Kotagiri Cooperative Store Vs ITO (ITAT Chennai)
Assessment Completed in 7 Lines Without Discussion – Non-Speaking NFAC Assessment Set Aside in Co-op Store Case
Assessee, a co-operative society running public distribution system (PDS) fair price shops, filed return at NIL income after claiming deduction u/s 80P(2)(a)(iii). The return was picked for “limited scrutiny” to examine business expenses. AO, however, disallowed the 80P claim outright & assessed income at ₹34.20 lakh, completing the assessment in just seven lines, without issuing mandatory show-cause notice or draft order as per CBDT SOP dated 19.11.2020. CIT(A) confirmed the disallowance without detailed reasoning.
Before Tribunal, Assessee argued that both AO & CIT(A) failed to examine the nature of activities, statutory position as a co-operative society, & even the procedural safeguards mandated for limited scrutiny. Tribunal observed that AO’s order was non-speaking, passed without addressing the issue for which scrutiny was initiated. Further, CIT(A) also failed to deal with grounds on non-service of SCN & draft order.
Accordingly, Tribunal set aside the orders of AO & CIT(A) & remanded the matter back to AO for fresh adjudication, with direction to pass a speaking order, keeping in view the purpose of limited scrutiny & after affording proper opportunity of hearing.
