Dated This The 10[Th] Day Of September, 2021 v. Wp(C)

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS FRIDAY, THE 10 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 : 1INCOME TAX OFFICER, NATIONAL FACELESS ASSESSMENT CENTRE, INCOME TAX DEPARTMENT, 2ND FLOOR, E-RAMP, JAWAHARLAL NEHRU STADIUM, NEW DELHI-110 002 2THE PRINCIPAL COMMISSIONER OF INCOME TAX,KOZHIKODE-673 001KOZHIKODE-673 001 AAYAKAR BHAVAN, NORTH BLOCK, MANANCHIRA, SRI.CHRISTOPHER ABRAHAM, SC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON10.09.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: BECHU KURIAN THOMAS, J. ------------------------------------ W.P.(C) No.17730 of 2021 -------------------------------------- Dated this the 10[th] day of September, 2021 JUDGMENT Petitioner challenges the order of assessment for the year2018-19. The reasons for invoking the jurisdiction of this Court underArticle 226 of the Constitution of India for challenging an order ofassessment is twofold- violation of the principles of natural justice andfailure to apply the law laid down by the Supreme Court. 2. Petitioner is a primary agricultural credit co-operativesociety 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 deductionunder section 80P of the Income Tax Act 1963 (for short the Act) whenExt. P2, draft assessment order was issued to the petitioner. However,ignoring the objection dated 28.07.2021 filed by the petitioner to the draftassessment order, the first respondent completed the assessment asproposed in the draft assessment order. According to the petitioner, theassessing officer had erroneously held that petitioner had not filed itsobjection. It was also alleged that the procedure adopted was contrary to the provisions contained under section 144B of the Act. It was furtherpleaded that recently, a Division Bench of this court had, in W.A. No.753of 2021, set aside the order of a learned single Judge refusing to quashan assessment order on almost identical grounds pleaded. According tothe counsel for the petitioner, the present case squarely falls within thecategory of cases where this Court can interfere in exercise of thediscretionary jurisdiction under Article 226 Constitution of India. 3. I have heard Adv. Arun Raj S., the learned counsel for thepetitioner as well as Adv. Christopher Abraham, the learned standingcounsel 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 authoritycannot go behind the classification accorded to the society under the Co-operative Societies Act and merely because the word ‘bank’ is included inthe name of the society, the same would not be sufficient to deprive aprimary agricultural credit society of the benefits of deduction underSection 80P of the Act. 5. In the impugned assessment order, the assessing officerproceeded to find that the assessee had not produced any relevantdocumentary evidence relating to the objects of the Society as a service co-operative agricultural bank. It was also found that the assessee failedto discharge its primary onus to bring evidence in support of the claimabout the fund deployment for the purpose of agricultural loan to itsmembers to be a PACS in the light of Kerala Co-operative Societies Act,1969. The aforesaid conclusion of the assessing officer is directlycontradictory to the dictum laid down by the Supreme Court in Mavilayi’sCase. 5. In the impugned assessment order, the assessing officerproceeded to find that the assessee had not produced any relevantdocumentary evidence relating to the objects of the Society as a service co-operative agricultural bank. It was also found that the assessee failedto discharge its primary onus to bring evidence in support of the claimabout the fund deployment for the purpose of agricultural loan to itsmembers to be a PACS in the light of Kerala Co-operative Societies Act,1969. The aforesaid conclusion of the assessing officer is directlycontradictory to the dictum laid down by the Supreme Court in Mavilayi’sCase. 6. Further, it is seen from a reading of paragraph 4 of theimpugned assessment order that the assessing officer proceeded toconsider the case of the assessee on an assumption that the assesseehad not filed any reply to the show cause notice issued to it. Petitionerclaims that it had filed Ext.P3 objection dated 26-07-2021 to the draftassessment order dated 23-07-2021, which is produced as Ext.P2. Areading of Ext.P2 reveals that the assessing officer directed the petitionerto submit its response by 23.59 hours on 28-07-2021. Contrary to thefindings in the assessment order mentioned earlier, it is seen from Ext. P4acknowledgement from the Income tax department itself that theDepartment received petitioner’s reply along with relevant case law as aresponse on 28-07-2021. Thus there is merit in the petitioner’s contentionthat the impugned order is bad on account of violation of the principles ofnatural justice. 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 ofassessment and relegated the assessee to the remedy of a statutoryappeal. However in appeal, noticing that the assessing officer had failedto apply the law laid down by the Supreme Court in Mavilayi’s Case, theDivision Bench set aside the order of the learned single Judge andquashed the assessment order and directed the assessing authority toredo the assessment. The assessment order is liable to be set aside onthe aforesaid reason also since the assessing officer had clearly failed toapply the dictum laid down Mavilayi’s Case. 8. In view of the above, Ext.P5 order of assessment for theyear 2018-19 is quashed and the first respondent is directed to re-do theassessment of the petitioner society for the said assessment year afreshafter issuing notice to the petitioner and after affording him an opportunityof being heard. It is made clear that this Court has not rendered anyopinion on the merits of the matter and that all contentions on merits areleft open to the assessee to be canvassed before the assessing authorityat the time of the hearing. Needless to say the assessing authority shalltake steps to complete the assessment order as directed above taking 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 thisjudgment. This writ petition is allowed as above. Sd/-JUDGE BECHU KURIAN THOMAS RKM APPENDIX OF WP(C) 17730/2021 PETITIONER'S EXHIBITS: Exhibit P1TRUE 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 P2TRUE 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 P3TRUE 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 P4TRUE 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 This writ petition is allowed as above. Sd/-JUDGE BECHU KURIAN THOMAS RKM APPENDIX OF WP(C) 17730/2021 PETITIONER'S EXHIBITS: Exhibit P1TRUE 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 P2TRUE 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 P3TRUE 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 P4TRUE 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 P5TRUE COPY OF THE ASSESSMENT ORDER DATED 30.7.2021 U/S. 143930 R.W.S. 144B OF THE ITACT ISSUED BY THE 1ST RESPONDENT FOR THE AY2018-1930.7.2021 U/S. 143930 R.W.S. 144B OF THE ITACT ISSUED BY THE 1ST RESPONDENT FOR THE AY2018-19 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