ITAT Remands Taxability of Co-operative Bank under Liquidation for Fresh Assessment

ITAT Remands Taxability of Co-operative Bank under Liquidation for Fresh Assessment

In these appeals, scrutiny assessments under Section 143(3) were framed on a co-operative bank under liquidation. Returns were filed at nil income. The Assessing Officer invoked Section 80P(4) to deny deduction under Section 80P and brought to tax interest and recovery receipts; assessed incomes were Rs. 10,19,72,904 (A.Y. 2013-14), Rs. 32,58,14,133 (A.Y. 2014-15) and Rs. 22,31,74,924 (A.Y. 2015-16). Penalty proceedings under Section 271(1)(c) were also initiated.

The assessee argued that realisations in liquidation were statutorily earmarked towards the discharge of depositors’ claims under the DICGC framework, leaving no real income. Reliance was placed on the Tribunal’s earlier order in the assessee’s own case. On financials, reference was made to a debit balance in the Profit & Loss Account of about Rs. 441.97 crore and an outstanding DICGC claim of about Rs. 374.40 crore. The CIT(A)/NFAC dismissed appeals, including refusing condonation for A.Y. 2013-14.

Issue Raised: Whether the assessed sums represented real taxable income in the hands of a co-operative bank under liquidation or stood diverted at source by overriding statutory title under the DICGC Act and the Gujarat Co-operative Societies Act; and whether disallowance under Section 80P(4) arises when no deduction under Section 80P was claimed.

ITAT’s Decision: The Tribunal held that only real income can be taxed. Since no deduction under Section 80P was claimed in the returns, the core issue was whether any real income accrued given overriding DICGC liabilities. As these aspects had not been verified by the Assessing Officer, the Tribunal set aside the orders of the CIT(A) for all years and restored the matters to the Assessing Officer for fresh adjudication after providing due opportunity of hearing.

Therefore the appeals were allowed for statistical purposes; and matters were remanded for de-novo assessment to the AO.

To Read Full Judgment, Download PDF Given Below