fresh order after affording a reasonable opportunity. Similarly, in ITO v. M. Pirai Choodi [(2011) 334 ITR 262 (SC)], it was held that even if the assessee fails to appear before the CIT(A), the Tribunal should, in the interest of justice, restore the matter to the CIT(A) or the AO for fresh adjudication after due opportunity. Respectfully following the ratio laid down in the above judicial precedents and considering the totality of the facts, we are of the opinion that the assessee deserves an opportunity to substantiate its claim before the Assessing Officer by producing necessary documentary evidence. We, therefore, restore the matter to the file of the Assessing Officer for de-novo consideration. The Assessing Officer shall examine the issue afresh in accordance with law, after providing adequate and meaningful opportunity of being heard to the assessee and after verifying all the evidences that may be furnished in support of its contentions regarding the source of deposits and the eligibility of deduction under section 80P(2)(a)(i) of the Act.
We make it clear that the assessee shall co-operate in the proceedings before the Assessing Officer and produce all requisite details and evidence Savli Taluka Secondary and Higher Secondary Employees Co-op. Credit Society Ltd. vs. ITO Asst. Year : 2019-20 within the time granted to it. The Assessing Officer shall pass a speaking order after affording due opportunity to the assessee.
In the result, the appeal of the assessee is allowed for statistical purposes.