2025 (3) TMI 862 - AT - Income Tax

Cooperative society wins appeal for Section 80P deductions despite PAN and filing procedural errors

The Pishaver Vividh Karyakari Seva Sahkari Mandali Ltd. Versus I.T.O, Ward-2, Bardoli

The Pishaver Vividh Karyakari Seva Sahkari Mandali Ltd. Versus I.T.O, Ward-2, Bardoli - TMI ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are: Whether the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) erred in upholding the assessment order passed under Section 144 of the Income Tax Act without proper jurisdiction and appreciation of facts. Whether the denial of deduction under Section 80P of the Income Tax Act by the AO and CIT(A) was justified, given the appellant's status as a cooperative society. Whether the procedural errors related to the PAN (Permanent Account Number) issuance and subsequent filing of returns affected the eligibility for deductions under Section 80P.ISSUE-WISE DETAILED ANALYSIS1. Jurisdiction and Validity of Assessment Order under Section 144 Relevant Legal Framework and Precedents: Section 144 of the Income Tax Act allows for best judgment assessment when an assessee fails to comply with a notice under Section 142(1). The appellant argued that the assessment was made without proper jurisdiction. Court's Interpretation and Reasoning: The Tribunal examined whether the AO acted within his jurisdiction when issuing the assessment order. The Tribunal found that the AO did not issue a fresh notice under the correct PAN for the cooperative society, which was a procedural lapse. Key Evidence and Findings: The appellant had informed the AO about the correct PAN and requested to file returns under this PAN. The AO failed to issue a fresh notice or take corrective steps based on this information. Application of Law to Facts: The Tribunal compared the facts with a similar case, where the procedural lapses were deemed significant enough to warrant relief. Treatment of Competing Arguments: The Tribunal considered the revenue's argument that no return was filed, thus justifying the assessment under Section 144. However, it found that the appellant had made efforts to correct the procedural error. Conclusions: The Tribunal concluded that the procedural errors invalidated the jurisdiction of the AO to make the assessment under Section 144.2. Denial of Deduction under Section 80P Relevant Legal Framework and Precedents: Section 80P provides deductions to cooperative societies on income derived from providing credit facilities to its members. The denial was based on the absence of a return filed under the correct PAN. Court's Interpretation and Reasoning: The Tribunal referred to precedents where the denial of deductions was considered unjustified if the procedural requirements were met during assessment proceedings. Key Evidence and Findings: The appellant had provided financial statements and audit reports indicating eligibility for deductions under Section 80P. The Tribunal noted that these were submitted in response to the AO's notices. Application of Law to Facts: The Tribunal applied the principles from similar cases, where it was held that procedural lapses should not prevent the granting of rightful deductions if the substantive conditions are met. Treatment of Competing Arguments: The Tribunal acknowledged the revenue's position but emphasized the appellant's compliance with substantive requirements for the deduction. Conclusions: The Tribunal directed that the deduction under Section 80P should be allowed, as the appellant met the substantive eligibility criteria.3. Impact of PAN and Return Filing Issues Relevant Legal Framework and Precedents: The issue revolved around the procedural correctness of PAN issuance and return filing. The Tribunal examined whether these procedural issues could bar the appellant from claiming deductions. Court's Interpretation and Reasoning: The Tribunal found that procedural errors related to PAN should not affect the substantive rights of the appellant, especially when corrective measures were attempted. Key Evidence and Findings: The appellant's efforts to rectify the PAN issue and subsequent filing of returns under the correct PAN were considered significant. Application of Law to Facts: The Tribunal applied principles from similar cases, emphasizing that procedural lapses should not overshadow substantive compliance. Treatment of Competing Arguments: The Tribunal considered the revenue's strict interpretation but prioritized the appellant's substantive compliance efforts. Conclusions: The Tribunal concluded that the procedural errors related to PAN should not preclude the appellant from claiming deductions under Section 80P.SIGNIFICANT HOLDINGS Verbatim Quotes of Crucial Legal Reasoning: 'The procedural errors related to PAN should not overshadow the substantive compliance of the appellant, especially when corrective measures were attempted.' Core Principles Established: Procedural lapses, such as incorrect PAN issuance, should not bar an assessee from claiming rightful deductions if substantive compliance is demonstrated. Final Determinations on Each Issue: The Tribunal allowed the appeal, directing that the deduction under Section 80P be granted, and emphasized the need for corrective procedural actions by the revenue authorities.