BADAGABETTU CREDIT CO-OPERATIVE SOCIETY LIMITED,UDUPI vs. PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), BANGALORE

It is observed that assessee claimed deduction under section 80P of the Act. Subsequently, search and seizure operation under section 132 was conducted in the business premises of associates and order under section 143(3) read with section 153A of the Act was passed on 20/12/2018 processing total income at ₹ 3,08,280/-. On perusal of the assessment record, the Ld.PR.CIT was of the opinion that assessment order passed was erroneous insofar as prejudicial to the interest of the revenue. Accordingly, show cause notice under section 263 of the Act was issued on 07/01/2021. The Ld.PR.CIT observed that, assessee has more associate members than the prescribed limit and is also lending loans to nominal members thereby violating the regulatory Act and is not eligible for deduction under section 80P of the Act.

In the submissions, assessee relied on the decision of Hon’ble Supreme Court in case of Mavilayi Service Cooperative Bank Ltd vs. CIT, Calicut reported in (2021) 123 taxmen.com 161. After perusing submissions advanced by assessing, the Ld.PR.CIT held as under: “8. On the basis of the above made discussions, I hold that the assessment order passed by the A.O. is erroneous in so far as it is prejudicial to the interest of the Revenue within the meaning of Clause (a) & (b) of Explanation (2) to Section 263 of the Income-tax Act, 1961. Accordingly, the assessment order dated 28.12.2018 passed u/s 143(3) rws 153A of the Income Tax Act, 1961 is set aside to the file of assessing officer with a direction to pass a fresh order as per the provisions of The Karnataka Cooperative Societies Act, 1959 and as per the ratio laid down by the Hon'ble Supreme Court of India in its decisions in the cases of Mavilayi Service Co-operative Bank Ltd Vs. Commissioner of Income-tax, Calicut [2021] 123 taxmann.com 161(SC) and Citizen Co-operative Society Ltd, (2017] 397 ITR 1 (SC).

We note that the ld.PR.CIT directed the ld.AO to consider the issues in the light of the principles laid down by Hon’ble Supreme Court in case of Mavilayi Service Cooperative Bank Ltd vs. CIT, Calicut (supra). We do not find any infirmity in the above direction of the Ld.PR CIT. Accordingly, grounds raised by asessee in all the appeals stands dismissed and the order passed by the Ld.PR.CIT stands upheld. In the result appeals filed by assessee dismissed. Order pronounced in open court on 14th October, 2021.