Primary Agricultural Credit Society loses challenge to assessment order denying section 80P deduction despite citing Supreme Court precedent

The Kerala HC dismissed a writ petition challenging an assessment order denying section 80P deduction to a Primary Agricultural Credit Society. The petitioner alleged the AO violated SC precedent in Mavilayi Service Co-operative Bank Ltd. and natural justice principles. The HC held that while authorities must follow SC orders, when factual appreciation is required, statutory appeal is the appropriate remedy. The court found the AO had jurisdiction to assess the case on merits following SC directions, and no natural justice violation was established. The petition was dismissed with liberty to pursue statutory remedies.

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Issues:
Challenge to assessment order under Article 226 based on conflict with Supreme Court judgment in Mavilayi Service Co-operative Bank Ltd. case; Claim for deduction under Section 80P of Income Tax Act, 1969; Disallowance of deductions by assessing authority; Invocation of writ jurisdiction under Article 226 vs. resorting to statutory appeal; Allegation of assessment order being in contempt of Supreme Court judgment; Application of principles of natural justice in assessment process.

Analysis:
The petitioner, a Primary Agricultural Credit Society, challenged an assessment order for the year 2018-19 under Article 226, alleging it contradicted the Supreme Court judgment in Mavilayi case. The petitioner claimed deduction under Section 80P but faced disallowance by the assessing authority, despite meeting queries with explanations and documents. The assessing officer's decision was deemed to be in direct conflict with the Supreme Court ruling, leading to the petitioner's contention that the assessment order bordered on contempt of court. The petitioner argued that the assessing authority disregarded established legal principles, including the binding nature of higher authorities' orders, such as in Union of India v Kamalakshi Finance Corporation Ltd.

The court considered the rival contentions and emphasized the limited scope of writ jurisdiction under Article 226 in tax matters. It highlighted that the court generally refrains from interfering in assessment orders unless they are wholly without jurisdiction, violate natural justice, or for exceptional reasons. The judgment cited precedents like Veerappa Pillai v. Raman & Raman Ltd and State of Bombay v. United Motors Ltd. to underscore the importance of following statutory remedies in tax matters, except in cases of fundamental rights infringement. The court reiterated that the Income Tax Act provides a comprehensive mechanism for addressing improper or erroneous orders by taxing authorities.

Regarding the petitioner's plea for the court to set aside the assessment order, the judgment emphasized that the assessing officer had the jurisdiction to issue the order, as directed by the Supreme Court in the Mavilayi case. The court noted that the petitioner had an alternative and efficacious remedy available through statutory appeal, making it unnecessary to invoke extraordinary jurisdiction under Article 226. The judgment concluded that there was no merit in the writ petition and dismissed it, while allowing the petitioner to pursue statutory remedies as available.

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