2021 (4) TMI 459 - AT - Income Tax

Denial of deduction under section 80P(2)(a)(i) - assessee being a bank is not entitled for deduction under section 80P(2)(a)(i) of the Act by placing reliance on the judgment of Citizen Co-operative Society Ltd 2017 (8) TMI 536 - SUPREME COURT -.HELD THAT - The issue is squarely covered in case of M/S. SAPTAGIRI PATTINA SOUHARDA SAHKARI NIYAMITHA 2020 (2) TMI 155 - ITAT BANGALORE wherein held that entities registered under the Karnataka Souharda Sahakari Act, 1997 fit into the definition of co-operative society as enacted in sec.2(19) of the Income Tax Act, 1961, and therefore, subject to all just exceptions, petitioners are entitled to stake their claim for the benefit of sec.80P - Decided in favour of assessee.

Summary

Issues Involved:
1. Justification of the CIT(A) order.
2. Denial of deduction under section 80P(2)(a)(i).
3. Requirement of AO to record reasons under section 148.
4. Validity of action under section 147 beyond four years.
5. Additional grounds of appeal.

Issue-wise Detailed Analysis:

1. Justification of the CIT(A) Order:
The assessee challenged the CIT(A)'s order, arguing it was not justified in law or on facts. The Tribunal did not provide a separate analysis on this issue, focusing instead on specific grounds related to deductions and procedural matters.

2. Denial of Deduction Under Section 80P(2)(a)(i):
The primary issue was the denial of deduction under section 80P(2)(a)(i) of the Income Tax Act. The CIT(A) had denied this deduction, considering the appellant not a Co-operative Society entitled to such benefits. The Tribunal referred to previous judgments, including the Karnataka High Court's decisions in Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITO and PCIT vs. Totagars Co-operative Sale Society. The Tribunal noted the need to examine whether the funds deposited in the bank were from the assessee's own funds or liabilities. The Tribunal restored the matter to the CIT(A) for fresh examination in light of these judgments and the Supreme Court's decision in Citizen Co-operative Society Ltd. vs. ACIT.

3. Requirement of AO to Record Reasons Under Section 148:
The assessee argued that the AO must record reasons as per section 148(2) before issuing any notice under section 148. The AO had not provided written reasons despite a formal request, which the assessee claimed invalidated the notice and assessment order. The Tribunal did not address this issue separately, as it was not pressed during the hearing.

4. Validity of Action Under Section 147 Beyond Four Years:
The assessee contended that the AO wrongfully initiated action under section 147 beyond four years from the end of the relevant assessment year without satisfying the first proviso's requirements. This argument was not pressed during the hearing and was dismissed accordingly.

5. Additional Grounds of Appeal:
The appellant reserved the right to add, alter, substitute, or delete any grounds of appeal. The Tribunal focused on the primary issues presented and did not address additional grounds separately.

Conclusion:
The Tribunal allowed the appeals, directing the CIT(A) to re-examine the facts concerning the deduction under section 80P(2)(a)(i) in light of relevant judicial precedents. The Tribunal's decision emphasized ensuring the proper application of the law and providing adequate opportunity for both parties to present their cases.