KADIRUR SERVICE CO-OPERATIVE BANK LTD,KADIRUR vs. ITO, WARD-2, KANNUR

Brief facts of the case are that the appellant is a primary agricultural credit society founded with the objective of providing credit facilities to the members for carrying out agricultural and allied activities. The return of income for AY 2018-19 was filed on 28.09.2018 declaring total income at Rs. 2,18,720/- after claiming Kadirur Service Co-op. Bank Ltd. deduction u/s. 80P of the Income Tax Act, 1961 (the Act). Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-2, Kannur (hereinafter called "the AO") vide order dated 09.02.2021 passed u/s. 143(3) r.w.s. 143(3A) & 143(3B) of the Act at a total income of Rs. 1,19,04,650/- denying deduction u/s. 80P and after making the following additions: - i) Disallowance of income tax refund ii) Disallowance of provision for bad and doubtful debts iii) Disallowance of ‘reserve of overdue interest’

Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order while allowing the claim for deduction u/s. 80P of the Act following the judgement of the Hon'ble Supreme Court in the case Mavilayi Service Co-operative Bank Ltd. v. CIT [2021] 431 ITR 1 (SC) deleted the additions on account of provision for overdue interest and provision for bad and doubtful debts, have confirmed the addition on account of income tax refund of Rs. 44,40,300/-.

Being aggrieved, the assessee in appeal before the Tribunal in the present appeal.

The learned A.R. submitted that he CIT(A) ought not have confirmed the addition of the income tax refund as the same was not allowed in the earlier years.

We have heard the rival contentions of both the parties and perused the material available on record. From a perusal of the assessment order it is evident that the AO chose to disallow income tax refund of Rs. 44,40,300/- claimed as deduction for the failure of the assessee to demonstrate that the said income tax refund was credited to the Profit & Loss A/c., which is a condition necessary to allow the claim made by the assessee. Even during the proceedings before the CIT(A), it appears that the appellant had made no efforts in this direction except harping on that income tax refund cannot be taxed. In the circumstance, in order to meet the ends of justice the matter is set aside to the file of the AO for de novo adjudication in accordance with law after affording opportunity of being heard to the appellant.

In the result, appeal filed by the assessee is allowed for statistical purposes.