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Facts
The assessee, a Cooperative Society, filed its return of income claiming a deduction u/s 80P(2)(d), which was subsequently disallowed by CPC Bengaluru and confirmed ex-parte by the CIT(A). The disallowance led to an addition of Rs. 87,19,150/-, with the assessee contending that technical glitches prevented compliance and that notices for hearing were sent to an incorrect e-mail ID, leading to non-service.
Held
The Tribunal observed that the notice of hearing was not issued to the proper e-mail ID as specified in Form No. 35, which resulted in non-service of notice on the assessee. Consequently, the matter was remanded back to the CIT(A) for fresh adjudication on the merits of the deduction u/s 80P(2) of the Act, after providing the assessee a proper opportunity of being heard and considering relevant Apex Court judgments. The ground relating to the disallowance of provident fund was not adjudicated upon as it was raised for the first time before the Tribunal.
Key Issues
1. Whether the CIT(A) was justified in confirming the disallowance of deduction u/s 80P ex-parte due to alleged non-compliance, given that the notice of hearing was sent to an incorrect e-mail ID. 2. Whether the disallowance of employees' share of provident fund u/s 36(I)(VA) was valid (this ground was not adjudicated by the Tribunal).
Sections Cited
250, 143(1), 154, 80P, 36(I)(VA), 37(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: SH. UDAYAN DASGUPTA & SH. BRAJESH KUMAR SINGH
This appeal is preferred by the assessee against the order of the ld. CIT, Appeal Addl/JCIT(A)-10, Mumbai passed u/s 250 of the Income Tax Act, 1961 dated 02.01.2024 which has arisen from the order of the AO, CPC, Bengaluru dated 02.11.2022 passed u/s 143(1) of the I.T. Act, 1961.
The grounds of appeal taken by the assessee in Form No. 36 are as follows:
“1. That on facts and circumstances of the case and the provisions of Law, the Worthy Commissioner of Mumbai Income Tax (Appeals)/ JCIT (Appeals)-10, Mumbai has wrongfully denied the claim of deduction of the assessee under Section 80P of Income Tax Act, 1961.
2. That the Worthy Commissioner of Income Tax (Appeals)/ JCIT (Appeals)-10, Mumbai has wrongfully disallowed claim of the assessee amounting Rs. 29,875/- being employees share of provident fund u/s 36(1)(VA) of the Income Tax Act, 1961 which otherwise was deductible under section 37(1) of the Income Tax Act, 1961 being a direct charge/ expenditure in the course of carrying on the business of the assessee.
3. The appellant craves permission to raise additional grounds and to amend or alter the foregoing grounds before the appeal is finally decided.”
Brief facts emerging from the records are that the assessee is a Cooperative Society and is engaged in providing credit facilities to its members and is also engaged in the trading of fertilizers, pesticides, clothes and other allied goods. Return of income was filed on 15th March, 2022 declaring nil income after claiming deduction u/s 80P(2)(d) amounting to Rs.87,00,771/-. CPC, Bengaluru issued proposal for adjustment dated 09.08.2022 in the portal which was not complied with by the assessee because of technical glitches, regarding non availability of the response link under the e-proceedings portal. As a result of non compliance, the claim of the assessee u/s 80P(2) of the Act has not been allowed which resulted in an addition of Rs.87,19,150/- as apparent from the intimation u/s 154/143(1) dated 02.11.2022.
The matter was carried in appeal before the ld. first appellate authority where the assessee raised the issue of deduction u/s 80P(2) and the fact that the interest income derived from Cooperative Banks has been included under the head “profits and gains of business & profession”. However, the ld. CIT(A) has not adjudicated the issue on merits of the case and as apparent from the appellate order (para 4), notices issued from the office of the ld. CIT(A) has remained un-complied and in absence of any submission or response filed by the assessee, the ld. first appellate authority has proceeded to decide the case ex-parte and has confirmed the addition u/s 80P(2) of the Act by observing as follows:
“(a). In this case, the return of income was filed by the appellant on 15.03.2022 declaring total income of Rs. Nil. The said return of income was processed u/s 143(1) on 02.11.2022 determining the total income of Rs. 87,19,150/- after restricting the claim of deduction u/s 80P of the Act by Rs. 86,89,271/- and making the disallowance of 29,875/- u/s 36(1 )(va) on account of provident fund payable which was actually paid after the due date prescribed under the Act. Here this is pertinent to mention that before processing the return of income due opportunity of being heard was provided to the appellant in respect of the aforesaid adjustments vide the proposal for adjustment dated 09.08.2022.
(b). In the order u/s 143(1) of the Act the appellant’s claim of deduction u/s 80P of the Act was restricted as per law by Rs. 86,89,271/- since in the return of income in "Schedule 80P" SI.no.11, column "Amount eligible for deduction" is more than lower of below: (i) si.
Assessment Year: 2021-22 No 14(iii+ iv) P & L account (Interest and dividend income) (ii) 5ii of BFLA (BP) + 5xiii of BFLA(OS). Hence deduction u/s 80P, SI. No. 11 was rightly restricted minimum of above 2.Thus, the disallowance of claim of deduction u/s 80P of the Act of Rs. 86,89,271/- is confirmed.”
Now, the assessee is in appeal before the Tribunal on the grounds contained in the memorandum of appeal. The ld. AR of the assessee submits that the interest has been earned by the society from deposits made in various Cooperative Banks as well as from Scheduled Banks and also from the members, the breakup of which has been submitted in the written submissions. It is also submitted that the interest from Cooperative Banks has been considered by the society as part of “profit and gains from business profession”. However, the AO, CPC, Bengaluru has allowed the deduction u/s 80P(2)(d) only to the extent of the claim that is appearing under the head “income from other sources”. Now the assessee states that the claim for deduction u/s 80P(2)(d) has not been allowed.
He further submits that the e-mail address mentioned in Form No. 35 before the ld. CIT(A) was mahilgailan@crgautam.com but the notice of hearing has been sent to itr2007@yahoo.com which is the secondary e-mail id in the income tax profile. As such, contention of the assessee is that the notices of hearing from the office of the first appellate authority has not been received because the notice has not been issued in the e-mail id as mentioned in Form No. 35, which resulted in their non matter may please be remanded back to the ld. first appellate authority for considering the submissions on merits of the case and to adjudicate the issue relating to the claim of section 80P(2)(d) of the Act.
The ld. DR relied on the order of the ld. CIT(A) but has no objection if the matter is remanded back for fresh consideration.
We have heard the rival submissions and considered the materials on record and we are of the opinion that the notice of hearing has not been issued in the proper e-mail id as specified in Form No. 35 which has resulted in non-service of notice on the assessee and the assessee was prevented by sufficient cause for not responding or non filing of the submission in appellate proceedings.
In the interest of justice, we remand the matter back to the files of the ld. CIT(A) for fresh adjudication to decide the issue of claim of deduction u/s 80P(2) of the Act as per the provisions of law, taking into consideration the law laid down by the Hon’ble Apex Court in the case of (a) “Totegars Coop. Society [2010] 322/ITR 283 dated 08.02.2010, (b) PCIT, Mumbai v. Annasaheb Patil MKS Pathpedi [civil appeal no. 8719/2022 dated 20.04.2023] and in the case of the Mavilayi Service Coop. Bank v. CIT, Calicut, dated 12.01.2021, civil appeal no. 7343-7350 of 2019 (AIR 2021 Supreme Court). of Provident Fund (PF) of Rs.29,875/-, we find that this particular ground was never taken before the first appellate authority in Form No. 35 and as such, the said ground being taken for the first time before the Tribunal is not adjudicated upon.
The assessee is also directed to file all submissions and all documentary evidences in support of his contentions for its claim of deduction under the provisions of section 80P(2) of the Act and is directed to fully cooperate in the appellate proceedings for proper disposal of the appeal.
The assessee shall be allowed proper and reasonable opportunity of being heard.
We have not adjudicated any issue on merits and all legal issues are left open.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in accordance with Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 as on 07.07.2025 Sd/- Sd/- (Brajesh Kumar Singh) (Udayan Dasgupta) Accountant Member Judicial Member *GP/Sr.PS* Copy of the order forwarded to: (1)The Appellant: (2) The Respondent: