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Facts
The assessee, a co-operative bank, filed its return claiming exemption under Section 80P(2)(a)(i) of the Income-tax Act, 1961. The Assessing Officer disallowed the exemption, holding that interest income from surplus deposits with banks was not attributable to the principal activity of providing credit to members. The CIT(A) dismissed the assessee's appeal in limine due to a delay of 189 days in filing.
Held
The Tribunal held that it is well-settled law that the appellate authority should adopt a liberal and justice-oriented approach to condone delay if bona fide reasons are demonstrated and there is no mala fide intent or deliberate delay. The Tribunal found that the CIT(A) did not consider the condonation petition in a reasoned manner.
Key Issues
Whether the CIT(A) was justified in dismissing the appeal in limine on the ground of delay without considering the condonation petition on merits. Whether the interest income earned by the co-operative society is eligible for deduction under Section 80P(2)(a)(i).
Sections Cited
Section 80P(2)(a)(i), Section 80P
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO & SHRI SONJOY SARMA
Assessment Year: 2020-21 Cheekode Service Co-Operative Bank Ltd.....………………..…..….……….Appellant Mundakkal, Cheekode, Malappuram-673645. [PAN:AABAC6187A] vs. ITO, Ward-2, Tirur…….……..……….....................……........……...…..…..Respondent Appearances by: Shri Raghunathan P, Adv, appeared on behalf of the assessee. Smt. Leena Lal, Snr AR,appeared on behalf of the Revenue. Date of concluding the hearing :June 09, 2025 Date of pronouncing the order :July 31, 2025 ORDER
Per Sonjoy Sarma, Judicial Member:
This appeal by the assessee is directed against the order dated 26.03.2020 passed by the Commissioner of Income-tax (Appeals) for the assessment year 2020-21,whereby the appeal was dismissed in limine on the ground of delay of 189 days in filing, without adjudicating, the case on merits.
Brief Facts of the Case are that the appellant is a co-operative society registered under the Kerala Co-operative Societies Act, 1969, and functions as a primary agricultural credit society, primarily engaged in banking and credit-related activities for its members. The assessee filed its return of income on 09.12. 2020 declaring nil taxable income, claiming exemption under Section 8OP(2)(a)(i) of the Income-tax Act,1961.The case was selected for scrutiny primarily on the ground that the assessee had shown high liabilities in the balance sheet compared to low income declared and had also claimed substantial deductions under Cheekode Service Co-Operative Bank Ltd Chapter VI-A, specifically under Section 80P. During the assessment proceedings, the AO held that the assessee was not eligible for deduction under Section 80P(2)(a)(i) insofar as the interest income earned was from surplus deposits with banks and not from regular credit activity with members. The AO relied on the decision of the Hon'ble Supreme Court in Totgars Co-operative Sale Society Ltd. v. ITO, holding that such interest income is not attributable to the principal activity of providing credit to members. Accordingly, the AO disallowed the exemption and passed the assessment order. The order was served on the assessee on 10.04.2023, and the appeal was filed before the CIT(A) on 12.04.2023
Aggrieved the above order, the ld. CIT(A) dismissed the appeal of assessee in limine citing a delay of 189 days in filing the appeal. According to the ld. CIT(A), the assessee failed to satisfactorily explain the cause of delay, and therefore, the appeal was not admitted. The assessee had filed a petition for condonation of delay along with the appeal, citing bona fide reasons for the delay. However, the CIT(A) did not consider the condonation petition in a reasoned manner nor did he address the grounds on merits.
We have heard both the parties and perused the materials available on record. It is a well-settled law that when the assessee demonstrates bona fide reasons and there is no mala fide intent or deliberate delay, the appellate authority should adopt a liberal and justice-oriented approach to condone the delay and proceed to decide the appeal on merits. In the present case, we are of the view that interest of justice would be met if the matter is restored to the file of the CIT(A), with a direction to consider the appeal of assessee after providing an opportunity of hearing to the assessee and thereafter to decide the appeal on merits in accordance with law. In view of the above discussion, we set aside the impugned order of the CIT(A)and restore the matter to his file with a direction to reconsider the assessee's appeal by condoning Cheekode Service Co-Operative Bank Ltd the delay and adjudicate the appeal on merits in accordance with law. We clarify that we have not expressed any opinion on the merits of the case and all contentions are kept open.
In the result, the appeal of the assessee is allowed for statistical purposes.
31st July, 2025.