No Section 69 Addition Merely for Reflecting Depreciation in Incorrect ITR Schedule

ACIT Vs Zila Sahkari Bank Private Limited (ITAT Delhi)

ITAT Allows Deduction Under Section 80P(2)(d) Because Dividend Was Received From Cooperative Societies

SEO Description: The Tribunal held that dividend received from cooperative societies qualified for deduction under Section 80P(2)(d), despite the assessee originally claiming exemption under Section 10(34). Relying on earlier decisions in the assessee’s own case, it deleted the sustained addition.

The Income Tax Appellate Tribunal (ITAT), Delhi, decided the Revenue’s appeal and the assessee’s cross objection arising from the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC) for Assessment Year 2016-17. The Revenue challenged the deletion of an addition of Rs. 2,12,74,240, while the assessee challenged the sustenance of an addition relating to dividend income.

The assessee, a cooperative society engaged in banking activities, filed its return declaring total income of Rs. 6,59,93,730 and claimed exemption on dividend income of Rs. 2,22,03,400 under Section 10. During scrutiny assessment under Section 143(3), the Assessing Officer made two additions aggregating Rs. 4,34,77,640: (i) disallowance of exemption claimed on dividend income of Rs. 2,22,03,400, and (ii) addition of Rs. 2,12,74,240 under Section 69 read with Section 115BBE on the ground that fixed assets were overvalued due to the manner in which depreciation was reflected in the income tax return.

The CIT(A) deleted the addition under Section 69. It observed that the Assessing Officer had not considered the depreciation claimed under “Other Expenses” in the return and had instead treated the omission of entering depreciation in another schedule as a basis for invoking Section 69. The CIT(A) held that although depreciation had not been reflected in the appropriate schedule, it had been claimed elsewhere in the return, and the reconciliation furnished by the assessee supported the claim. Relying on the Tribunal’s decision in the assessee’s own case for Assessment Year 2015-16, the CIT(A) held that such inconsistencies could not justify treating part of the fixed assets as unexplained investments and deleted the addition.

Before the Tribunal, the Revenue supported the assessment order, whereas the assessee relied on the earlier Tribunal decision in its own case. The Tribunal found that the issue was identical to the one decided in favour of the assessee for Assessment Year 2015-16. In that earlier decision, the Tribunal had held that the assessee maintained audited books of account, the depreciation claim was reflected in the return under “Other Expenses,” and the computation as well as the profit and loss account supported the claim. It had further observed that disallowing depreciation merely because it was entered in a different column of the return was not justified and that Section 69 read with Section 115BBE had no application in such circumstances. Following the earlier decision, the Tribunal upheld the deletion of the addition of Rs. 2,12,74,240 and dismissed the Revenue’s appeal.

In the cross objection, the assessee challenged the addition sustained in respect of dividend income of Rs. 2,22,03,400 received from IFFCO and UP Cooperative Bank Ltd. The assessee submitted that although exemption had been claimed under Section 10(34), the correct claim was deduction under Section 80P(2)(d). It also pointed out that similar deductions had been allowed in earlier assessment years and that the Tribunal had already decided the issue in its favour for Assessment Year 2015-16.

The Tribunal observed that its earlier orders in the assessee’s own case had consistently held that dividend received from cooperative societies such as IFFCO and UP Cooperative Bank Ltd. qualified for deduction under Section 80P(2)(d). Respectfully following its earlier decisions, the Tribunal deleted the addition sustained by the CIT(A) and allowed the assessee’s cross objection.

Accordingly, the Tribunal dismissed the Revenue’s appeal and allowed the assessee’s cross objection.

FULL TEXT OF THE ORDER OF ITAT DELHI

The Revenue has filed the instant appeal and Assessee has filed the Cross Objection and both are arising out of the order of the Ld. Commissioner of Income Tax(Appeals)/National Faceless Appeal Centre (NFAC), Delhi (in short CIT(A)) dated 25.09.2025 passed in Appeal No. CIT(A), Ghaziabad/10642/2018-19, pertaining to assessment year 2016-17. The assessment was framed by the ACIT, Circle 2(3)(1), Bulandshahr on 20.12.2018. Since the revenue’s appeal as well as assessee’s cross objection are inter­connected, hence, the same were heard together and disposed of by this common order for the sake of convenience, by dealing first with Revenue’s Appeal.

2. The solitary issue raised by the Revenue in its appeal is as regards to deletion of addition of Rs. 2,12,74,240/- made by the AO considering the working of WDV.

3. Brief facts of the case are that the assessee is an a cooperative society doing banking activities in the district of Bulandshahr. The assessee society e-filed its ITR for AY 2016-17 on 15.10.2016, declaring total income of Rs. 6,59,93,730/- and dividend income of Rs. 2,22,03,400/- claimed as exempt u/s. 10 of the Act. The case was selected for compulsory scrutiny on the basis of the manual scrutiny guidelines Instruction No. 05/2017 of CBDT dated 07.07.2017 and consequent thereupon notice u/s. 143(2) was issued on 22.9.2017. Thereafter, incumbent AO changed and following the requirement of section 129 of the Act, notice u/s. 143(2) was again issued on 25.09.2017. Further, notice u/s. 142(1) was issued from time to time. During assessment proceedings, the assessee filed replies and other details. In absence of satisfactory explanation and documentary evidences, the assessment was finalized u/s. 143(3) on 20.12.2018 at total income of Rs. 10,94,71,370/- after making following two additions/ disallowances aggregated to Rs. 4,34,77,640/-.

a) Addition of Rs. 2,22,03,400/- on account of disallowance of exemption claimed u/s. 10(34) of the Act in respect of dividend amount received from IFFCO and UP Cooperative Bank. Ltd.

b) Addition of Rs. 2,12,74,240/- on account of unexplained investment u/s. 69 r.w.s. 115BBE of the Act as the assessee overvalued the fixed asset shown in column 1(a) of Part-BS of the ITR.

4. Being aggrieved with the assessment order, assessee filed appeal before CIT(A) who vide his order under consideration has partly allowed the appeal of the assessee. The CIT(A) deleted the addition of Rs. 2,12,74,240/- u/s. 69 of the Act, out of total addition of Rs. 4,34,77,640/- made by AO by holding as under:-

“I have considered the submission made by the assessee, also the appellate decision of the Hon’ble ITAT on the issue in assessee’s own case. The entire basis of the assessment on this issue which led to bringing to tax an amount of Rs. 2,12,74,240/- as income of the assessee by invoking provisions of section 69 of the Act, is not considering the claim of depreciation made by the assessee under the head “other expenses” at Column 36 of Part A of the ITR. AO opines that such claim should have been made under Column 1(b) of fixed assets of Part A-BS of the ITR. AO also states that at Column 1(a), the value of fixed assets has been shown without claiming depreciation. Though inconsistencies in the way depreciation figures are claimed as exists, however, as the Hon’ble ITAT has directed in its earlier order, such inconsistencies cannot be stretched to declare the part of assets of the assessee as unexplained. Further, the claim of depreciation might not have been made in the correct schedule, however, the said figures is claimed under the head “other expenses: in the return of income filed. A screen shot of the return is enclosed. Thus figure of depreciation corroborate3s the reconciliation furnished by the assessee.

Moreover, the additions on similar ground have been consistently deleted by the Hon’ble ITAT. Thus, respectfully following the decision of Hon’ble ITAT in immediately preceding year i.e. AY 2015-16 in ITA No. 914/Del/2021 dated 22.5.2023, which involved identical facts in assessee’s own case and the reconciliation furnished by the assessee, I do not find any merit in the additions made by the AO u/s. 69 of the Act. In the result, the ground nos. 2 & 3 raised by the assessee are allowed.”

5. Aggrieved, Revenue in appeal before us.

6. DR supported the order of the AO.

7. Per contra, Ld. AR for the assessee relied upon the order of the CIT(A) and also submitted that the issue is squarely covered by the ITAT decision in assessee’s own case for AY 2015-16, hence, requested to follow the said ratio and the the issue in dispute may be allowed by upholding the order of the CIT(A).

8. We have heard both the sides and perused the records. We find that issue in dispute raised by the Revenue before us, is squarely covered by the decision of the Tribunal in ITA No. 914/Del/2021 (AY 2015-16) in assessee’s own case, wherein, the Tribunal has decided the issue in favour of the assessee by observing as under:-

“8. Ground No.2 raised by the assessee is challenging the disallowance of depreciation of Rs.97,94,657/- on fixed assets as per section 32 of the Act and making the addition u/s 69 r.w.s. 115BBE of the Act for the same.

9. We have heard the rival submissions and perused the material available on record. It is not in dispute that the assessee had maintained regular books of account which are duly audited by a firm of Chartered Accountants and presented before the Registrar of Cooperative Societies. The accounts of the assessee are also subjected to audit by NABARD on behalf of the Reserve Bank of India. The only reason adduced by the lower authorities for not allowing the depreciation was that the assessee has not filled the depreciation figure in the relevant column of ITR, i.e., in column No.45 of the return in Part-A — P&L Account in the ITR form. We find that the assessee had mentioned the depreciation figure of Rs.1,00,46,380/- under column No.39 in sub-item No.14 under the main head: ‘Other expenses’ in the ITR. Though mentioning of depreciation figure in column No.39 under the head ‘Other expenses’ was a mistake, still, the depreciation figure together with the computation thereon had been enclosed and claimed properly by the assessee in the return of income. This figure of depreciation of Rs.1,00,46,380/- duly tallies with the depreciation figure mentioned in the P&L Account of the assessee also. Hence, we do not appreciate the action of the lower authorities in disallowing the genuine claim of depreciation on a very flimsy reason. We also condemn the action of the lower authorities in invoking the provisions of section 69 of the Act r.w.s. 115BBE of the Act for the purpose of disallowing the claim of depreciation of the assessee, without even understanding and appreciating the fact that the provisions of section 69 of the Act , by no stretch of imagination, could be applied in the instant case. We direct the ld. AO to allow depreciation in the sum of Rs.1,00,46,380/-. Accordingly, ground No.2 raised by the assessee is allowed.”

9. On perusing the aforesaid findings of the Ld. CIT(A) as well as the findings of the Tribunal, we are of the considered view that the issue in dispute is identical to that of the issue decided in assessee’s favour, in assessee’s own case in ITA No. 914/Del/2021 (AY 2015-16) vide order dated 22.05.2023. Thus, Ld. CIT(A) keeping in view the decision of the Tribunal, as aforesaid, has rightly deleted the addition, as aforesaid, which does not need any interference on our part, hence, we uphold the same and reject the ground raised by the revenue.

10. In the result, the revenue’s appeal is dismissed.

11. As regards assessee’s cross objection is concerned, the solitary issue raised is relating to addition sustained by the Ld. CIT(A) on account of dividend income of Rs. 2,22,04,400/-. Briefly stated facts by the Ld. AR that during the year the assessee has received dividend from IFFCO amounting to Rs. 20,22,600/- and from UP Cooperative Bank Ltd. amounting to Rs. 2,01,08,800/- the same has been claimed to be exempt from tax under section 10(34) of the Act. He further submitted that the AO has added divided income of Rs. 2,22,03,400/- to returned income on the basis that exemption u/s. 10(34) is permissible for dividend income which is subject to dividend distribution tax as per section 1150 of the Act. It was further submitted that the assessee has wrongly claimed exemption u/s. 10(34) of the Act, in fact such dividend income is allowable deduction u/s. 80P(2)(d) of the Act and assessee has been allowed dividend income u/s. 80P(2)(d) of the Act from the assessment years 2007-08 to 2014-15 and in AY 2014-15 CIT(A) has allowed the dividend income u/s. 80P(2)(d) of the Act vide order dated 17.4.2018. He further submitted that on the aforesaid issue, the Tribunal also allowed dividend income u/s. 80P(2)(d) of the Act in ITA No. 914/Del/2021 (AY 2015-16) in assessee’s own case vide order dated 22.05.2023. Hence, he requested to follow the aforesaid precedent and accordingly the instant issue raised in this cross objection may be allowed accordingly.

12. Per contra, Ld. DR relied upon the orders of the authorities below.

13. We have heard both the sides and perused the records. We find that issue in dispute raised by the Assessee in the cross objection before us, is squarely covered by the decision of the Tribunal in ITA No. 914/Del/2021 (AY 2015-16) vide order dated 22.5.2023 in assessee’s own case, wherein, the Tribunal has decided the issue in favour of the assessee by observing as under:-

“4. The ground No.1 raised by the assessee is as to whether the assessee is eligible for deduction u/s 80P(2)(d) of the Act in respect of dividend income.

5. We have heard the rival submissions and perused the material available on record. The assessee is a cooperative society engaged in the business of banking activities. The assessee derived dividend income of Rs.20,22,600/- and claimed the same as exempt u/s 10 of the Act in the return of income. This dividend was received from IFFCO. The ld. AO observed that the exemption u/s 10(34) of the Act could be claimed by the assessee only when the amount has been subjected to dividend distribution tax in the hands of the payer in terms of section 115-0 of the Act. The ld. AR argued that this issue was decided in favour of the assessee by the appellate authorities, but, the AO had made this addition only in order to keep the issue alive. We find that the issue in dispute is squarely covered by the decisions of this Tribunal in assessee’s own case in ITA No.3913/Del/2016 for AY 2012-13, dated 18.09.2018 and in ITA No.5030/Del/2018 for AY 2014-15 dated 4th May, 2022. For the sake of convenience, the order passed by this Tribunal in this regard for AY 2012-13, referred to supra, is reproduced hereunder:-

“3. The assessee is a cooperative society derives income from banking activity and house property. Return declaring income of Rs. 3,50,53,910/- was E-filed on 27.09.2012. During the course of assessment proceedings, it was observed by the Assessing Officer that the assessee had credited the amount of Rs. 1,82,02,860/- on account of dividend under the head gross receipts which had been claimed exempt in the computation of income. It was also observed by the Assessing Officer that the IFFCO from whom dividend was received was not a company but was a cooperative society and dividend distribution tax had not been deducted by IFFCO. It was held by the Assessing Officer that the dividend income was not exempt in the hands of the assessee. Thus, the amount of Rs.1,82,02,860/- was disallowed and added to the income of the assessee.

4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.

5. The Ld. DR submitted that the dividend received from IFFCO is exempt u/s 80P(2)(1) of the Income Tax Act, as per the claim of the assessee. But the Assessing Officer rightly observed that Section 1150 of the Income Tax Act 1961 provides special provisions relating to tax on Distributed Profit of Domestic Companies. Since, no tax on the dividend received by the assessee has been paid by the dividend paying society, being cooperative society, therefore, the dividend income cannot be exempted in the hands of the assessee. Therefore, the Assessing Officer rightly added Rs. 1,82,02,860/- to the income of the assessee. The 14. DR submitted that the CIT(A) in deleting this addition.

6. The 14. AR relied upon the order of the CIT(A).

7. We have heard both the parties and perused all the relevant material available on record. In the present case, dividend received from IFFCO and UP Cooperative Bank Ltd. are exempt u/s 80P(2)(1) of the Income Tax Act, 1961 as IFFCO and U.P. Cooperative Bank Ltd. are cooperative society. The CIT(A) held as under:-

“4. Having considered facts of the case and rival contentions, the appeal is decided as under:-

4.1. All the grounds of appeal except ground No. 4 being inter-related are against the addition of Rs.1,82,02,860/- being disallowance of dividend income received form IFFCO and U.P. Cooperative Bank Ltd. During appeal proceedings the appellant has made written submission, the relevant para is reproduced as under:-

“……………………. Unfortunately the claim of exemption in respect of dividend income of the appellant considered with reference to the provisions of section 1150 an section 10(34) was not correct as the claim is admissible u/s 80P(2)(d) of the Income Tax Act. It may be submitted that the appellant is a cooperative society and the dividend paying concern i.e. Indian Farmer Fertilizer cooperative Ltd. is also a society. Since the dividend income derived by the appellant is from a concern which is also a cooperative society, the whole of such income is exempt u/s 80P(2)(d) of the I.T. Act. It may very humbly be submitted that exactly similar issue had also arisen in the assessment year 2007­08, 2009-10, 2010-11 and 2011-12 where Ld. Predecessors and your honor had been pleased to accept the claim of the appellant. Copies of those decisions are enclosed herewith for ready reference.

In view of the above submissions, the appellant is entitled to exemption in respect of total income of Rs. 18202860/-/- from dividend.”

4.2 The facts of the case as well as submission made by the appellant have been carefully considered. It is observed that the Assessing Officer had made addition of Rs. 1,82,02,860/- holding that dividend income received from IFFCO is not exempt. The aforesaid cooperative society had not paid tax on dividend paid to the appellant as per provisions of section 10 (34) r.w. Section 1150 of the Act. On the other hand the appellant has vehemently argued that dividend income received from the aforesaid cooperative society was exempt u/s 80P (2)(d) of the Act. It is also contended that the A.O. has ignored the fact that part dividend has come from U.P. Cooperative Bank. The appellant has also furnished copies of the order of CIT (A) wherein in similar facts and circumstances, the CIT (A) in their orders dated 20.09.2013, 21.02.2014, 23.02.2015 & 17.04.2015 had allowed the appeals of appellant for A.Yrs. 2007-08, 2009-10, 2010­11 & 2011-12 respectively. To decide the impugned issue let us go through the relevant provisions of the Act.

Section 80P(2)(d) of the Act says-

“in respect of any income by way of interest or dividends derived by the co operative investment with any other co- operative society, the whole of such income.”

The appellant has received dividend from IFFCO and U.P. Cooperative Bank Ltd, which are cooperative society. As far as IFFCO is concerned, the fact that it is a cooperative society is an established fact in earlier years and this year also the A.O. has mentioned that it is a cooperative society. As far as the U.P. Cooperative Bank Ltd. is concerned, the A.O. has not mentioned anything about it. I have verified that it is cooperative society as is ascertainable from the Registration Certificate produced by the appellant and on my behest the appellant has also produced I.T. Return of the Bank wherein the status is mentioned to be cooperative society. Even otherwise it is not the case of the A.O. that U.P. Cooperative Bank Ltd. is a company. Thus, the amount of Rs. 1,82,02,860/- being dividend received from the aforesaid cooperative societies is expressly exempt u/s 80P (2)(d) of the Act. Similar view has also been taken by the CIT (A) in appellant’s own case for A. Ys. 2007­08, 2009- 10, 2010-11 & 2011-12. In view of the above, it is held that the Assessing Officer is not justified to make addition of Rs. 1,82,02.860/-. The same is deleted and related grounds of appeal are allowed.”

The CIT(A) has extensively given the finding and followed the earlier years orders. The La DR also could not point out whether the Revenue has challenged the earlier years order or not. There is no need to interfere with the findings of the CIT(A). Thus, we are following the rules of consistency and thus, appeal of the Revenue is dismissed.

8. In the result, the appeal of the Revenue is dismissed.

9. Respectfully following the same, the ground No.1 raised by the assessee is allowed.”

14. On perusing the aforesaid findings of the Tribunal, we are of the considered view that the issue in dispute is identical to that of the issue decided in assessee’s favour, in assessee’s own case in ITA No. 914/Del/2021 (AY 2015-16) vide order dated 22.05.2023. Thus, respectfully following the aforesaid precedent, the addition sustained by the Ld. CIT(A) is hereby deleted and accordingly, the ground raised in the cross objection of the assessee is allowed. Resultantly, the assessee’s cross objection is allowed in the very terms.

15. In the result, the assessee’s cross objection stand allowed and revenue’s appeal is dismissed, in the aforesaid manner.

Order Pronounced in the Open Court on 19/06/2026.