CONSTITUTION OF INDIA,L 1950

Article 226

Writ - Maintainability - Revenue pleading no specific issue raised by assesses in affidavits filed in support of writ petition - Also, assessment orders were passed without considering assessee's arguments

Assessees claiming to be Primary Agricultural Cooperative Credit Societies claimed deduction under section 80P. AO disallowed deduction claimed on interest income received by the petitioner from deposits/investment of funds in banks on the ground that same it did not form part of operational income of assessee and was liable to be taxed in terms of section 56. Assessees challenged this by way of batch of nine (9) Writ Petitions before High Court. revenue has filed counters in a few writ petitions objecting to the maintainability of writs sought. Issues as regards classification and taxability of interest income had not been specifically raised in affidavit filed in support of Writ Petitions. Upon perusal, the affidavits appear to be a cut and paste exercise from Writ Petitions filed by other Co-operative Societies challenging orders of assessment rejecting claims for exemption on the ground of mutuality. Held: Though all assessees had not replied identically to the notices issued by AO, the replies were illustrative of stands adopted by assessee at the time of assessment and crystallized the arguments of assessee ' to the effect that (i) the investments in question did not comprised surplus funds (ii) investments constituted a statutory reserve as mandated by TNCS Act (iii) interest generated therefrom was eligible for deduction in the light of CIT v. Nawanshahar Central Co-operative Bank Ltd. [Civil Appeal Nos. 2499, 2500 of 2005, dt. 8-4-2005] : 2007 TaxPub(DT) 79 (SC) (iv) at worst interest received should be netted with interest paid. (iv) at worst the interest received should be netted with interest paid. These arguments ought to have been at least, considered, by AO in deciding the issue but had unfortunately been brushed aside despite being noted in the order itself. This amounted to a fatal flaw as it rendered the impugned order entirely non-speaking and passed without application of mind. If affidavits of assessee were looked upon as mechanical and filed in haste and without application of mind, equally so were the impugned orders of assessment that simply relief on. Totgars' Cooperative Sale Society Limited v. ITO, Karnataka (2010) 322 ITR 283 (SC) : 2010 TaxPub(DT) 1466 (SC). Without discussing the arguments put forth by assessee . For this reason arguments of revenue based on the lack of pleadings in the affidavit was rejected. In such case assessees should not suffer for lacunae in drafting particularly when stand of assessees' were clear from materials on record. Thus, to balance convenience of both parties and in the interests of justice, issue was set aside for de novo and fresh examination and conclusion by AO.

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