Fresh adjudication needed as claim of deduction u/s 80P dismissed without considering merits of case

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.

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