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Facts
The assessee, a credit co-operative society, claimed a deduction under Section 80P and faced additions under Section 68 for unexplained cash credits. The CIT(A) dismissed the appeal ex-parte due to non-compliance by the assessee, upholding the AO's order.
Held
The ITAT noted the assessee's negligent behavior but, in the interest of justice, set aside the CIT(A)'s order and restored the matter to the AO for fresh adjudication, imposing a cost of Rs. 5,000 on the assessee to be deposited in the Prime Minister Relief Fund.
Key Issues
The key legal issues were the disallowance of deduction under Section 80P and the addition of unexplained cash credits under Section 68, along with the procedural issue of the CIT(A) dismissing the appeal ex-parte due to non-compliance.
Sections Cited
Section 80P, Section 68, Section 143(3), Section 144B, Section 44AB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RAJKOT BENCH,
Before: DR. ARJUN LAL SAINI & DR. DINESH MOHAN SINHA
आदेश/ORDER Per DR. Dinesh Mohan Sinha, JM: Captioned appeal filed by the assessee, pertaining to Assessment Year (AY)-2020-21, is directed against the order passed by the National Faceless Appeal Centre (NFAC) vide order dated 22.08.2025, which in turn arise from assessment order passed by Income Tax Department/Assessing Officer under section 143(3) r.w.s. 144B of the Income Tax Act, 1961 vide order dated 22.09.2022.
① ITA 693/RJT/2025 Shree Pragati CO OP Credit Society, Rajkot 2. Grounds of appeal raised by the assessee are as follows:
1.The Id. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi (hereinafter referred to as the "CIT(A)"] erred in law and on facts in dismissing the appeal without adjudicating the grounds on merits, solely on account of alleged non-compliance, which is unjustified and against the principles of natural justice 2. The Id. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi (hereinafter referred to as the "CIT(A)"] erred on facts as also in law in dismissing the appeal ex-parte.
3. The learned CIT(A) erred in confirming the disallowance of deduction of ₹53,43,299/-claimed u/s 80P of the Income Tax Act, 1961, without appreciating the nature of the appellant's activities and its eligibility under the said section.
4. The learned CIT(A) erred on facts as also in law in confirming addition of ₹4,93,91,318/-made by the AO u/s 68 of the Act, treating amounts held in various bank accounts of members and RDC Bank as unexplained cash credits, without proper verification or opportunity to explain. The addition made and confirmed is bad in law as also on facts therefore the same may kindly be deleted.
Your Honour’s appellant craves leave to add, to amend, alter, or withdraw any or more grounds of appeal on or before the hearing of appeal.
Brief facts of the case that the appellant , a credit co-operative Society, is assessed to tax. The appellant filed return of income for the A.Y. 2020- 21 on 23.12.2020 declaring total income of Rs 7,88,470/- claiming deduction u/s. 80P of the Act.The appellant maintains regular books of accounts which are duly audited u/s 44AB of the Income-tax Act, 1961. The case of the appellant was selected for scrutiny under CASS ‘Limited scrutiny’ on the ground of high Liabilities as compared to low income/receipts. It is further stated that low income (including exempt income and agricultural income) in comparison to high loans/advances/investment in shares appearing in balance sheet and large deduction under chapter VI-A of the Act. On which further clarification is required, therefore, the case has been selected for Limited scrutiny and clarification is required on following issues.
② ITA 693/RJT/2025 Shree Pragati CO OP Credit Society, Rajkot I. High Creditors/Liabilities II. High interest expenditure/finance costs III. Deduction from Total Income under Chapter VI-A Practically this being the first scrutiny assessment in many years, the appellant in response to notice u/s 143(2) dated 29.06.2021 immediately vide its letter dated 08.07.2021 furnished the details of High creditors/liabilities, High interest expenditure/ Finance costs and the claim made under chapter VI-A of the Act. Since the appellant had furnished the details of the issue raised in the notice , the management was under the belief that since the accounts of the society are audited u/s 44AB of the Act, the information called for subsequently are available in the audit report. As the appellant failed to prove his claim of deduction u/s. 80P of Rs. 53,43,299/-, the A.O disallowed the same and added it back to the total income for the year. Further, the A.O also made addition on account of unsecured loan and investment treating it as unexplained cash credits u/s 68 of the Act. Feeling aggrieved by the order of assessment dated 22.09.2022 appellant filed appeal before CIT(A).
The assessee filed an appeal before the CIT (A), upheld the order of the AO dated 22.09.2022.
5. The assessee is in appeal before us against the impugned order of Ld. CIT(A) dated 22.08.2025. 5.1. The Ld. AR of the assesse prayed that one opportunity be kindly given to him to explain his case before the lower authority. 5.2. On the contrary Ld. DR of the revenue relied on the order of Ld. CIT(A) and having no objection with the prayer of the Assesse.
We have heard the rival contention of both the party and perused all the relevant material available on record. We note that The Ld. CIT ③ ITA 693/RJT/2025 Shree Pragati CO OP Credit Society, Rajkot Appeal has issued 3 notices for hearing from 21.10.2024 to 06.08.2025. Neither the assessee nor his AR filed any written submission. The Ld. AR asked for adjournments only. We note the assessee was having negligent behavior in pursuing the Appeal and it is well settled that the law assists those who are vigilant, not those who sleep over their rights. Seeing the negligent behaviour of the assessee a cost of Rs. 5000-/- imposed on the assessee and the same is to be deposited with Prime Minister Relief Fund within 10 days from today and the copy of the same should be provided to the AO during course of hearing of the case. Therefore, considering the facts and circumstances of the case and in the interest of justice we are of the view that one more opportunity be given to the assessee to present this case before the lower authority. we set aside the order of Ld. CIT(A) and restore back the matter to the file of AO for fresh adjudication of the matter after giving due opportunity of hearing to the assessee. The assessee is also directed to ensure the participation in the hearing as and when it may be fixed by AO and don’t take unnecessary adjournments . AO shall be at liberty to pass appropriate order in accordance with law.
In the result, the appeal of the assessee is allowed for statistical purpose.
Order is pronounced in the open court on 27/01/2026.