Poonjar Service Co-Operative Bank Ltd. Vs ITO (Kerala High Court)
In Poonjar Service Co-Operative Bank Ltd. vs ITO, the Kerala High Court addressed the validity of an income tax assessment order for the assessment year 2018–19. The petitioner, a Primary Agricultural Credit Society (PACS), had challenged the assessment on the grounds that the Assessing Officer ignored the binding precedent set by the Supreme Court in Mavilayi Service Co-operative Bank Ltd. vs CIT. In that judgment, the Supreme Court clarified the interpretation of Section 80P(2) and (4) of the Income Tax Act, affirming that a PACS registered under the relevant co-operative statute is entitled to deductions under Section 80P, and that tax authorities are not permitted to question the statutory classification or deny benefits merely due to the presence of the word “Bank” in the society’s name. However, in the impugned assessment, the officer concluded that the petitioner did not qualify as a PACS and denied the deduction.
The learned Single Judge had earlier dismissed the writ petition on the ground that the petitioner had an alternative remedy through statutory appeal. On appeal, however, the Division Bench of the High Court held that ignoring a binding judgment of the Supreme Court constituted a legal error that could not be corrected merely through appellate remedies. The Bench emphasized that tax authorities are obligated to apply Supreme Court rulings, particularly in long-standing, contentious matters. As the assessment order was found to be inconsistent with the apex court’s settled position, it was quashed. The court directed the Assessing Officer to redo the assessment in accordance with law, after giving the assessee an opportunity to be heard, and complete the reassessment within three months. The court clarified that it had not expressed any opinion on the merits, which were left open for fresh consideration.
