Chelairu Halu Utpadakara Sahakari Sangha Niyamitha Vs ITO (ITAT, Bangalore Bench)
Date of Order Is Not Date of Service: ITAT Revives Rural Milk Society’s ₹87.28 Lakh Cash-Deposit Case
Summary: In Chelairu Halu Utpadakara Sahakari Sangha Niyamitha v. ITO, ITA No. 758/Bang/2026, decided on 28 August 2026, the Bangalore Bench of the Income Tax Appellate Tribunal examined whether the CIT(A) was justified in dismissing the assessee’s appeal as delayed by 57 days by treating the date of the assessment order as its date of service. Considering the procedural irregularities & the need to verify substantial cash deposits, the Tribunal restored the entire matter to the AO for fresh examination.
Relevant Facts
The assessee was a rural co-operative milk society registered under the Karnataka Co-operative Societies Act. It did not originally file its return for AY 2018-19. The Revenue received information that the assessee had deposited ₹61,82,000 in one bank account & ₹25,46,000 in another account, aggregating to ₹87,28,000. It had also earned interest income of ₹3,539.
Based on this information, reassessment proceedings were initiated after following the prescribed procedure. In response to the notice u/s 148 dated 21 April 2022, the assessee filed its return on 30 June 2022, declaring gross income of ₹7,50,637. It claimed the entire amount as deduction under Chapter VI-A, principally u/s 80P, resulting in nil taxable income.
During reassessment, the AO issued several notices requiring the assessee to furnish supporting particulars regarding the cash deposits. The assessee did not respond. Even the final show-cause notice dated 17 November 2023 remained unanswered. Consequently, the AO completed the reassessment ex parte u/s 147 read with section 144B on 22 January 2024.
The AO treated the cash deposits of ₹87,28,000 as unexplained cash credits u/s 68, added interest income of ₹3,539 & assessed total income at ₹95,12,176 against the returned nil income. The deduction u/s 80P was also denied on the ground that the return had not been filed within the prescribed time.
The assessee filed Form No. 35 before the CIT(A) on 18 April 2024. Although the assessment order was dated 22 January 2024, the assessee stated that it was served only on 23 March 2024. Therefore, according to the assessee, the appeal was filed within the statutory period calculated from the date of actual service. The CIT(A), however, treated the appeal as delayed by 57 days, declined to condone the alleged delay & dismissed it in limine without examining the merits.
Issue Involved
The principal issue was whether limitation for filing the appeal could be calculated from the date appearing on the assessment order, without verifying its actual date of service. A connected issue was whether the CIT(A) could dismiss the appeal in limine without confronting the assessee with the proposed computation of delay or providing an effective opportunity to explain the position.
The Tribunal also had to determine the appropriate course regarding the merits, particularly the addition of ₹87.28 lakh u/s 68 & denial of deduction u/s 80P.
Assessee’s Submissions
The assessee contended that there was no delay at all. While the order was passed on 22 January 2024, it was served by post only on 23 March 2024. Since the appeal was filed on 18 April 2024, it fell within the limitation period calculated from actual communication of the order.
The assessee argued that the CIT(A) had independently calculated the alleged delay without confronting it or properly considering the declaration in Form No. 35. Documentary evidence supporting the date of postal service was allegedly ignored. It was further submitted that the assessee was a rural co-operative milk society managed by laypersons unfamiliar with electronic & faceless proceedings. Dismissal without meaningful opportunity violated the principles of natural justice.
On merits, it contended that the cash deposits represented routine collections arising from its milk-procurement activities involving member milk producers. It also claimed eligibility for deduction u/s 80P as a co-operative milk society.
Revenue’s Contentions
The Revenue supported the CIT(A)’s order by contending that the appeal had not been filed within time & that the assessee had failed to respond to notices issued at different stages. According to the Revenue, the assessee’s persistent non-compliance justified the dismissal & no interference was warranted.
Tribunal’s Findings & Legal Reasoning
The Tribunal observed that the assessee had clearly disclosed in Form No. 35 that the assessment order was served on 23 March 2024 & that the appeal filed on 18 April 2024 was within time. The CIT(A), however, calculated limitation by presuming that the order’s date was also its date of receipt. The Tribunal held that such a presumption “may not be correct”, because limitation commences from communication or service of the order, not merely from the date printed upon it.
It was equally significant that the CIT(A)’s order did not record the issuance of any notice before dismissing the appeal in limine. Further, the assessee had not opted in Form No. 35 to receive notices by email. Therefore, the CIT(A)’s approach could not be approved.
Although restoration to the CIT(A) was possible, the Tribunal noticed that the assessee had also failed to furnish essential information before the AO. Since the source & nature of the substantial cash deposits required factual verification, it restored the entire matter directly to the AO. The assessee was directed to explain & substantiate each cash deposit, after which the AO must verify the evidence & decide afresh in accordance with law. The appeal was allowed for statistical purposes.
Practical Implications
The decision confirms that the date of an order cannot automatically be treated as its date of service for computing appellate limitation. Authorities must verify actual communication & provide an opportunity before dismissing an appeal as time-barred. However, remand does not amount to deletion of the additions. The assessee must now maintain complete evidence linking cash deposits with milk collections, member-wise receipts, sales, cash books & bank deposits, besides substantiating its eligibility u/s 80P.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, BANGALORE
1. This appeal has been filed by Chelairu Halu Utpadakara Sahakari Sangha Niyamitha [the Assessee/Appellant] against the appellate order dated 11 January 2026 passed by the National Faceless Appeal Centre (NFAC), Delhi [the learned CIT(A)], for assessment year 2018–19. By that order, the learned CIT(A) dismissed the assessee’s appeal against the assessment order dated 22 January 2024 passed by the Income Tax Officer under section 147 read with section 144B of the Income-tax Act, 1961, in limine by refusing to condone a delay of 57 days in filing the appeal. Aggrieved, the assessee is in appeal before us.
2. The Assessee has raised the following grounds of appeal:
1. The learned Commissioner of Income Tax (Appeals) erred in law and on facts in dismissing the appeal in limine on the alleged ground of limitation, without adjudicating the appeal on merits.
2. The learned CIT(A) failed to appreciate that there was no delay in filing the appeal, as the assessment order was served on the Appellant on 23.03.2024 by post, and the appeal was filed within the prescribed period reckoned from the date of actual service of the order.
3. The learned CIT(A) erred in ignoring the documentary evidence placed on record by the Appellant evidencing the date of service of the assessment order and thereby wrongly concluded that the appeal was time-barred.
4. The learned CIT(A) failed to appreciate that the Appellant had clearly demonstrated reasonable and sufficient cause, supported by documents, to establish that the appeal was filed within time, and therefore the dismissal of the appeal on the ground of limitation is arbitrary, unjust, and contrary to law.
5. The impugned order of the learned CIT(A), having been passed without proper appreciation of facts and evidence on record, is bad in law and liable to be set aside.
6. The ld. CIT(A) erred in dismissing the appeal without granting a meaningful opportunity of being heard, thereby violating the principles of natural justice. The learned CIT(A) failed to appreciate that the appellant is a rural co-operative milk society, managed by lay members not conversant with electronic/faceless appellate procedures.
7. The learned CIT(A) erred in law in not exercising the appellate jurisdiction vested under section 250 of the Income-tax Act, 1961, by refusing to decide the appeal on merits. The learned CIT(A) ought to have adjudicated the issues on merits, especially when substantial additions involving exemption u/s 80P and section 68 were involved.
8. The ld. CIT(A) erred in confirming the reassessment ex-parte order u/s 147 r.w.s. 144B, without ensuring effective service of notices and meaningful participation by the appellant. The reassessment proceedings are vitiated due to mechanical reopening and non-application of mind, based merely on cash deposits without examining the nature of business of the appellant.
9. The ld. CIT(A) erred in confirming the cash deposits of ₹87,28,000/- as unexplained cash credits u/s 68, without appreciating that the appellant is a co-operative milk society, wherein cash collections represent routine business receipts from member milk producers. The addition u/s 68 is made purely on presumption, without disproving the business nexus of the receipts.
10. The ld. CIT(A) erred in denying deduction u/s 80P of the Act, despite the appellant being a co-operative milk society registered under the Karnataka Cooperative Societies Act. The learned CIT(A) failed to appreciate that income of the appellant is statutorily eligible for deduction u/s 80P(2)(a)(i)/(b).
11. The learned CIT(A) failed to follow settled judicial principles that procedural delays should not defeat substantive justice, particularly in tax matters involving rural co-operative institutions.
12. The order of the learned CIT(A) is bad in law, contrary to facts, opposed to equity and justice, and liable to be set aside.
13. Without prejudice the disallowances as confirmed by the learned CIT (A) are arbitrary excessive and ought to be reduced substantially.
14. For these and such other grounds that may be urged at the time of hearing the Appellant prays that the appeal may be allowed.
3. Briefly stated, the assessee is an Association of Persons that did not file its return of income for the relevant assessment year. Based on information available with the Revenue that the assessee had deposited cash of ₹61,82,000 in one bank account and ₹25,46,000 in another bank account, and had earned interest income of ₹3,539 during the relevant financial year, notice under section 148 of the Income-tax Act was issued after following the prescribed procedure.
4. In response to the notice dated 21 April 2022, the assessee filed its return of income on 30 June 2022 declaring gross income of ₹7,50,637, which was claimed as deduction under Chapter VIA, resulting in nil total income.
5. Thereafter, several notices were issued during the assessment proceedings, but the assessee did not respond. A final show-cause notice dated 17 November 2023 also remained unanswered. Consequently, the Assessing Officer completed the reassessment by making an addition of ₹87,28,000 under section 68 in respect of the cash deposits in the two bank accounts and a further addition of ₹3,539 towards interest income, assessing the total income at ₹95,12,176 as against the returned income of nil. The Assessing Officer also denied the deduction claimed under section 80P on the ground that the return was not filed within time, and passed the reassessment order under section 147 read with section 144B of the Act on 22 January 2024.
6. Aggrieved by the assessment order, the assessee filed an appeal before the learned CIT(A). The learned CIT(A) held that the appeal was delayed by 57 days and, finding no sufficient cause for the delay, dismissed the appeal as not admitted.
7. The assessee is now in appeal before us, contending that the learned CIT(A) was not justified in dismissing the appeal. It was submitted that, although Form No. 35 mentioned the date of the assessment order as 22 January 2024, the order was served on the assessee only on 23 March 2024. Since the appeal was filed on 18 April 2024, there was no delay in filing the appeal. The assessee further submitted that the learned CIT(A) computed the delay on his own, without confronting the assessee despite the facts stated in Form No. 35, and dismissed the appeal by holding that it was delayed by 57 days.
8. The learned authorised representative, Shri Niranjan, reiterated these facts and submitted that the matter should be restored to the file of the learned CIT(A).
9. We also heard the learned Senior Departmental Representative, Shri Balusamy H., JCIT, who submitted that, as the assessee had not filed the appeal within time and had not responded to the notices issued by the learned CIT(A), there was no error in the order of the learned CIT(A).
10. We have carefully considered the rival contentions and perused the orders of the lower authorities. The Revenue had information that the assessee had deposited cash in its bank accounts and had also earned interest income. In the reassessment proceedings, the assessee filed its return claiming deduction under section 80P of the Act and disclosed nil income. However, when the Assessing Officer commenced the assessment proceedings, the assessee did not respond to the notices issued, including the show-cause notice. After completion of the assessment and receipt of the assessment order, the assessee filed an appeal before the learned CIT(A). In Form No. 35, the assessee stated that the appeal was within time and that there was no delay, explaining that although the assessment order was dated 22 January 2024, it was served on the assessee only on 23 March 2024, and the appeal was filed on 18 April 2024. The learned CIT(A), however, computed the delay by treating the date of the assessment order as the date of its receipt, which may not be correct. Further, the learned CIT(A) did not record that any notice was issued to the assessee before dismissing the appeal in limine. We therefore find that such an approach cannot be approved. It is also relevant that, in Form No. 35, the assessee did not opt for receipt of notices by email.
11. In view of the above facts, the appeal deserves to be restored to the file of the learned CIT(A). However, since the assessee had also failed to furnish the required information before the Assessing Officer, and in the interest of justice and proper verification of the cash deposits, we restore the entire matter to the file of the Assessing Officer. The assessee is directed to substantiate the source of the cash deposits by explaining their nature and source. Upon furnishing such information, the Assessing Officer shall verify the same and decide the issue afresh in accordance with law.
12. Accordingly, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 28th August, 2026.
