Reopening of assessment u/s 147 - Notice issues u/s 148 kept in abeyance since the issue of Deduction u/s u/s 80P(2)(a)(i) is pending before the Apex Court

2019 (7) TMI 389 - MADRAS HIGH COURT

2019 (6) TMI 1098 - MADRAS HIGH COURT

2016 (8) TMI 560 - MADRAS HIGH COURT

The issue involves, interpretation of Section 80P (2) (a) (i) read with 80P (4).

As per the revenue, "as per Section 80P (4), the benefit under Section 80P cannot be extended to any cooperative Bank other than a primary agricultural credit society. The assessee cannot be treated as a credit society for the loan advanced to non-agricultural purposes and so the assessee societies are not entitled for the benefit under Section 80P (2) (a) (i) read with 80P (4)."

In its decision, the High Court [2016 (8) TMI 560 - MADRAS HIGH COURT] while allowing the deduction has held that:

"The appellate authority, namely, the Commissioner of Income Tax (Appeal) and the Income Tax Appellate Tribunal has clearly held that the assessees are not co-operative bank and that their activities in the nature of accepting deposits, advancing loans etc., carried on by the assessees are confined to its members only and that too in a particular geographical area. Therefore, the respondent Societies are eligible for deduction under Section 80P (2) (a) (i) of the Act. The contention of the appellants that the members of the assessee societies are not entitled to receive any dividend or having any voting right or no right to participate in the general administration or to attend any meeting etc., because they are admitted as associate members for availing loan only and was also charging a higher rate of interest at the rate of 14%, is not a ground to deny the exemption granted under Section 80P (2)(a) (i) of the Act."

Revenue has taken the matter before the Apex Court and SLP is still pending.

Since the revenue is not in agreement with the decision of HC as above, Revenue re-opened the assessment u/s 147 and issued notices u/s 148 to various co-operative societies claiming deduction u/s 80P in the similar circumstances. 

These assessee, filed writ petitions before the HC, since no stay was granted by the Hon'ble Supreme Court hence prayed to quash the notice issued u/s 148 for reassessment. 

In this matter, HC [2019 (6) TMI 1098 - MADRAS HIGH COURT] observed that:

"15. Be that as it may, as of today, there is no disputation that the aforesaid order of Hon'ble Division Bench has neither been stayed nor reversed. Therefore, it holds the field.

16. Though this could be the end of the matter and this Court would have been inclined to set aside the impugned notices, this Court takes a slightly different view owing to the second submission made by learned counsel, which is a crucial aspect of the trajectory of the hearing today.

x x x x x x x

21. In the light of the narrative supra, the following order is passed:

a) All the five impugned notices 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 aforesaid order of Hon'ble Division Bench of this Court particularly order dated 02.08.2016 in Tax Case Appeal Nos.484-487 and 490 of 2016.

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 the aforesaid 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) Though obvious, it is made clear that 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 the High Court, all the five impugned notices will stand set aside without further reference to this Court."

Therefore,

For the co-operative societies who have filed writ petitions before the HC to quash the notices issued u/s 148 has to wait till the hon'ble Supreme Court decide the matter which is pending before it as discussed above.

In case, the decision comes in favor of assessee, notices for reassessment will be quashed automatically. However, if the decision of Apex Court comes in favor of Revenue, the reassessment proceedings would revive and to be proceeded further. 

Full Text:

2019 (7) TMI 389 - MADRAS HIGH COURT

2019 (6) TMI 1098 - MADRAS HIGH COURT

2016 (8) TMI 560 - MADRAS HIGH COURT