2020 (1) TMI 1378 - AT - Income Tax

Non filing of E-appeal - Condonation of delay 570 days in filing e-appeal - HELD THAT - Requirement of filing e-appeal was prescribed w.e.f. 01.03.2016 and the assessee was required to file the appeal within 30.04.2016 which the assessee has done by filing the appeal on 26.04.2016 although in paper format and this is the explanation of the assessee that by this time, e-filing of the appeals was not activated. As noted by learned CIT(A) that as per CBDT Circular No. 20/16 dated 26.05.2016, it was noted by the CBDT that it has come to the notice of the Board that although e-filing of appeal is compulsory from 01.03.2016, in some cases, the tax payers who are required to e-file the appeal before CIT(A) were unable to do so due to lack of knowledge of e-filing procedure/technical issues in e-filing also. This is also noted by the CBDT in the said circular that EVC functionality for verification of e-appeals was made operation from 12.05.2016 for individuals and from 19.05.2016 for other persons. Time limit for filing appeal before learned CIT(A) by e-appeal was extended up to 15.06.2016. Hence it is seen that this claim of the assessee is correct that when the assessee filed the appeal in paper format, the facility of e-filing of appeal was not operational. We feel it proper to condone the delay of 570 days in filing the e-appeal before the CIT(A) and restore the entire matter back to the CIT(A) for a decision on merit. - Appeal of the assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Condonation of delay in filing the e-appeal.
2. Disallowance of deduction under Section 80P.
3. Classification of interest income under the head "Income from Other Sources."

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the E-Appeal:

The assessee filed an appeal on 26th April 2016 in paper format against the assessment order dated 31st March 2016. The CIT(A) dismissed the appeal on the grounds that the condonation of delay was not granted for the e-appeal filed on 14th October 2017. The tribunal noted that the requirement for e-filing was effective from 1st March 2016, and the assessee filed the paper appeal within the stipulated time. The tribunal also considered the CBDT Circular No. 20/16 dated 26th May 2016, which acknowledged the taxpayers' difficulties in e-filing due to technical issues and extended the time limit for e-filing up to 15th June 2016. Given these circumstances, the tribunal condoned the delay of 570 days in filing the e-appeal and restored the matter to the CIT(A) for a decision on merit.

2. Disallowance of Deduction under Section 80P:

The assessee contested the disallowance of deduction under Section 80P, arguing that it is a co-operative society providing credit facilities to its members and not a co-operative bank. The tribunal referred to the Karnataka High Court's decision in the case of Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, which distinguished between a co-operative society and a co-operative bank, holding that deduction under Section 80P is allowable to a co-operative society. The tribunal also noted that the assessee is registered under the Karnataka Co-operative Society Act, 1959, and not under the Karnataka Souharda Sahakari Act, 1997. The tribunal emphasized the importance of reading Section 80P liberally to promote the growth of the co-operative sector, as highlighted by the Supreme Court in the case of Citizen Cooperative Society Limited.

3. Classification of Interest Income Under the Head "Income from Other Sources":

The assessee argued that the interest income earned was from the deposit of Statutory Reserve Fund and other specific funds, not from idle and surplus funds. The tribunal noted that the society is mandated to transfer 25% of its profits to the Statutory Reserve Fund, which must be deposited in co-operative banks and cannot be utilized without the Registrar's permission. The interest earned on these funds must also be transferred to the Reserve Fund. The tribunal found that treating this interest income as earned from idle and surplus funds was incorrect and that the interest should be considered as business income in the course of co-operative business.

Conclusion:

The tribunal allowed the appeal for statistical purposes, condoning the delay in filing the e-appeal and restoring the matter to the CIT(A) for a decision on merit. The CIT(A) is directed to decide the issues on merit after providing reasonable opportunity of being heard to both sides. The tribunal did not adjudicate on the merits of the case at this stage.