SHREE JAY LIMBACH CO.OP. CREDIT SOCIETY LTD.,AHMEDABAD vs. THE ITO, WARD-1(2)(3), AHMEDABAD

These four appeals have been filed by the assessee against separate orders of the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as "CIT(A)" for short], all dated 29.05.2023, passed under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as "the Act" for short] for the Assessment Years (AY) 2010-11 to 2013-14.

All the present appeals have come up before us against the orders of the ld. CIT(A) wherein the assessee had challenged the rejection of its rectification application filed u/s 154 of the Act to the Assessing Officer in identical facts and circumstances.

The assessee is a Co-operative Society engaged in the business of providing short term loans to its members. In short, it is a credit co- operative society providing credit facilities to its members. For all the impugned years, the assessee had filed returns of income claiming deduction of its entire income u/s 80P(2) of the Act, thus filing Nil return of (SMC) to 573/Ahd/2023 Shree Jay Limbach Co Op Credit So Ltd Vs. ITO AYs : 2010-11 to 2013-14 2 income. For all the impugned years, i.e. AYs 2010-11 to 2013-14, intimation u/s 143(1) of the Act was made denying grant of deduction u/s 80P(2) of the Act and treating the income as income from other sources subjecting the same to tax. The details of the incomes returned to tax and assessed to tax for the respective assessment years are as under:-

Submissions were made in writing before us and documents were also filed by way of paper-books.

He first pointed out the facts of the case which lead to the Assessing Officer holding so, pointing out that the intimation u/s 143(1) was dated 27.10.2010 and rectification of the same u/s 154 of the Act was sought by the assessee vide letter dated 15.12.2022; that considering that the application

He, thereafter, pointed out that the Assessing Officer responded to the same by staying that the assessee had claimed deduction on interest income earned from FDs made in Bank of India and State Bank of India which is not permitted in terms of Section 80P(2)(d) of the Act. This communication of the Assessing Officer dated 10.10.2014 was placed before us at Exhibit-C of the paper-book. The ld. Counsel for the assessee thereafter pointed out that the assessee responded to the same by pointing out that no deduction u/s 80P(2)(d) had been claimed by the assessee on the (SMC) to 573/Ahd/2023 Shree Jay Limbach Co Op Credit So Ltd Vs. ITO AYs : 2010-11 to 2013-14 6 said incomes, and that deduction, on the contrary, had been claimed u/s 80P(2)(a)(i) of the Act, to which it was eligible. Reference was made to certain decisions also. This letter dated 20.10.2014 was placed before us at Exhibit-D of the paper-book.

Ld. Counsel for the assessee pointed out that repeatedly, therefore, the assessee sought rectification of the mistake in the intimation made u/s 143(1) of the Act; and when the same was not done, finally an application u/s 154 was made on 15.12.2022, in which it was stated that to correct the adjustment made to the income of the assessee in the intimation u/s 143(1)(a) of the Act, to which the Assessing Officer responded by saying that it was barred by limitation.

The contention of the ld. Counsel for the assessee was that the assessee was unaware firstly of any intimation made to the assessee in the year 2010; that it was only when demand notices were issued to the assessee for the impugned years that the assessee informed the Assessing Officer of not having been served with any intimation and, therefore, seeking the quashing of the demand notices. That in response to the same, when the Assessing Officer informed the assessee of the denial of claim of deduction of the assessee on interest income earned from banks in terms of Section 80P(2)(d) of the Act, that the assessee explained its position that the deduction had not been claimed under the said section but Section 80P(2)(a)(i) of the Act which was allowable as per law; that even when the same was not responded to by the Assessing Officer, the assessee thereafter filed an application seeking rectification of the intimation again on 29.12.2022 which in turn was dismissed by the Assessing Officer as having been filed beyond the time prescribed for the same u/s 154(7) of the Act. The ld. Counsel for the assessee contended that considering its repeated

He further pointed out that even on merits it was not the case that the entire income returned by the assessee was by way of interest on FDs made in nationalized banks as noted by the Assessing Officer. That the assessee had also earned interest income from credit facilities provided to members and, therefore, there was a clear mistake apparent from record which needed to be entertained. In this regard, he placed copies of financial statements of the assessee for all the impugned years pointing out there from the aforesaid facts that the assessee had earned interest income, both from banks and also from credit facilities provided to members.

Per contra, ld. DR relied heavily on the order of the ld. CIT(A) stating that the assessee’s application seeking rectification had been rightly held to have been barred by limitation considering the facts of the case. This despite the fact that, on the direction of the Bench on 07.12.2023 asking the DR to inform whether intimation u/s 143(1) of the Act for all the impugned years was served on the assessee, and if yes then when; a letter was filed of the Assessing Officer who stated to have no records available of the details of service of intimation u/s 143(1) of the Act. This letter is dated 27.12.2023. On merits also, he relied on the order of the ld. CIT(A).

We have heard both the parties. The assessee before us is aggrieved with the rejection of its application seeking rectification in the intimation made to him u/s 143(1) of the Act, as per which his claim of deduction of his entire income u/s 80P of the Act was denied in entirety. The rectification application was rejected stating that it is barred by limitation. The assessee has contested this finding of the ld.CIT(A) first before us.

We are in agreement with the contention of the ld. Counsel for the assessee that the application seeking rectification in the intimation could not have been rejected as being time barred. As per the provisions of Section 154(7) of the Act, rectification application is to be filed within four years from the end of the financial year in which the order sought to be rectified is passed. In the present case, the assessee has sought rectification in the intimation made u/s 143(1) of the Act and his contention is that the said intimation is never served on him, though it was passed in 2010. The Department admitted, in as many words, that it has no details of service of intimation to the assessee u/s 143(1) of the Act for all the impugned assessment years before us. The clock for the four year limitation seeking rectification starts ticking the moment the assessee is in receipt of the order. Without his being aware of any such order passed, there is no question of the time barring period ticking into motion, for the simple reason that the assessee is in a position to act upon it and seek rectification only when he is aware of such order passed. In the present case, the Department has nothing to prove that the intimation was at any time was served on the assessee. Therefore, there arises no question of calculating the period of limitation of four years from the date of passing of intimation u/s 143(1) of the Act, i.e. from the year 2010 for holding the assesses application seeking rectification as barred by limitation.

Even otherwise, we have noted that the assessee had duly responded to the demand notices which were issued to it in consequence to the intimation made u/s 143(1) of the Act challenging it constantly and well within the period of four years of the intimation made on the assessee. It was only finally, when the Assessing Officer did not do the needful with respect to the demand raised, that it ultimately moved an application in the year 2022 again seeking rectification in the intimation made u/s 143(1) of (SMC) to 573/Ahd/2023 Shree Jay Limbach Co Op Credit So Ltd Vs. ITO AYs : 2010-11 to 2013-14 9 the Act. Therefore, for all purposes, the assessee was all along, from the beginning since it became aware of some intimation having been made u/s 143(1) of the Act, seeking rectification in the same, and therefore the rejection of its application as being time barred is not in conformity with law. The order of the ld. CIT(A) holding so, therefore, is set aside. We hold that the assessee’s application seeking rectification of the intimation was well within the stipulated time and, therefore, needed to be entertained.

On merits, the ld. Counsel for the assessee has demonstrated before us that its claim of deduction u/s 80P(2) of the Act was denied for the reason that the assessee had claimed the same on interest income earned from nationalized banks which was not allowable in terms of Section 80P(2)(d) of the Act. On facts of the case, the ld. Counsel for the assessee has demonstrated before us that its entire profits did not comprise only of interest earned from nationalized banks and it included even profits earned from its activity of providing credit facilities to members. That on facts, therefore, the intimation made u/s 143(1) of the Act contained mistake apparent from record which needed rectification. That the Assessing Officer had given the assessee no opportunity of hearing at all, and even the ld. CIT(A) had failed to consider this fact which was evident from the record. Even otherwise, he has contended that even on law he was entitled to claim deduction u/s 80P(2)(a)(i) of the Act on the interest earned on deposits made in banks since these deposits were made in the course of carrying out the normal activity of the assessee co-operative society of providing credit facility to its members and the interest incomes earned, therefore, constitute income earned from the said activity entitled to deduction u/s 80P(2) of the Act. Reference was made to several case laws. Since the authorities below, we have noted, have failed to adjudicate the issue in the light of the correct facts of the case and the judicial propositions

All the appeals of the assessee, therefore, are allowed for statistical purposes in above terms.

In effect, all the appeals of the assessee are allowed for statistical purposes in above terms.