Kerala HC Directs ITO to Reconsider Section 80P Claim as Delay in Filing Return Was Condoned

Kerala State Taxes Employees Co Op Society Limited Vs ITO (Kerala High Court)

The Kerala High Court directed the Income Tax Officer (ITO) to consider the petitioner’s rectification application within three months after observing that the delay in filing the income tax return had already been condoned by the competent authority. The petitioner, a co-operative society registered under the Kerala Co-operative Societies Act, 1969, claimed eligibility for deduction under Section 80P of the Income Tax Act. It could not file its return for Assessment Year 2018-19 within the prescribed time due to delay in completing the statutory audit, following which the assessment was completed and the Section 80P deduction was denied.

Subsequently, pursuant to CBDT Circular No. 13/2023 dated 26.07.2023, the petitioner obtained condonation of delay under Section 119(2)(b) of the Income Tax Act. The petitioner then sought consequential relief from the Assessing Officer, but the request was rejected on the ground that no direction had been issued by the appellate or revisional authority. The petitioner thereafter filed a rectification application.

The High Court observed that since the delay in filing the return had been condoned, the principal ground for denying the Section 80P deduction no longer existed and the assessment required reconsideration. Accordingly, the Court directed the Assessing Officer to consider the rectification application, provide the petitioner an opportunity of hearing, and pass appropriate orders in accordance with law within three months.

FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT

The petitioner is a Co-operative Society registered under the Kerala Co-operative Societies Act, 1969. According to the petitioner, on account of the nature of services rendered by the petitioner, it is entitled to get deduction under Section 80P of the Income Tax Act, 1961, in respect of the eligible income. For the assessment year 2018-19, the petitioner could not file its return within the statutory period stipulated, owing to the delay occurred in completing the statutory audit contemplated under the Kerala Co­operative Societies Act. In the meantime, the assessment was completed as per Ext.P1 order dated 04.03.2021.

2. In the light of the guidelines issued by the Central Board of Direct Taxes as evidenced by Ext.P2 Circular No.13/2023 dated 26-07-2023, the petitioner approached the 2^nd respondent, seeking condonation of delay in submitting the returns, under Section 119(2)(b) of the Income Tax Act. The same was considered and as per Ext.P3, the delay was condoned. On the strength of Ext.P3, the petitioner approached the Assessing Officer, the 3rd respondent herein, seeking to issue an order, giving effect to Ext.P3 order condoning the delay in submitting the returns. Exts.P4, P5 and P6 are the applications submitted by the petitioner in this regard. However, the said application were rejected as per Ext.P7, on the ground that, the same cannot be entertained in the absence of any direction by the Appellate or Revisional Authority.

3. In such circumstances, the petitioner submitted Ext.P4 rectification application highlighting this aspect. Since the same has not been considered, this writ petition is submitted by the petitioner.

4. I have heard learned Counsel for the petitioner and the learned Standing Counsel for the respondents.

5. The only relief sought by the petitioner is for a direction to consider Ext.P4 application for rectification. Such an application is necessitated in view of the fact that, the petitioner’s return was ordered to be accepted after condoning the delay as per Ext.P3 order passed by the competent authority, based on the Circular issued by the CBDT. Since the denial of the benefits of the Section 80P as per Ext.P1 is mainly on the ground of non-filing of the return, the order condoning the delay in filing the return, will have a decisive impact upon the said assessment order, as one of the basic reasons on which the benefit of Section 80P was denied, is no longer in existence. Therefore, it is a matter where, the assessment is to be reopened and reconsidered. Now that, the petitioner has already submitted Ext.P4 application for rectification and it is for the Assessing Officer to consider the same and to pass appropriate orders.

Accordingly, this writ petition is disposed of, directing the Assessing Officer to take up Ext.P4 application and to pass appropriate order in accordance with law, taking note of the fact that, the return of the petitioner pertaining to the relevant assessment year is ordered to be accepted, after condoning the delay and also taking note of the observations made by this Court in this judgment. Such a decision shall be taken within a period of three months from the date of receipt of a copy of this judgment, after giving the petitioner an opportunity for being heard.