Wp/4840/2020 Of Swarna Souharda Credit Co-Operative Ltd v. Commissioner Of Income Tax (Appeals)

IN THR HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 3 DAY OF MARCH 2020 BEFORE| THR HON BLE MR.JUSTICE S. SUNIL DUTT YADAV .WRIT PETITION No.4840/2020 (TIT) Between: owarna Souharda Credit Co-operative Ltd.Karkera Towers,Kannangaru Bypass, Padubidri, Udupi Taluk,Udupi District —- 974 111.Rep. by its Secretary ©Mr.Bhaskar N. Amin | ... Petitioner. (By Sri Mahesh R. Uppin, Advocate) And 1.|Commissioner of Income Tax (Appeals)Aayakar Bhavan,C.R.Building, N.G.Road,Attavara,Mangaluru- 975 OO1.Aayakar Bhavan,C.R.Building, N.G.Road,Attavara,Mangaluru- 975 OO1. 2.|Income Tax Officer, Ward-3, Aayakar Bhavan, Adi-Udupi, Malpe Road,Udupi- 976 103.Udupi- 976 103. ... Respondents| (By Sri Jeevan J. Neeralgi, Advocate) This Writ Petition is filed under Articles 226 & 227of the Constitution of India, praying to quash theAssessment Order dated 15.12.2019 passed in OrderNo.ITBA/AST/S/143(3)/2019-20 /1022367068(1)passedby the second respondent vide Annexure-‘A’ or in thealternative quash the notice dated 13.02.2020 issued bythe R? marked as Annexure-F and etc. | This Writ Petition coming on for hearing this day, the Court made the following: ORDER The petitioner is a credit Co-operative Societyregistered under the provisions of Karnataka Souhardasahakari Act, 1997. The petitioner is engaged in thebusiness of providing credit facilities to its members fortheir financial needs. | 2 |It is stated that the petitioner had filed its|return of income for the Assessment Year 2017-2018|declaring an amount of Rs.16,608,26//- as being profitsand gains of its business after having claimed deductionof Rs.16,54,031/- under Section 8O0P of the Income TaxAct, 1961 (“the Act”, for short). 3.|It|1Sfurthersubmitted that|in.theassessment proceedings, the second respondent has—disallowed deduction with respect to interest oninvestment of Rs.13,72,228/- and has also disallowedthe provision for interest payable on deposits and hasmade certain additions. It is held that no deduction|could be allowed under Section SOP of the Act on the'eround that the petitioner has transacted with nominalmembers and that its interest on investments was!taxable under the head ‘Income from other Sources’. © 4As|againsttheassessment|Orderanddemand notice, the petitioner has preferred an appealbefore the first respondent under Section 246-A of theAct and has also filed an application for stay of thedemand. | 5The petitioner has filed an application undersection 220(6) of the Act requesting to Keep the demand of tax in its entirety in abeyance till dispose of appeal bythe first respondent. 6. It is submitted that the Assessing Authorityas per the order at Annexure-‘F’ has stated that thequestion of considering the application for stay ofdemand could be considered only if 20% of the totaldisputed demand is paid, failing which, coercive stepswill be taken tor collection of demand outstandingwithout giving any further opportunity. [|The petitioner submits that the profits ofpetitioner—Society is eligible for deduction under SectionS8OP(2)(a)(1) of the Income Tax Act, 1961 (‘1.T. Act’ forbrevity). It is further submitted that the petitioner’sassessment was concluded allowing the benefit ofdeduction as contemplated under Section 80P of the I.T.Act for the year 2014-2015, which was howeverreopened by the Department under Section 263 of theI.T. Act on the ground that the original assessment order was prejudicial to the interests of Revenue andfresh assessment proceedings were initiated. 8.|It is submitted that the entire sum otfRs.16,94,031/- that was permitted as deduction underSection SOP of the [.T. Act on the earlier occasion was|now treated as ‘income from other source’ and was/brought under the purview of tax as per the order dated15.12.2019 and subsequently the demand notice cameto be raised. order was prejudicial to the interests of Revenue andfresh assessment proceedings were initiated. 8.|It is submitted that the entire sum otfRs.16,94,031/- that was permitted as deduction underSection SOP of the [.T. Act on the earlier occasion was|now treated as ‘income from other source’ and was/brought under the purview of tax as per the order dated15.12.2019 and subsequently the demand notice cameto be raised. QO It is submitted that the petitioner haspreferred an appeal before respondent No.l undersection 246A of the I.T. Act, which is pending disposal.It is further submitted that the application for stay ofdemand was made before respondent No.2 and therespondent No.2 as per the order at Annexure-F has.declined to consider the petition for stay by orderingthat the petitioner had to pay 20% of the demand and as such demand was not met, the application wasrejected. 10.|The petitioner has challenged the said orderat Annexure-F and has raised various contentions on|merits of the matter, including that the income that isderived from fixed deposit is allowed as permissiblededuction and reliance is placed on the judgment of this Court in the case otfM/s.Guttigedarara Credit Co-operative Society Ltd.Vi.The Income Tax officer (ITA No.29/2015 disposed off on 9.6.2015)TO |contend that a wide meaning ought to be assigned tothe word ‘attributable to’ as found in the said Section|(Section 8OP of I.T. Act). 1] .Learned counsel appearing for respondents.would however contend that the appeal is still pendingadjudication and the order that is passed is a reasonedorder. Once the application for stay has been disposedoff on the ground that 20% deposit of the demand as required has not been made as per the Circular No.1914.as modified by subsequent circular No.F 404/72/93,.the assessee has a right to approach the jurisdictionalAdministrative Principal Commissioner of Income Tax(PCIT)/ Commissioner of Income Tax (CIT) for review ofdecision of the officer. This is in light of the fact thatSenior Administrative Officer has been conferred with|power to look into the imposition of condition relating todeposit. This Court in the order dated 23.02.2017.passed in W.P.No.1339-1342/2017 at para-16 hasfurther observed that PCIT 1s also to examine as to'whether the grounds as made out by the assessee thatassessment|1S“unreasonablyhighpitched”OTtherequirement of deposit would lead to genuine hardshipbeing caused to the assessee. 12.In light of the procedure that is provided forin the circular referred to above and noting that in thepresent case the application for stay has been rejected primarily on the inability of the petitioner to havedeposited 20% of the demand, keeping all thecontentions open, the petitioner is at liberty to explorethe procedure provided for under the circular byapproaching the Administrative Senior Authority asprovided for in the circular and seek for review of theorder including the direction relating to deposit andPCIT/CIT would dispose of the said application of thepetitioner, if made within a period of one week from thedate of release of this order expeditiously. — 13.)ori Jeevan J. Neeralgi, the learned standingcounsel appearing for respondents submits that afteraffording an opportunity of hearing to the petitioner onthe application to be submitted by him, necessaryorders would be passed within a period of two weeks ofreceipt of the representation of the petitioner. © 14.|During this whole process, it is needless to state that no coercive measures would be taken to' recover the demand which is a matter still pending consideration. It is also open for the Appellate| Authority to dispose of the appeal expeditiously. subject to the above, this petition isdisposed off Np/- Sd/- JUDGE|