2019 (7) TMI 1275 - HC - Income Tax

Deduction u/s 80P (2) (a) (i) - reopening of assessment u/s 147 - the assessee is to be treated as primary agricultural society and is carrying on the business of banking or providing credit facilities to its members and is entitled for deduction with respect to the interest received from Class B members who were involved in non-agricultural activity - HELD THAT - In the light of the common submission made in unison by all the learned counsel that the four writ petitions on hand are covered by the common order in NERINJIPETTAI PRIMARY AGRICULTURAL COOPERATIVE CREDIT SOCIETY LTD. VERSUS THE ITO 2019 (7) TMI 389 - MADRAS HIGH COURT , it follows as a sequitur that the operative portion of the aforesaid order contained/adumbrated in paragraph 4 will apply to the instant cases also. To be noted, in the aforesaid operative portion extracted and reproduced supra, the term of 'notices' alone will read as 'proceedings' in the instant case. Therefore, in these four writ petitions, the following common order is passed a) All the four impugned proceedings will be kept in abeyance and there will be no further proceedings pursuant to the same until disposal of the Special Leave Petitions said to have been filed by respondent / Revenue in Hon'ble Supreme Court against the aforementioned orders of Hon'ble Division Bench of this Court in CIT VERSUS TIRUCHENGODE AGRICULTURAL PRODUCERS COOPERATIVE MARKETING SOCIETY LTD.and others 2016 (8) TMI 560 - MADRAS HIGH COURT b) Subject to the outcome of the aforesaid Special Leave Petitions, i.e., if the Special Leave Petitions are in favour of the Revenue, the impugned orders will stand revived and law will take its course. If this scenario unfolds, it is open to the writ petitioner assessee to take all objections and defences available to section 148 notice including calling for reasons and limitation. c) If the Special Leave Petitions end in favour of assessees and if the aforesaid Hon'ble Division Bench orders are confirmed or if the Hon'ble Supreme Court refuses to interfere with the orders of High Court, all the four impugned proceedings will stand set aside without further reference to this Court. d) Though obvious it is made clear that this order pertains to benefit under Section 80P of IT Act qua writ petitioners covered by Hon'ble Division Bench orders against which Revenue submits that SLPs have been filed before Hon'ble Supreme Court and therefore, this order will not preclude Revenue from proceeding against writ petitioners in a manner known to law with regard to other issues, if any.

Summary

Issues Involved:
1. Entitlement to the benefit of Section 80P of the Income Tax Act, 1961, for Cooperative Societies.
2. Validity of notices issued under Section 148 of the Income Tax Act.
3. Limitation period for issuing notices under Section 148.
4. Impact of pending Special Leave Petitions (SLPs) before the Supreme Court on the impugned notices.

Issue-wise Detailed Analysis:

1. Entitlement to the Benefit of Section 80P of the Income Tax Act, 1961, for Cooperative Societies:

The core issue revolves around whether the petitioners, being Cooperative Societies, are entitled to the benefit of Section 80P of the Income Tax Act, 1961. The petitioners claim entitlement based on a prior judgment by a Division Bench of the High Court dated 02.08.2016, which held that Cooperative Societies similar to the petitioners are entitled to the benefits of Section 80P. The judgment emphasized that the primary objective of these societies is to provide financial accommodation to their members for agricultural purposes, thereby qualifying them for the said benefit. The Division Bench's decision was based on substantial questions of law related to the classification and activities of the societies under Section 80P.

2. Validity of Notices Issued Under Section 148 of the Income Tax Act:

The petitioners challenged the validity of the notices issued under Section 148, which were based on the premise that income had escaped assessment under Section 147. The notices called upon the petitioners to file returns for the relevant assessment years. The court noted that the Division Bench's earlier judgment, which favored the Cooperative Societies, would apply to the petitioners' cases. Therefore, it would be futile to allow the impugned notices to proceed further as the authorities would be bound by the Division Bench's ratio.

3. Limitation Period for Issuing Notices Under Section 148:

The Revenue raised a concern regarding the limitation period for issuing fresh notices under Section 148 if the current notices were set aside. Different periods of limitation are prescribed under the first proviso to Section 147, Section 149(1)(b), and Section 149(1)(c). The court acknowledged this concern but did not delve into the specifics, as the primary focus was on the pending SLPs and the applicability of the Division Bench's judgment.

4. Impact of Pending Special Leave Petitions (SLPs) Before the Supreme Court on the Impugned Notices:

The Revenue informed the court that SLPs had been filed before the Supreme Court against the Division Bench's judgment, and the matter was still pending. As of the date of the judgment, there was no stay or reversal of the Division Bench's order. The court decided to keep the impugned proceedings in abeyance until the disposal of the SLPs. If the SLPs were decided in favor of the Revenue, the impugned orders would be revived, and the petitioners could raise all available objections, including those related to limitation. Conversely, if the SLPs were resolved in favor of the assessees, the impugned proceedings would be set aside without further reference to the court.

Conclusion:

The court disposed of the writ petitions by keeping the impugned proceedings in abeyance, subject to the outcome of the SLPs pending before the Supreme Court. The court clarified that this order pertains specifically to the benefit under Section 80P of the Income Tax Act and does not preclude the Revenue from proceeding against the petitioners on other issues. The petitions were disposed of without any order as to costs, and the connected miscellaneous petitions were closed.