BOMBAY MERCANTILE CO-OP BANK LTD EMPLOYEES CO-OP CREDIT SOC. LTD ,MUMBAI vs. INCOME TAX OFFICER-17(2)(1), MUMBAI

3. Erred in not appreciating that the Appellant was not served a copy of the Assessment Order by the Ld. Assessing Officer (AO), and only on 20th March, 2023, one of the employees and Authorized Signatory of the Appellant received a call from the Department informing them about the outstanding demand for the present A.Y. thereafter the Chartered Accountant ("CA") of the Appellant wrote to the AO to provide them a copy of the Assessment Order and Demand Notice, which was handed over to the CA of the Appellant physically on 27th March 2023 which is beyond a period of 2 Years from the date of passing the Assessment Order,

4. Erred in not appreciating that at the time of assessment proceedings, notices dated 21/09/2019 u/s. 143 (2), 16/12/2020 U/s. 142 (1) were not received on the email id of the Appellant, but were informed via a message dated 26/12/2020 on the mobile number of the Authorized signatory of the Appellant as a reminder that the same have been issued by the Department under the faceless Assessment Scheme, which were duly replied to by the Appellant on getting the knowledge of the same, thereby showing that during the course of assessment proceedings the Department had not served all the notices to the Appellant at the correct correspondence address/mobile number and post passing the Assessment Order they did not to serve the Assessment Order dated 16/02/2021 and it was only given to the Appellant physically on 27/03/2023 and therefore there was no delay-on the part of the Appellant to file the Appeal. 5.Erred in not appreciating that the Appellant has regularly filed their ROJ within the prescribed due date and also duly responded to the notices issued under section 143(2) and 142(1) of the Act during the assessment proceedings for the present AY. It is further submitted that there has been no change in the address of the Appellant. There was no attempt on the Bombay Mercantile Co-op. Bank Ltd part of the Ld. AO to serve the Assessment Order for 2 years. Therefore, there was no delay on the part of the Appellant to file the appeal before the Ld. CIT(A).

6. Without prejudice to the above grounds, the CIT(A) erred in not appreciating that the Hon’ble. Supreme Court had, by way of various orders, extended the period of limitation for filing appeals during the COVID19 pandemic from time to time. By way of the order dated 10th January, 2022 passed in Misc. Application No. 21 of 2022, it was specified that in cases where the limitation would have expired during the period 15th ...March, .2020 till .28th August, 2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 1st March, 2022. In the present case, since the Assessment Order was passed within the aforementioned period, the same had to be excluded for the purpose of computing the period of limitation. However, even otherwise, since the Appellant was not served a copy of the Assessment Order between the aforementioned period and it was served only on 27th March. 2023, there was no delay on the part of the Appellant to file the appeal before CIT(A).

, the CIT(A) erred in not appreciating that the Appellant is engaged in providing credit facilities only to its members, who are employees of the Bombay Mercantile Co-Op. Bank Ltd. The Appellant does not provide such facilities to any non-member or an outsider. It is further submitted that the Appellant is not governed by the Rules and Regulations of the Reserve Bank of India. The Appellant does not accept any deposits from its members or any outsider. However, every- member has to contribute to the share capital of the Appellant at the time of enrolling as a member of the Appellant-society, The Appellant therefore, is not engaged in any banking business and is a purely co-op, credit society. Further, the CTT(A) erred in not allowing deduction under section 80P(2)(a)(i) of Rs. 71,56,179/- in respect of interest received by the Appellant from providing credit facilities to its members on the principle of mutuality.

12. Erred in denying deduction under section 80P(2)(d) of the Act amounting to Rs. 35,23,895/- without appreciating the settled law that the interest earned by a co-operative society from a co-operative bank is covered within the scope of section 80P(2)(d)of the Act, because even a cooperative bank is essentially a co-operative society registered under the Co- operative Societies Act, 1912, or under any other law for the time being in force in any state for the registration of co-operative societies, therefore, the interest income derived by a co- operative society from its investments held with a co-operative bank, would be entitled for claim of deduction under Sec. 80P(2)(d) of the Act. 13.Erred in not appreciating the fact that section SOP of the Act is a benevolent provision which is enacted by the Parliament in order to encourage and promote growth of co- operative sector, therefore, such a provision has to be read liberally, reasonably and in favour of an Assessee with a view to effectuate the object of the Legislature and not to defeat it. 14.The Appellant craves leave to add, alter, amend, delete or modify all or any of the above grounds of appeal.”

3. Brief facts of the case are that the assessee is a co-operative society and has been formed by employees of Bombay Mercantile Co-operative Bank Ltd. It caters to only its members, who are employees of the said bank only. Bank provides loan only amongst the members of the society. The excess fund of the assessee was invested in Bombay Mercantile Co-op. Bank Limited and earned interest. The assessee claimed deduction under section 80P(2)(a)(i) amount of Rs.1,06,80,074/- in impugned assessment year during the time of filing return. But the assessment was framed. The Ld. AO disallowed the deduction claimed by Bombay Mercantile Co-op. Bank Ltd assesseeU/s 80P(2)(a)(i) and tax on the total income of Rws.1,06,80,074/-. Aggrieved, assessee filed an appeal before the Ld.CIT(A). The ld.CIT(A) has not spent a single word about the merit of the case. The appeal was rejected on the basis of the delay in filing appeal. Being aggrieved on the appellate order, the assessee filed an appeal before us.

“4. Decision in Appeal:

4.1 At the outset, it is noticed that the appellant, in Form-35, has stated the date of service of Assessment order passed on 16.02.2021 to be 27.03.2023 and has thereby, concluded that there is no delay in filing the appeal, thus, no condonation was filed considering the above.

4.2 It is seen from the impugned assessment order that the same has been passed by National e-Assessment Centre, Delhi and a Document Identification Number (DIN) has been duly allotted to the said order. Furthermore, the last page of the impugned order also shows that the order was digitally signed on 16.02.2021. In order to shed light on the same, the relevant pages of the order are reproduced as below- "1. The case was selected for Complete Scrutiny assessment under the E- assessment Scheme, 2019 on the following issues: - I. Deduction u/s 80P II . Deduction from Total Income under Chapter VI-A

Bombay Mercantile Co-op. Bank Ltd The assessee has e-filed its return of income on 02.10.2018, declaring total income of Rs. 1,06,80,074/-, The return was processed u/s 143(1) of the I.T. Act. The case was selected for scrutiny assessment under CASS selection. Accordingly, statutory notice u/s 143(2) was issued on 21.09.2019.

"During the year as well in last three years, the Assessee Society has collected Share Money from members against which these members are issued Shares in the Assessee Society. The amount so received is kept in FD with bank and an Overdraft Facility has been availed against these FD which is used to give loans to members. Thus, those employees who need loans apply for loans and are allowed loans as per the terms and conditions as prescribed by the Management of the Assessee Society. The Assessee is a co-operative society formed and registered under Maharashtra Cooperative Societies Act, 1956 with the classification as 'credit co-operative society The Assessee provides credit facilities to its members only. The members are employees of 'BOMBAY MERCANTILE CO-OPERATIVE BANK LTD. The Assessee does not carry on any banking activity as also does not in any manner provide credit facility to any nonmember or outsider. The Assessee is not registered under Banking Regulation Act and is not controlled or regulated or governed by rules and regulations of Reserve Bank of India for the purpose. Thus, it is submitted that the Assessee is only 'credit co-operative society and is not a bank or co-operative bank in any manner...

Bombay Mercantile Co-op. Bank Ltd The Assessee is admittedly a co-operative society registered under the Co- operative societies Act and is engaged in providing credit facilitiesto its own members only. Consequently, the income earned by the appellant from its activity of providing credit facilities to its members, is entitled to deduction under Section 80P(2)(a)(i) of the Act. The appellant is not a co-operative Bank and thus, the exclusion provided under Section 80P(4) of the Act would have no application.

In support of the above contentions, the reliance is placed on the following judgements: 1. Quepem Urban Co-operative Credit Society Ltd vs ACIT, Margao 2. ........."

3. Above submission has been duly considered. It is felt expedient to verify the claim of the assessee as stipulated in sectionSOP and decide whether the submission is tenable or it ought to be rejected. For this, following issues/facts/ decisions also need to be considered.

3(a) On perusal of the Profit & Loss Account and Balance Sheet as on 31.03.2018, it amplydemonstrated that the activity being carried out by the assessee was nothing but acceptingdeposits and extending loan facilities. Moreover, it is seen that the assessee's credit society was formed in 1960, It is registered with the Registrar of Society. It carries out business of credit facilities, financial / banking transaction to cater the business and financial needs of the members. Who happen to be employees of the Bombay Mercantile Co-op. Bank Ltd. Thus, these members have good chance of availing credit facility from bank also.

Bombay Mercantile Co-op. Bank Ltd 3(b) Apart from the above, the assessee society has given loan and advances to its members after availing overdraft facility. Further, the business activity of the assessee was carried out at other branches apart from the Main Branch.

3(c) The above activity can be carried out for expanding the credit facility only by a Scheduled bank or Non-scheduled bank or a cooperative bank other than a primary agricultural society or a primary cooperative agricultural and Rural Development Bank. Thus, these aspects also clearly showed that the assessee had been engaged in banking business and that the assessee credit society is taking the benefits which are enjoyed by the banking business. Further, in its submissions the assessee's nature of business is mentioned as "Co-operative society carrying on business of providing credit facility to its own members only".

Bombay Mercantile Co-op. Bank Ltd Officer in the orders passed u/s 143(3) of the Act dated 26/12/2018 and 08/12/2019 respectively, by holding that the deduction claimed by the assessee is not allowable.

6. Further, the assessee's appeals for the above years were allowed by the Hon. ITAT relying on a decision in the case of Quepem Urban Co-operative Credit Society. However, the Department has not accepted the decision of the Hon'ble Bombay High Court in the case of Quepem Urban Co-operative Credit Society and SLP has been admitted by the Hon'ble Apex. Court. As the decision on the issue has not attained finality, the deduction claimed amounting to Rs. 1,06,80,074 made by the assessee is hereby disallowed."

4.3 Therefore, the statement regarding date of service of order to be 27.03.2023 is without any substantiation to justify as to how the date of service was after a time lag of more than two years.Since, it is incomprehensible that an order will be served after such a serious lapse of time, especially when the same was issued via electronic mode and bears a digital signature as well as a duly allotted DIN which is uploaded on the e-portal of the appellant/assessee.”

4.1 The Ld.AR further invited our attention in APB page 92 where the assessee filed a letter to the Income-tax Officer, Ward 17(2)(1) and requested for issuance of the copy of the assessment order for A.Y. 2018-19. The assessee placed that the assessee has not received any order for A.Y. 2018-19 till that date. So the certified copy of the order should be issued. Then the assessee received the order and filed appeal. Assessee claimed that the assessee received the order dated 23/03/2023 though the order is issued on 16/02/2021. The long delay was Bombay Mercantile Co-op. Bank Ltd not condoned by the Ld.CIT(A) and passed an order without considering the merit.

5. The Ld.DR vehemently argued and fully relied on the order of the revenue authorities.