Bharat Electronics M C Unit Employees Co-Op. Credit Soc Ltd Vs Chief Commissioner of Income Tax (Andhra Pradesh High Court)
The petitioner, a co-operative society registered under the Andhra Pradesh Co-operative Societies Act, 1964, provides credit facilities to its members, who are employees of Bharat Electronics Limited, Machilipatnam. The respondent authorities issued a notice under Section 148 of the Income Tax Act, 1961 requiring the petitioner to furnish its return under Section 139(1). Pursuant to the notice, the petitioner filed its return for Assessment Year 2019-2020 on 23.08.2023 along with an application under Section 119(2)(b) seeking condonation of delay in filing the return so that it could claim deduction under Section 80P. The petitioner stated that it was under a bona fide belief that its activities were exempt from the provisions of the Income Tax Act and that it filed the return after consulting a tax consultant upon receipt of the notice under Section 148. The petitioner also relied upon CBDT Circular No.13/2023 dated 26.07.2023.
By order dated 12.02.2025, the first respondent rejected the condonation application, observing that the petitioner had failed to satisfy the statutory and procedural requirements for condonation of delay, including establishing sufficient cause or circumstances beyond its control. In the counter affidavit, the respondents reiterated the reasons contained in the impugned order and further contended that, in the absence of documentary evidence explaining the delay, the petitioner was not entitled to the benefit of CBDT Circular No.13/2023.
The High Court noted that the petitioner had filed its return on 23.08.2023 for Assessment Year 2019-2020. It observed that co-operative societies had earlier been exempt from filing income tax returns by virtue of Section 80AC of the Act, but the provision was amended with effect from 01.04.2018 by the Finance Act, 2018, requiring co-operative societies to file returns within the stipulated time. The Court further noted that Section 80P grants deductions to co-operative societies, which are available upon furnishing returns within the prescribed time.
The Court examined CBDT Circular No.13/2023 dated 26.07.2023 and observed that it had been issued after the Central Board of Direct Taxes received applications from co-operative societies seeking condonation of delay in filing returns for Assessment Years 2018-2019 to 2022-2023 so that such returns could be treated as having been furnished within the due date under Section 139(1). The circular prescribed guidelines for considering such belated returns.
The Court observed that the petitioner had filed its return after receiving the notice under Section 148 and that, following the amendment effective from 01.04.2018, this was the first return filed by the petitioner for Assessment Year 2019-2020. The Court held that if the petitioner’s application were rejected, it would suffer serious hardship because deductions otherwise lawfully available under Section 80P would be denied. According to the Court, such an outcome would defeat the very object of CBDT Circular No.13/2023.
The Court also noted that the impugned order rejected the application solely on the ground that no plausible explanation had been offered for the delay. Referring to the principle that substantial justice should prevail over technicalities, the Court observed that there was no dispute regarding the petitioner’s entitlement to deductions under Section 80P if it were permitted to file its return.
Further, the Court held that the authorities administering the Act should adopt a liberal approach while considering applications under Section 119(2)(b), particularly in light of CBDT Circular No.13/2023. It also observed that co-operative societies such as the petitioner were not fully aware of the amended provisions requiring filing of returns, as they were run with minimal staff who were not fully trained, and that this constituted a genuine difficulty faced by the petitioner.
Accordingly, the High Court set aside the impugned order dated 12.02.2025 and directed the respondents to treat the return filed by the petitioner as having been filed within time. The writ petition was allowed without any order as to costs, and all pending applications stood closed.
FULL TEXT OF THE JUDGMENT/ORDER OF ANDHRA PRADESH HIGH COURT
1. The petitioner is a society registered under Andhra Pradesh Co-operative Societies Act, 1964, engaged in the activity of lending credit facilities to its members who are the employees of Bharat Electronics Limited, Machilipatnam, an organization under the Ministry of Defense, Government of India.
2. The respondent authorities issued notice under Section 148 of the Income Tax Act, 1961 calling upon the petitioner to furnish its tax return as per Section 139 (1) of the Act. Thereafter, the petitioner filed its return for the Assessment year 2019-2020 on 23.08.2023 along with an application seeking to condone the delay under Section 119(2)(b) of the Act, in furnishing the return by claiming deduction under Section 80P of the Act. It was inter alia contended that the petitioner was under bonafide belief that the activities of the society are exempted from the provisions of Income Tax Act, and therefore it could not furnish return. It was further averred that after receiving the notice under Section 148, and after consulting the tax consultant, the petitioner filed its return as aforesaid with an application seeking to condone the delay by placing the reliance on the circular issued by CBDT vide Circular No.13/2023, dt.26.07.2023.
3.The 1st respondent after considering the matter by impugned order dt.12.02.2025 rejected the delay application filed by the petitioner by observing that the petitioner has failed to meet the statutory and procedural requirements for condonation of delay, including establishing sufficient cause or demonstrating circumstances beyond its control. Aggrieved by the same, the present writ petition is filed.
4. The respondent Nos.1 & 2 filed counter affidavit reiterating what has been stated in the impugned order. It was further stated that in the absence of documentary evidence in support of the delay caused in the matter, the petitioner is not entitled to get the benefit under Circular No.13/2023, dt.26.07.2023.
5. Heard, Sri C. Sanjeeva Rao, learned counsel for the petitioner and the learned Senior Standing Counsel Sri Y.N.Vivekananda for CBDT.
6. Perused the material available on record.
7. It is not in dispute that the petitioner has filed its income tax returns on 23.08.2023 for the Assessment year 20192020. It is pertinent to note that the Co-operative Societies had earlier were exempted from filing of its Income Tax returns by virtue of Section 80AC of the Act. This provision was amended with effect from 01.04.2018 by the Finance Act, 2018. By virtue of this amendment, the Co-operative Societies were required to file returns within the stipulated date. Further, as per Section 80P of the Act, an exemption is granted to the Co-operative Societies by allowing certain deductions from the income. The said deduction under Section 80P would be allowed upon furnishing returns within the time stipulated under the Act. In the case on hand, admittedly the petitioner filed its return on 23.08.2023.
8. The 1st respondent while rejecting the application made by the petitioner observed that the petitioner did not show any reason to condone the delay so as to enable it to take benefit under Circular No.13/2023, dt.26.07.2023. Be that as it may, a perusal of the said circular would show that the same was issued upon receipt of applications by Central Board of Direct Taxes from the Co-operative Societies claiming deduction under Section 80P of the Act for various assessment years from AY 2018-2019 to AY 2022-2023, regarding condonation of delay in furnishing return of income to treat such returns as returns furnished within the due date under Sub Section (1) of Section 139 of the Act. Under this circular, certain guidelines were fixed so as to satisfy/ accept the belated returns filed by the Co-operative Societies. The petitioner filed its return on 23.08.2023 after receipt of the notice under Section 148. Further, it is pertinent to note by virtue of Amendment made to the Income Tax Act, 1961 with effect from 01.04.2018, the Co-operative Societies were made to file Income Tax returns as per Section 139(1). In the case on hand, the petitioner is filing return for the first time for the Assessment year 2019-2020. If the application filed by the petitioner is not allowed, it will be put to serious hardship inasmuch as the deductions that are lawfully entitled by the petitioner would be denied. In such a situation, the very object of issuing circular No.13/2023, dt.26.07.2023 would be defeated.
9. Further, on a perusal of the order under challenge it is clear that the same was dismissed on the ground that the petitioner has not offered any plausible explanation for the delay caused in filing the returns. In this connection, it is to be noted that, whenever substantial justice and technicalities are pitted against each other, the Constitutional Courts have time and again held that substantial justice would prevail over the technicalities. As already observed supra, there is no dispute insofar as the fact that the petitioner is entitled to certain deductions under Section 80P of the Act, if the petitioner is allowed to file its returns.
10. Further, the authorities manning the Act have to take liberal approach towards the Co-operative Societies, especially in the teeth of Circular No.13/2023, while dealing with applications filed seeking to condone the delay under Section 119(2)(b) of the Act. Further, it is also not out of place to mention that the Cooperative Societies like that of the petitioner were not fully aware of the provisions of the Act and its applicability, inasmuch as, it is being run with a minimal staff who were not fully trained. This aspect of the matter has to be treated as a genuine difficulty faced by the petitioner society.
11. For the foregoing reasons, the impugned order dt.12.02.2025 passed by the 1st respondent is set aside and the respondents are directed to treat the returns filed by the petitioner is within time.
12. Accordingly, the writ petition is allowed. There shall be no order as to costs.
13. As a sequel, pending applications, if any shall stand closed.
