KATTAPPANA SERVICE CO-OPERATIVE BANK LTD.,IDUKKI vs. THE INCOME TAX OFFICER, THODUPUZHA

The assessee is a Primary Agricultural Co-operative Society (PACS) and filed its return of income on 31.05.2021 and the ld. Assessing Officer (AO), while scrutinising the return had issued a notice under Section 143(2) of the Act and thereafter a notice u/s 142(1) was issued calling for various details. The assessee also furnished various details as sought for by the ld. AO and an order under Section 143(3) of the Act was made on 29.10.2021 by 2 SA No. 160/Coch/2023 Kattappana Service Co-op. Bank Ltd. accepting the return of income. While making the demand notice and the income tax computation sheet the ld. AO had mistakenly levied tax on the income of the society on which he has granted exemption while passing the order u/s 143(3) of the Act. The assessee challenged the said order before the CIT(A) and contended that the issue has been elaborately discussed by the ld. AO in the order passed u/s 143(3) of the Act and gave a finding that the income returned by the assessee is accepted and therefore the mistake committed by the ld AO in the demand notice and the income tax computation sheet has to be rectified. The appeal was filed with a delay of 30 days and filed an application for condonation of delay and explained that the new Counsel took some time to study the case file to file the appeal and hence there is a delay. The learned CIT(A) had not considered the issue in detail but rejected the appeal on the ground of delay. The assessee filed a circular issued by the CBDT about the condonation of delay in filing the returns u/s 80 P for the assessment years 2018 -19 to 2022-23. The CIT(A) directed the assessee to approach the proper authority for the condoning the delay in filing the return as per the circular issued by the CBDT. Aggrieved by the order of the learned CIT(A) the assessee is in appeal before us.

At the time of hearing the learned A.R. of the assessee argued that the claim of exemption under Section 80P of the Act is in order and also the ld. AO accepted the returned income and passed an order u/s 143(3) of the Act and therefore the tax levied in the demand notice and income tax computation sheet on the exempted income is only a mistake and therefore the ld. AO had not applied his mind properly and prayed to set aside the order of the ld. AO in this regard. The learned A.R. also brought to our notice that the delay in filing the appeal was properly explained and in spite of that the CIT(A) had refused to condone the delay and thereby confirmed the illegal demand raised by the ld. AO. The learned A.R. also filed an order passed by the Pr. Chief Commissioner of Income Tax (PCCIT), Kerala under Section 119(2)(b) of the 3 SA No. 160/Coch/2023 Kattappana Service Co-op. Bank Ltd. Act in which the PCCIT had condoned the delay in filing the return under Section 139 of the Act and argued that the return of income filed by the assessee is in order and therefore assessee is eligible for deduction u/s 80P of the Act and prayed to allow the appeal.

The learned D.R., on the other hand, relied on the orders of the lower authorities and prayed to dismiss the appeal of the assessee.

We have heard the rival contentions and perused the materials on record. As rightly contended by the learned A.R., the ld. AO while passing the assessment order under Section 143(3) of the Act had given the following findings: - “5. The reply of the assessee is perused and examined vis-a-vis the scrutiny parameter for which the case is selected under CASS and the relevant case laws. The explanation of the assessee on the issues is found to be acceptable and hence, the assessment is completed without any variations. The income returned by the assessee is accepted.”

After giving the above said findings, the ld AO in the demand notice and the income tax computation sheet had mistakenly levied tax on the entire income which in our view is not correct. The ld AO can reject the returns as belated and levied tax on the entire income but having passed an order u/s 143(3) of the Act by accepting the returns he cannot levy tax in the demand notice and the income tax computation sheet. Before the learned CIT(A), the assessee has no opportunity to contest the matter since the ld CIT(A) had rejected the appeal of the assessee on the ground that the same is barred by limitation. We have perused the reasons stated in the affidavit filed in support of the delay condonation petition and found that the assessee had stated sufficient reasons for not filing the appeal in time and, therefore, we inclined to condone the delay in filing the appeal and set aside the order of the learned CIT(A).

Now coming to the issue of condonation of delay in filing the return by the PCCIT by an order dated 21.12.2023,the same was not available at the time of passing the order by the CIT(A) and therefore he has not considered the issue. Moreover, neither the assessee nor the AO had raised this issue.

We have a genuine doubt that the ld AO might have levied tax on the income of the assessee in the demand notice and the income tax computation sheet since the return of income was filed belatedly. Now this issue has been set right by the PCCIT by passing an order condoning the delay in filing the returns and therefore the return filed by the assessee is to be treated as filed in time and the assessee is eligible for deduction u/s 80P of the Act if there is no other impediment.

All these issues has to be looked into by the ld. AO based on the order passed by the PCCIT and come to a conclusion whether the levy is in order or not and therefore, we set aside the orders of the lower authorities and remitted the matter to the ld. AO for considering the issue afresh. While deciding the issue afresh the ld. AO is directed to consider the order passed by the PCCIT under Section 119(2)(b) of the Act and also the genuine claim of the assessee made u/s 80P of the Act and pass appropriate order in accordance with law. Since the appeal of the assessee is disposed of, the stay petition becomes infructuous and hence dismissed.

10.In the result, the appeal filed by the assessee is allowed for statistical purposes and the stay application is dismissed. Order pronounced in the open Court on 21st June, 2024.