2025 (9) TMI 223 - AT - Income Tax

Revision under Section 263 denied; Section 80P(2)(d) deduction allowed for cooperative bank interest and dividends

Subhash Samudayak Sahakari Shetki Sangh Limited Versus ITO, Ward 14 (5), Pune

Subhash Samudayak Sahakari Shetki Sangh Limited Versus ITO, Ward 14 (5), Pune - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether the delay in filing appeals (965 days and 327 days) ought to be condoned as constituting 'reasonable cause'. 2. Whether invocation of revisionary jurisdiction under Section 263 against an assessment that allowed deduction under Section 80P is justified where the Assessing Officer had called for and verified details and allowed the claim. 3. Whether interest and dividend earned from deposits/investments with Cooperative Banks are eligible for deduction under Section 80P(2)(d) (and relatedly whether the small claim under Section 80P(2)(c) is allowable) when the cooperative society invests with cooperative banks. 4. Whether additions of large amounts to business income (and related issues) where the appellant failed to appear before the first appellate authority should be remitted for de novo adjudication by the Commissioner (Appeals) with directions to afford opportunity of hearing. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Condonation of delay in filing appeals Legal framework: Principles governing condonation of delay in filing appeals require demonstration of 'sufficient cause' or 'reasonable cause' to excuse non-compliance with limitation periods; courts may rely on established principles in Collector, Land Acquisition, Anantnag v. Katiji and analogous authorities permitting relaxation where causes are reasonable. Precedent treatment: The Tribunal relied on Supreme Court authority accepting broad equitable discretion to condone delays where reasonable cause is shown and referred also to a subsequently cited authority (Inder Singh) applying the same principle. Interpretation and reasoning: The assessee's affidavit explained organizational limitations (cooperative society with farmer-members lacking tax knowledge), lack of adequate professional advice, attachment of bank account and resultant financial distress, engagement of chartered accountants only shortly before filing appeals and consequent advice to file, and absence of mala fides. The Tribunal found these circumstances constituted reasonable cause for delay. Ratio vs. Obiter: Ratio - delay was condoned because the explained circumstances amounted to 'reasonable cause' within established jurisprudence; Obiter - none significant beyond applying settled principles. Conclusions: Delay of 965 days and 327 days in filing the appeals was condoned and appeals admitted for adjudication. Issue 2 - Validity of invoking Section 263 where Assessing Officer had verified and allowed deduction under Section 80P Legal framework: Section 263 permits revision where an assessment is prejudicial to the interests of the revenue owing to jurisdictional error or lack of enquiry; however, revision is improper where the Assessing Officer has made due enquiry and accepted a claim after verification of records. Precedent treatment: The Tribunal applied its own earlier decisions holding that where a claim under Section 80P has been examined and supported by documentary evidence (interest/dividend certificates, audited accounts, bye-laws, member lists) and accepted in assessment, invocation of Section 263 is unjustified. Coordinate-bench precedents recognizing the allowability of interest from cooperative banks under Section 80P(2)(d) were followed. Interpretation and reasoning: Record showed the Assessing Officer issued a notice under Section 142(1), the assessee furnished a detailed reply with documentary evidence (interest certificates from the cooperative bank, audited accounts, list of members, bye-laws, computation), and the returned claim was accepted in scrutiny assessment. The Tribunal held there was no justification for PCIT to proceed under Section 263, as the basic conditions for exercising revisionary jurisdiction (lack of enquiry or jurisdictional error) were absent. Ratio vs. Obiter: Ratio - Section 263 revision was quashed because the Assessing Officer had conducted verification and allowed the deduction after considering the evidence; Obiter - emphasis that mere disagreement with an assessment does not suffice for Section 263. Conclusions: Revisionary order under Section 263 was quashed and the assessment restored. Issue 3 - Allowability of interest/dividend from Cooperative Banks under Section 80P(2)(d) and of Section 80P(2)(c) claim Legal framework: Section 80P(2)(d) exempts, subject to conditions, income by way of interest or dividend derived by a cooperative society from investment with another cooperative society. Section 80P(2)(c) provides a separate limited deduction in specified circumstances. Precedent treatment: The Tribunal treated the question as settled in favor of allowability when investments are made with Cooperative Banks, relying on a series of internal decisions and coordinate-bench rulings that recognize Cooperative Banks as cooperative societies for the purposes of Section 80P(2)(d), notwithstanding their banking license. Interpretation and reasoning: The Tribunal noted the assessee's interest income from Cooperative Banks was supported by certificates and assessment-stage verification. Citing a recent Tribunal order (Annapurna Nagari ...) and other coordinate decisions, the Tribunal concluded that interest/dividend from Cooperative Banks qualifies for deduction under Section 80P(2)(d) because Cooperative Banks remain cooperative societies in substance. The small deduction under Section 80P(2)(c) was also held to meet necessary conditions and allowed. Ratio vs. Obiter: Ratio - interest and dividend earned from deposits/investments with Cooperative Banks are eligible for deduction under Section 80P(2)(d) where the investments and documentation satisfy statutory conditions; Section 80P(2)(c) deduction allowed where conditions are met. Obiter - commentary that the issue 'is no longer res integra' within the Tribunal's jurisprudence. Conclusions: Deduction of Rs. 26,19,223 (interest) and Rs. 19,453 (dividend) under Section 80P(2)(d) and deduction of Rs. 50,000 under Section 80P(2)(c) were allowed; grounds challenging allowance were accepted and the revisionary order was quashed. Issue 4 - Remand for de novo adjudication of additions and procedural default before first appellate authority Legal framework: Principles of natural justice and fair adjudication require that where a taxpayer has not had opportunity to be heard before the appellate authority due to non-appearance, and where circumstances justify further opportunity, matters may be remitted for fresh consideration with directions to afford hearing; appellate authorities may call for remand reports and decide afresh in accordance with law. Precedent treatment: The Tribunal followed established practice of remitting issues to the Commissioner (Appeals) for de novo consideration where the assessee seeks hearing and the Department does not object, subject to directions to ensure diligence (update contacts, avoid frivolous adjournments). Interpretation and reasoning: For the assessment year in question, the assessee had failed to appear before the Commissioner (Appeals) multiple times; counsel explained reasons beyond control and sought one more opportunity. The Department raised no objection. In the interests of justice and fairness, the Tribunal remitted all issues (including a substantial addition of Rs. 4,81,66,095 and the Section 80P issue) to the Commissioner (Appeals) for de novo adjudication, instructing the appellate authority to provide a reasonable opportunity of hearing, to call for remand reports if necessary, and directing the assessee to update contact details and avoid unnecessary adjournments. Ratio vs. Obiter: Ratio - where procedural default before the first appellate authority is explained and no objection is raised by the revenue, remand for de novo adjudication with directions to afford hearing is appropriate; Obiter - procedural admonitions to the assessee about vigilance and adjournments. Conclusions: The Tribunal set aside the impugned order for that year and remitted the matters to the Commissioner (Appeals) for fresh consideration in accordance with law; the remand was made subject to directions to ensure fair opportunity and procedural compliance.