Fresh adjudication needed as claim of deduction u/s 80P dismissed without considering merits of case
Case Law Details
Kolhapur Udyam Co-op. Society Ltd. Vs ACIT (ITAT Pune)
ITAT Pune held that as NFAC dismissed the claim of deduction u/s 80P on legal issue without considering the case on merits, matter remanded back for fresh adjudication.
Facts- The assessee is a registered Co-operative Society and is engaged in the activity of supply of raw materials and industrial sheds to members. The assessee filed its return of income (ROI) in Form ITR-5 for the impugned AY 2018-19 electronically on 10.2018, declaring a total income of Rs. 1,70,01,576/-, after claiming deduction u/s. 80P(2)(d) of the Income-tax Act, 1961 to the extent of Rs. 46,54,401/-, being interest and dividend received from investment made with other co-operative banks, apart from lease rent of Rs. 48,006/-, aggregating to Rs. 47,02,407/-.
ROI was processed by the AO at CPC u/s. 143(1) of the Act, accepting the returned income, without making any adjustments/additions. Subsequently, the case was picked up for complete scrutiny under E-assessment Scheme, 2019, to verify the issue of deduction from total income under Chapter VI-A of the Act. Accordingly, the AO issued the statutory notices u/s. 143(2) and 142(1) of the Act to the assessee, calling for various details and documentary evidence. In response thereto, the assessee submitted the requisite details and documentary evidences electronically through ITBA before the AO. After having considered the submissions made by the assessee, the AO framed the assessment order u/s. 143(3) r.w.s 143(3A) & 143(3B) of the Act dated 22.03.2021, determining the total income of the assessee at Rs. 1,70,01,576/-. While doing so, the AO denied the assessee’s claim of deduction u/s. 80P(2)(d) of the Act to the extent of Rs. 47,02,407/-.
Conclusion- We have perused the respective orders of the subordinate authorities and have considered the submissions made by the ld. D.R. The NFAC in its decision has observed that the assessee had failed to fulfil the conditions precedent i.e. filing of return of income within due date stipulated u/s 139(1) of the Act i.e. on or before 30-9-2018 for the purposes of claiming deduction u/s 80P(2)(d) of the Act. Therefore, in terms of section 80AC(ii) of the Act, the assessee was not entitled to claim deduction u/s 80P of the Act as well. Thereafter, the NFAC at para 6.19 holds that since it has already decided the legal issue against the assessee and in favour of the revenue, therefore, grounds on merits becomes mere academic in nature. Thus, it is evident that the first appellate authority has not considered the merits of the case and even the ld. D.R submitted before us that the case needs re-adjudication from the merits perspective. In view thereof, in the interest of justice, we set aside the order of the NFAC and remand the matter back to its file for fresh adjudication as per law on the merits of the issue while complying with the principles of natural justice. Grounds of appeal are allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal preferred by the assessee emanates from order of National Faceless Appeal Centre (NFAC) Delhi, dated 26-09-2022 for A.Y. 2018-1 9, on the following grounds:
1. On the facts and in the circumstances of the case and in law, the lower authorities have erred in disallowing a sum of Rs. 47,02,407/- being deduction claimed u/s B0P(2)(d) on interest/dividend received from other co-operative societies by rejecting appellant’s contention.
2. On the facts and in the circumstances of the case and in law, the lower authorities erred in denying the deduction u/s B0P of the Act by invoking of provisions section 80AC of the IT Act by rejecting appellant’s
Your appellant craves for to add, alter, amend, modify, delete all above or any grounds of appeal before or during the course of hearing in the interest of natural justice.
3. At the time of hearing, none appeared for the assessee and there were placed no evidence on record to suggest that the notices were not served to the assessee at the given address. Therefore, the submissions of the ld. D.R along with relevant documents/materials on record considered and the matter was heard.
4. The relevant facts are that the assessee is a registered Co-operative Society under the provisions of the Maharashtra Co-operative Societies Act, 1960. The assessee is engaged in the activity of supply of raw materials and industrial sheds to members. The assessee is assessed to tax in the status of an Association of Persons (AOP). The assessee filed its return of income in Form ITR-5 for the impugned AY 2018-19 electronically on 10.2018, declaring a total income of Rs. 1,70,01,576/-, after claiming deduction u/s. 80P(2)(d) of the Income-tax Act, 1961 hereinafter referred to as the “Act”) to the extent of Rs. 46,54,401/-, being interest and dividend received from investment made with other co-operative banks, apart from lease rent of Rs. 48,006/-, aggregating to Rs. 47,02,407/-. The return of income was processed by the AO at CPC u/s. 143(1) of the Act, accepting the returned income, without making any adjustments/additions. Subsequently, the case was picked up for complete scrutiny under E-assessment Scheme, 2019, to verify the issue of deduction from total income under Chapter VI-A of the Act. Accordingly, the AO issued the statutory notices u/s. 143(2) and 142(1) of the Act to the assessee, calling for various details and documentary evidence. In response thereto, the assessee submitted the requisite details and documentary evidences electronically through ITBA before the AO. After having considered the submissions made by the assessee, the AO framed the assessment order u/s. 143(3) r.w.s 143(3A) & 143(3B) of the Act dated 22.03.2021, determining the total income of the assessee at Rs. 1,70,01,576/-. While doing so, the AO denied the assessee’s claim of deduction u/s. 80P(2)(d) of the Act to the extent of Rs. 47,02,407/-.
5. Thereafter, the assessee went in appeal before the NFAC. The first appellate authority after considering the submissions of the assessee and the assessment order held as follows:
“6.17 Under the circumstances, I am of the considered opinion that the assessee has failed to fulfill the condition precedent i.e., filing of the return of income within the due date stipulated u/s. 139(1} of the Act i.e., on or before 30.09.20 18, for the purpose of claiming deduction u/s. 80P(2)(d) of the Act. Accordingly, in terms of provisions of sec. 80AC(ii) of the Act, the assessee is not entitled to claim deduction uls 80P of the Act.
6.18 In view of the above, I do not want to interfere with the action of the AO in disallowing the deduction u/s. 80P(2)(d) of the Act, on account of the second ground i.e., legal ground – the assessee has failed to file the return of income on or before the due date stipulated u/s. 139(1) of the Act. Thus, the ground of appeal raised by the assessee on this issue i.e., ground no. 4 is dismissed.
6.19 Coming to the other grounds of appeal raised by the assessee i.e., ground nos. 1 to 3 on merits of the case, since I have already held the legal issue against the assessee and in favour of the Revenue that the assessee is not entitled to claim deduction under any of the provisions of Chapter VIA of the Act, let alone u/s. 80P(2)(d) of the Act, am of the considered view that adjudication of the issue on merits of the case would become mere academic in nature. Accordingly, at this juncture, I deem it not required to adjudicate the said grounds of appeal raised by the assessee on merits of the case.”
6. The ld. D.R submitted that the NFAC has not considered or adjudicated the issue on merits in this case. The NFAC on legal issue has dismissed the appeal of the assessee. Therefore, the matter may be remanded back to the file of the NFAC for fresh adjudication on merits also.
7. We have perused the respective orders of the subordinate authorities and have considered the submissions made by the ld. D.R. The NFAC in its decision has observed that the assessee had failed to fulfil the conditions precedent i.e. filing of return of income within due date stipulated u/s 139(1) of the Act i.e. on or before 30-9-2018 for the purposes of claiming deduction u/s 80P(2)(d) of the Act. Therefore, in terms of section 80AC(ii) of the Act, the assessee was not entitled to claim deduction u/s 80P of the Act as well. Thereafter, the NFAC at para 6.19 holds that since it has already decided the legal issue against the assessee and in favour of the revenue, therefore, grounds on merits becomes mere academic in nature. Thus, it is evident that the first appellate authority has not considered the merits of the case and even the ld. D.R submitted before us that the case needs re-adjudication from the merits perspective. In view thereof, in the interest of justice, we set aside the order of the NFAC and remand the matter back to its file for fresh adjudication as per law on the merits of the issue while complying with the principles of natural justice. Grounds of appeal are allowed for statistical purposes.
8. In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on this 14th day of February 2023.
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