High Court of KeralaSingle Judge2022-11-28Writ petitions allowed; assessment orders quash...

WP(C) Nos.34316/2022, 33413/2022 and 34334/2022; Cherthala Taluk Agricultural Credit Co-Operative Society; Uzhva Service Co-Operative Bank Ltd; Muttom Service Co-Operative Bank Ltd. v. Income Tax Officers, National Faceless Assessment Centre, and Commissioner of Income Tax (Appeals))

Case / Petition Number:WP(C) Nos.34316/2022, 33413/2022, 34334/2022

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: Gopinath P.
Judgment Date: 2022-11-28
Court Decision / Holding: Writ petitions allowed; the assessment orders under Ext.P1 in all three cases were quashed and the matters remanded to the National Faceless Assessment Centre for fresh consideration in accordance with law after affording the petitioners hearing and considering the cited judgments.
Final Disposition: Writ petitions allowed; assessment orders quashed; remanded to NCAC for fresh consideration with hearing and application of the cited judgments; expedited action encouraged; judgments to be applied to reassess under law.

Parties to the Case

Appellants / Petitioners

Cherthala Taluk Agricultural Credit Co-Operative Society
Uzhva Service Co-Operative Bank Ltd.
Muttom Service Co-Operative Bank Ltd.

Respondents

Income Tax Officer Ward-1 & TPS, Alappuzha – 688011
Income Tax Officer National Faceless Assessment Centre, North Block, New Delhi-110001
The Commissioner of Income Tax (Appeals) Office of the Commissioner of Income Tax, Kottayam – 686002

Legal Representation & Advocates

Counsels for Petitioners

• Adv C.A.Jojo

Counsels for Respondents

• Adv. Jose Joseph (SC)

Case Synopsis & Summary

The three connected writ petitions before the Kerala High Court arise from assessments for the 2020-21 year where the respective cooperatives claimed a deduction under Section 80P(ii)(d) of the Income Tax Act and were denied this deduction. The petitioners argued that the issue is governed by binding Supreme Court judgments, notably Peroorkada Service Co-Operative Bank Ltd. (442 ITR 141) and Mavilayi Service Co-Operative Bank Ltd. (431 ITR 1), which should guide the Assessing Officer’s determinations. The Department contends that a challenge to the assessment order lies through an appeal, not via a writ petition under Article 226, since the correct interpretation of deduction under 80P(ii)(d) depends on the facts of each case. The Court observed that the Supreme Court judgments in Mavilayi and Peroorkada were not considered while finalizing the challenged assessments, and relied on the Division Bench’s reasoning in Poonjar Service Co-operative Bank Ltd. to remand. Consequently, the petitions were allowed; the assessment orders (Ext. P1 in each case) were quashed and the matters remanded to the National Faceless Assessment Centre for fresh consideration after hearing the petitioners and applying the cited judgments. The court emphasized that ignoring binding Supreme Court precedents cannot be treated merely as subject to appellate remedy.

Provisions of Law Cited

Income Tax Act, 1961Section 80P(ii)(d)Section 143(1)Section 143(3)Section 156Article 226 of the Constitution

Legal Doctrines & Maxims

An erroneous assessment occasioned by ignoring a binding judgment of the Supreme Court cannot be trivialized as an order against which an appellate remedy lies that would provide justice to an assessee.

Submissions & Arguments

Contentions of Appellants / Petitioners

The petitioners contended that the denial of deduction under Section 80P(ii)(d) runs counter to binding Supreme Court precedents (notably Peroorkada and Mavilayi). They urged that the assessment orders be quashed and the matters remanded for fresh consideration in light of those judgments, arguing that the issue is covered by law laid down in those decisions and that the orders ignored binding authority. They criticized the respondents’ stance that writ relief is unavailable for this issue and sought correction by remand with hearing.

Contentions of Respondents

The respondents argued that the correctness of the deduction under Section 80P(ii)(d) is a question of fact to be determined in accordance with law after proper appellate scrutiny, and not by writ proceedings. They asserted that the remedy lies in filing an appeal against the assessment orders, and that a writ petition should not intervene in the assessment’s factual determinations.

Cited Precedents (3)

Case Name	Citation	Treatment	Explanation
Peroorkada Service Co-Operative Bank Ltd.	442 ITR 141	Positive	Court relied on the binding Supreme Court decision, noting the AO’s failure to consider it while denying the deduction; the judgment supports remand and re-evaluation in light of binding precedents.
Mavilayi Service Co-Operative Bank Ltd. v. Commissioner of Income Tax and another	431 ITR 1	Positive	Binding Supreme Court decision acknowledged as not considered during assessment; used to justify remand and reconsideration.
M/s. Poonjar Service Co-operative Bank Ltd. v. Income Tax Officer	WA No.753/2021 (judgment dated 28-06-2022)	Positive	Division Bench view cited to support that erroneous assessment caused by ignoring binding judgments cannot be trivialized; used to justify remand for consideration of the cited judgments.

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Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE GOPINATH P.** **MONDAY, THE 28[TH] DAY OF NOVEMBER 2022 / 7TH AGRAHAYANA, 1944** ## **WP(C) NO.34316 OF 2022** ## **PETITIONER:** CHERTHALA TALUK AGRICULTURAL CREDIT CO-OPERATIVE SOCIETY H.W 11, CHERTHALA P.O, ALAPPUZHA-688524 REPRESENTED BY ITS SECRETARY , PIN - 688524 BY ADV C.A.JOJO ## **RESPONDENTS:** 1 INCOME TAX OFFICER WARD-1 &TPS, ALAPPUZHA ALAPPUZHA – 688011. 2 INCOME TAX OFFICER NATIONAL FACELESS ASSESSMENT CENTRE, NORTH BLOCK, NEW DELHI-110001. 3 THE COMMISSIONER OF INCOME TAX (APPEALS) OFFICE OF THE COMMISSIONER OF INCOME TAX, KOTTAYAM686002, PIN - 686002 ## **OTHER PRESENT:** ADV. JOSE JOSEPH (SC) THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 28.11.2022, ALONG WITH WP(C).33413/2022, 34334/2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P (C) Nos.34316, 33413 and 34334/2022 -2- ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE GOPINATH P.** **MONDAY, THE 28[TH] DAY OF NOVEMBER 2022 / 7TH AGRAHAYANA, 1944** ## **WP(C) NO. 33413 OF 2022** ## **PETITIONER:** UZHUVA SERVICE CO-OPERATIVE BANK LTD NO.A 305 PATTANAKKAD P.O, CHERTHALA, ALAPPUZHA-688531 REPRESENTED BY ITS SECRETARY , PIN - 688531 BY ADV C.A.JOJO ## **RESPONDENTS:** 1 INCOME TAX OFFICER WARD-4, ALAPPUZHA ALAPPUZHA - 688011 2 INCOME TAX OFFICER NATIONAL FACELESS ASSESSMENT CENTRE, NORTH BLOCK, NEW DELHI-110001. 3 THE COMMISSIONER OF INCOME TAX (APPEALS) OFFICE OF THE COMMISSIONER OF INCOME TAX, KOTTAYAM686002, PIN - 686002 ADV. JOSE JOSEPH (SC) THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 28.11.2022, ALONG WITH WP(C).34316/2022 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P (C) Nos.34316, 33413 and 34334/2022 -3- ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE GOPINATH P.** **MONDAY, THE 28[TH] DAY OF NOVEMBER 2022 / 7TH AGRAHAYANA, 1944** ## **WP(C) NO. 34334 OF 2022** ## **PETITIONER:** MUTTOM SERVICE CO-OPERATIVE BANK LTD., NO.1165, MAIN ROAD CHERTHALA P.O, ALAPPUZHA-688524 REPRESENTED BY ITS SECRETARY , PIN - 688524 BY ADV C.A.JOJO ## **RESPONDENTS:** 1 INCOME TAX OFFICER, WARD-1 &TPS, ALAPPUZHA ALAPPUZHA - 688011 2 INCOME TAX OFFICER NATIONAL FACELESS ASSESSMENT CENTRE, NORTH BLOCK, NEW DELHI-110001 3 THE COMMISSIONER OF INCOME TAX (APPEALS) OFFICE OF THE COMMISSIONER OF INCOME TAX, KOTTAYAM686002, PIN - 686002 ADV. JOSE JOSEPH (SC) THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 28.11.2022, ALONG WITH WP(C).34316/2022 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P (C) Nos.34316, 33413 and 34334/2022 -4- ## **J U D G M E N T** [WP(C) Nos.34316/2022, 33413/2022, 34334/2022] The petitioners in these cases suffered orders of assessment under the provisions of the Income Tax Act, 1961 for the assessment year 2020-21. In W.P (C) Nos.34316/2022 and 33413/2022 the assessing officer appears to have denied deduction in respect of interest income under Section 80 P (ii) (d) of the Income Tax Act. It is the case of the petitioner that the issue stands covered in favour of the petitioner by the judgment in _**PCIT v. Peroorkada Service Co-Operative Bank Ltd.; 442 ITR 141**_ and that the assessing officer has failed to consider the said judgment while finalizing the assessment against the petitioner. 2. The learned standing counsel appearing for the respondent Department states that the issue raised by the petitioner is to be agitated by by filing an appeal against the order of assessment and not by way of a writ petition under Article 226 of the Constitution of India. It is submitted that the question as to whether the petitioner was actually entitled to deduction under Section 80 P (ii) (d) of the Income Tax Act is a matter to be determined with reference to the facts and therefore the petitioner cannot challenge the assessment order directly by filing a writ petition under Article 226 of the Constitution of India. 3. In W.P (C) No.34334/2022 the petitioner challenges the order of assessment for assessment year 2020-21 on the ground that the assessing officer denied the deduction under Section 80 P as well as under Section 80 P (ii) (d) without considering the judgment of the Supreme Court reported in 431 ITR 1. It is submitted that the deduction under Section 80 P (ii) (d) was denied by discarding W.P (C) Nos.34316, 33413 and 34334/2022 -5- the judgment in _**Peroorkada**_ (supra). 4. Having heard the learned counsel appearing for the petitioner and the learned standing counsel appearing for the respondent bank, I am of the view that since it is admitted that the judgment of the Supreme Court reported in _**Mavilayi**_ _**Service Co-operative Bank Ltd. and others v. Commissioner of Income**_ _**Tax and another;** 431 ITR 1_ and was not considered while finalizing the assessment which was subject matter of challenge in W.P (C) No.34334/2022 and since the decision in _**Peroorkada**_ (supra) [442 ITR 141] was not considered while denying the benefit of deduction under Section 80P (ii) (d), the assessment orders which are impugned are liable to be set aside and the matter remanded to the respective assessing authorities for reconsideration after taking into consideration of the judgments referred to above. A Division Bench of this court to which I was also a party has by judgment in _**M/s. Poonjar Service Co-operative Bank Ltd., v. Income Tax officer** (_ judgment dated 28-06-2022 in WA No.753/2021) concluded as follows; _“An erroneous assessment occasioned by ignoring a binding judgment of the Supreme Court cannot be trivialized as an order against which an appellate remedy lies that would provide justice to an assessee.”_ Having regard to the above and taking into consideration of the judgment of the Division Bench in _**M/s. Poonjar Service Co-operative Bank Ltd.,**_ (supra) these writ petitions are allowed. Accordingly orders of assessment produced as Ext.P1 in all these writ petitions are quashed and the assessments are remanded to the National Faceless Assessment Centre for fresh consideration in accordance with law after affording to the petitioner an opportunity of being heard and taking into W.P (C) Nos.34316, 33413 and 34334/2022 -6- consideration the law laid down in the judgments referred to above. The needful shall be done as expeditiously as possible and without any undue delay. Sd/- **GOPINATH P. JUDGE** AMG W.P (C) Nos.34316, 33413 and 34334/2022 -7- ## **APPENDIX OF WP(C) 33413/2022** PETITIONER EXHIBITS - Exhibit P1 EXHIBIT-P1: A TRUE COPY OF THE ASSESSMENT ORDER U/S 143(1) WITH NIL INCOME FOR AY 2019-20 DATED 12.02.2020 ISSUED BY THE 2ND RESPONDENT - Exhibit P2 A TRUE COPY OF THE DEMAND NOTICE U/S 156 WITH RS.5/-AY 2018-19 DATED 25.02.2021 ISSUED BY THE SECOND RESPONDENT. - Exhibit P3 EXHIBIT P3 A TRUE COPY OF THE ALLOWED APPELLATE ORDER IN ITA NO.A.71/CIT(A)/KTM/2016-17 FOR AY 2014-15 DATED 28.02.2018 ISSUED BY THE THIRD RESPONDENT. - Exhibit P4 EXHIBIT P4: A TRUE COPY OF THE ASSESSMENT ORDER U/S 143(3) FOR AY 2020-21 DATED 20.09.2022 ISSUED BY THE SECOND RESPONDENT - Exhibit P5 EXHIBIT P5: A TRUE COPY OF THE DEMAND NOTICE U/S 156 FOR AY 2020-21 DATED 20.09.2022 ISSUED BY THE SECOND RESPONDENT. W.P (C) Nos.34316, 33413 and 34334/2022 -8- ## **APPENDIX OF WP(C) 34334/2022** PETITIONER EXHIBITS - Exhibit P1 A TRUE COPY OF THE ASSESSMENT ORDER U/S 143(3) WITH NIL INCOME FOR AY 2016-17 DATED 17.12.2018 ISSUED BY THE SECOND RESPONDENT - Exhibit P2 EXHIBIT P2: A TRUE COPY OF THE ALLOWED APPELLATE ORDER IN ITA NO.A.38/CIT(A)/KTM/2017-18 FOR AY 201516 DATED 17.07.2018 ISSUED BY THE THIRD RESPONDENT. - Exhibit P3 EXHIBIT P3: A TRUE COPY OF THE ASSESSMENT ORDER U/S 143(3) FOR AY 2020-21 DATED 27.09.2022 ISSUED BY THE SECOND RESPONDENT - Exhibit P4 EXHIBIT P4: A TRUE COPY OF THE DEMAND NOTICE U/S 156 FOR AY 2020-21 DATED 27.09.2022 ISSUED BY THE SECOND RESPONDENT Exhibit P5 EXHIBIT P5: A TRUE COPY OF THE STAY ORDER IN WP (C ) NO.33413/2022 DATED 20.10.2022 W.P (C) Nos.34316, 33413 and 34334/2022 -9- ## **APPENDIX OF WP(C) 34316/2022** PETITIONER EXHIBITS Exhibit P1 EXHIBIT-P1: A TRUE COPY OF THE RELEVANT PAGES OF INTIMATION U/S 143(1) WITH NIL DEMAND FOR AY 2019-20 DATED 12.02.2020 ISSUED BY THE CPC BANGALORE Exhibit P2 EXHIBIT P2: A TRUE COPY OF THE ASSESSMENT ORDER U/S 143(3) FOR AY 2020-21 DATED 27.09.2022 ISSUED BY THE SECOND RESPONDENT Exhibit P3 EXHIBIT P3: A TRUE COPY OF THE DEMAND NOTICE U/S 156 FOR AY 2020-21 DATED 27.09.2022 ISSUED BY THE SECOND RESPONDENT Exhibit P4 EXHIBIT P4: A TRUE COPY OF THE STAY ORDER IN WP (C ) NO.33413/2022 DATED 20.10.2022