Case Law Details
Cherthala Taluk Agricultural Credit Co-Operative Vs ITO (Kerala High Court)
The Kerala High Court recently ruled on the case of Cherthala Taluk Agricultural Credit Co-Operative vs. Income Tax Officer (ITO), focusing on significant issues related to the denial of tax deductions under Section 80P(ii)(d) of the Income Tax Act, 1961. The petitioners challenged the assessment orders for the year 2020-21, arguing that critical judicial precedents were not considered by the assessing officers. This article provides a detailed analysis of the court’s decision, the arguments presented, and the broader implications for similar cases.
Background of the Case
The petitioners, Cherthala Taluk Agricultural Credit Co-Operative, faced assessment orders under the Income Tax Act for the assessment year 2020-21. In their writ petitions (W.P (C) Nos.34316/2022, 33413/2022, and 34334/2022), the primary contention was the denial of deductions for interest income under Section 80P(ii)(d). The petitioners argued that the assessing officers failed to consider relevant judicial rulings, particularly the judgment in PCIT v. Peroorkada Service Co-Operative Bank Ltd. (442 ITR 141).
Petitioner’s Argument
The petitioner’s counsel argued that the judgment in the Peroorkada case, which favored similar deductions, was not taken into account. They asserted that this oversight invalidated the assessment orders. Furthermore, in W.P (C) No.34334/2022, the petitioner highlighted that the Supreme Court’s judgment in Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax (431 ITR 1) was also disregarded.
Respondent’s Stand
The learned standing counsel for the respondent Department argued that the issues raised by the petitioners should be addressed through an appeal rather than a writ petition under Article 226 of the Constitution of India. They maintained that the entitlement to deductions under Section 80P(ii)(d) involves factual determinations unsuitable for direct challenge via writ petitions.
Court’s Examination
The court examined the impugned orders and found that the assessing officers did not consider the binding judgments cited by the petitioners. Specifically, the court noted that both the Peroorkada and Mavilayi rulings were pertinent and should have influenced the assessment decisions. Ignoring these judgments constituted a significant procedural lapse.
Court’s Decision
The Kerala High Court quashed the assessment orders and remanded the cases to the National Faceless Assessment Centre for fresh consideration. The court provided specific directives:
1. Reconsideration of Assessments: The assessments must be re-evaluated in light of the judgments in Peroorkada and Mavilayi.
2. Opportunity for Hearing: The petitioners must be given an opportunity to be heard during the reassessment process.
3. Expeditious Processing: The reassessment should be completed promptly without undue delay.
The court referenced a Division Bench judgment in M/s. Poonjar Service Co-operative Bank Ltd. v. Income Tax Officer (judgment dated 28-06-2022 in WA No.753/2021), reinforcing the principle that an erroneous assessment ignoring binding Supreme Court judgments warrants rectification.
Conclusion
The Kerala High Court’s ruling in Cherthala Taluk Agricultural Credit Co-Operative vs. ITO underscores the necessity for assessing officers to consider relevant judicial precedents while finalizing assessments. By remanding the case for fresh consideration, the court reaffirmed the importance of procedural fairness and adherence to binding legal principles. This decision serves as a crucial reminder for tax authorities to ensure comprehensive and just evaluations in their assessments, respecting established judicial rulings.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The petitioners in these cases suffered orders of assessment under the provisions of the Income Tax Act, 1961 for the assessment year 2020-21. In W.P (C) Nos.34316/2022 and 33413/2022 the assessing officer appears to have denied deduction in respect of interest income under Section 80 P (ii) (d) of the Income Tax Act. It is the case of the petitioner that the issue stands covered in favour of the petitioner by the judgment in PCIT v. Peroorkada Service Co-Operative Bank Ltd.; 442 ITR 141 and that the assessing officer has failed to consider the said judgment while finalizing the assessment against the petitioner.
2. The learned standing counsel appearing for the respondent Department states that the issue raised by the petitioner is to be agitated by by filing an appeal against the order of assessment and not by way of a writ petition under Article 226 of the Constitution of India. It is submitted that the question as to whether the petitioner was actually entitled to deduction under Section 80 P (ii) (d) of the Income Tax Act is a matter to be determined with reference to the facts and therefore the petitioner cannot challenge the assessment order directly by filing a writ petition under Article 226 of the Constitution of India.
3. In W.P (C) No.34334/2022 the petitioner challenges the order of assessment for assessment year 2020-21 on the ground that the assessing officer denied the deduction under Section 80 P as well as under Section 80 P (ii) (d) without considering the judgment of the Supreme Court reported in 431 ITR 1. It is submitted that the deduction under Section 80 P (ii) (d) was denied by discarding the judgment in Peroorkada (supra).
4. Having heard the learned counsel appearing for the petitioner and the learned standing counsel appearing for the respondent bank, I am of the view that since it is admitted that the judgment of the Supreme Court reported in Mavilayi Service Co-operative Bank Ltd. and others v. Commissioner of Income Tax and another; 431 ITR 1 and was not considered while finalizing the assessment which was subject matter of challenge in W.P (C) No.34334/2022 and since the decision in Peroorkada (supra) [442 ITR 141] was not considered while denying the benefit of deduction under Section 80P (ii) (d), the assessment orders which are impugned are liable to be set aside and the matter remanded to the respective assessing authorities for reconsideration after taking into consideration of the judgments referred to above. A Division Bench of this court to which I was also a party has by judgment in M/s. Poonjar Service Co-operative Bank Ltd., v. Income Tax officer (judgment dated 28-06-2022 in WA No.753/2021) concluded as follows;
“An erroneous assessment occasioned by ignoring a binding judgment of the Supreme Court cannot be trivialized as an order against which an appellate remedy lies that would provide justice to an assessee.”
Having regard to the above and taking into consideration of the judgment of the Division Bench in M/s. Poonjar Service Co-operative Bank Ltd., (supra) these writ petitions are allowed. Accordingly orders of assessment produced as Ext.P1 in all these writ petitions are quashed and the assessments are remanded to the National Faceless Assessment Centre for fresh consideration in accordance with law after affording to the petitioner an opportunity of being heard and taking into consideration the law laid down in the judgments referred to above. The needful shall be done as expeditiously as possible and without any undue delay.
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