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Facts
The assessee, a Co-operative Society, earned interest income which it did not offer to tax. The AO reopened the case, disallowed deduction under Section 80P, and added the interest income to the assessee's total income. The NFAC dismissed the assessee's appeal due to a delay of 159 days.
Held
The Tribunal condoned the delay in filing the appeal before it, finding the explanation for delay reasonable. The Tribunal restored the case to the NFAC with a direction to decide the appeal on merits after providing the assessee an opportunity to present its case.
Key Issues
Whether the NFAC was justified in dismissing the appeal on delay without considering the merits, and whether the interest income earned by the co-operative society is deductible under Section 80P.
Sections Cited
80P, 148, 147, 144B, 80P(2)(a), 80P(2)(c), 271(1)(c), 151, 80P(2)(a)(iii)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, SMC BENCH, LUCKNOW
Before: SHRI. SUDHANSHU SRIVASTAVA
Assessment Year: 2014-15 Daryabad Co-operative Cane v. The Addl/Joint/Dy. ACIT Development Union Limited NFAC Daryabad, Ram Sanehi Ghat Delhi Barabanki TAN/PAN:AAAAD4943N (Appellant) (Respondent) Appellant by: Shri Shubham Rastogi, C.A. Respondent by: Shri Sunil Kumar Rajwanshi, D.R. Date of hearing: 23 04 2025 Date of pronouncement: 24 04 2025 O R D E R
This appeal has been preferred by the assessee against order dated 25.11.2024, passed by the National Faceless appeal Centre, Delhi (NFAC) for Assessment Year 2014-15.
The brief facts of the case are that the assessee is a Co- operative Society. The assessee filed its return of income for the year under consideration on 11.08.2014 and claimed deduction under section 80P of the Income Tax Act, 1961 (hereinafter called “the Act’) to the tune of Rs.23,72,576/-. The case of the assessee was reopened on the ground that the assessee-society had earned interest income of Rs.3,61,625/- during the year under consideration and had not offered the same to tax under the head ‘income from other sources’. The Assessing Officer (AO) issued notice under section 148 of the Act, requiring the assessee to file the return of income, but the assessee did not file any return of income in response to notice under section 148 of the Act. The AO completed the assessment under section 147 read with section 144B of the Act, observing that the income derived by way of interest on fixed deposits and saving account with Banks fell under the head ‘income from other sources’ and it thus, it could not fall within the expression profit and gains of business and, therefore, was not admissible for deduction under section 80P(2)(a) of the Act, whereas if it was income from other sources, deduction was admissible under section 80P(2)(c) of the Act to the extent of Rupees Fifty Thousand only. The AO accordingly, disallowed an amount of Rs.1,11,462/- under the provisions of section 80P(2) (c) of the Act, 1961 and added the same to the income of the assessee.
2.3 The AO also initiated penalty proceedings under section 271(1)(c) of the Act, separately.
Aggrieved, the Assessee preferred an appeal before the NFAC, which dismissed the appeal of the assessee for the reason of there being a delay of 159 days in filing of the appeal before the NFAC.
Now, the assessee has approached this Tribunal challenging the dismissal of its appeal by the NFAC by raising the following grounds of appeal:
(1) That the Ld. C. I. T. (A) erred on facts and in law in dismissing the appeal in limine without condoning the delay of 159 days in filing of Appeal and in doing so fail to consider that the Assessee has reasonably explained the cause for delay in filing of the appeal. Without prejudice to above (2) That the reopening is bad in law in as much as the sanction accorded u/s 151 is improper and without considering the provisions of Taxation and Other Laws [Relaxation and Amendment of Certain Provisions] Act. (3) That the reopening is bad in law as the reasons recorded are reasons to suspect and without bringing and tangible material and live nexus of the information and reason to believe. (4) That the Authorities below erred on facts and in law in not allowing deduction u/s 80P(2)(a)(iii) of I. T. Act on Interest received on Investments held with Banks in form of FDR's Rs.111462/-. (5) That the Ld. C.I.T. (A) erred on facts and in law in not considering that the Law has used the word "attributable" and not the word "derived" in section 80P so as to include income from sources other than the actual conduct of the Business of the Society and thus Interest Income on FDR's & S. B. A/c is attributable to the business of providing credit facilities and providing assistance to cane growers for better development cane crops. (6) The Ld. C.I.T.(A) erred on facts and in law in not considering that the funds of the Society in form of Share Capital from members and the society being co-operative society is statutorily required to maintain a Reserve Fund of a minimum 25% of its profit and thus the investments in form of deposits with Banks to the extent of the Share Capital and Reserve Funds cannot be said to be made out of surplus funds. (7) That Ld. C.I.T. (A) erred on facts and in law in not considering that the P. F. Balance of seasonal employees of society which is held in the form of deposits are not the investments of the society and accordingly interest accruing on the said amount cannot be said to be the Income of the Society. (8) That the addition made is highly excessive, contrary to the facts, law and principle of natural justice and without providing sufficient time and opportunity to have its say on the reasons relied upon by CIT (A).
The Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that there is a delay of 35 days in filing the appeal before the Tribunal. He further submitted that the assessee had filed an application dated 25.02.2025 for condonation of delay, duly supported by an Affidavit of the Secretary of the assessee-society, stating therein that the wife of the local Counsel of the assessee was admitted in Hospital for surgery owing to severe pain of Sciatica and, therefore, he had not attended the office till the date of discharge of his wife from the Hospital and it was only after getting his wife discharged from the Hospital, that he joined the office and came to know about the order of the ld. CIT(A) dated 25.11.2024 served on the email id and had accordingly advised the assessee-society to engage a Counsel at Lucknow and file the appeal before the Tribunal. It was submitted that the delay caused in filing the appeal was not deliberate and that it was beyond the control of the assessee, which may please be condoned and the appeal be heard on merits.
The Ld. D.R. had no objection to the delay being condoned.
In view of the prayer made by the Assessee, duly supported by an Affidavit and no objection by the Ld. D.R., I condone the delay in filing of the appeal and admit the appeal for hearing.
During the course of hearing before me, the Ld. A.R. submitted that the NFAC had dismissed the appeal of the assessee for the reason of delay of 159 days in filing of the appeal before the NFAC and that the NFAC had not dealt with the issues in dispute on merits. The Ld. A.R. prayed that the matter may be restored to the file of the NFAC for deciding the issues in dispute on merits of the case.
The Ld. Senior D.R. had no objection to the restoration of appeal to the file of the NFAC.
I have heard both the parties and have also perused the material on record. Looking into the facts of this case, I restore this file to the Office of the NFAC with the direction to decide the appeal on merits after providing an opportunity to the assessee to present his case. I also caution the assessee to fully comply with the directions of the NFAC in the set-aside proceedings when called upon to do so, failing which, the NFAC would be at complete liberty to pass the order in accordance with law, based on material available on record even if it is ex-parte qua the assessee.
In the result, the appeal of the assessee stands allowed for statistical purposes.
Order pronounced in the open Court on 24/04/2025.