Chandarlapdu Large Size Cooperative Credit Society Limited Vs ITO (ITAT Visakhapatnam)
Summary: The Income Tax Appellate Tribunal, Visakhapatnam Division Bench, in The Chandarlapdu Large Size Cooperative Credit Society Limited Vs ITO, held that the restriction introduced through the amendment to Section 80AC of the Income Tax Act, 1961, effective from Assessment Year 2018-19, could not be applied retrospectively to deny a cooperative credit society’s deduction under Section 80P for Assessment Year 2017-18. The Tribunal considered the assessee’s claim of ₹33,56,490 under Section 80P(2)(a)(i), which had been disallowed because its return of income was filed belatedly on 12 September 2019 in response to notices issued under Section 142(1). The Assessing Officer treated the return as invalid, and the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, upheld the disallowance. The Tribunal held that the amended due-date restriction under Section 80AC was prospective and directed the Assessing Officer to examine the claim of deduction on merits.
The assessee was a cooperative credit society engaged in rendering services and providing credit facilities to its members. It did not file its return of income within the prescribed time under Section 139(1). Consequently, the Assessing Officer issued notices under Section 142(1) on 23 November 2017, 2 August 2019 and 23 August 2019, requiring the assessee to file its return and furnish information. In response, the assessee filed its return on 12 September 2019, declaring nil taxable income after claiming the deduction of ₹33,56,490 under Section 80P. It also submitted its trading account, profit and loss account, income and expenditure account, balance sheet and comparative details of cash deposits and cash sales. Nevertheless, the Assessing Officer treated the return as invalid because it had been filed after 31 March 2018 and completed the assessment under Section 144 by disallowing the deduction.
Before the Tribunal, the assessee argued that the requirement to file a return within the due date under Section 139(1) for claiming a deduction under Section 80P became applicable only from Assessment Year 2018-19 by virtue of the Finance Act, 2018. It was submitted that Section 80A(5) required a deduction claim to be made in the return of income but did not prescribe a specific filing deadline for that purpose. As the assessee had made the claim in the return filed in response to the statutory notice, the deduction could not be rejected merely because the return was submitted beyond the original due date. The Revenue contended that the return was not valid under Sections 139(1) or 139(4), and consequently the deduction was unavailable under Section 80A(5). Reliance was placed on Maruthi Primary Agricultural Cooperative Credit Society Limited Vs ITO, ITA No. 151/VIZ/2022, dated 28 February 2024.
Examining the relevant provisions, the Tribunal observed that Section 80A(5) requires a taxpayer to make the deduction claim in the return of income but does not independently prescribe the due date by which such return must be furnished. The Bench further noted that, before its amendment by the Finance Act, 2018, Section 80AC imposed the due-date restriction only in respect of specified deductions, including Sections 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID and 80-IE. From Assessment Year 2018-19, the amended provision extended the requirement of filing a return within the due date under Section 139(1) to deductions under the heading “C.—Deductions in respect of certain incomes” in Chapter VI-A, including Section 80P. Since the assessment year under consideration was 2017-18, the Tribunal held that the amended restriction was inapplicable. The Tribunal also distinguished the Revenue’s reliance on Maruthi Primary Agricultural Cooperative Credit Society Limited, noting that the present assessee had filed its return before the Assessing Officer.
Accordingly, the Tribunal concluded that the Revenue was not justified in refusing to entertain the Section 80P claim merely because the return was filed belatedly. It directed the Assessing Officer to consider the deduction claimed in the return dated 12 September 2019 and restored the issue for examination on merits. The appeal was allowed for statistical purposes. The decision does not grant the deduction unconditionally; it establishes that the prospective amendment to Section 80AC cannot itself justify denial of a Section 80P claim for Assessment Year 2017-18, where the taxpayer had made the claim in a return filed during assessment proceedings. The conclusion is consistent with the distinction between the pre-amendment and post-amendment statutory positions also discussed in other Tribunal decisions concerning Assessment Year 2017-18.
Cases Discussed
1. Maruthi Primary Agricultural Cooperative Credit Society Limited Vs ITO (ITAT Visakhapatnam); ITA No. 151/VIZ/2022; 28/02/2024 — The Revenue relied on this decision for the proposition that a deduction under Section 80P is inadmissible in the absence of a valid return of income. The Tribunal distinguished the decision because the assessee in the present case had filed its return before the Assessing Officer and had claimed the deduction therein.
FULL TEXT OF THE ORDER OF ITAT VISAKHAPATNAM
1. This appeal is filed by the assessee against order of Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld. CIT(A)”] vide DIN & Order No. ITBA/NFAC/S/250/2024-25/1067135464(1) dated 30.07.2024 for the A.Y. 2017-18 arising out the order passed under section 144 of Income Tax Act, 1961 [hereinafter in short “the Act”] dated 10.12.2019.
2. Brief facts of the case are, assessee is a society rendering services and providing credit facilities to its members. Assessee has not filed return of income under section 139(1) of the Act. Ld. Assessing Officer [hereinafter in short “Ld.AO”] issued notices under section 142(1) of the Act dated 23.11.2017, 02.08.2019 & 23.08.2019 requiring the assessee to file its return of income and to furnish information. In response, assessee filed its Return of Income on 12.09.2019 for the A.Y. 2017-18 admitting a total income of Rs.Nil after claiming the deduction of Rs.33,56,490/- under section 80P of the Act. Assessee furnished Trading Account, Profit & Loss Account, Income and Expenditure Account and Balance Sheet as on 31.03.2017 and also filed comparative statement of cash deposits and cash sales. After considering the submissions of the assessee, Ld. AO treated the return as invalid since the return is filed beyond due date i.e., after 31.03.2018. Ld. AO completed the assessment by making an addition of Rs. 33,56,490/- by disallowing the claim of the assessee made under section 80P(2)(a)(i) of the Act.
3. On being aggrieved, assessee filed an appeal before Ld. CIT(A). Ld.CIT(A) after considering the submissions of the assessee sustained the order of the Ld. AO.
4. On being aggrieved by the order of the Ld. CIT(A), assessee is in appeal before us by raising following grounds of appeal: –
“1. On the facts and circumstances of the case and in law the Ld.Commissioner of Income Tax (Appeals), NFAC, Delhi, erred in sustaining the order of the Income Tax Officer Ward 1(3), Vijayawada by confirming the disallowance of deduction claimed u/s 80P amounting to Rs.33,56,490/-
2. Both in law and in Facts of the case, the order made by the Ld.Commissioner of Income Tax (Appeals), NFAC, Delhi is bad in law, arbitrary and contrary to the provisions of law.
3 The Ld, Commissioner of Income Tax (Appeals), NFAC, Delhi is wrong in appraising that, the return filed by the assessee in response to notice u/s 142(1), is not a valid return when the return filed was accepted by the e-filing portal and there is NO WATERMARK OF “INVALID” on the acknowledgement issued.
4. The Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi ought to have taken into consideration that provisions of sec 80A(5) are applicable only when the assessee fails to make a claim for deduction u/s.80P in the return of income filed.
5. The Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi is wrong in mentioning that Section 80A(5) states that claims for deduction must be made in a valid return since Section 80A(5) only mentions that the assessee should make a claim in a return.
6. The Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi is not justified in deeming returns filed after the due date in response to notice U/S 142(1) as invalid.
7. The Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi is wrong in upholding the order of Assessment Order passed u/s 144 of the I.T Act when the assessee has filed Return of Income in response to notice u/s 142(1) and submitted the information that has been called for from time to time during the assessment proceedings.
8. For these reasons and those which may be urged at the time of hearing of appeal and on the facts and circumstances of the case the disallowance of deduction claimed u/s 80P amounting to Rs.33,56,490/- shall be deleted.
9. The appeal craves leave to add to alter, amend, modify, substitute, delete, and /or rescind all or any of the grounds of appeal on or before the final hearing, if the necessity so arises.
The appellant prays for appropriate relief based on the said grounds of appeal and the facts and the circumstances of the case.”
5. The only issue emanating from the grounds raised by the assessee is with respect to disallowance of deduction claimed by the assessee under section 80P of the Act.
6. At the outset, the Learned Authorized Representative [Ld. AR] argued that the assessee is a Society Limited and claimed deduction under section 80P of the Act for the AY 2017-18. Ld.AR submitted that Ld. CIT(A) erred in appraising that the return filed by the assessee is an invalid return since the same is not filed under section 139(1) or 139(4) of the Act without considering that for the purpose of claiming deduction u/s 80P, the return of income is required to be filed u/s 139(1) w.e.f A.Y.2018-19 only. The Ld. AR further submitted that as per section 80P(2)(a)(i) of the Act, the assessee is entitled for deduction as the assessee is carrying on the business of providing credit facilities to its members. The Ld. AR further submitted that section 80A(5) cannot be applied in the instant case due to the fact that it does not mention within which period the return should be filed. The Ld.AR further submitted that section 80AC(ii) which was inserted w.e.f. 1/4/2018 specifies that “any Deduction is admissible under any provisions of this Chapter under 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 of the Act. The Ld. AR argued that since the heading “C-deductions in respect of certain incomes” has been segregated from the other deductions it has to be applied to the instant case also. The Ld. AR further argued that as per the Finance Act, 2018 which came into effect w.e.f 01/04/2018, the substitution to section 80AC is only applicable from the assessment year commencing on or after 01/04/2018 i.e., AY 2018-19 and not applicable to the earlier assessment years ie., A.Y. 2017-18 as in the case of the assessee. Therefore, the assessee is entitled to claim deduction under section 80P(2)(a)(i) of the Act.
7. Per contra, the Ld. DR submitted that the assessee has not filed a valid return of income in accordance with the provisions of section 139(1) or 139(4) of the Act in order to claim deduction under section 80P of the Act. The Ld. DR further submitted that as per section 80A(5) of the Act when no valid return of income is filed, the assessee has failed to make a claim of deduction under section 80P(2)(a)(i) of the Act, and therefore no deduction is permissible under the Act. She also placed reliance on the decision of the Jurisdictional ITAT wherein SMC Bench in the case of Maruthi Primary Agricultural Cooperative Credit Society Limited v. ITO in ITA No. 151/VIZ/2022 dated 28.02.2024 has held that deduction under section 80P of the Act is inadmissible in the absence of filing the return of income. She pleaded that the order of the revenue authorities be upheld. Ld. DR strongly relied on the orders of the Ld. Revenue Authorities.
8. We have heard both the sides and perused the material available on record as well as the orders of the Revenue Authorities. It is an admitted fact that the assessee has failed to file the return of income U/s. 139(1) of the Act. Further, in response to notice under section 142(1) of the Act issued on 23.11.2017, 02.08.2019 & 23.08.2019, assessee belatedly filed the return of income on 12.09.2019 by claiming deduction under section 80P of the Act amounting to Rs.33,56,490/-. The Ld. AO while invoking the provisions of section 80A(5) and 80AC of the Act observed that the assessee has not filed the return of income on or before the due date of filing the return of income under section 139(1) of the Act and therefore disallowed the deduction claimed by the assessee. The Ld. AO arrived at this conclusion by treating the return of income filed belatedly as invalid and non-est. Section 80A(5) and Section 80AC of the Act are reproduced herein below for reference:
“80A(5) Where the assessee fails to make a claim in his return of income for any deduction under section 10A or section 10AA or section 10B or section 10BA or under any provision of this Chapter under the heading “C.—Deductions in respect of certain incomes”, no deduction shall be allowed to him thereunder.
9. On a plain reading of section 80A(5) of the Act, it is clear that the assessee should make a claim in the return of income for claiming deduction under “Certain income under the Chapter heading “C”. However, the section does not specify that whether the deduction is allowable if the return of income is filed belatedly. The only condition is that the assessee should make a claim while filing the return of income. In the case on hand the assessee has made a claim for deduction u/s 80P while filing the return of income on 12.09.2019, in response to notice u/s 142(1) of the Act.
10. Section 80AC of the Act is reproduced below for ready reference: –
“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-IE;
(ii) the 1stday 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.”
11. Similarly, from the AY 2018-19 section 80AC(ii) was introduced to allow the deduction under certain income under Chapter heading “C-Deductions in respect of certain incomes”, unless the return of income for such assessment year has been filed on or before the due date specified under section 139(1) of the Act. This condition was not applicable for the AY 2017-18. In the instant case, the assessee filed the return of income for AY 2017-18, belatedly on 12.09.2019during the course of assessment proceedings. Further, the amendment to section 80AC was considered prospective by various judicial pronouncements. It can be observed from the provisions of section 80A(5) of the Act, which can be made applicable to the instant case, only when the return of income is filed by an assessee and deduction under Chapter-VIA of the Act is not claimed while filing the return of income. The provisions of section 80AC of the Act contemplate denial of deduction of certain provisions of Chapter-VIA of the Act if the return of income is not filed by the assessee on or before the due date specified under sub-section (1) of section 139 of the Act. These provisions, introduced from the AY 2018-19 in our opinion, is prospective and hence do not apply to the deduction under section 80P of the Act in the instant case for the impugned assessment year. Therefore, we are of the considered view that the Revenue is not justified in not entertaining the deduction under section 80P of the Act made by the assessee while filing the return of income for AY 2017-18 on 12.09.2019. Accordingly, we direct the Ld. AO to consider the claim of the assessee under section 80P as made in the return of income filed on 12.09.2019. The reliance placed by the Ld.DR in the case of Maruthi Primary Agricultural Cooperative Credit Society Limited v. ITO (supra) cannot be applied to the instant case as assessee has filed its return of income manually before the Ld.AO and hence the facts are distinguishable. Therefore, this issue is set aside to the record of the Ld.AO for examination of the claim of deduction under section 80P on merits.
12. In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 12th June, 2025.
