The Ezhome Service Co-Operative ... vs Income Tax Officer
2021 Latest Caselaw 18842 Ker

           IN THE HIGH COURT OF KERALA AT ERNAKULAM
                              PRESENT
        THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS
   FRIDAY, THE 10TH DAY OF SEPTEMBER 2021 / 19TH BHADRA, 1943
                    WP(C) NO. 17730 OF 2021
PETITIONER :

          THE EZHOME SERVICE CO-OPERATIVE BANK LTD
          NO.C - 1508,
          P.O.EZHOME, KANNUR-670 334, REPRESENTED BY ITS
          SECRETARY VENU.E.

          BY ADV S.ARUN RAJ



RESPONDENTS :

    1     INCOME TAX OFFICER,
          NATIONAL FACELESS ASSESSMENT CENTRE,
          INCOME TAX DEPARTMENT, 2ND FLOOR,
          E-RAMP, JAWAHARLAL NEHRU STADIUM,
          NEW DELHI-110 002

    2     THE PRINCIPAL COMMISSIONER OF INCOME TAX,
          AAYAKAR BHAVAN, NORTH BLOCK, MANANCHIRA,
          KOZHIKODE-673 001

          SRI.CHRISTOPHER ABRAHAM, SC



     THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON
10.09.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
 WP(C) NO. 17730 OF 2021
                                     2

                     BECHU KURIAN THOMAS, J.
                        ------------------------------------
                        W.P.(C) No.17730 of 2021
                       --------------------------------------
                Dated this the 10th day of September, 2021

                               JUDGMENT

Petitioner challenges the order of assessment for the year

2018-19. The reasons for invoking the jurisdiction of this Court under

Article 226 of the Constitution of India for challenging an order of

assessment is twofold- violation of the principles of natural justice and

failure to apply the law laid down by the Supreme Court.

2. Petitioner is a primary agricultural credit co-operative

society registered under the Kerala Co-operative Societies Act 1967.

Relying upon the decision of the Supreme Court in Mavilayi Service Co-

operative Bank Ltd. and Others v. Commissioner of Income Tax,

Calicut and Others [2021] 431 ITR 1 (SC), petitioner claimed deduction

under section 80P of the Income Tax Act 1963 (for short the Act) when

Ext. P2, draft assessment order was issued to the petitioner. However,

ignoring the objection dated 28.07.2021 filed by the petitioner to the draft

assessment order, the first respondent completed the assessment as

proposed in the draft assessment order. According to the petitioner, the

assessing officer had erroneously held that petitioner had not filed its

objection. It was also alleged that the procedure adopted was contrary to WP(C) NO. 17730 OF 2021

the provisions contained under section 144B of the Act. It was further

pleaded that recently, a Division Bench of this court had, in W.A. No.753

of 2021, set aside the order of a learned single Judge refusing to quash

an assessment order on almost identical grounds pleaded. According to

the counsel for the petitioner, the present case squarely falls within the

category of cases where this Court can interfere in exercise of the

discretionary jurisdiction under Article 226 Constitution of India.

3. I have heard Adv. Arun Raj S., the learned counsel for the

petitioner as well as Adv. Christopher Abraham, the learned standing

counsel for the respondents.

4. As per the decision in Mavilayi Service Co-operative

Bank and Others v. Commissioner of Income Tax, Calicut and Others

[2021] 431 ITR 1 (SC) : (2021 (1) KLT 485), the income tax authority

cannot go behind the classification accorded to the society under the Co-

operative Societies Act and merely because the word 'bank' is included in

the name of the society, the same would not be sufficient to deprive a

primary agricultural credit society of the benefits of deduction under

Section 80P of the Act.

5. In the impugned assessment order, the assessing officer

proceeded to find that the assessee had not produced any relevant

documentary evidence relating to the objects of the Society as a service WP(C) NO. 17730 OF 2021

co-operative agricultural bank. It was also found that the assessee failed

to discharge its primary onus to bring evidence in support of the claim

about the fund deployment for the purpose of agricultural loan to its

members to be a PACS in the light of Kerala Co-operative Societies Act,

1969. The aforesaid conclusion of the assessing officer is directly

contradictory to the dictum laid down by the Supreme Court in Mavilayi's

Case.

6. Further, it is seen from a reading of paragraph 4 of the

impugned assessment order that the assessing officer proceeded to

consider the case of the assessee on an assumption that the assessee

had not filed any reply to the show cause notice issued to it. Petitioner

claims that it had filed Ext.P3 objection dated 26-07-2021 to the draft

assessment order dated 23-07-2021, which is produced as Ext.P2. A

reading of Ext.P2 reveals that the assessing officer directed the petitioner

to submit its response by 23.59 hours on 28-07-2021. Contrary to the

findings in the assessment order mentioned earlier, it is seen from Ext. P4

acknowledgement from the Income tax department itself that the

Department received petitioner's reply along with relevant case law as a

response on 28-07-2021. Thus there is merit in the petitioner's contention

that the impugned order is bad on account of violation of the principles of

natural justice.

WP(C) NO. 17730 OF 2021

7. In this context, it is relevant to refer to the Division Bench

Judgment of this Court in W.A. No. 753 of 2021 (Poonjar Service Co-

operative Bank Ltd. v. Income Tax Officer). In the afore cited judgment,

the learned single Judge had refused to interfere with an order of

assessment and relegated the assessee to the remedy of a statutory

appeal. However in appeal, noticing that the assessing officer had failed

to apply the law laid down by the Supreme Court in Mavilayi's Case, the

Division Bench set aside the order of the learned single Judge and

quashed the assessment order and directed the assessing authority to

redo the assessment. The assessment order is liable to be set aside on

the aforesaid reason also since the assessing officer had clearly failed to

apply the dictum laid down Mavilayi's Case.

8. In view of the above, Ext.P5 order of assessment for the

year 2018-19 is quashed and the first respondent is directed to re-do the

assessment of the petitioner society for the said assessment year afresh

after issuing notice to the petitioner and after affording him an opportunity

of being heard. It is made clear that this Court has not rendered any

opinion on the merits of the matter and that all contentions on merits are

left open to the assessee to be canvassed before the assessing authority

at the time of the hearing. Needless to say the assessing authority shall

take steps to complete the assessment order as directed above taking WP(C) NO. 17730 OF 2021

note of the judgment of the Supreme Court in Mavilayi's Case within an

outer time limit of six months from the date of receipt of a copy of this

judgment.

This writ petition is allowed as above.

Sd/-

BECHU KURIAN THOMAS JUDGE RKM WP(C) NO. 17730 OF 2021

APPENDIX OF WP(C) 17730/2021

PETITIONER'S EXHIBITS :

Exhibit P1 TRUE COPY OF THE DETAILED REPLY ALONG WITH THE DOCUMENT E-FILED BY THE PETITIONER IN RESPONSE TO NOTICE U/S. 142(1) OF THE IT ACT WITH E-ACKNOWLEDGMENT

Exhibit P2 TRUE COPY OF THE DRAFT ASSESSMENT ORDER DATED 23/7/2021 ISSUED U/S.144B OF THE ACT BY THE 1ST RESPONDENT FOR THE AY 2018-19

Exhibit P3 TRUE COPY OF THE REPLY/OBJECTION DATED 26.7.2021 TO THE DRAFT ASSESSMENT ORDER, E-FILED ON 28.7.2021 IN THE INCOME TAX WEBSITE

Exhibit P4 TRUE COPY OF THE ACKNOWLEDGMENT AND RESPONSE SHEET EVIDENCING THE FILING OF REPLY/OBJECTION TO EXHIBIT P2 DRAFT ASSESSMENT ORDER E-FILED ON 28.7.2021

Exhibit P5 TRUE COPY OF THE ASSESSMENT ORDER DATED 30.7.2021 U/S. 143930 R.W.S. 144B OF THE IT ACT ISSUED BY THE 1ST RESPONDENT FOR THE AY 2018-19

Exhibit P6 TRUE COPY OF THE JUDGMENT DATED 28.6.2021 PASSED BY THE DIVISION BENCH OF THIS HONOURABLE COURT IN WA NO.753 OF 2021