SSMP Sahakari Sangha Vs ITO (ITAT Bangalore)
Limitation Runs from Service, Not Mere Passing of Order: Bangalore ITAT Revives Co-operative Society’s Section 80P Appeal
Summary:
The assessee, SSMP Sahakari Sangha, was a co-operative credit society registered under the Karnataka Co-operative Societies Act, 1959. It was engaged in accepting deposits, providing credit facilities to its members & making investments.
For AY 2017-18, the assessee filed its return on 17 October 2017 declaring gross income of ₹22,71,847. After claiming deduction under Chapter VI-A, principally u/s 80P, it declared nil total income.
During scrutiny proceedings, the AO noticed that the assessee had earned interest from investments maintained with BDCC Bank, other co-operative banks & nationalised banks. Relying upon the Karnataka High Court decision in Totgars Co-operative Sale Society, the AO treated the interest as income from other sources & disallowed the deduction claimed u/s 80P. The assessment was completed u/s 143(3) on 17 October 2019.
The assessee filed an appeal before the Addl./Joint CIT(A) on 11 January 2020. However, the appellate authority treated the appeal as delayed by 56 days. Finding no sufficient cause for condonation, the appeal was dismissed at the threshold without deciding the assessee’s eligibility for deduction u/s 80P.
The assessee therefore approached the Bangalore Tribunal.
Issue before the Tribunal
The principal issue was whether there was actually any delay when the assessee claimed that the physical copy of the assessment order & demand notice was received only on 7 January 2020, followed by filing of the appeal within four days.
Alternatively, even if the appeal was technically delayed by 56 days, the Tribunal had to determine whether the assessee’s location in a small town, lack of internet access, absence of trained manpower & delayed physical service constituted sufficient cause for condonation.
The substantive issue regarding deduction u/s 80P on interest from co-operative banks & nationalised banks was not adjudicated by the Tribunal.
Assessee’s submissions
The assessee contended that the assessment order & demand notice were not received by post when originally passed. Therefore, the society was unaware of the assessment & could not initiate appellate proceedings.
A hard copy was received only on 7 January 2020. The appeal was filed on 11 January 2020, merely four days thereafter. Accordingly, limitation ought to have been computed from the date on which the order was actually communicated or served. On this basis, there was no delay at all.
The assessee further submitted that its place of business, Kerur, was a small town where access to reliable internet or email facilities was difficult. The society did not have trained manpower familiar with electronic tax proceedings. These practical difficulties explained why the order uploaded electronically did not immediately come to its knowledge.
On merits, the assessee maintained that it was engaged in providing credit facilities to members & that the interest income was incidental to its activities. It claimed eligibility u/s 80P(2)(a)(i) or 80P(2)(d), depending upon the nature of each investment.
Revenue’s contentions
The Revenue supported the order of the Addl./Joint CIT(A). Since the assessment order was dated 17 October 2019, the appeal filed on 11 January 2020 was beyond the prescribed limitation period.
The appellate authority had found the explanation insufficient & dismissed the appeal on delay. The Revenue therefore sought to sustain the rejection without entering into the merits of the section 80P claim.
Tribunal’s findings & legal reasoning
The Tribunal considered the assessee’s explanation in light of the Supreme Court decision in Collector, Land Acquisition v. Mst. Katiji. That decision laid down that procedural rules are intended to serve justice & should not defeat adjudication of genuine disputes through an excessively technical approach.
The Tribunal observed that when substantial justice & technical considerations conflict, the former should ordinarily be preferred. A taxpayer normally does not benefit by filing an appeal late; instead, delay exposes the taxpayer to the risk of losing the statutory remedy.
The assessee had explained that it received the physical assessment order only on 7 January 2020 & filed the appeal within four days. Its rural or small-town location, lack of internet access & absence of trained staff provided a credible explanation for not acting upon electronic communication earlier.
The Tribunal held that these circumstances satisfied the requirement of sufficient cause. It therefore condoned the alleged 56-day delay, set aside the appellate order & restored the appeal for de novo adjudication.
The CIT(A) was directed to provide a reasonable & adequate opportunity of hearing. The assessee was correspondingly directed to appear on every hearing date without default. The appeal was allowed for statistical purposes.
Practical implications
The ruling reinforces that appellate limitation should ordinarily be reckoned from the date of effective service or communication of the order, not merely its date of passing. Taxpayers should preserve envelopes, speed-post tracking records, email headers & portal-download details to establish the actual date of service.
The decision also recognises the genuine digital limitations faced by co-operative societies operating in smaller towns. However, such societies should maintain updated email addresses, regularly monitor the portal & authorise responsible persons for tax communications.
Importantly, the Tribunal has not allowed the deduction u/s 80P. The CIT(A) must now separately examine interest from co-operative banks & nationalised banks under the applicable clauses. The core principle is that a meritorious tax appeal should not be buried by limitation when the order itself was communicated late.
Cases Discussed
- The Pr. Commissioner of Income Tax & Anr. Vs. The Totagars Co-Operative Sale Society — Karnataka High Court.
- Collector, Land Acquisition Vs. Mst. Katiji & Ors. — Supreme Court.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT BANGALORE
The assessee has filed the present appeal against the impugned order dated 25/03/2026, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Additional/Joint Commissioner of Income Tax (Appeals)-1, Delhi, [“learned Addl./Joint CIT(A)”], for the assessment year 2017-18.
2. In this appeal, the assessee has raised the following grounds: –
1. The order of the Honourable Addl Joint Commissioner of Income Tax (Appeals) is opposed to law and facts of the case.
2. The impugned appellate order is passed in violation of principles of natural justice, hence bad in law.
3. The Honourable Addl Joint Commissioner of Income Tax (Appeals) erred in dismissing the appeal at the threshold by refusing to condone the delay of 56 days, without appreciating that the appellant had furnished cogent reasons for the delay.
4. The Honourable Addl Joint Commissioner of Income Tax (Appeals) failed to appreciate that there no delay in filing the appeal as the physical copy of the assessment order along with the demand notice was received on 07.01.2020, and the appeal was filed within the statutory period reckoned from such date. Hence, the order dismissing the appeal is bad in law.
5. The Honourable Addl Joint Commissioner of Income Tax (Appeals) ought to have examined the reasons for the alleged delay in a judicious manner, instead of mechanically dismissing the appeal based on the details filled in Form 35.
6. Without prejudice the Honourable Addl Joint Commissioner of Income Tax (Appeals) failed to decide issues raised on the merits of the case and failed to appreciate that the Appellant being a Co-operative Credit Society registered under the Karnataka State Co-operative Society Act is eligible to claim deduction under section 80P(2)(a)(ii)/80P(2)(d) of the Act.
7. The Honourable Addl Joint Commissioner of Income Tax (Appeals) failed to look into the fact that the appellant is carrying on the business of providing credit facilities to its members hence the interest income is incidental to its business hence, section 80P was applicable.
3. We have considered the submissions of both sides and perused the material available on record. The brief facts of the case are that the assessee is a Co-Operative Credit Society registered under the Karnataka State Co-Operative Societies Act, 1959. The assessee is engaged in accepting deposits and providing credit facilities to its members and making investments. For the year under consideration, the assessee filed its return of income on 17/10/2017, declaring gross income of INR 22,71,847 after claiming deduction under Chapter – VIA amounting to INR, and thereafter declared total income of INR Nil. The return filed by the assessee was selected for scrutiny, and statutory notices under section 143(2) and section 142(1) of the Act were issued and served on the assessee. During the assessment proceedings, it was observed that the assessee earned interest income from investments with BDCC bank, other co-operative banks, and nationalised banks. The Assessing Officer (“AO”), vide order dated 17/10/2019, passed under section 143(3) of the Act, held the interest income to be taxable as income from other sources in view of the decision of the Hon’ble Karnataka High Court in Totagars Sale Co-operative Credit Society. Accordingly, the deduction claimed by the assessee under section 80P of the Act was disallowed.
4. Since the appeal filed by the assessee before the learned Addl./Joint CIT(A) was delayed by 56 days, the learned Addl./Joint CIT(A), disagreeing with the submissions of the assessee, held that there is no sufficient cause for condonation of the delay in filing the appeal. Accordingly, vide impugned order, the appeal filed by the assessee was dismissed on the ground of delay. Being aggrieved, the assessee is in appeal before us.
5. As per the assessee, since it did not receive the notice of demand and assessment order by post, it was not aware of the same and therefore could not take the necessary steps for filing the appeal before the learned CIT(A). As per the assessee, a hard copy of the assessment order was received on 07/01/2020. Accordingly, the appeal before the learned CIT(A) was filed within 4 days on 11/01/2020. Thus, as per the assessee, since the appeal was filed within the prescribed limitation period, there is no delay in filing the appeal before the learned CIT(A). As per the assessee, the place of its business, i.e., Kerur, is a small place, and access to the Internet or email is not possible, and there is no trained manpower.
6. We find that the reasons stated by the assessee for seeking condonation of delay before the learned CIT(A) fall within the parameters for grant of condonation laid down by the Hon’ble Supreme Court in the case of Collector Land Acquisition, Anantnag vs. M.S. Katiji and others, reported in 1987 SCR (2) 387. It is well-established that the rules of procedure are handmade of justice. When the substantial justice taking into consideration are pitted against each other, the cause of substantial justice deserves to be preferred. In the present case, it is evident that the assessee did not stand to benefit from the late filing of the appeal.
7. Accordingly, in view of the facts and circumstances of the present case, as noted above, we are of the considered view that the assessee has proved sufficient cause for not filing the appeal before the learned CIT(A) within the prescribed limitation period. Accordingly, we are of the view that delay should be condoned. Hence, the impugned order is set aside, and the appeal of the assessee is restored to the file of the learned CIT(A) / learned Addl./Joint CIT(A) for de novo consideration, after condoning the delay in filing the appeal by the assessee. We order accordingly. Needless to mention, no order shall be passed without affording reasonable and adequate opportunity of hearing to the parties. The assessee is directed to appear before the learned CIT(A) / learned Addl./Joint CIT(A) on all dates of hearing as may be fixed without any default. As the matter is being restored to the file of the learned CIT(A) / learned Addl./Joint CIT(A) for de novo adjudication, the grounds raised by the assessee in the present appeal before us do not call for adjudication at this stage. Accordingly, the grounds raised by the assessee are allowed for statistical purposes.
8. In the result, the appeal by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 27-Aug-2026.
