THE THANE ZILLA MADHYAMIK SHIKSHAK SANGH SAHAKARI PATPEDHI,THANE vs. ACIT PALGHAR CIR, PALGHAR, MUMBAI

order s dated 02.01.2017 of the CIT(A)- 3,Mumbai,the Assessee has filed appeals for the above mentioned AY.s.It is engaged in the business of providing credit facilities to its members.The details of dates of filing of returns, returned incomes,dates of assessment etc. can be summarised as under: AY. ROI filed on Returned income Assessment Date Assessed income 2008-09 29.09.2008 Nil 04.12.2015 Rs.97,80P,811/- 2012-13 28.09.2012 Nil 20.03.2015 Rs.1,57,72,930/- ITA/1249/Mum/2017,AY.2008-09. 2.First ground of appeal is about reopening of the assessment. We find that in this matter the original order was passed u/s.143 (1). The AO had issued a notice within the time u/s.148 of Act,after regarding the reasons for reopening.We find that the CIT(A)has upheld the re - opening,as it was based on justifiable reasons.Certain facts about the reopening would be dealt with in the subsequent paragraphs.Considering the totality of the facts of the case,we are of the opinion that there is no need to interfere with the order of the CIT (A). Hence,we dismiss the ground raised about reopening. 3.Second and the most effective ground deals with this allowing deduction u/s.80P (Rs. 93.57 lakhs),audit fees(Rs.2.14 lakhs) and provision for gratuity (Rs.2.09 lakhs). The assessee filed its return of income wherein a claim of Rs. 93, 57,022 was made u/s.80P of the Act. Initially the return was processed u/s.143 (1) and later on a notice u/s.148 was issued.The AO observed that the assessee would accept deposits from its member and would provide credit facilities to the members, that it had claimed audit fee of Rs. 2.14 lakhs, that the payments 1249-50/M/17(08-09&12-13) The Thane zilla Madhyamik Shikshak Sangh were subjected to tax deducted at source.He directed the assessee to furnish proof of tax deducted. As the assessee could not furnish any evidence in that regard,the AO disallowed the sum of Rs. 2.14 lakhs. He further found that it had claimed Rs. 2.09 lakhs on account of ‘sevak updaan nidhi’. As per the AO the amount was provision for gratuity and hence same was not a allowable deduction. With regard to the claim made by the assessee u/s.80P, the AO observed that during the AY. 2007-08 it had accepted cash deposits in excess of Rs. 20,000/-to the tune of Rs.61.83 lakhs, that for the contravention of the provisions of section 269SS penalty u/s.271D of the Act levied on 27/09/2010, that the First Appellate Authority (FAA)had deleted the penalty on the ground that the provisions of Maharashtra State Cooperative Societies Act, 1960 clearly showed that the assessee fell under the category of cooperative bank and subcategory of other banks that included the urban bank and salary earners societies. He referred to the order of the FAA for the AY. 2007-08,wherein he had reproduced the submissions made by the assessee.Accordingly,he held that assessee was a cooperative society and fell in the category of cooperative bank as per part V of the Banking Regulation Act,1949.Referring to the submissions made by the assessee before the FAA,he held that the assessee was not a consumer society or an agricultural society but was a pretty bank as per the classification of society as per rule 10 of the Maharashtra State Cooperative Societies Act,1960.Considering the above facts, he asked the assessee as to why the deduction u/s.80P should not be disallowed.Vide its reply, dated 26/11/2015, the assessee filed explanation in that regard. After considering the submissions of the assessee, the AO held that the assessee argued that it was not a cooperative bank, that it had argued before the FAA that it was carrying on banking business and squarely came under the definition of Cooperative Bank,that it was carrying on banking business as per its own confession,that it had share capital of Rs. 6.29 crores and surplus of Rs. 2.38 crores as on 31/03/2008, that the assessee fulfils the criteria laid down in section 5 of the Banking Regulation Act. He made a reference to section 80P (4) of the Act and held that the assessee was not eligible for deduction u/s.80P (2) (a) (i) of the Act. 3.1.Aggrieved by the order of the AO,the assessee preferred an appeal before the FAA.Before him,the chairman of the assessee-society filed an affidavit and made detailed submissions relying upon several case laws. It was also stated that while arguing the case before the F AA with regard to penalty proceedings of section 271D the Act the then AR had made erroneous interpretation, that the assessee was not a cooperative bank in the term of section 80P (4) of the Act. The FAA directed the AO to file a remand report after going through the affidavit of 1249-50/M/17(08-09&12-13) The Thane zilla Madhyamik Shikshak Sangh the chairman of the society.After considering the remand report and the rejoinder of the assessee to the remand report,the FAA held that the assessment was reopened on the ground that in the penalty proceedings u/s.271D the assessee had pleaded that it’s status was of a cooperative bank and that accordingly it got relief from the then FAA,that the assessment was rightly reopened as the co-operative bank was not entitled to claim deduction u/s.80P in view of the section 80P(4)of the Act,that the assessee had not raised any objection for reopening the assessment u/s.147 at the time of assessment proceedings before the AO. 3.2.Before us,the Authorised Representative(AR)stated that the assessee was a cooperative society,that just because of deletion of penalty the assessee could not be treated as cooperative bank,that the CA had mis-represented the facts before the FAA who had adjudicated the penalty appeal.He relied upon the cases of Quepem Urban Cooperative Credit Society Ltd.(377 ITR 272), Goa PWD Staff Cooperative Credit Society Ltd.(242 Taxman 422) Belgaum Merchants Cooperative Credit Society Ltd.(64 taxmann.com 274). The Departmental Represnetative(DR) argued that the assessee itself had submitted before the FAA that it was a cooperative bank.he referred to pages 86 and 87 of the paper book filed by the assessee for the AY. 2012-13. He further stated that principle of mutuality was not applicable in the case under consideration,that the funds were coming and going from other sources, that the conduct of the assessee proved that it was a cooperative bank. He referred to the case of Durga Prasad More. 3.3.We have heard the rival submissions and perused the material before us. We find that the basic issue to be decided is whether the assessee should be treated a co-operative bank or a co-operative society in light of two different stand taken by it.Therefore,before proceeding further,it would be useful to take note of principle of approbate and reprobate and some of the cases dealing with the said concept.It is said that one of the basic principles of tax- administration is that a litigant cannot and should not be allowed to urge the reverse of what was pleaded before the statutory forum/court.In other words,it should not be allowed to blow hot and cold at the same time.It is a part of rule of evidence (Estoppel-rule) which bars a party from denying or alleging certain facts owing to his/its previous conduct, allegation, or denial.The Hon’ble Supreme Court in the matter of V.MR.P.Firm,Muar (56ITR67)has held that the doctrine of approbate and reprobate, which is a species of estoppel,only applies to the conduct of parties and cannot bring to tax and income which cannot otherwise be taxed under the law. Relevant portion of the order of the Hon’ble Court reads as under: "The contention is that the assessees having opted to accept the scheme, derived benefit thereunder, and agreed to have their discharged debts excluded from the assets side in the 1249-50/M/17(08-09&12-13) The Thane zilla Madhyamik Shikshak Sangh balance-sheet subject to the condition that subsequent recoveries by them would be taxable income, they are now precluded, on the principle of approbate and reprobate, from pleading that the income they derived subsequently by realization of the revived debts is not taxable income. The doctrine of "approbate and reprobate" is only a species of estoppel; it applies only to the conduct of parties…. Equity is out of place in tax law; a particular income is either exigible to tax under the taxing statute or it is not. If it is not, the Income-tax Officer has no power to impose tax on the said income." Now,we will refer to the case of M.MD Shagtullah (83 ITR 775).In that matter the petitioner set the law in motion and contended that his status at all material times was that of a registered partnership and he sought for an adjudication on this issue.It was only in 1961 that the High Court, on a reference made to it, held that the contention of the firm, in which the petitioner was a partner,that it was to be treated as a registered firm had to be accepted and directed the incidental and consequential proceedings to be undertaken by the Tribunal and the officers concerned. It is on the basis of this the Tribunal passed an order on 16.06.1961, pursuant to which the department took up the matter once over so as to remedy the defect which had gone into the record.After recording the above facts the Hon’ble Madras High Court held as under: “The other contention has also to fail. In fact, it was the order of the High Court, followed up by the directive of the Tribunal, that was responsible for the reassessment and this reassessment was made at a time when section 35(5) was in the statute book, having been inserted in 1952. The petitioner cannot approbate and reprobate. If he desires to go back to a period prior to April 1, 1952, he could only claim that the status of the firm, in which he was a partner, should be recognised as an unregistered firm. The learned counsel, however, stated that the order of the High Court virtually set aside the original order of assessment treating the firm as an unregistered firm. Therefore, it is idle to contend that, at the time when the rectification proceedings were undertaken under section 35(5) of the Act, the law as it stood on the date when it was rectified cannot be invoked. In the case of Army and Navy Stores Ltd.(31 ITR 959),the Bombay High Court has held that if an assessee has obtained a benefit by making a certain representation to the taxing authorities, he cannot be permitted to deny the truth of the representation at a later stage.Facts of the case of C V Ramana(181ITR 248)were that the business and residential premises of two assessees, husband and wife, were searched by officials of the Income-tax Department acting under section 132 of the Act, that account books and certain promissory notes were seized,that two suits were filed by the assessees seeking a decree for damages and loss sustained by them as a result of wrongful retention of the promissory notes,that the suits were dismissed by the High Court,that the judgment of the High Court showed that the Income-tax Officers had expressed their readiness to return the promissory notes and the assessees had actually taken back 86 promissory notes and refused to take back the rest,that in the meantime, the assessments of both were finalised and demand notices were issued.On writ petitions to quash the notices on the ground that it was incumbent on the tax officials to 1249-50/M/17(08-09&12-13) The Thane zilla Madhyamik Shikshak Sangh collect the amounts covered by the promissory notes and adjust the same towards the arrears of tax due by the assessees: the Hon’ble AP High Court held as under: “The petitioners are trying to approbate and reprobate having taken the plea in the earlier litigation that the retention itself was illegal, now they are contending that the departmental officials ought to have taken steps for recovery of the amounts from the debtors under section 226(3)(x) of the Act. Such a plea is not plainly available to them.” In Hope India Ltd.(203 ITR 118)the Hon’ble Calcutta High Court has held that the assessee cannot approbate and reprobate at the same time.In that matter certain direction were given by the Tribunal on the basis of the contention of the assesse.Later on,it was argued that direction should not be followed.Rejecting the request made by the assessee,the Hon’ble Court held that the assessee having taken the benefit could not now contend against the said decision.In the case of N.Mangathayaramma and others(255 ITR 127),the Hon’ble AP High Court has also dealt with the issue of taking opposite stands by an assessee in the assessment proceedings. In this matter,wealth-tax arrears to the tune of Rs. 5.5 lakhs owed by A.Certain house properties with appurtenant lands belonged to the joint family and were assessed in the hands of A, Hindu undivided family. In connection with the recovery of the said arrears of the wealth-tax, the TRO, issued a proclamation in the Telugu daily newspaper and brought to sale the schedule property and ultimately auction was conducted and the sale was knocked down in favour of the highest bidder, for a consideration of Rs. 6,58,000. A writ petition was filed by M and her five children who claimed that the properties mentioned in the auction notification and published in Eenadu daily were the properties of petitioners Nos. 2 to 6.Another writ petition was filed by R who claimed that the properties belonged to him.Dismissing the writ petitions the Hon’ble Court held that M and her children had agreed to the sale for realisation of the wealth-tax dues,that they could not be permitted to approbate and reprobate. In the case of C.Hanumantha Rao (Deceased) and another,the Hon’ble Madras High Court (335ITR17)found that the AO had accepted the loss returned by the assessee,an individual and owner of a coffee estate in respect of the sale proceeds of the silver oak trees standing in the coffee estate. Subsequently the case of the assessee was taken up for scrutiny and a notice u/s.143(2) of the Act was issued.The AO held that the sale proceeds would attract capital gains and accordingly computed the capital gains.The FAA upheld the assessment on the capital gains and directed the AO to adopt the gross capital gain at lower rate. The Tribunal confirmed the order passed by the FAA.Dismissing the appeal,filed by the assessee,that Hon’ble Court held as follow: “10. In the assessee's own case in respect of the assessment year 1990-91 the assessee himself offered a sum of Rs. 56,000 as income arising out of the sale of shade trees in his 5 1249-50/M/17(08-09&12-13) The Thane zilla Madhyamik Shikshak Sangh coffee estate for capital gains, but later, filed a revised return seeking exclusion of the said sum on the premise that the trees which were cut and sold by the assessee had been planted by the previous owner of the estate and removal of the said old trees were sought for better yield from the coffee plants and therefore the income derived from the sale of such trees in the coffee estate was agricultural in nature and consequently the same falls outside the purview of the Income-tax Act. The Commissioner of Income-tax rejected the plea of the assessee by relying on the apex court judgment in State of Kerala v. Karimtharuvi Tea Estate Ltd. [1966] 60 ITR 275. As against that order of the appellate authority, the assessee filed Writ Petition No. 6433 of 1993. The writ petition was dismissed by following the same decision in the case of Karimtharuvi, as against which the writ appeal in W. A. No. 372 of 2002 was filed. In that writ appeal, the Division Bench has surveyed almost all the earlier judgments on this issue and after noting the facts, in para. 6.1.4 that there was no controversy about the fact that the shade trees were planted by the previous owner and they had become old and useless due to efflux of time and therefore, they were cut and sold for planting shade trees newly for better yield from the coffee plants, held that the income so earned was liable to tax under section 45 of the Act.…… rather we are of the view that the assessee is not entitled to put forth any other contrary contention, in view of his conceding argument before the Tribunal. Before us, the correctness of the order of the Tribunal is only put in issue and we do not find any ground for interference in that order.” Lastly,we would like to refer to the case of Gupta perfumers P. Ltd.,the Hon’ble Delhi High Court(348 ITR 86)has also dealt with the issue of approbation and reprobation.In that matter the settlement commission had substantially accepted the undisclosed income surrendered by the assessee and had granted the applicant immunity from prosecution and penalty.Later on the applicant pleaded that application should be rejected.Deciding the matter,the Hon’ble Court held that the argument of the petitioner that the settlement application should have been rejected as the petitioner had not made full and true disclosure, has to be rejected on the principle of approbate and reprobate.

3.4.As per the Provisions of section 80P(4) of the Act stipulate that cooperative banks are not entitled to deduction u/s.80P (2) from a particular date.In the case under consideration the assessee itself at contended before the FAA,while arguing the penalty appeal for the AY. 2007- 2008 as under: “…… there are certain institutions which have been granted exemption provisions of section 269SS one which is ‘any banking company, post office, saving bank or cooperative bank’ XXXXX 2. Part V Of the Banking Regulation Act, 1949 states that provision of this act shall apply to banking companies. As per part V, “cooperative credit Society means cooperative Society, the primary objective of which is to provide financial accommodation to its members and includes a cooperative land mortgage bank”. Moreover, cooperative society means the society register or deemed to have been registered under any Central Act for the time being in force relating to the multi-State cooperative societies or any other central or state law relating to cooperative societies for the time being in force. The assessee is a cooperative society register under the Maharashtra State Cooperative Societies Act, 1960 providing financial assistance to its member who are mainly salary earners of secondary school. The nature of business as stated in form 3 CD is that of Banking Business.

1249-50/M/17(08-09&12-13) The Thane zilla Madhyamik Shikshak Sangh The fact that the assessees carrying on the banking business has not been objected by the assessing officer while conducting scrutiny assessment proceedings u/s.143 (3) of the Income Tax Act, 1961. Moreover the assessing officer has while granting deduction u/s.80P (2) (a) (i) has also not objected to the fact that assessee is a co-operative society engaged in carrying on the business of banking for providing credit facilities to its members. Thus the assessee’s covered under the definition as stated in part V of Banking Revolution Act, 1949 as stated…….” Considering the above facts, the FAA, deciding the penalty appeal held that the assessee was covered by explanation to section 269SS of the Act. He further held there was merit in the arguments advanced by the assessee, that the assessee had contended that it fell within the meaning of cooperative bank as per the meaning assigned to it in part V of the Banking Regulation Act, 1949. Accordingly the FAA deleted the penalty levied by the AO.Now, before us the assessee has argued that it was not a cooperative bank and that the CA had misrepresented the case before the then FAA. Nothing was brought on record to prove that any action was taken against the CA for alleged misrepresentation. No affidavit of the CA concerned has been filed to prove that he had made the claim before the then FAA on his own and not as per the instructions of the assessee.The case of the assessee can be easily summarised in a Hindi proverb- “Chitt bhee meri Pat bhee meri.”To save itself from the penal provisions,it claimed that it was a cooperative bank and for claiming deduction u/s.80P now it claims that it is not a cooperative bank.As per the settled principles of taxation jurisprudence, as discussed in the earlier paragraphs,assessees and the AO.s are not allowed to approbate and reprobate.Rule of consistency is applicable to both the parties.The assessee has not filed any application before the then FAA requesting him to cancel the penalty order and claiming that submissions made by it were factually wrong. We have gone through the cases relied upon by the assessee.In none of the cases the assessee itself had admitted that it was a cooperative bank.From the day one they were claiming that they were cooperative societies. But in the case under consideration,the assessee itself has claimed that it was a cooperative bank and the reopening is also based on the claim made by it before the FAA during the penalty proceedings.A person coming to judicial forums is supposed to come with clean hands.We are aware that morality and ethics are not part of the tax jurisprudence and we are also not deciding a moral issue.But,it does not mean that assessee can take a stand as per its convenience resulting in depriving the Sovereign of its due taxes.In our opinion,considering the peculiar facts and circumstances of the case under consideration, the order of the FAA does not suffer from any legal or factual infirmity. Therefore,confirming the same,we decide second ground of appeal against it.

1249-50/M/17(08-09&12-13) The Thane zilla Madhyamik Shikshak Sangh 4.Ground 2.b. and 2.c.pertain to disallowance of audit fees and disallowance of provision of gratuity respectively.The FAA has given a categorical finding of fact that the assessee did not file any submission with regard to both the issues, before him, during the appellate proceedings. Before us also no documentary evidence was produced about payment of audit fees.In these circumstances, in our opinion, the FAA was justified in rejecting the claim made by the assessee.Grounds 2.b. and 2.c.stand dismissed. 5.Third ground of appeal,dealing with initiation of penalty proceedings.As the issues are premature and not maitainable,hence are not being adjudicating I.T.A./1250/Mum/2017,AY.2012-13: 7.Except for the amount of deduction claimed u/s.80P of the Act,all the facts for the year under appeal are identical to the facts of AY.2008-09.So,following our order,for that AY.,we decide the effective ground (GOA-2)against the assesse and hold that there was no legal infirmity in reopening the assessment.Ground of appeal dealing with levy of penalty is not maintainable.