Lokapavani Credit Co-operative Society Ltd. Vs ITO (ITAT Bangalore)
The Bangalore ITAT held that the mere presence of associate or nominal members does not disentitle a co-operative society from claiming deduction u/s 80P(2)(a)(i). In the case of Lokapavani Credit Co-operative Society Ltd., the Assessing Officer had denied section 80P deduction by relying on the Supreme Court ruling in Citizen Co-operative Society Ltd., alleging that the society had nominal members and therefore ceased to qualify for deduction. The Tribunal, however, relied on the later Supreme Court ruling in Mavilayi Service Co-operative Bank Ltd. and observed that the Karnataka Co-operative Societies Act itself permits admission of associate/nominal members. Accordingly, the ITAT held that denial of deduction merely on this ground was unsustainable and directed allowance of deduction u/s 80P(2)(a)(i).
On the issue of demonetisation cash deposits treated as unexplained cash credits u/s 68, the Tribunal restored the matter back to the AO for fresh examination. The assessee contended that the deposits represented monies received from members and had also filed additional evidences before the CIT(A). However, the CIT(A) refused to admit those evidences solely because they were not produced during assessment proceedings. The ITAT held that such an approach violated principles of natural justice and observed that once the assessee attempted to substantiate the source of deposits, the appellate authority ought to have examined the documents after obtaining remand report. The Tribunal therefore remanded the section 68 issue to the AO with direction to consider all evidences and grant personal hearing to the assessee.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
