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Facts
The assessee, a primary agricultural credit co-operative society, filed a return of income declaring Nil income after claiming deduction u/s. 80P. The AO denied this deduction, stating that agricultural loans disbursed were meagre, and also made an addition for cash deposits during demonetization. The CIT(A) confirmed the AO's order.
Held
The Tribunal held that the AO cannot go beyond the certificate classifying the society as a primary agricultural credit co-operative society, which is eligible for deduction u/s. 80P. Regarding the cash deposits, the Tribunal found that the CIT(A) did not consider the appellant's explanation and remanded the matter back to the CIT(A) for fresh adjudication with an opportunity of hearing.
Key Issues
Denial of deduction u/s. 80P and addition on account of demonetized cash deposits.
Sections Cited
80P, 143(3)
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM
Assessment Year: 2017-18 Ranni Service Co-op. Bank Ltd. .......... Appellant Ranni P.O., Pathanamthitta 689272 [PAN: AACAR8865P] vs. The Income Tax Officer, WD-2, Thiruvalla .......... Respondent Assessee by: Shri Amaljit P.J., CA Revenue by: Shri Sanjit Kumar Das, CIT-DR Date of Hearing: 05.08.2025 Date of Pronouncement: 12.08.2025 O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 12.06.2025 for Assessment Year (AY) 2017-18.
Brief facts of the case are that the appellant is a co-operative society registered under the Kerala State Co-operative Societies Act, 1969. It is classified as a primary agricultural credit co-operative society. The return of income for AY 2017-18 was filed on 26.01.2018 disclosing Nil income after claiming deduction u/s. 80P Ranni Service Co-op. Bank Ltd. of the Income Tax Act, 1961 (the Act). Against the said return of income, the assessment was completed by the ITO, Ward-2, Thiruvalla (hereinafter called "the AO") vide order dated 20.12.2019 passed u/s. 143(3) of the Act at a total income of Rs. 4,16,32,882/-., While doing so, the AO denied deduction u/s. 80P of the Act by holding that the agricultural loans disbursed to the members is very meagre. The AO also made addition on account cash deposits made on 30.11.2016 in specified bank notes (SBN), during demonetisation period, of Rs. 34,70,000/- in Thiruvalla East Co-operative Bank, for the failure of the appellant society to discharge the onus of proving the source of cash deposit.
Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order confirmed the action of the AO.
Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal.
The learned counsel for the assessee submitted that the learned lower authorities had clearly fell in error in disallowing the claim for deduction us 80P of the Act in view of the decision of the Hon'ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. v. CIT [2021] 431 ITR 1 (SC).
With regard to the cash deposits, the learned counsel for the assessee submits that during the course of proceedings before the CIT(A) the appellant company had filed complete details of the
On the other hand, the learned CIT-DR opposed the above submissions of the learned counsel for the assessee.
We have heard the rival contentions and perused the material available on record. Ground of appeal No. 1 challenges the denial of clam for deduction u/s. 80P of the Act. On a mere perusal of the assessment order, it would be evident that the AO had denied deduction u/s. 80P of the Act solely on the ground that the loans advanced for agricultural operations to the members is very meager. Admittedly the appellant is a primary agricultural credit co- operative society. The AO cannot go beyond the certificate issued by the Registrar of Co-operative Societies. Once the co-operative society is classified as a primary agricultural credit co-operative society the same is eligible for deduction u/s. 80P of the Act. Therefore, we direct the AO to allow deduction u/s. 80P of the Act. This ground of appeal stands allowed.
9. Ground No. 2 challenges the addition on account of cash deposits in SBNs made during the demonetisation period in Thiruvalla East Co-Operative Bank. It is stated before us that during the course of proceedings before the CIT(A) the appellant had filed a detailed explanation in support of the source of cash deposits made during demonetisation period. However, the CIT(A), with taking Ranni Service Co-op. Bank Ltd. into consideration the explanation offered by the appellant, merely dismissed the appeal. Therefore, in the interest of justice, we remand the matter back to the file of the CIT(A) to adjudicate the issue of addition made on account of cash deposits during demonetisation period taking into consideration the submissions made on behalf of the appellant co-operative society. Needles to say that reasonable opportunity of hearing should be afforded to the appellant. Ground stands partly allowed.
In the result, the appeal filed by the assessee stands partly allowed for statistical purposes.
Order pronounced in the open court on 12th August, 2025.