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Facts
The assessee, a co-operative society engaged in banking, filed its return for AY 2017-18. The AO made additions under Section 40A(ia) for TDS default, denied deduction under Section 80P treating interest income as "income from other sources," and added Rs.13,47,19,707/- under Section 68 for unexplained cash credit from FDRs. The ld. CIT(A) allowed substantial relief by deleting the Section 68 addition and allowing the Section 80P claim, which the Revenue challenged before the ITAT.
Held
The ITAT noted that the ld. CIT(A) granted relief without proper verification of documents, genuineness of transactions, or seeking a remand report from the AO. Finding that the CIT(A)'s order lacked factual verification, the Tribunal remanded the entire matter back to the ld. CIT(A) for fresh examination, directing an opportunity of hearing to both parties and, if necessary, a remand report from the AO. The appeal filed by the Revenue was allowed for statistical purposes.
Key Issues
Whether the ld. CIT(A) was justified in deleting additions under Section 68 and allowing deduction under Section 80P without conducting proper verification of the supporting documents, genuineness of transactions, or obtaining a remand report from the AO.
Sections Cited
143(3), 40A(ia), 80P(2)(a)(i), 80P(2)(d), 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI SONJOY SARMA, JM
Assessment Year: 2017-18 Income Tax Officer Triruvananthapuram ...................….……….Appellant vs. Thiruvananthapuram Service Co-operative. ….. …..Respondent Bank Limited Head Office, Govt.Press Road Puthenchanthai, Thiruvananthapuram 695001 [PAN: AAAAT9697D] Appellant by: Smt.Bineesha Baby,Advocate Respondent by: Smt.. Leena Lal, Sr, DR Date of Hearing: 05.06.2025 Date of Pronouncement: 13.06.2025 O R D E R Per Sonjoy Sarma: This appeal is filed by the assessee against the order dated 22.01.2024 of the National Faceless Appeal Centre (hereinafter referred to as ‘CIT(A)’] for the assessment year 2017–18.
Brief facts of the case are that the assessee is a co-operative society and engaged in banking activities as its principal business. The assessee filed its return of income for A.Y. 2017–18 declaring a Thiruvananthapuram Service Co-operative Bank Ltd loss of Rs.3,70,470/-. The case was selected for scrutiny under CASS, and assessment was completed under Section 143(3) of the Income-tax Act, 1961 on 26.12.2019. The AO assessed the total income at Rs.16,27,30,080/- after making the addition of Rs.2,83,80,844/- under Section 40A(ia) for disallowance of expenses where TDS was not deducted. The assessee denied the status of the society as a co-operative society and consequently, treating interest income of Rs.2,95,38,828/- as income from other sources, thereby denying deduction under Section 80P(2)(a)(i) and 80P(2)(d). Further, the AO made addition of Rs.13,47,19,707/- under Section 68 of the Act treating increase in FDR balances over the previous year as unexplained cash credit.
Aggrieved by the above order, the assessee preferred an appeal before the ld. CIT(A). The ld. CIT(A) allowed substantial relief to the assessee observing that the action of the AO in making an addition u/s 68 of the Act for an amount of Rs.13,47,19,707/- as unexplained cash deposits without examining the documents furnished by the assessee, is unwarranted. Hence, the ld. CIT(A) deleted the addition so made by the AO.
The Revenue has come in appeal before the Tribunal challenging the order of the ld. CIT(A). The ld. DR stated that the ld. CIT(A) erred in allowing the claim under Section 80P without proper verification of whether the assessee was actually conducting business exclusively with members. He further stated that the addition under Section 68 was wrongly deleted without examining whether the FDR deposits were genuinely explained and the ld.
Thiruvananthapuram Service Co-operative Bank Ltd CIT(A) granted relief despite incomplete responses filed by the assessee at the fag end of the assessment proceedings and also that the ld. CIT(A) did not verify the genuineness of transactions nor called for a remand report from the AO on the documents relied upon by the assessee.
Per contra, the ld. AR supported the order of the ld. CIT(A) and stated that there is no infirmity in the order of the ld. CIT(A) and the order may be confirmed by the Tribunal.
We have carefully considered the submissions of both the parties. Upon perusal of the records and the order of the ld. CIT(A), we find that while granting relief to the assessee, the ld. CIT(A) observed that the assessee had filed all the requisite details before the AO. However, the contention of the revenue is that such submissions were made belatedly filed at the time of framing of the impugned order and only partial details were submitted and the AO hardly got any time to examine those documents carefully. We note that neither the ld. CIT(A) has recorded any discussion or verification of the underlying documents filed by the assessee nor called for any remand report from the AO to validate the genuineness of deposits or interest income sources. Given the quantum involved and the absence of examination of facts and supporting material, we find merit in the Revenue’s contention that the ld. CIT(A)’s order suffers from lack of factual verification and was passed without proper appreciation of the assessment record. In such a circumstance, in the interest of natural justice and fair play, we are inclined to remand the entire matter back to the file of Thiruvananthapuram Service Co-operative Bank Ltd the ld. CIT(A) with a direction to re-examine the documents and submissions in detail after providing an opportunity of hearing to both parties and if necessary, call for a remand report from the AO. The assessee is directed to fully cooperate with the appellate proceedings and submit all necessary evidence in support of its claims.
In view of the above, the appeal filed by the Revenue is allowed for statistical purposes.
Order pronounced on 13.06.2025.
Sd/- Sd/- (INTURI RAMA RAO) (SONJOY SARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Cochin, Dated: 13th June, 2025