Vallapuzha Service Co-Operative Bank Ltd Vs ITO (Kerala High Court)
The Kerala High Court has intervened in a case where the Vallapuzha Service Co-operative Bank Ltd chal-lenged an assessment order issued by the Income Tax Officer under Section 143(3) of the Income Tax Act, 1961. The petitioner, a Primary Agricultural Credit Society, had filed a return declaring nil taxable income for the assessment year 2023-24. However, the assessment order, Exhibit-P7, imposed a significant tax liability of ₹1,59,63,972 on the bank. The primary grievance of the petitioner was that the as-sessing authority disallowed the deduction claimed under Section 80P(2)(a)(i) of the Act, which pertains to deductions for cooperative societies providing credit facilities to their members, without considering the binding precedent set by the Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. and Others vs. Commissioner of Income Tax and Another.
Upon reviewing the impugned assessment order, the Kerala High Court noted that the assessing officer had disallowed the Section 80P(2)(a)(i) deduction but failed to even refer to the Supreme Court’s judg-ment in the Mavilayi Service Co-operative Bank Ltd. case, which had established several findings in favor of Primary Agricultural Credit Societies. Instead, the assessing officer relied on a decision of the Karna-taka High Court in Principal Commissioner of Income Tax vs. Totgars Co-operative Society, which was a different precedent. The petitioner had specifically brought the Mavilayi case and a decision of the juris-dictional Kerala High Court in Principal Commissioner of Income Tax vs. M/s. Peroorkada Service Co-operative Bank Ltd. to the assessing officer’s attention in their reply to the show-cause notice, but these binding precedents were ignored. The High Court emphasized that when an assessment is carried out disregarding a binding precedent of the Supreme Court, the constitutional jurisdiction under Article 226 can be invoked, and the assessee is not necessarily required to exhaust statutory remedies.
