Case Law Details
Chatrai Primary Agricultural Cooperative Credit Society Limited Vs ITO (ITAT Visakhapatnam)
The Income Tax Appellate Tribunal (ITAT), Visakhapatnam, dismissed the assessee’s appeal and upheld the denial of deduction under Section 80P(2)(a)(i) of the Income Tax Act, holding that filing a return of income before completion of assessment is mandatory for claiming the deduction.
The assessee, a cooperative society, challenged the assessment completed under Section 144 for Assessment Year 2017-18, contending that deduction under Section 80P(2)(a)(i), being an incentive provision, should be interpreted liberally and allowed even though no return of income had been filed under Section 139(1).
The Assessing Officer noted that the assessee had not filed its return of income and had also failed to respond to the notice issued under Section 142(1). Consequently, Section 80A(5) was held to be applicable, and since no claim for deduction under Section 80P had been made, the entire net profit of ₹24.94 lakh disclosed in the profit and loss account was assessed as business income without allowing any deduction. The assessment was completed under Section 144.
Before the Commissioner of Income Tax (Appeals), the assessee submitted that it had filed its return of income on 26 December 2019 claiming deduction of ₹26.07 lakh under Section 80P. However, the assessment had already been completed on 25 December 2019. The Commissioner (Appeals) held that to claim deduction under Section 80P, the assessee was required to file a return of income under Sections 139(1), 139(4), 142(1), or 148. Since the return was filed only after completion of the assessment, the Assessing Officer had rightly denied the deduction and assessed the income under the head “Business or Profession.”
Before the Tribunal, the assessee reiterated that Section 80P is a beneficial provision and should therefore be interpreted liberally. It also argued that Section 80AC was not applicable to its case.
The Revenue relied on decisions of the Kerala High Court and coordinate benches of the ITAT, Visakhapatnam, which had held that deduction under Section 80P cannot be granted in the absence of a return of income and a corresponding claim.
The Tribunal observed that the issue was already covered by the decision of the coordinate bench in Chinnampeta Primary Agricultural Cooperative Credit Society Limited, which held that filing a return of income is mandatory for claiming any deduction, including deduction under Section 80P. Since it was an admitted fact that the assessee had not filed its return before completion of the assessment, the Tribunal held that the Revenue had validly denied the deduction under Section 80P.
Accordingly, following the earlier decisions relied upon by the Revenue and the coordinate bench, the Tribunal dismissed the assessee’s appeal.
FULL TEXT OF THE ORDER OF ITAT VISAKHAPATNAM
This appeal is filed by the assessee against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (“NFAC”), Delhi, vide DIN & Notice No. ITBA/NFAC/S/250/2024-25/1067606601(1) dated 13.08.2024, arising out of order passed by the Ld.AO u/s 144 on the Income Tax Act, 1961 (“the Act”) dated 25.12.2019 for the A.Y.2017-18.
2. In the above cited appeal, the assessee is aggrieved with the assessment order passed u/s 144 of the Act and rejection of appellant’s claim for deduction u/s 80P(2)(a)(i). The appellant’s claim is that the benefit u/s 80P(2)(a)(i), being an incentive provision should be interpreted liberally and granted even though return of income was not filed u/s 139(1) of the Act. From the assessment order, it is noticed that the assessee cooperative society did not file the return of income and hence, section 80A(5) is clearly applicable and since the assessee failed to make the claim of deduction u/s 80P(2)(a)(i), the net profit shown by the assessee in the Profit & Loss account was brought to tax as income from business for the A.Y.2017-18. Accordingly, no deduction u/s 80P was granted to the assessee society and the Ld.AO made an addition of Rs.24.94 lakh by treating the same as profit earned out of its business activities. Thus, the proceedings have culminated into assessment u/s 144(1)(b) as there was no response from the assessee with regard to filing of return in response to notice issued u/s 142(1) of the Act. In other words, the entire profit as admitted by the assessee society was brought to tax and no deduction u/s 80P(2) was given as there was no return of income nor there is any response to notice issued u/s 142(1) of the Act.
3. Aggrieved by this order of the Ld.AO, an appeal was filed before Ld.CIT(A). Before Ld.CIT(A), the appellant has stated that a return of income was filed after claiming deduction of Rs.26.07 lakhs. From the record, it is observed that the assessment was completed on 25.12.2019, whereas, the appellant society claims that it has filed return of income on 26.12.2019 in pursuance of notice issued u/s 142(1) of the Act. Before the Ld.CIT(A), the appellant claimed deduction u/s 80P of the Act on its entire profit earned to the extent of Rs.26.07 lakh in the return of income which was filed after completion of assessment. But the Ld.AO disallowed the claim of the appellant u/s 80P, stating that there is neither return of income nor a claim u/s 80P by the appellant and hence section 80A(5) is applicable. In view of the same, the Ld.AO brought the entire profit into tax net and completed the assessment. After considering the submission of the appellant, the Ld.CIT(A) held that for claiming deduction u/s 80P of the Act, the appellant shall file a return of income either u/s 139(1) / 139(4) /142(1) / 148 to avail deduction u/s 80(P) of the Act even for the assessment years prior to the A.Y.2018-19. In this case, the assessee has filed the return of income only after completion of assessment and hence, the Ld.CIT(A) held that the Ld.AO has correctly assessed the income under the head “Business/Profession” without granting deduction u/s 80P of the Act.
4. As the appeal of the appellant was dismissed by the First Appellate Authority, the assessee filed an appeal before the ITAT. The Ld.AR of the appellant argued that the provisions of section 80P are beneficial in nature and hence, the same should be interpreted in a liberal manner and deduction u/s 80P should be granted, even though no return of income was filed and section 80AC is not applicable to their case.
5. The Ld.DR relied on the following decisions :
a) Nileshwar Range Kallu Chethu Vyavasaya Thozhilali Sahaskarana Sangham vs. CIT (2023) 459 ITR 730/152 com 347/333 CTR 655 (Ker)/HC.
b) Maruthi Primary Agricultural Cooperative Credit Society Ltd. Vs. ITO in ITA No.151/VIZ/2022 for the A.Y.2017-18.
c) Narasimha Rao Palem Primary Agricultural Credit Society Ltd. Vs.ITO in ITA No.211/VIZ/2023 for the A.Y.2017-18.
It was argued that the issue was squarely covered by the coordinate Bench decisions of ITAT, Visakhapatnam in favour of Revenue on the issue of not granting deduction u/s 80P in the absence of return of income/claim of deduction.
6. Heard both the sides. The main argument of the Ld.AR of the appellant is that the deduction u/s 80P should be given to the assessee even though no return of income was filed before the completion of the assessment. This argument of the assessee was held to be incorrect, in view of the decision of coordinate Bench relied on by the Ld.DR in the case of Chinnampeta Primary Agricultural Cooperative Credit Society Limited, in ITA No.247/Viz/2025. The Bench has already taken a decision that it is mandatory to file return of income to claim any deduction including deduction u/s 80P of the Act. In this case, it is an admitted fact that there was no return of income filed before completion of assessment and hence the denial of deduction u/s 80P of the Act by the Revenue is hereby held as valid. Respectfully following the decisions relied on by the Ld.DR and Orders passed by the Co-ordinate Bench in this regard, the appeal of the assessee is dismissed.
7. In the result, the appeal filed by the Assessee is dismissed.
Order pronounced in the open court on 12th June, 2026.
Author Bio
