2021 (9) TMI 1450 - HC - Income Tax

High Court quashes tax assessment for 2018-19 due to legal errors

THE EZHOME SERVICE CO-OPERATIVE BANK LTD Versus INCOME TAX OFFICER, THE PRINCIPAL COMMISSIONER OF INCOME TAX,

THE EZHOME SERVICE CO-OPERATIVE BANK LTD Versus INCOME TAX OFFICER, THE PRINCIPAL COMMISSIONER OF INCOME TAX, - TMI Issues:Challenge to assessment order for the year 2018-19 under Article 226 of the Constitution of India based on violation of natural justice and failure to apply Supreme Court law on deduction under section 80P of the Income Tax Act.Analysis:Issue 1: Violation of Natural JusticeThe petitioner, a primary agricultural credit co-operative society, claimed deduction under section 80P of the Income Tax Act based on a Supreme Court decision. The assessing officer completed the assessment without considering the petitioner's objection and alleged that the petitioner had not filed any objection. However, evidence showed that the petitioner did submit objections and relevant case law within the specified time frame, as acknowledged by the Income tax department. This failure to consider the petitioner's response violated the principles of natural justice.Issue 2: Failure to Apply Supreme Court LawThe assessing officer's conclusion in the impugned assessment order contradicted the Supreme Court's decision in Mavilayi Service Co-operative Bank case. The officer found that the petitioner did not provide documentary evidence supporting its claim as a service co-operative agricultural bank under the Kerala Co-operative Societies Act, 1969. This assessment was in direct contradiction to the Supreme Court's ruling that the classification under the Cooperative Societies Act cannot be disregarded. Additionally, the officer assumed that the petitioner did not reply to the show cause notice, despite evidence showing otherwise. This failure to apply the law laid down by the Supreme Court led to an erroneous assessment.JudgmentIn light of the above issues, the High Court quashed the assessment order for the year 2018-19 and directed the assessing authority to redo the assessment after affording the petitioner an opportunity to be heard. The Court emphasized that it did not express any opinion on the merits of the case, leaving all contentions open for the petitioner to argue before the assessing authority. The assessing authority was instructed to complete the reassessment within six months, considering the Supreme Court's decision cited in the case. The writ petition was allowed accordingly.