No Basis for Cooperative Bank Status: ITAT Restores Society Status and Remands Disallowance Matter [Read Order]

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) restored its status as a Cooperative Society under the Income Tax Act, 1961, and set aside the Assessing Officer’s (AO) classification of the bank as a Banking Company and remanded several disallowance issues related to tax deductions and provisions for fresh adjudication, citing inadequate verification by the authorities.

Raiganj Central Co-Operative Bank Ltd. (assessee) faced scrutiny for Assessment Years (AYs) 2014-15, 2015-16, and 2017-18. The assessee, a cooperative bank, filed its returns of income, declaring its status as a Cooperative Society.

Want a deeper insight into the Income Tax Bill, 2025? Click here

The AO reclassified the assessee as a Banking Company, invoking provisions of the Banking Regulation Act, 1949, and imposed Dividend Distribution Tax (DDT) under Section 115-O and interest under Section 115-P of the Income Tax Act.

Also Read: Income Tax Notice Dispatch Date Prevails Over Digital Signature Date: Delhi HC upholds Notice issued on Basis of SC Judgment [Read Order]

The AO made disallowances under Section 40(a)(ia) for non-deduction of Tax Deducted at Source (TDS) on expenses such as audit fees, vehicle hiring charges, and agents’ commissions, and under Section 36(1)(va) for delayed provident fund contributions.

Aggrieved by the AO’s orders, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) upheld the AO’s findings and dismissed the appeals on grounds of insufficient evidence and confirming the change in status and disallowances.

Aggrieved by the CIT(A)’s order, the assessee appealed to the ITAT challenging the status change, DDT imposition, and disallowances, citing prior favorable rulings in its own case for AYs 2007-08, 2009-10, and 2010-11.

Step by Step Guidance for Tax Audit & E-filing, Click Here

The two-member bench comprising Pradip Kumar Choubey (Judicial Member) and Rakesh Mishra (Accountant Member note) observed that the ITAT’s earlier orders for AYs 2007-08, 2009-10, and 2010-11, upheld by the Calcutta High Court, had confirmed the assessee’s status as a Cooperative Society.

The tribunal held that the AO’s reclassification lacked basis, as no cogent reasoning was provided for changing the status, and the issue had attained finality in prior rulings.

Also Read: Non Compliance to Income Tax Notices Due to Working in Saudi Arabia: ITAT Remands Rs.1.90 Cr Matter for Fresh Adjudication [Read Order]

The Tribunal further ruled that since the assessee was not a domestic company, the imposition of DDT under Section 115-O and interest under Section 115-P was invalid. On the disallowances under Section 40(a)(ia), the Tribunal observed that the assessee had submitted evidence, including TDS returns and tax audit reports, which the AO and CIT(A) failed to adequately consider. The bench remanded these issues to the AO for verification of TDS compliance, directing that disallowances be limited to cases where TDS was not deducted or deposited.

The Tribunal remanded the issue of a duplicate addition of Rs. 1,56,56,307 as provision for income tax, directing the AO to verify if it was already included in the returned income. The disallowance of provision on standard assets was also remanded to confirm eligibility under Section 36(1)(viia) of the Income Tax Act.

The appeal of the assessee partly allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates