Facts of the Case

The assessee, U.P. Civil Secretariat Primary Co-operative Bank Limited, is a cooperative society registered under the U.P. Co-operative Societies Act, 1912 and engaged in providing banking services to its members. A survey under Section 133A was conducted at the assessee’s premises, during which books of account and documents relating to fixed deposit receipts (FDRs) and interest thereon were impounded by the Income Tax Department.

Subsequently, the Assessing Officer / Addl. CIT (TDS) passed orders under Sections 201 and 201(1A) for Assessment Years 2008-09 and 2009-10 treating the assessee as an assessee in default for alleged non-deduction of tax at source on interest paid on FDRs, raising substantial demands of tax and interest. For Assessment Year 2011-12, an assessment under Section 143(3) was completed making additions and disallowances, including disallowance of interest on FDRs, denial of deduction under Section 80P, disallowance of PF contribution, provisions for computerisation, staff welfare expenses, and other items.

The assessee filed appeals before the CIT(A), contending that the orders were passed without providing copies of impounded records and without granting adequate opportunity. The CIT(A) dismissed the appeals and upheld the orders of the Assessing Officer / Addl. CIT (TDS). Aggrieved, the assessee filed multiple appeals before the Tribunal.

Issues Involved

Whether the orders passed under Sections 201 and 201(1A) and the assessment under Section 143(3) were vitiated due to violation of principles of natural justice, whether the Revenue could require the assessee to furnish details without providing copies of impounded records, whether adequate opportunity was granted to the assessee, and whether the matters required remand for fresh adjudication.

Petitioner’s Arguments

The assessee contended that the Assessing Officer and the Addl. CIT (TDS) passed the impugned orders without making available copies of the books of account, FDR day books, and other documents that were impounded during the survey and remained in the custody of the Department. It was argued that preparation of detailed information from alternative sources was extremely time-consuming and manpower-intensive, and that adequate opportunity was not provided either at the assessment stage or at the appellate stage. The assessee prayed that all issues be restored to the file of the Assessing Officer for de novo adjudication after providing copies of impounded materials and granting reasonable opportunity.

Respondent’s Arguments

The Revenue, represented by the Departmental Representative, expressed no serious objection to the matter being restored to the file of the Assessing Officer and left the issue to the discretion of the Tribunal.

Court Order / Findings

The ITAT Lucknow observed that the Revenue placed an onerous burden on the assessee by requiring it to furnish detailed information without providing or making available copies of the impounded records that were in the possession of the Department. The Tribunal further observed that both the Assessing Officer and the CIT(A) passed the impugned orders without providing reasonable opportunity to the assessee in the facts and circumstances of the case.

The Tribunal held that such action amounted to violation of principles of natural justice. Accordingly, the Tribunal restored all the issues involved in the appeals for Assessment Years 2008-09, 2009-10 and 2011-12 to the file of the Assessing Officer with a direction to make available copies of all impounded materials and records and to pass de novo orders in accordance with law after providing reasonable opportunity of hearing to the assessee and ensuring due adherence to principles of natural justice.

Important Clarification

The Tribunal clarified that where books of account and primary records are impounded by the Department, the assessee cannot be expected to effectively comply with statutory requirements unless copies of such records are made available. Passing orders without supplying impounded material and without granting reasonable opportunity vitiates the proceedings.

Final Outcome

All the appeals filed by the assessee were partly allowed for statistical purposes. The impugned orders passed under Sections 201 and 201(1A) and under Section 143(3) were set aside, and the matters were remanded to the file of the Assessing Officer for de novo adjudication in accordance with law after providing copies of impounded records and granting reasonable opportunity of hearing to the assessee.

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