Primary Agricultural Credit Co-operative Society Vs ITO (ITAT Bangalore)
Rectification Can’t Rewrite Scrutiny Order — ITAT Quashes 80P Disallowance for Co-op Society; ITAT Bangalore sets aside rectification disallowing 80P deduction – delay condoned for co-operative society
Assessee, a Primary Agricultural Credit Co-operative Society, filed return for AY 2020-21 declaring NIL income after claiming deduction u/s 80P(2)(a)(i) on interest earned from deposits with co-operative banks. Assessment u/s 143(3) was completed on 19.09.2022 accepting the claim except for a small disallowance of ₹91,130.
Subsequently, based on an audit objection, AO passed a rectification order u/s 154 r.w.s. 143(3) on 19.12.2024, holding that the society’s deposits with co-operative banks were not part of providing credit facilities to members, & hence deduction u/s 80P(2)(a)(i) amounting to ₹42.53 lakh was wrongly allowed. Total income was recomputed at ₹43.44 lakh.
The appeal before CIT(A) was filed 32 days late, explaining that the secretary was not legally trained & did not comprehend the impact of the rectification until a large demand notice was received. The CIT(A) refused to condone the delay & dismissed the appeal.
On further appeal, Tribunal noted that the explanation constituted sufficient cause for condoning the 32-day delay & that the CIT(A)’s refusal was unjustified. On merits, it found that no notice had been issued prior to passing the rectification order, violating Sec. 154 procedure. It held that the AO had already verified & allowed the deduction during regular assessment after examining by-laws, membership, & responses. Hence, the issue was debatable & could not be rectified u/s 154.
