Co-operative Bank Is Also a Co-operative Society; HC Strikes Down Section 148 Notices

The Diamond Jubilee Co-operative Bank Ltd., now functioning solely as a Co-operative Society after the cancellation of its banking license by the RBI in June 2004, approached the High Court challenging a series of reopening actions. For AY 2020-21, the petitioner had filed its return, undergone full scrutiny, and received a final assessment order under Section 143(3) read with Section 144B in September 2022. The Department issued fresh notices under Section 148A(1) in March and May 2025, relying on an unsigned Audit Memorandum alleging wrongful deduction under Section 80P(2)(d) on interest income from Co-operative Banks.

However, the Assessing Officer proceeded to pass an order under Section 148A(3) on 29.06.2025 and simultaneously issued a notice under Section 148, prompting the present writ petition.

Issue Raised: Whether a Co-operative Society, whose banking licence has been cancelled, is entitled to deduction under Section 80P(2)(d), and whether reopening under Sections 148 and 148A based on a contrary assumption is legally sustainable.

HC Ruled: The High Court held that the petitioner is not a Co-operative Bank but a Co-operative Society, and therefore Section 80P(4) does not bar its claim under Section 80P(2)(d). Relying on Ashwinkumar Arban Co-operative Society Ltd., the Court reaffirmed that interest earned from investments in a Co-operative Bank qualifies for deduction because such banks are themselves Co-operative Societies.

The Court quashed the Section 148 notice dated 29.06.2025, the order under Section 148A(3) of the same date, and the show-cause notices issued under Section 148A(1). The writ petition was allowed in full, and the Rule was made absolute.

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