Case Law Details
Kassia Credit Co-operative Society Ltd. Vs DCIT (ITAT Bangalore)
The Income Tax Appellate Tribunal (ITAT), Bangalore, dismissed the appeal filed by the assessee against the order of the Commissioner of Income Tax (Appeals) [NFAC], which had upheld the disallowance of deduction claimed under Section 80P of the Income-tax Act, 1961 for Assessment Year (AY) 2018-19.
The assessee had not filed its return of income under Section 139(1) of the Act for AY 2018-19. Based on information regarding cash deposits and interest earned on securities, the Assessing Officer (AO) issued a show cause notice under Section 148A(b) on 14.03.2022. After considering the assessee’s reply, the AO passed an order under Section 148A(d) and issued a notice under Section 148 on 31.03.2022 after obtaining the required approval.
In response to the notice under Section 148, the assessee filed its return of income on 29.04.2022 declaring total income of ₹5,14,250 after claiming deduction of ₹83,89,567 under Section 80P. During the reassessment proceedings, notices under Sections 142(1) and 143(2) were issued and replies were furnished by the assessee. After considering the submissions, the AO held that since the assessee had failed to file its return within the due date prescribed under Section 139(1), the deduction claimed under Section 80P could not be allowed. Accordingly, the AO disallowed the deduction of ₹83,89,567.
The assessee challenged the disallowance before the CIT(A), contending that the provisions of Section 80AC were not applicable and that deduction under Section 80P could not be denied. The CIT(A) rejected the submissions and upheld the assessment order.
Before the Tribunal, the assessee argued that the amendment to Section 80AC with effect from 01.04.2018 should not be applied to defeat its substantive rights in respect of Financial Year 2017-18. It further submitted that the return filed in response to the notice under Section 148 was a valid return and that the deduction under Section 80P claimed therein ought to have been considered on merits. The assessee also contended that Section 80P is a beneficial provision and that procedural non-compliance in filing the original return should not defeat the statutory benefit. It argued that there was no finding by the Assessing Officer that it was not a co-operative society or that the income claimed was otherwise ineligible for deduction under Section 80P.
The Departmental Representative relied upon the orders of the Assessing Officer and the CIT(A).
After considering the rival submissions and examining the record, the Tribunal observed that it was an admitted and undisputed fact that the assessee had not filed its return of income under Section 139(1) for the relevant assessment year.
The Tribunal referred to the amended provisions of Section 80AC, applicable from Assessment Year 2018-19, which provide that where any deduction is claimed under Chapter VI-A under the heading “C.—Deductions in respect of certain incomes,” no such deduction shall be allowed unless the return of income is furnished on or before the due date specified under Section 139(1).
The Tribunal held that, in view of Section 80AC(ii), filing the return of income within the due date prescribed under Section 139(1) is a mandatory condition for claiming deductions under Chapter VI-A, including deduction under Section 80P. Although the assessee had subsequently filed its return in response to the notice issued under Section 148 on 29.04.2022, such filing did not satisfy the statutory requirement of Section 80AC.
Accordingly, the Tribunal concluded that the assessee was not entitled to deduction under Section 80P on the basis of the return filed under Section 148. It therefore upheld the orders of the Assessing Officer and the CIT(A), dismissed the grounds raised by the assessee, and dismissed the appeal.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal is filed by the assessee against the order of learned Commissioner of Income Tax — Appeals (NFAC, Delhi) [in short “CIT(A)”] vide DIN No. ITBA/NFAC/S/250/2025-26/1082590998(1) dated 13.11.2025, for the Assessment Year 2018-19, arising out of the order passed under section 147 r.w.s. 144B of the Act dated 23.03.2023.
2. Briefly stated facts of the case are assessee has not filed its return of income under section 139(1) of the Act for the Assessment Year 2018-19. The jurisdictional Assessing Officer [in short `A01 in possession of the information that assessee has made cash deposits on the earned interest on securities proceeded to issue a show cause notice under section 148A(b)of the Act on 14.03.2022. Considering the reply furnished by the assessee, the learned AO passed an order under section 148A(d) of the Act and issued a notice under section 148 of the Act on 31.03.2022 after obtaining prior approval from the competent authority. In response to notice issued under section 148 of the Act assessee filed the return of income on 29.04.2022 by declaring a total income of Rs.5,14,250/- after claiming deduction under section 80P of the Act of Rs.83,89,567/-. The learned AO issued notices on various dates under sections 142(1) and 143(2) of the Act. Assessee filed reply partly to the notice issued by the learned AO. A final show cause notice was issued was issued on03.03.2023. The assessee furnished its reply on 11.03.2023.After carefully perusing the submissions made by the assessee the learned AO noticed that since the assessee has not filed return of income under section 139(1) of the Act, disallowed the deduction claimed under section 80P of the Act amounting to Rs.83,89,567/-.
3. On being aggrieved by the order of the learned AO, assessee filed appeal before the learned CIT(A). The learned AR contested before the learned CIT(A) that the provisions of section 80AC of the Act are not applicable to the assessee and hence no deduction can be disallowed under section 80P of the Act. The learned CIT(A) not satisfied with the assessee’s submissions, upheld the order of the learned AO by dismissing the appeal of the assessee.
4. On being aggrieved by the order of the learned CIT(A) assessee is in appeal before us by raising the following grounds:
| Sl. No. | Ground | Tax Effect |
| 1 | The Order of the Authorities below, in so far as these are against the appellant, is opposed to law, weight of the evidence, probabilities, facts and circumstances of the Appellant’s case. | – |
| 2 | The appellant denies himself to be liable to be assessed on a total income of Rs. 89,03,817/- as against the returned income of Rs. 5,14,250/- as per the facts and circumstances of the case. | – |
| 3
|
A. The learned authorities erred in confirming the disallowance of deduction of Rs. 83,89,567/- claimed under Section 80P(2)(a)(i) of the Income-tax Act, 1961, despite the Appellant being fully eligible for such deduction on merits. |
Rs.
55,16,597/- |
| B. The learned authorities failed to appreciate that the relevant previous year in the Appellant’s case is Financial Year 2017-18, and that the amendment to Section 80AC effective from 01.04.2018 cannot be applied in a manner that defeats accrued substantive rights for the said year. | ||
| C. The learned authorities erred in not appreciating that the return of income filed by the Appellant in response to notice under Section 148 is a valid return of income and that lawful claims made therein, including deduction under Section 80P, are required to be adjudicated on merits. | ||
| D. The learned authorities erred in treating the delay in filing the return under Section 139(1) as a fatal and incurable defect, ignoring settled judicial principles that procedural non-compliance cannot defeat substantive statutory benefits, particularly under beneficial provisions. | ||
| E. The learned authorities failed to appreciate that Section 80P is a beneficial provision intended to promote the co-operative movement, and that the same ought to be interpreted liberally rather than in a restrictive or technical manner. |
||
| F. The learned authorities erred in law in confirming the disallowance even though there is no fmding or allegation by the Assessing Officer that the Appellant is not a co-operative society or that the income claimed is not eligible for deduction under Section 80P. | ||
| G. Without prejudice to the above, the learned authorities erred in not granting appropriate relief or opportunity so as to assess only the real taxable income, after excluding income eligible for deduction and exempt receipts, thereby causing grave injustice to the Appellant. | ||
| 5 | For the above and other grounds to be urged during the hearing of the appeal the Appellant prays that the appeal be allowed, and the addition made by the Assessing Officer and sustained by the Commissioner of Income Tax (Appeals) be deleted in the interest of equity and justice. | – |
5. At the outset, the learned AR submitted that the provisions of section 80AC of the Act w.e.f. 01.04.2018 cannot be applied to the assessee. He submitted that the returns were furnished in response to notice under section 148 of theAct on 29.04.2022. He also submitted that the claim for deduction under section 80P of the Act was made while filing the return of income under section 148 of the Act. He therefore pleaded that since section 80P of the Act being a beneficial provision, disallowance of the claim under section 80P of the Act is not justifiable.
6. Per contra, the learnedDepartmental Representative [in short `DR1heavily placed reliance on the orders of the Revenue authorities.
7. We have heard rival contentions and perused the material available on record. It is an admitted and undisputed fact that the assessee has not filed return of income under section 139(1) of the Act for the impugned Assessment Year. Section 80AC of the Act has been amended w.e.f. Assessment Year 2018-19 which reads as follows:
“80AC. Where in computing the total income of an assessee of any previous year relevant to the assessment year commencing on or after—
(i) the 1st day of April, 2006 but before the 1st day of April, 2018, any deduction is admissible under section 80-IA or section 80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80-1E;
(ii) the 1st day of April, 2018, any deduction is admissible under any provision of this Chapter under the heading “C.—Deductions in respect of certain incomes”,
no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139.]
8. According to section 80AC(ii) of the Act, the assessee has to file his return of income under section 139(1) of the Act to claim the benefit under Chapter “C.—Deductions in respect of certain incomes”. In the instant case, the assessee has not filed the return of income on or before the due date prescribed under section 139(1) of the Act,however, has filed belatedly in response to notice under section 148 of the Act. In these circumstances, we are of the opinion that the assessee is not entitled for deduction under section 80P of the Act for the claim made in the returns filed under section 148 of the Act on 29.04.2022 for the AY 2018-19. We therefore dismiss the grounds raised by the assessee.
9. In the result, appeal of the assessee is dismissed.
Pronounced in the open court on the date mentioned on the caption page.
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