2023 (6) TMI 1381 - AT - Income Tax

Primary Rural Agricultural Co-operative Credit Society eligible for section 80P deduction without proper notice under 143(1)(a)

ITAT Cochin held that a Primary Rural Agricultural Co-operative Credit Society registered under Kerala Co-operative Society Act, 1969 was eligible for ... Deduction u/s 80P - assessee is a Primary Rural Agricultural Co-operative Credit Society duly registered u/s 7(1) of Kerala Co-operative Society Act, 1969 - Adjustment u/s 143(1) - HELD THAT:- Taking note of the certificate issued by the assistant Registrar of Co-operative Society that the assessee is a Primary Rural Agricultural Co-operative Credit Society duly registered u/s 7(1) of Kerala Co-operative Society Act, 1969 (Act 21 of 1969), we hold that it is eligible for exemption/deduction and no adjustment could have been made under section 143(1)(a) of the Act, unless notice was issued proviso to section 143(1)(a) of the act and in the light of the fact that assessee has made the claim u/s 80P(2) of the Act albeit in Schedule BP clearly filing up the column of exempted income of Co-operative Society u/s 80P(2) of the Act, the deduction ought to have been allowed; and since adjustment has been made by disallowing the same u/s 143(1) of the Act, without intimation, and failure to consider the response to it as provided by proviso to subsection (1) of section 143 of the Act cannot be sustained and directed to be deleted. Appeal of the assessee is allowed. Issues involved:The main issue in this case is the denial of deduction claimed by the assessee under section 80P of the Income Tax Act, 1961.Comprehensive details of the judgment:1. Background and Facts:The assessee, a Primary Rural Agricultural Co-operative Credit Society, filed a nil income tax return claiming deduction under section 80P of the Act. The assessing officer disallowed the deduction and assessed the income of the assessee. The Commissioner (Appeals) upheld this action, stating that the assessee did not show exempt income in the Schedule EI. The assessee appealed against this decision.2. Arguments and Analysis:During the hearing, the assessee's representative pointed out that the deduction under section 80P(2) of the Act was claimed in the return of income under Schedule BP. The Tribunal noted that the assessee had indeed claimed the deduction as exempted income of the Co-operative Society under section 80P(2) of the Act. The Tribunal held that a mere typographical error or omission in one column should not be the sole ground for disallowance. The assessing officer should have issued a notice before making any adjustment under section 143(1)(a) of the Act.3. Legal Precedents and Decisions:The Tribunal referred to the decision of the Hon'ble Supreme Court in the case of Malvilayi Services Co-operative Bank Ltd. & Ors Vs. CIT and the decision of the Hon'ble Jurisdictional High Court in the case of Chirakkal Service Co-operative Bank Ltd. Vs. CIT. These decisions emphasized that primary agricultural credit societies registered under the Kerala Co-operative Societies Act are entitled to exemption under section 80P of the Act.4. Judgment and Conclusion:Considering the certificate confirming the assessee as a Primary Rural Agricultural Co-operative Credit Society, the Tribunal held that the assessee was eligible for the deduction under section 80P of the Act. The Tribunal found that the adjustment made by disallowing the deduction without issuing a notice was not sustainable. Therefore, the appeal of the assessee was allowed, and the adjustment was directed to be deleted.5. Final Decision:The Tribunal pronounced the order in favor of the assessee, allowing the appeal and directing the deletion of the adjustment disallowing the deduction under section 80P of the Income Tax Act.This summary provides a detailed overview of the judgment, highlighting the key issues, arguments presented, legal precedents cited, and the final decision reached by the Tribunal.