ITAT Restores Co-op Society’s Appeal, Orders Fresh Hearing on Rs.1.1 Cr 80P Deduction Denial [Read Order]

The Income Tax Appellate Tribunal (ITAT) Panaji Bench has set aside an ex parte order against The Mercantile Co-op Credit Society Ltd., directing the Commissioner of Income Tax (Appeals) [CIT(A)] to re-examine the denial of Rs.1.1 crore deduction under Section 80P of the Income Tax Act, 1961. The Panaji bench ruled that the cooperative society deserved another opportunity to present its case, emphasizing principles of natural justice.

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The Belagavi-based credit society had filed its return for assessment year 2017-18 declaring nil income after claiming Rs.1.10 crore deduction under Section 80P, which provides tax relief to cooperative societies. The Assessing Officer (AO) rejected the claim during scrutiny, additionally adding Rs.80.33 lakh as unexplained cash credits under Section 68, resulting in a total assessed income of Rs.1.91 crore. The CIT(A) later upheld partial additions through an ex parte order after the society failed to respond to multiple hearing notices.

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The ITAT noted that while the CIT(A) had issued proper notices, the society's non-appearance might have been due to unavoidable circumstances. Pavan Kumar Gadale ( Judicial Member) and GD Padmashali (Accountant Member) observed that the merits of the case warranted reconsideration, particularly regarding the Section 80P deduction eligibility and Section 68 additions. The tribunal condoned a 359-day delay in filing the appeal, accepting the society's affidavit explaining the reasons.

The ITAT remanded the matter back to the CIT(A) with directions to grant the cooperative society a fresh hearing opportunity. The bench clarified that the society must actively participate in proceedings and submit required evidence for early resolution. The appeal was allowed for "statistical purposes," meaning the case will be re-adjudicated without prejudice to either party.

The ruling provides relief to the credit society, which now gets a chance to substantiate its tax claims before the appellate authority. The ITAT's intervention underscores the judiciary's role in ensuring fair hearing opportunities, even in cases of procedural lapses by taxpayers. The fresh proceedings will specifically examine whether the society qualifies for Section 80P benefits and the validity of cash credit additions made during original assessment.

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