Bombay HC Grants Interim Relief to Co-operative Credit Society, Restrains Coercive Recovery in Section 80P Deduction Disallowance Dispute [Read Order]

The Bombay High Court at Goa granted interim relief to Janaseva Urban Cooperative Credit Society Limited and restrained the Income Tax Department from taking coercive recovery measures in the assessment order passed for the Assessment Year (AY) 2019–2020.

The petitioner, a cooperative credit society, approached the Court challenging the assessment order where the Assessing Officer (AO) had disallowed a deduction claim of ₹32,16,371 under Section 80P of the Income Tax Act, 1961, and proposed to add the same amount as business income.

The assessment order further recorded that, upon verification of the e-filing portal, the assessee had not filed its return of income for AY 2019–2020 despite having engaged in transactions amounting to ₹8,63,55,868, comprising cash deposits, time deposits, and interest income received from banks. It was observed by the AO that the income arising from such transactions had not been offered to tax as required under the provisions of the Act.

The assessee submitted that there was no conclusive finding in the assessment order to show that the entire amount of ₹8,63,55,868 constituted the petitioner’s income, rather, the total income was assessed only at ₹32,21,371, while in the computation sheet, the income from other sources was incorrectly shown as ₹.8,95,72,239, which was inconsistent with the findings recorded in the assessment order itself. This revealed serious discrepancies in computation and made the resultant demand unsustainable.

It was further pointed out that an amount of ₹23,49,186 had already been recovered by the Department from the petitioner, which was substantially higher than what would be due even if the entire tax liability were computed on the assessed income of ₹32,00,000.

The petitioner also relied upon Clause 4 of the CBDT Circular 29/02/2016, which directs that no coercive steps should be taken where the assessee has paid 20% of the disputed demand during the pendency of appeal proceedings.

The Division Bench comprising Justices M.S. Karnik and Nivedita P. Mehta directed that no coercive steps shall be taken against the petitioner in respect of the assessment order for AY 2019–2020.

The Court further observed that the petitioner’s request to operate its bank accounts would be considered on the next date after hearing the respondents.

Accordingly, notice was issued to the respondents, and the matter was adjourned for further consideration. The Court’s interim protection ensured that the cooperative credit society would not face any coercive recovery actions pending a fuller examination of the discrepancies in the assessment and the petitioner’s entitlement under Section 80P.

The assessee was represented by Rahul Sarda along with Eesha Dukle, Neha Shirodkar, and Gaurang Panandikar, while Purshottam Karpe appeared for the Revenue.

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