2024 (8) TMI 556 - HC - Income Tax

Deduction u/s 80P(2)(d) - interest received from the Co-operative Banks - in the absence of Return u/s 139(4), benefit of Section 80P(2)(d) of the Act will not available to the petitioner - as submitted petitioners have neglected assessment in as much as neither filed their Returns nor participated in the proceedings after the notices were issued u/s 148 and thus, the respective impugned orders have been passed. HELD THAT - The Court is of the view that the final issue relating to the availability of exemption under Section 80P(2)(d) of the Act, cannot be decided under Article 226 of the Constitution of India. In these cases, no doubt the petitioners have neglected. However, the petitioners do deserve one more opportunity to went out their grievances in the re-assessment proceedings. Therefore, the cases are remitted back to the respondent to pass fresh orders on merits and in accordance with law from the stage of show cause notice after the issuance of Section 148 notices to the respective petitioners, since the petitioners have neglected by not filing of Return both at the stage of filing of regular Return under Section 139(4) of the Act and have not participated in the proceedings, despite the service of the respective show cause notices through post to the respective petitioners. Since the respective petitioners have neglected and did not comply with the requirements of the Act, under new regime, the respective petitioners are directed to pay a sum of Rs. 10,000/- each to the credit of Siddha Centre, Madura within a period of 15 days from today. It is made clear that the petitioner shall participate in the de-novo proceedings and co-operate with the respondent. The impugned orders, which stand quashed, shall be treated as addendum to the respective show cause notices issued to the respective petitioners.

Summary

Issues:
1. Entitlement to deduction under Section 80P(2)(d) of the Income Tax Act, 1961.
2. Compliance with filing regular Returns under Section 139(4) of the Act.
3. Failure to participate in proceedings initiated against the petitioners.
4. Non-compliance with mandatory requirements under Section 144B of the Act.
5. Neglect of assessment by the petitioners.
6. Availability of exemption under Section 80P(2)(d) of the Act.
7. Direction for fresh orders and payment of penalty.

Entitlement to deduction under Section 80P(2)(d) of the Income Tax Act, 1961:
The petitioners, Primary Agricultural Co-operative Credit Societies, claimed entitlement to deduction under Section 80P(2)(d) of the Act based on interest received from Co-operative Banks. They argued that their Auditors' failure to file regular Returns led to notices under Section 148A(d) and subsequent orders under Section 148 of the Act. The petitioners contended that they deserved the benefit under Section 80P(2)(d) and raised concerns about non-compliance with Section 144B of the Act.

Compliance with filing regular Returns under Section 139(4) of the Act:
The petitioners blamed their Auditors for not filing regular Returns under Section 139(4) of the Act, leading to notices and subsequent orders. The respondent argued that the petitioners deliberately failed to file Returns, which impacted their eligibility for the benefit under Section 80P(2)(d) of the Act.

Failure to participate in proceedings initiated against the petitioners:
Despite receiving notices and filing Returns, the petitioners failed to participate in the proceedings initiated against them. The petitioners attributed this to their Auditors' failure to assist them, while the respondent highlighted the petitioners' neglect of assessment by not participating in the proceedings.

Non-compliance with mandatory requirements under Section 144B of the Act:
The Court referred to a previous decision emphasizing the importance of complying with Section 144B of the Act, which outlines the procedure for Draft Assessment Orders. The Court noted that overlooking safeguards under this provision could lead to quashing of orders and remitting cases for fresh assessment.

Neglect of assessment by the petitioners:
The Court acknowledged that the petitioners had neglected their obligations, including filing Returns and participating in proceedings. However, the Court granted the petitioners another opportunity to address their grievances in re-assessment proceedings, emphasizing the need for compliance with legal requirements.

Availability of exemption under Section 80P(2)(d) of the Act:
The Court held that the final issue regarding the availability of exemption under Section 80P(2)(d) of the Act could not be decided under Article 226 of the Constitution. Despite the petitioners' neglect, the Court remitted the cases for fresh orders to be passed on merits and in accordance with the law.

Direction for fresh orders and payment of penalty:
The Court directed the petitioners to pay a specified sum and participate in the de-novo proceedings. Failure to comply would allow the respondent to take further action based on available records. The impugned orders were quashed, and the petitioners were instructed to file a consolidated reply within a specified timeframe.

In conclusion, the judgment addressed various issues related to the petitioners' entitlement to deductions, compliance with legal requirements, neglect of assessment, and the need for fresh orders to be passed. The Court emphasized the importance of following procedural safeguards and directed the petitioners to fulfill their obligations within the specified timelines.