2018 (9) TMI 1012 - AT - Income Tax

Claim for deduction under Section 80P - Held that - Assessing Officer has disallowed the assessee s claim for deduction under Section 80P on the issue that the assessee is a federation of societies and other members and hence the concept of who constitute Members is very relevant. We also observe that the Assessing Officer has rendered a finding that the sales are made to agencies other than members, by invoking the principle of mutuality. In the case of Citizen Co-operative Society Ltd. (2017 (8) TMI 536 - SUPREME COURT) in the context of credit co-operative societies has ruled on these two principles while deciding the issue of deduction under Section 80P of the Act. AO is directed to consider the principles enunciated in the aforesaid decision of the Hon ble Apex Court (supra) while passing orders, after considering the jurisdictional issues remanded back. JCIT assuming jurisdiction over the case on hand without a specific order assigning the case to him - Held that - JCIT, in the case on hand, has assumed jurisdiction over the case by mentioning that the JCIT has been given concurrent jurisdiction and has also referred to the Central Action Plan for 2013-14. The learned CIT (Appeals) has held that the JCIT has concurrent jurisdiction over this case in terms of Notification issued under Section 140 by the CBDT. As per the decision cited above it is an imperative mandatory requirement of law that an order in writing, to this effect, must be passed under Section 127 by the jurisdictional Commissioner of Income Tax for effecting the transfer of assessment proceedings from one Assessing Officer to another Assessing Officer. From the records before us, it is not clear as to whether such an order has been passed. Considering that there is no clarity on the process adopted, before the JCIT came to pass the impugned orders of assessment for Assessment Years 2010-11 to 2013-14; particularly whether an order under Section 127 of the Act was passed in this regard. In this factual matrix of the case, we deem it appropriate to remand the matter back to the file of the Assessing Officer to examine whether the necessary orders, as explained above, have been passed in the case on hand for the JCIT to assume valid jurisdiction to pass the impugned orders of assessment. Even if such an order is not passed, it would be a procedural issue and in terms of the decision of the Hon ble High Court of Madras in the case of M/s. Home Finders Housing Ltd. Vs. ITO (2018 (5) TMI 260 - MADRAS HIGH COURT) such a defect is not fatal and can be cured / rectified by passing a fresh order. We remand this issue to the file of the Assessing Officer for necessary action in accordance with law.

Summary

Issues Involved:
1. Reopening of assessments and non-furnishing of reasons recorded (A.Ys 2010-11 & 2011-12).
2. Jurisdiction of JCIT in passing the assessment orders.
3. Disallowance of the assessee's claim for deduction under Section 80P of the Income Tax Act.

Detailed Analysis:

1. Reopening of Assessments - Non-furnishing of Reasons Recorded (A.Ys 2010-11 & 2011-12):

The assessee contended that the orders of assessment for these years are invalid as the Assessing Officer (AO) did not provide the reasons recorded for reopening the assessments despite requests. The CIT (Appeals) acknowledged that the reasons were not provided but dismissed the contention, stating that the assessee was aware of the reasons and participated in the proceedings. The Tribunal referenced the Supreme Court's decision in GKN Driveshafts (India) Ltd. vs. ITO, which mandates that providing reasons for reopening assessments is a prerequisite for passing an assessment order. However, the Tribunal also considered a recent Madras High Court decision in Home Finders Housing Ltd. vs. ITO, which held that non-compliance with this procedural requirement does not invalidate the entire proceedings. Consequently, the Tribunal remanded the matter back to the AO to correct this procedural irregularity by providing the reasons recorded and following the appropriate procedures.

2. Jurisdiction of JCIT in Passing the Assessment Orders:

The assessee argued that the JCIT lacked jurisdiction to pass the assessment orders as the notices under Section 148/143(2) were issued by the ITO, Ward-1, Chitradurga. The CIT (Appeals) rejected this argument, stating that the JCIT had concurrent jurisdiction over the cases in Davangere Range as per CBDT notifications. The Tribunal, however, noted that the JCIT assuming jurisdiction without a specific order under Section 127 of the Income Tax Act was problematic. Referencing several judicial pronouncements, including those from the Delhi High Court and ITAT, the Tribunal emphasized that an order in writing under Section 127 is necessary to effectuate the transfer of assessment proceedings from one officer to another. The Tribunal remanded the issue back to the AO to verify if such an order was passed and to take necessary action in accordance with the law.

3. Disallowance of the Assessee's Claim for Deduction under Section 80P of the Income Tax Act:

The substantive issue of disallowing the assessee's claim for deduction under Section 80P was not adjudicated by the Tribunal at this stage, as it was contingent upon the resolution of the jurisdictional issues. The Tribunal noted that if the jurisdictional issues result in the assessment orders being invalid, the disallowances would also fail. The Tribunal directed the AO to reconsider the substantive issue of deduction under Section 80P, taking into account the principles laid down by the Supreme Court in Citizen Co-operative Society Ltd. vs. ACIT, which addresses the concepts of who constitutes "members" and the principle of mutuality in the context of credit co-operative societies.

Conclusion:

The appeals for Assessment Years 2010-11 to 2013-14 were partly allowed for statistical purposes, with the matters remanded back to the AO for further proceedings in line with the Tribunal's directions. The Tribunal's decision emphasized the importance of procedural compliance and proper jurisdictional authority in the assessment process.