Itta/250/2022 Of The Prudential Co-Operative Bank Ltd v. Deputy Commissioner Of Income Tax

II [ [3386 ]I IN THE HIGH COURT FOR THE STATE OF TELANGANAAT HYDERABAD THURSDAY, THE THIRTY FIRST DAY OF AUGUSTTWO THOUSAND AND TWENTY THREE PRESENT THE HON'BLE SRI JUSTICE P.SAM KOSHY AND THE HON'BLE SRI JUSTICE LAXMI NARAYANA ALISHETTY INCOME TAX TRIBUNAL APPEAL No:25O of 2022 lncome Tax Tribunal Appeal Under Section 260 of the lncome Tax Act,1961against the order of the lncome Tax Appellate Tribunal, Hyderabad Bench ' B',Hyderabad in ITA No.101/Hydl2018, for assessment Year 2005-06 dated 17-08-2O22, preferrd against the Order of the Deputy Commissioner of lncome Tax Circle-2(3), Hyderabad, ITA No.DC-2(3yAABCT7077Jl2013-14, dated 17-O2-2O14,preferred against the Order of the Assistant Commissioner of lncome Tax, Circle-2(3), Hyderabad, PAN/GIR No. AABCT 7077 J I f -17 8, dated: 29-1 2-2008. Between: The Prudential Co-operative Bank Ltd, Rep., by its Official Liquidator, Smt. KAnitha, 8-1-381, R.P. Road, Secunderabad - 500003. ...Appellant AND Deputy Commissioner of lncome Tax, Circle - 2(3), Signature Towers, OppBotanical Gardens, Kondapur, Hyderabad - 500084. ...Respondent Counsel for the Appellant: SRI A"V. RAGHURAM Counsel for the Respondent: SRI SUNDARI [PISUPATI, ]Sr.SC FOR TAX DEPARTMENT The Court delivered the following: JUDGMENT I I,ONOT'RABLE SRI JUSTICE P.SAIII KOSM'ANDHON'BI,E SRI JUSTICE LIU(III NARAYANA ALISIIE]"TY INCC I{E TAX TRIBUNAL APPEAL NO.250 OF 2O2i" .IJDGMENT: (p r Hon'ble Si Justice Lotmi Naragaaa Alisha'ttA) The pre.;ent appeal has been liled under se,:tjon 260-A ofIncome Tax I ct, 1961 (for short, the "Act") assailing the orderpassed by Inc< me Tax Appellate Tribunal, Benc,h-B, H5de:abad (forshort "Tribunel") in ITA No.101/Hyd/2O18, dated -.7.O8.2O22 forthe Assessme nt Year 2005-06. Vide impugned orde,r, datedL7.O8.2O22, t re Tribunal dismissed the appeal filed by thepetitioner by o l;serving that there is no suflicicnt cause made outby ttre assesset to condone the delay and the reasons s lated for thedelay are not at. all relevant in so far as the apl)eal ci:ra.llenging ttreorder dated 1..08.2013 is concerned and dismissr:d the appealwithout going t rrough the merits of the appeal. 2. We have heard the learned counsel Sri .A..\'.RaghuramMurthy for the lppellant and the learned senior starrding counselfor the respondt'n t. 3. The brief ftrcts leading to hling of pres,:nt aopreal are asunder: 4. The appellant is a Co-operative Society, registered underMutually Aided Co-operative Societies Act, 1995 and is engaged inthe business of banking as licensed by Reserve Bank of India. Theappellant frled its returns for the Assessment Year 2O05-06 on2a.1O.2015, by admitting loss of Rs.9,O6,34,836/-. The return ofincome of the appellant was processed under Section 143(1) of theIncome Tax Act, 1961 (for short, 'the Act') on 31.12.2OO5 byaccepting the loss returned. Subsequently, the assessment wasreopened on the ground that tJle Reserve Bank of India (RBI)cancelled the appellant's banking license w.e.f. O4.12.2OO4 andaccordingly, notice under Section 148 of the Act was issued.Thereafter, the assessment proceedings were completed by therespondent under Section 143(3) read with Section 147 of the Act,on 29.l2.2OO8 by determining the income of the appellant atRs. 1O,48, 16,318/- and disallowed the claim of deduction underNon-Performing Asset (NPA) provision and further disallowed theclaim of under Section 8OP of the Act on the ground of cancellationof license of the appellant by RBI. 5. Th.e appellant hled Appeal before the Commissioner of [ncomeTax (Appeals) (for short, the Appellate CommissionerJ against theassessment order, dated 29.12.2OOa. The appellant contended thatappqJlant being a Co-operative Society engaged in the business of I l 5. Th.e appellant hled Appeal before the Commissioner of [ncomeTax (Appeals) (for short, the Appellate CommissionerJ against theassessment order, dated 29.12.2OOa. The appellant contended thatappqJlant being a Co-operative Society engaged in the business of I l banking and :arned the entire income up to 06. l2.2OO.l and afterO7.12.2OO4, [,tre ]appellant did not carry any banking activity.Therefore, de luction u/s. 80P of the Act is zrllowable tr t]re totalincome of co operative society engaged in the bushess [,rf ]bankingor of a co-rjperative society providing crt'dit facilitles to itsmembers. 6. The Ap6 ellate Commissioner vide his orcier daterl 27.01.2o10did not accep [r- ]the contentions of appellant [rvith ]r<:sp,:ct to theclaim of NPA Ceduction u/s. 8OP of the Act and rrk;o [.ralidit5r ]ofissuance of notice u/s. 148 of the Act and dismissed *re a,ppeal. 7, Aggrieve l by the same, the appellant filt'd ap1>e,el lrcfore theIncome Tax Al.,pellate Tribunal (ITAT) and the ITAT vide its orderdated 26. 1 1. ,)013 quashed the order of the AppellateCommissioner and allor'r,ed the appeal on the issue of validity ofissuance of no ice u/s. 148 of the Act. Aggrievt:d by th.e same, theDeputy Commi:;sioner of Income Tax (DCIT) hled app.:al before thisCourt vide ITTI No.4a7/2O14 and the same is pending. 8. In the meanwhile, the assessment of the appellant forAssessment Ye,:r 20O5-O6 was reopened by the Departrnent andnotice under Se ,:tion 148 of thc Act was issued ,tn 27.O3.2O12 andqrvd on the Official Liquidator of the appellant since t.Ileappellant was ur:tder liquidation and the respon(lent cornpleted the assessment by determining the income of the appellant atRs.32,66,86,90/ - and also disallowed interest expenditure ofRs.22,18,70,1751- by invoking provisions of Section 40a(ia) of theAct, on the ground that tax was not deducted at source.Rs.22,18,70,1751- by invoking provisions of Section 40a(ia) of theAct, on the ground that tax was not deducted at source. 9. The appellant before the Appellate Commissioner submittedthat the respondent disallowed the entire interest for the wholeyear and submitted upto the date of cancellation of banking licenseby RBI, the appellant was not required to deduct tax at source onpayment of interest. The Appellate Commissioner, uide order dated14.O8.2O 13 partly allowed the appeal with a direction torespondent to calculate the interest paid till 03.12.2OO4 .Thereafter, the Appellate Commissioner passed consequentialorder on 14.02.2014 observing that the appellant did not lilenecessary evidence as per the directions of the AppellantCommissioner and therefore, interest paid until 03.12.20O4 couldnot be calculated. Subsequently, the respondent passed theconsequential order on L7.O2.2O14 by determining tlte income ofthe appellant at 'NIL'. Thereafter, the respondent passed order on15.03.2017 under section 154 of the Act by rectirying theconsequential order, dated 14.02.2014, by determining the [total]income at Rs. 13,14,33,731l- and tax at Rs. [6,26,6O,7651-.] 10. After il came to know about the order oassel under Section154 of the ,\ct on 07.11.2017 and after seekinl3 advice of theCommissione : of Co-operative Societies and Tax '3ons':ltant, theappellant frle,1 Appeal before the Appellate Tribuna. cn I1.01.2018against the rrder of Appellate Commission,-'r dale(l I4.08.2013with a delay application. The Appellate Trii:unal, vidt: its orderdated 17.08.1',O22 in ITA No. 101/Hyd/2O18, rlismir;sr:d the appealon the groun( I of delay in filing the appeal. Aggriev,:d by the abovesaid order, dated 17.O8.2O22, appellant f-rled the present appeal. 10. After il came to know about the order oassel under Section154 of the ,\ct on 07.11.2017 and after seekinl3 advice of theCommissione : of Co-operative Societies and Tax '3ons':ltant, theappellant frle,1 Appeal before the Appellate Tribuna. cn I1.01.2018against the rrder of Appellate Commission,-'r dale(l I4.08.2013with a delay application. The Appellate Trii:unal, vidt: its orderdated 17.08.1',O22 in ITA No. 101/Hyd/2O18, rlismir;sr:d the appealon the groun( I of delay in filing the appeal. Aggriev,:d by the abovesaid order, dated 17.O8.2O22, appellant f-rled the present appeal. 11. lean red counsel for the appellant submits that despiteexplaining pL rusible reasons, the Tribunal d id nc,t condone thedelay and the:'eby dismissed the appeal. He lurther sutrmits thatthe Tribunal c rght not to have dismissed the appeal on the groundof technicalitir,s in spite of binding [judgments ]in thr casr: of SuryaGeneral Tradr r,rs va. Conmercial Tax OIIicer and othersl, orderdated 03.07.2(.04, as well as Honble Supreme Cour, in the case ofCollector, Lal rrd Acquisition vs. MST. Katiji and others2. Theappeal ought not to have becn dismissed on the: ground oflimitation, sinr'e the appellant has very good case on mr:rits. Hefurther submj :s that Appeltate Tribunal m sdire(tr(:d itsetf byincorrectly app lying the judgment of Hon'ble Sr rprerr e Corrrt in the ' rgsz [(:)arr ]rro\-'? 987) 167 trR 471 ( c) case of Esha Bhattacharjee vs. Mg.ComEit. of RaghunathpurNafara. 12. The learned counsel for the appellant submits that appellantwas under liquidation and the offrcial liquidator has been operatingthe Appellant Bank. In view of the order d,ated 17.O2.2O14, whereinthe tax stated to be 'T,{|L", they were under impression that nofurther action is required to be taken in the matter. The appellant,however, subsequently noticed that in the order dated L7.O2.2OL4,there was no reference to the earlier order, but received a letterdated 18.O3.2O17 directing the oflicial liquidator to payoutstanding amounts. [n response to the same, the ollicialIiquidator addressed a letter dated i7.03.2O17 to Assessing Officerrequesting to clarify as to how there was a demand for AssessmentYear 2OO5-O6 when as per the order, dated 17 .O2.2O14 thedemand was "NIL'. 13. The learned counsel for the appellant further submits that itappears that the Assessing Officer addressed a letter dated15.03.2017, but the same was not available in the records ofappellant. When the official liquidator appeared before theAssessing Officer on O7.ll.2ol7 in connection with notices forAssessment Years 20 14-15 and 2015-16, it [came ][to ][light ][from ]the---..'(zor*)lzsccoqs records of As:;essing Officer that in fact, a letter w:rs ad,lressed on15.03.2017 a:rd was served in the appellant rffice or1 11.O7.2017.Thereafter, tl:.e oflicial liquidator had obtairLed legz:l e.dvice andafter consulti:rg Commissioner of Co-operativt: Societies an appealwas filed on I 1..01.2O18 with delay of 1529 days. 14. l.earnec counsel for the appellant further submitted that theappellant is r r Co-operative bank under liqtLidation arrd as theofficial liquidalor was not conversant with the tax nra:ters and didnot take notr: of letter dated 15.03.2017 addressect by theAssessing Oflir:er and therefore could not take stel)s in time. Hewould further submit that a lenient view may be take n, since theappellant is bling officiated by ofhcial liquidalor and furlher, theappellalt has',ery good case on merits. He fur,.her contended thatif the appeal ir; rejected on technicalities of celay, the irppellantwould be depri,ed from contesting the matter on merit:;, urhich areclearly in favor rr of appellant. He also submits that the .rmountspayable to the lepositors of appellant bank are beinli 1;airl in pro-rata basis from the amounts that are being re< eived flom time totime and if the appeal is rejected at the threshold rvit.ho.:t goinginto the merits, it will have serious effect on the barrk as well asdepositors, who will be ultimate sufferers. 15. Per contra, learned standing counsel for respondent wouldsubmit that the impugned order is proper, sustainable as much asttre appellant failed to make out any case and also did not showvalid, proper reasons for condonation of inordinate delay of 1529days in frling the appeal. He further submitted tJlat there are clearlatches, default on the part of appellant and further, no case ismade out for condonation of delay and thus prayed for dismissal ofthe appeal. Coasideration: 16. It is an admitted fact that the license of appellant wascancelled by the RBI on 74.02.2014 and the appellant was underliquidation and is being operated by official liquidator and isresponsible for administrative and other activities concerning theappellant bank. The averments made in the allidavit that theoflicial liquidator did not notice the letter dated 15.O3.2O17addressed by Assessing Officer and that due to lack of knowledgeof income tax proceedings, the appeal could not be filed and thus,a delay of L529 days occurred in preferring the appeal, does notinspAe the confidence of this Bench. 17 . However, this Bench is concerned with the difficulty,injustice that may result to the depositors of the appellant-bank.To a query of this Bench [u'ith ]regard to refund of the amounts to i t the depositor s, the learned counsel for appellant infrrrmed theBench that tt e depositors are being paid their amorlnts [in ][pro-rata]basis from th:: amounts that are being received by the [i:alk ]fromtime to time. . n the above factual matrix, if tht: delay ,epplication isdismissed on the technicalities, the depositors woutd be put tofurther hardship for no fault of ttrem. On the olht:r hand, theconsequence ,f condone the delay would result in dec:iding theappeal on mer its by the Appellate Tribunal on its ou'n rnerits andno prejudice wrruld be caused to the respondents. 18. Consider ing the ordeal, plight of the depc,sitors and the hugeimpact that mrry have on the depositors, in consider,:d vir:w of thisBench, a syml,atJretic view has to be taken while cor-rsid':ring thedelay in prefen rng appeal.Conclusion: 19. In the ab rve factual matrix and circumstances, tfris Bench isinclined to con( one the delay of 1529 days in preferring the appealsubject to pa:,ment of costs of Rs.15,OOO/ - (Rupees hlteenthousand only) payable to the Secretary, S&lte Lr:g,el ServicesAuthority, withi:r a period of four weeks from today e.n,i nratter isremanded back to the Respondent for adjudicettion rr' merits inaccordance with law in expeditious manner. ,I \ l0 20.Accordingly, the present appeal is disposed ofNo order asto costs.to costs. Pending miscellaneous applications, if any, shall standclosed.closed. Sd/. K. SRINIVASA RAOJOINT REGISTRAR //TRUE COPY// SECOFFICER To, '1. The lncome Tax Appellate Tribunal, Hyderabad Bench ' B', Hyderabad 2. The Deputy Commissioner of lncome Tax Circle-2(3), Hyderabad, 3. The Assistant Commissioner of lncome Tax, Circle-2(3), Hyderabad, 4. One CC to SRI A.V. RAGHURAM MURTHY, Advocate 5. One CC to SRI SUNDARI R PISUPATI, Sr.SC FOR INCOME TAXDEPARTMENT DEPARTMENT 6. Two CD Copies kam 0 HIGH COUIRT DATED:31 ll$l2023 I[.4]SiTAT€Qr,, l.'|:)$1[sti][ u0]![c])+JUDGMENT'' - O,;p'6lC)' ITTA.No.25(t of 2022 DISPOSING OFTHE APPEAL GJ+,w--ilt*W