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Facts
The assessee, a cooperative society, filed its return of income. The Assessing Officer (AO) disallowed a deduction claimed under Section 80P and made additions to the income. The assessee's appeals to the CIT(A) were dismissed for delay without considering the merits. The tribunal considered the COVID-19 pandemic's impact on the delay in filing appeals and the arguments presented.
Held
The tribunal condoned the delay in filing the appeals for assessment years 2018-19 and 2020-21, citing the COVID-19 pandemic and the Supreme Court's judgment on extension of limitation. The appeals were restored to the Assessing Officer for fresh consideration after providing the assessee with a reasonable opportunity of being heard.
Key Issues
Whether the delay in filing the appeal can be condoned due to the COVID-19 pandemic, and whether the disallowance of deduction under Section 80P and additions under Sections 68 and 69 were justified.
Sections Cited
80P, 234A, 234B, 234C, 69, 68, 144, 249(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SMT. BEENA PILLAI & SHRI LAXMI PRASAD SAHU
PER SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER
All these 3 appeals are filed by the assessee against the different order passed by the NFAC, New Delhi dated 27/03/2024 in DIN Nos. ITBA/ NFAC/S/ 250/ 2023- 24/1063483071(1) for the assessment year 2017-18, ITBA/NFAC/S/250/2023-24/1061141446(1) dated
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19/02/2024 for the assessment year 2018-19 and ITBA/ NFAC/S/ 250/ 2023-24/1061142348(1) dated 19/02/2024 for the assessment year 2020-21.
ITA No.705/Bang/2024
The assessee has raised the following grounds of appeal:-
“1. The order passed by the authorities below insofar as it is against the Appellant, is opposed to law, weight of evidence, natural justice and probabilities on the facts and circumstances of the Appellant's case. 2. The Appellant denies itself liable to be assessed at Rs.31,48,247/- as against the returned income of Rs.73,590/- for the assessment year 2017-18, on the facts and circumstances of the case. 3. Grounds on disallowance of deduction u/s 8oP(2)(a)(i), Rs.30,74,662/-: a. The authorities below are not justified in disallowing the deduction under section 8oP(2)(a)(i) having admitted that the sum of Rs.30,74,662/- is business income, by holding that the `principles of mutuality' does not exist between the appellant and nominal members on the facts and circumstances of the case. b. The authorities below have failed to appreciate that the appellant has not claimed exemption under the `doctrine of mutuality' and the deduction is claimed under section 8oP(2)(a)(i) which does not require it to satisfy the test of mutuality on the facts and circumstances of the case. c. The authorities below have failed to appreciate that nominal members are also members under the Karnataka State Co- operative Societies Act and ought to have allowed the deduction under section 80P(2)(a)(i) of the Act. d. Without prejudice and not conceding that the disallowance is bad in law, the disallowance if any was to be restricted to non members, which in the instant case was NIL and consequently,
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the disallowance was bad in law, on the facts and circumstances of the case. 4. The appellant denies the liability to pay interest under section 234A, 234B and 234C of the Act in view of the fact that there is no liability to additional tax as determined by the learned assessing officer. Without prejudice the rate, period and on what quantum the interest has been levied are not in accordance with law and further are not discernable from the order and hence deserves to be cancelled on the facts and circumstances of the case. 5. The appellant craves leave to add, alter, delete or substitute any of the grounds urged above. 6. In view of the above and other grounds that may be urged at the time of the hearing of the appeal, the appellant prays that the appeal may be allowed and appropriate relief be granted in the interest of justice and equity.
The brief facts of the case are that the assessee is a cooperative society registered under Karnataka Co- operative Societies Act 1959. It has filed its return of income on 30/11/2017 declaring taxable income of Rs.73,590/-. Subsequently, the case was selected for scrutiny and statutory notices were issued to the assessee. From the details submitted, it was noticed that the assessee had claimed deduction u/s 80P of the Act of Rs.30,74,662/-. It was further noted that the assessee has nominal members and they are not eligible for voting rights and dividend as per bye laws of the society. The AO noted that the assessee has violated the principle of mutuality and nominal members constituted major chunk of the base of the organization both in terms of physical and financial significance and these nominal members are solely
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contributors to earning surpluses and not participated in the surpluses and hence, the concept of mutuality in the said entity ceases to exist. He also referred to the definition of co-operative society as per sec. 2(19) and discussed the provision of sec. 80P of the Act. After discussing the issue the deduction claimed u/s 80P(2) by the assessee to the tune of Rs.30,74,662/- was denied.
Aggrieved from the above order, the assessee filed appeal before the CIT(A). The ld. CIT(A) issued notices on different dates but the assessee did not respond to any of the notices. Accordingly, he dismissed the appeal of the assessee.
Aggrieved from the above, the assessee is before us.
The ld. AR of the assessee submitted that the ld.CIT(A) has not decided the issue properly. The assessee is earning income from business and interest from its investments and these are deductible as per Chapter VI-A u/s 80P of the Act. However, the ld. CIT(A) did not considered the merits of the case and proper opportunity of being heard to the assessee was not given. As per Form No. 35, the notices were not sent on the mail address provided i.e ajitclients3@gmail.com. and at the time of
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issuing notices for hearing by the CIT (A) , the assessee had no email address, therefore, the assessee could not see notices sent through email belonging to other person. The ld.AR further submitted that if a chance is given to the assessee to substantiate its case and he also undertook that he will comply all the notices issued by the AO/CIT(A) for adjudicating the case. Now, the assessee has valid email.id, which is mentioned in Form No.36 at Sl. No.1 2762pacsmadapura@gmail.com. and it is requested to send all the future notices to this email.id.
The ld. DR relied on the order of the lower authorities.
Considering the rival submissions the ld. CIT (A) has dismissed the appeal for want of non compliance by the assessee in spite of granting various opportunities to the assessee. The assessee has stated the reasons for not complying the notices as above. Considering the submissions and in the interest of justice the appeal is restored to the Assessing Officer for de novo consideration and decision as per law after giving reasonable opportunity of being heard to the assessee. The assessee shall produce its proper e-mail id and communication address to the revenue department and substantiate its case before the
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AO with necessary evidence and not to seek unnecessary adjournment for early disposal of the case.
In the result, appeal of the assessee is allowed for statistical purposes
ITA No.706/Bang/2024
The assessee has raised the following grounds of appeal:-
“1. The order passed by the authorities below insofar as it is against the Appellant, is opposed to law, weight of evidence, natural justice and probabilities on the facts and circumstances of the Appellant's case. 2. The Appellant denies itself liable to be assessed at Rs.21,54,88,310/- as against the returned income of Rs.1,50,210/- for the assessment year 2018-19, on the facts and circumstances of the case. 3. Grounds on dismissal of appeal by the first appellate authority on delay: a. The learned CIT(A) has failed to appreciate that there is a delay of only `two days' in filing the appeal considering the extension provided by the Hon'ble Supreme Court in Miscellaneous Application No.21 Of 2022. b. There existed sufficient cause for delay in filing the return of income and that the learned CIT(A) is empowered to condone the delay by exercising powers under section 249(3) of the Act, on the facts and circumstances of the case. 4. Grounds on disallowance of 8oP deduction, Rs.3i,66,632/-: a. The authorities below have erred in denying the deduction claimed under section 8oP of the Act though the appellant is lawfully eligible, on the facts and circumstances of the case.
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b. The authorities below have failed to appreciate that the profit of Rs.31,66,632/- earned by the appellant is attributable to its business of providing credit facilities, marketing of agricultural produce, supplying agricultural implements, articles and is eligible for deduction under section 8oP of the Act. 5. Grounds on addition made under section 69, Rs.13,96,76,114/-: a. The authorities below are not justified in making addition of Rs.13,96,76,114/- towards loans advanced and investment made by the appellant, on the facts and circumstances of the case. b. The authorities below have failed to appreciate that the source of money for making investments and advances is out of the members money and loans borrowed which has been recorded as `liability' in the balance sheet of the appellant, on the facts and circumstances of the case. c. The authorities below have erred in making addition of loans, and investment despite accepting the interest earned on such investment as income of the appellant, on the facts and circumstances of the case. d. The provision of section 69 of the Act finds no applicability where the nature and source is explained, on the facts and circumstances of the case. e. The learned assessing officer has failed to appreciate that the power to invoke the provision of section 69 of the Act is not mandatory rather directory in nature, on the facts and circumstances of the case. f. Without prejudice and conceding that the addition under section 69 of the Act is not warranted, the learned assessing officer is not justified in taxing the entire sum appearing in the balance sheet and the only the net increase in loans and advances for the year could have been taxed, on the facts and circumstances of the case. 6. Grounds on addition made under section 68, Rs.7,24,95,356/-: a. The authorities below are not justified in making addition of Rs7,24,95,356/- towards deposits received from member and employees of the appellant, on the facts and circumstances of the case. b. The provision of section 68 of the Act finds no applicability where the nature and source is explained, on the facts and circumstances of the case. c. The learned assessing officer has failed to appreciate that the power to invoke the provision of section 68 of the Act is not
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mandatory rather directory in nature, on the facts and circumstances of the case. d. Without prejudice and conceding that the addition under section 68 of the Act is not warranted, the learned assessing officer is not justified in taxing the entire sum appearing in the balance sheet and the only the net increase in deposits for the year could have been taxed, on the facts and circumstances of the case. 7. The appellant denies the liability to pay interest under section 234A, 234B and 234C of the Act in view of the fact that there is no liability to additional tax as determined by the learned assessing officer. Without prejudice the rate, period and on what quantum the interest has been levied are not in accordance with law and further are not discernable from the order and hence deserves to be cancelled on the facts and circumstances of the case. 8. The appellant craves leave to add, alter, delete or substitute any of the grounds urged above. 9. In view of the above and other grounds that may be urged at the time of the hearing of the appeal, the appellant prays that the appeal may be allowed and appropriate relief be granted in the interest of justice and equity.
The assessee filed its returned of income for AY 2018- 19 on 22.11.2018 declaring its total income of Rs. 1,50,210/-. Subsequently, the case was selected for scrutiny and statutory notices were issued to the assessee. In response to the said notices the assessee submitted details through e-portal with regard to the reason which have been examined with reference to the return filed by the assessee. The assessee was asked vide various notices to explain & justify with supporting documents the issues involved in its case. However, the assessee made no
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replies/compliances to any of the notices. Thereafter the case was marked nonresponsive through insight portal in ITBA & in response, the assessee uploaded computation of income, balance sheet and ITR V with no covering letter & did not comply to further notices. The assessee was further asked to submit documents and explanations but it was not complied and a show-cause notice was issued to the assessee for completing under best judgement assessment. The assessee did not respond to the show- cause notice, accordingly, the case was completed u/s 144 of the Act on 18/05/2021 and income was assessed at Rs.21,54,88,310/- and computed as under:-
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Aggrieved from the order of the AO (Assessing Officer), the assessee filed appeal before the First Appellate Authority (FAA).
The ld. FAA noted that the assessee filed appeal with the delay of almost 377 days but the assessee is not even taken cognizance of the delay and have not offered any reasons for the same and did not seek for condonation of such delay of more than a year. Accordingly, it was held that the assessee has no sufficient reason for the delay and accordingly appeal was dismissed.
Aggrieved from the above order, the assessee is before us.
The ld.AR of the assessee submitted that during the course of assessment proceedings, the assessee filed tax audit report and financial statements but due to lock down
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for COVID restrictions and Kodagu is very adjacent to Kerala and there were lot of restrictions for economic activities in the districts but AO issued show cause notice on 23/04/2021 and on the same time in Karnataka State also COVID case started increasing in the month of April 2021 and the State Government also imposed lock down during the same period. Accordingly, the case was not represented properly, therefore, the AO passed ex-pare order on 18/05/2021, which is peak COVID period, the order was served to the assessee on 19/05/2021 and it was instituted appeal before the CIT(A) on 31/05/2022 because of the lock down restriction due to COVID. The ld. AR further submitted that the CIT(Appeals) has dismissed the appeal on the reason that the appeal is time barred by 377 days without condoning the delay and without going into the merits, whereas it was a COVID period and the assessee received the assessment order on 19.05.2021 and preferred the appeal before the CIT(Appeals) on 31.05.2022. As per the Hon’ble Supreme Court judgment in Cognizance for Extension of Limitation, In re [2022] 134taxmann.com307 (SC), it is held that where limitation would have expired during period between 15-03-2020 till 28-02-2022, notwithstanding actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01-03-2022; in event actual balance
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period of limitation remaining, with effect from 01-03-2022, is greater than 90 days, that longer period shall apply. This judgment has not been considered by the CIT(Appeals) and considering the same, there is actually a delay of only 02 days in the appeal before the CIT(Appeals) due to the lockdown during the COVID period and preparation of appeal. He also submitted that there was a fee for filing appeal of Rs.1000/-, which was to be paid through on line, therefore, it got delayed by 2 days. He submitted that the CIT(A) should have considered this delay and he had to decide the appeal on merit after giving opportunity of being heard to the assessee. The AO has done high pitch assessment, which is completely injustice for the assessee. The entire unsecured loans have been added and the deduction under Chapter VIA has also not granted to the assessee and he undertook and further submitted that if a chance is given to the assessee to represent the case before the AO, he will comply all the notices issued by the CIT(A) for adjudicating the case.
The ld. DR relied on the order of the lower authorities.
After considering the rival submissions, we note from the judgment of Hon’ble Supreme Court (supra) regarding
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extension of limitation during the COVID period, the delay before the CIT(Appeals) is only for two days and considering the submissions of the assessee and in the interest of justice in this regard, we condone the delay of two days in filing the appeal before the CIT(Appeals). The appeal is restored to the Assessing Officer for de novo consideration and decision as per law after giving reasonable opportunity of being heard to the assessee. The assessee shall produce its proper e-mail id and communication address to the department and substantiate its case before the AO with necessary evidence and not to seek unnecessary adjournment for early disposal of the case.
. 18. In the result, appeal of the assessee is allowed for statistical purposes
ITA No.707/Bang/2024
The grounds of appeal filed by the assessee are as under:- “1. The order passed by the authorities below insofar as it is against the Appellant, is opposed to law, weight of evidence, natural justice and probabilities on the facts and circumstances of the Appellant's case. 2. The Appellant denies itself liable to be assessed at Rs.59,46,527/- as against the returned income of Rs.2,28,500/- for the assessment year 2020-21, on the facts and circumstances of the case. 3. Grounds on dismissal of appeal by the first appellate authority on delay:
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a. The learned CIT(A), NFAC is not justified in dismissing the appeal of the appellant by holding that there was no sufficient cause for delay of 156 days in filing the appeal, on the facts and circumstances of the case. b. The learned CIT(A), NFAC has failed to appreciate that the reasons furnished for delay in filing the appeal constitutes `reasonable cause' and ought to have condoned the delay by exercising the powers conferred under section 249(3) of the Act, on the facts and circumstances of the case. 4. Grounds on disallowance of 8oP deduction, Rs.36,03,000/-: a. The authorities below have erred in denying the deduction claimed under section 8oP of the Act though the appellant is lawfully eligible, on the facts and circumstances of the case. b. The authorities below have failed to appreciate that the profit of Rs.36,o3,000/- earned by the appellant is attributable to its business of providing credit facilities, marketing of agricultural produce, supplying agricultural implements, articles and is eligible for deduction under section 8oP of the Act. 5. Grounds on addition made under section 68, Rs.17,67,740/-: a. The learned assessing officer has erred in treating the increase of unsecured loan of Rs.17,67,74o/- during the year as unexplained in terms of section 68 of the Act, on the facts and circumstances of the case. b. The provision of section 68 of the Act finds no applicability where the nature and source is explained, on the facts and circumstances of the case. c. The learned assessing officer has failed to appreciate that the power to invoke the provision of section 68 of the Act is not mandatory rather directory in nature, on the facts and circumstances of the case. 6. Grounds on addition made under section 68, Rs.3,47,287/-: a. The learned assessing officer has erred in treating the increase of current liabilities of Rs.3,47,287/- during the year as unexplained in terms of section 68 of the Act, on the facts and circumstances of the case. b. The provision of section 68 of the Act finds no applicability where the nature and source is explained, on the facts and circumstances of the case. c. The learned assessing officer has failed to appreciate that the power to invoke the provision of section 68 of the Act is
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not mandatory rather directory in nature, on the facts and circumstances of the case. 7. The appellant denies the liability to pay interest under section 234A, 234B and 234C of the Act in view of the fact that there is no liability to additional tax as determined by the learned assessing officer. Without prejudice the rate, period and on what quantum the interest has been levied are not in accordance with law and further are not discernable from the order and hence deserves to be cancelled on the facts and circumstances of the case. 8. The appellant craves leave to add, alter, delete or substitute any of the grounds urged above. 9. In view of the above and other grounds that may be urged at the time of the hearing of the appeal, the appellant prays that the appeal may be allowed and appropriate relief be granted in the interest of justice and equity.”
The assessee has filed its original e-return of income for the assessment year 2020-21 on 25/01/2021 declaring income of Rs. 2,28,500/-. The case was selected for scrutiny and statutory notices were issued to the assessee. The AO issued various notices and assessee filed part reply 22.03.2022 viz. computation of income, balance sheet, profit and loss account and tax audit report with no covering letter. The AO noticed that the reply of the assessee was found incomplete & more details were required and as assessee has not provided any documentary evidence in support of its claim, another notice u/s 142(1) of the IT Act was issued on 19.08.2022. Since assessee did not respond to the notice dated 19.08.2022, a show cause notice was issued to the assessee on 30.08.2022. However, the assessee has not
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responded to the show cause notice also. In the view of the above, it is thus being assumed that assessee has nothing to say further on these matters and the assessment is being completed based on material available. The total income was determined at Rs. 59,46,527/-
Aggrieved, the assessee filed appeal before the ld. CIT(A).
The ld.CIT(A) at the outset noticed that the assessee, in Form-35 stated the reasons for delayed filing of appeal as that our tax consultant was busy with Tax Audit and Company ROC returns during the months of October and November 2022 and the assessee was fully dependent on professional advise for Tax Matters since they are a primary agricultural cooperative society. There was a lockdown during second wave of Covid-19and the society was allowed to work with minimum staff. The society was trying to contact its tax consultant who was also busy with filling of returns which was also continuously extending due to COVID-19. Hence, proper decision on pending case could not be completed on time and he further submitted that the assessee had no intention to jeopardize the interest of the revenue by
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delaying the filing of the appeal. These explanations were not accepted by the CIT (A) and did not condone the delay of 156 days and dismissed the appeal of the assessee without going into the merits of the case.
22.1 From the para 2 of the order, it is noticed that there were 9 statutory notices of the Act issued to assessee, however, the assessee complied only once that's too with partial reply. Now, there is a delay of 156 days in filing of this appeal. The ld. CIT(A) contended that the reason given by the assessee is held not to be a sufficient cause to condone the delay. Accordingly, the ld. CIT(A) dismissed the appeal of the assessee.
Aggrieved from the above order, the assessee is before us.
The ld.AR submitted that order of assessment under section 144 was passed for assessment year 2020- 21 on 13.09.2022 by disallowing the claim of deduction under section 8OP of the Act of Rs.36,03,000/- & by making addition under section 68 of the Act of Rs.21,15,027/- ( 17,67,740+3,47,287). The assessee filed an appeal on 15.02.2023, resulting in a delay of 156 days
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due to the reason that notices u/s 142(1) of the Act, assessment order was sent to the email id: a1itclients4@gmail.com, which belonged to the erstwhile Chartered Accountant and there was no communication of notices received from the C.A . The assessee prayed that remand the matter back to file of the AO as the assessment order was passed ex-parte, to adjudicate the disputed matter afresh after providing reasonable opportunity of hearing to the assessee.
Considering the rival submissions , we note that the ld. CIT (A) has not accepted the delay of 156 days for filling appeal that the reason given is held not to be a sufficient cause to condone the delay. The assessee had submitted the reasons for delay in filling appeal in Form No. 35 is reasonable cause. In view of the above reasons, relying on the judgment in the case of Collector, Land Acquisition v. Mst. Katiji (1987) 167 ITR 471 (SC), the delay of 156 days is hereby condoned. Considering the request made by the ld.AR of the assessee and in the interest of justice, the appeal is restored to the Assessing Officer for de-novo consideration and decision as per law after giving reasonable opportunity of being heard to the assessee. The assessee shall produce its proper e-mail id and communication address to the department and
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substantiate its case before the AO with necessary evidence and not seek unnecessary adjournment for early disposal of the case.
In the result, appeal of the assessee is allowed for statistical purposes.
In the result, all the appeals filed by the assessee are allowed for statistical purposes.
Order pronounced in court on 6th day of June, 2024 Sd/- Sd/- (BEENA PILLAI) (LAXMI PRASAD SAHU) Judicial Member Accountant Member
Bangalore, Dated : 06.06.2024. Vms Copyto: The Applicant 1. 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order
Asst. Registrar, ITAT, Bangalore.