Y47 ARUMANAI PACCS,KANYAKUMARI vs. THE INCOMETAX OFFICER, WARD 1, NAGERCOIL

आयकर अपीलीय अिधकरण, ‘ए’ �ायपीठ, चे�ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH: CHENNAI �ी एबी टी. वक�, �ाियक सद� एवं �ी गगन गोयल, लेखा सद�य के सम� BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER

ITA. No. 1177/Chny/2026 �नधा�रणवष�/Assessment Year: 2019-20 Y47 Arumanai PACCS VS ITO 8/40, Arumanai Vilavacode, Ward 1, No.379, K.P. Road, Kanyakumari - 629151 Nagercoil, Kanyakumari [PAN: AAAAY 2045 C] (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथ� की ओर से/ Appellant by : Ms. A. Vijayalakshmi, C.A. ��थ� की ओर से /Respondent by : Mrs. Anshu Sharawat, Addl. CIT सुनवाईक�तार�ख/Date of Hearing : 15.07.2026 घोषणाक�तार�ख /Date of Pronouncement : 20.08.2026 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee-Co-operative Society against the order of the Learned Commissioner of Income Tax (Appeal)/NFAC, (hereinafter referred to as ‘Ld. CIT(A)’), Delhi, dated 03.12.2025 for the Assessment Year (hereinafter referred to as ‘AY’) 2019-20 passed u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).

ITA No. 1177/Chny/2026 (AY 2019-20) Y47 Arumanai PACCS :: 2 :: return for AY 2019-20, the AO took note of this fact, when he received information that there was cash deposit made by the assessee in Kanyakumari District Central Cooperative Bank Ltd to the tune of Rs.2.16 crores. So, he re-opened the assessment by issuing notice u/s.148 of the Act dated 04.04.2023. Pursuant to the notice u/s.148 of the Act, the assessee filed its return on 21.12.2023 declaring gross total income of Rs.45,25,137/- after claiming deduction u/s.80P(2)(a)(i) resulting in ‘Nil’ taxable income. Pursuant to the various notices issued by the AO, the assessee filed details of the cash deposit (nature and source of it) and being convinced, the AO didn’t drew any adverse view against the cash deposit of Rs.2.16 crores in its bank account. However, the AO disallowed the deduction claimed u/s.80P(2) on the ground that assessee belatedly filed the return and thus disallowed the claim u/s.80P(2)(a)(i) and determined the total income at Rs.45,25,137/-.

ITA No. 1177/Chny/2026 (AY 2019-20) Y47 Arumanai PACCS :: 3 :: u/s.148 of the Act. Pursuant to which the assessee is noted to have filed the return on 21.12.2023 declaring gross total income of Rs.45,25,137/- and claimed deduction u/s.80P(2)(a)(i) resulting in ‘Nil’ taxable income. The assessee is noted to have filed the details of the nature and source of the cash deposits and being convinced the AO accepted the same, didn’t drew any adverse view against the cash deposits. However, the AO disallowed the deduction claimed u/s.80P(2)(a)(i) on the ground that assessee didn’t file the return of income within due date u/s.139(1) of the Act. And thus determined the total income of Rs.45,25,137/-. 5. On appeal the Ld. CIT(A) has upheld the order of the AO. Before us, the Ld. AR of the assessee submitted that the non-filing of the return before the due date u/s.139(1) of the Act was not deliberate and was mainly due to late receipt of statutory audit report on 16.08.2021 and due to 2nd wave of COVID, etc. there was delay in filing of the return, Moreover, pursuant to the notice u/s.148 of the Act, the assessee had filed the return on 21.12.2023. The Ld. AR further brought to our notice that assessee has filed an application dated 23.02.2026 u/s.119(2)(b) of the Act for condoning the delay [in filing of the return of income within due date u/s.139(1) of the Act] before the Chief Commissioner of Income Tax Madurai [refer copy of the letter placed on page 10 of paper book (PB)]. In this context, the Ld. AR brought to our notice the judgment of the Hon’ble Jurisdictional High Court (Madurai Bench of Hon’ble Madras High Court) order dated 01.06.2026 [in the case of T943 Vickrapandiyam Primary Agricultural Co-operative Society

ITA No. 1177/Chny/2026 (AY 2019-20) Y47 Arumanai PACCS :: 4 :: vs. The Chief Commissioner of Income Tax and others] wherein, the Hon’ble High Court was considering the action of the Chief Commissioner refusing to condone the delay (in filing of the Income Tax Return within the due date u/s.139(1) of the Act) and thereby, resulting in the petitioner’s Co-operative Credit Societies being disentitled to claim deduction u/s.80P of the Act. In the said writ petition, the writ petitioners were (Co-operative Societies) which could not file the return in time [within due date u/s 139(1)], mainly because of non-compliance of statutory audit, was denied deduction u/s 80P on the ground of belated filing of return of income. In other words, the petitioners claim that it’s the entire business income was exempt from tax as per Section 80P of the Act, was disallowed by the AO/CPC citing section 80AC which was inserted (with effect from 1.04.2018) mandating eligible Co- operative Societies must file return on or before due date prescribed u/s.139(1) of the Act, failing which the claim of exemption u/s 80P would not be allowed. Hence, the petitioners filed application for condoning the delay [in filing of the return of income within due date u/s.139(1) of the Act] before the Chief Commission of Income Tax u/s.119(2) of the Act which were rejected. Hence, the petitioners’ preferred writ petition before the Hon’ble High Court, and the Hon’ble High Court took notice of the CBDT Circular No.13/2026 dated 26.07.2023 which delegated power to the Chief Commissioner to condone the delay in filing of the return and was pleased not to accept the action of the Chief Commissioner rejecting the petition [for

ITA No. 1177/Chny/2026 (AY 2019-20) Y47 Arumanai PACCS :: 5 :: condoning the delay in filing of the return within due date u/s.139(1) of the Act] by holding as under : - …………………………………………… …………………………………………….. ………………………………………………. 5.1. Chapter VI-A of the Income Tax Act, 1961, deals with deductions to be made in computing the total income. Under Section 80p of the Income Tax Act, 1961, in the case of an assessee being a Cooperative Society, if the gross total income includes any one of the incomes referred to in sub-section (2), the same shall be deducted in accordance with sub-section (2) in computing the total income of the assessee. Under sub-section (2), with reference to Cooperative Societies, many of its activities mentioned therein, such as carrying on the business of banking, providing credit facilities, cottage industry, marketing of agricultural produce grown by its members, purchasing agricultural implements, seeds, livestock or other articles, processing of agricultural produce without the aid of power, collective disposal of labour of its members, fishing or allied activities, etc., are eligible to be deducted. The whole amount of profits and gains of business attributable to any one or more of such activities is to be deducted. Similarly, various other activities of Cooperative Societies, including consumer Cooperative Societies, income from interest, income from letting out godowns, warehouses, etc., and several other types of activities can also be deducted. 5.2. In all these cases, it is not disputed that the activities of the petitioner Cooperative Societies fall within the deductions permitted under Section 80 P (2) of the Income Tax Act, 1961. The Cooperative Societies were simply considering these deductions and were neither paying any income tax nor filing returns. Section 80 AC was introduced, and it became mandatory with effect from 01.04.2018 that no such deductions will be allowed under any provision of Chapter VI – A unless the assessee furnishes a return of its income before the due date specified under Section 139 (1) of the Income Tax Act, 1961. Section 139 (1) of the Income Tax Act, 1961 mandates that every company, firm, or person, other than a company or a firm, furnish a return of income before the due date. The due date in respect of each entity is enumerated in the Section. Under Section 80 of the Tamil Nadu Cooperative Societies Act,1983 read with Rule 102 of the Tamil Nadu Cooperative Societies Rules, 1988, a statutory audit is mandated in respect of each and every Cooperative Society. It is seen that in the majority of cases, the statutory audit could not be completed before the due date prescribed for each assessment year; more specifically, on account of the COVID-19 pandemic, the Cooperative Societies were not filing the returns in time. This Court has also seen cases of a lack of discipline among individual officers of the Cooperative Societies for not completing the statutory returns on time. Sometimes, it is also due to mismanagement of the society’s affairs; the completion of the statutory audit or the filing of returns is hampered. Therefore, there are different reasons for the non-completion of statutory audits in time and, consequently, the nonfiling of returns on time. 5.3. It must be recognized that the Cooperative movement itself is in the public interest, as it is necessary for driving inclusive socio-economic growth, particularly in rural and economically underdeveloped areas. The Cooperative movement’s importance lies in providing micro-credits and financial assistance to farmers and in promoting the marketing of their products, thereby ensuring socioeconomic equality. 5.4. The Cooperative movement in this country dates back to the 1800s, and the Cooperative Societies became a body corporate by the Cooperative Societies Act, 1912, itself. Only in that context, Article 43 B of the Directive Principles of State Policy enjoins the State to encourage the voluntary formation of Cooperative Societies and to ensure their autonomy, democracy and professionalism in their

ITA No. 1177/Chny/2026 (AY 2019-20) Y47 Arumanai PACCS :: 6 :: functioning. As a matter of fact, the core principles relating to the comprehensive governance code for the Cooperative Societies were inserted as Part XI-B of the Constitution of India, as Articles 243ZH to 243ZT. However, considering that there are two entries with reference to the Cooperative Societies, as far as legislative power is concerned, Cooperative Societies functioning within the State fall under Entry 32 of List II, and only Multi-State Cooperative Societies would fall under Entry 43 of List I, the said Part XI B was held to be unconstitutional, inasmuch as it was added without ratification by the States, and was held valid only with reference to the Multi State Cooperative Societies (Union of India Vs. Rajendra M.Shah, (Civil Appeal No.9108 of 2014, etc). In Daman Singh Vs. In State of Punjab6, the Hon'ble Supreme Court of India reiterated that the very concept of the Cooperative movement is in the public interest. It is in this context that the Parliament has enacted Section 80 P of the Income-tax Act, 1961, granting deductions in respect of the said activities of the Cooperative Societies. The denial of the same, solely because there is a delay in filing the returns, should be considered a procedural aspect pitted against the substantive entitlement. 5.5. In fact, when there is no tax evasion and only a procedural error in not filing the Income Tax returns in time is involved, then, as rightly contended by the learned counsel for the petitioners, this Court in R. Seshammal case (cited supra) held that such a plea would be technical. As rightly contended by the Cooperative Societies, the hardship appears genuine. The various Judgments cited supra on the alleviation of genuine hardship would apply to the facts in the instant cases. 5.6. Considering the genuine hardship, the CBDT has exercised its power under Section 119(2)(b) of the Income Tax Act, 1961. The CBDT is always entitled to issue circulars granting administrative relief to assessees, such as extensions of time, to alleviate genuine hardships. In this context, the circular was issued on 26.07.2023. It is essential to extract paragraph No. 6 of the Circular, which reads as follows: “6. In the context of para-5 above, the CCsIT/DGsIT while deciding such applications for condonation of delay in furnishing retum of income, shall satisfy themselves that the applicant's case is a fit case for condonation under the existing provisions of the Act. The CGsIT/DGsIT shall examine the following while deciding such applications (i) the delay in furnishing the return of income within the due date under sub-section (1) of section 139 of the Act was caused due to circumstances beyond the control of the assessee with appropriate documentary evidence/s; (ii) where delay in furnishing return of income was caused due to delay in getting the accounts audited by statutory auditors appointed under the respective State Law under which such person is required to get his accounts audited, the date of completion of audit vis-à-vis the due date of furnishing the return of Income under sub-section (1) of section 139 of the Act, and (iii) any other issue indicating towards tax avoidance or tax evasion specific to the case, which comes into the light in the course of verification and having bearing either in the relevant assessment year or establishing connection of relevant assessment year with other assessment year/s. 6.1 The cases falling under para 6(iii) above, would require further necessary action as per law.”

ITA No. 1177/Chny/2026 (AY 2019-20) Y47 Arumanai PACCS :: 7 :: 5.7. Thereafter, by a subsequent circular dated 30.10.2024 bearing No. 14/2024, the same was extended for the year 2023 – 2024. Thus, the CBDT, taking into consideration the genuine hardship from the year 2018 – 2019 up to the year 2023 – 2024, had issued the above circular, empowering the Chief Commissioner of Income Tax to condone the delay in filing the returns. However, the Chief Commissioner of Income Tax, instead of considering the true spirit and benevolent object of the Circular, namely, to condone the delay and extend the substantial relief otherwise available to the Cooperative Societies, proceeded to interpret the Circular in a restrictive manner. The authority adopted a hypertechnical approach by confining the consideration of condonation strictly to the delay in filing the statutory audit report and further insisted upon an explanation for each day’s delay, contrary to the liberal and purposive interpretation intended under the Circular. 5.8. The impugned orders passed with such a view cannot be countenanced. The circular has to be read in the context of the directive principles of State policy contained in Article 43 B of the Constitution of India, and with a view to promoting the Cooperative movement and the intention behind Section 80P of the Income-tax Act, 1961. Accordingly, as held by the Division Bench of the Allahabad High Court in the Cell Com Tele Services Private Limited case (cited supra) (paragraph No.18), an excessively precise and stringent approach cannot be countenanced. As a matter of fact, the binding precedent is the order passed by the Hon'ble Division Bench of this Court in W.A.(MD) No.2334 of 2025 (cited supra), whereby it considered the difficulties faced by the Cooperative Societies and condoned the delay. This has to be taken into account. Similarly, the Judgments in W.P.(MD) No.22108 of 2025 (cited supra) and W.P.(MD) No.30146 of 2025 (cited supra) would also squarely govern the fact situations. 5.9. At the same time, upon the arguments made by the learned Senior Standing Counsel for the respondents, that Cooperative Societies are repeatedly taking things for granted and that the larger public interest in completing the Income Tax Assessment proceedings should not suffer, this Court, suo motto, impleaded the Registrar of Cooperative Societies, Chennai, in W.P. (MD) No. 7261 of 2026, etc., posed specific queries to the Registrar of Cooperative Societies regarding the steps taken in this regard, and directed the Registrar of Cooperative Societies to file a detailed affidavit. 5.10. Accordingly, an affidavit was filed on 29.04.2026, and it is essential to extract paragraphs 5, 6 and 7 of the said affidavit: “5. It is humbly submitted that, the Registrar of Cooperative Societies has issued instructions to all Regional Joint Registrars through R.C.No.83839/2022/PACS1 dated 13.09.2024, directing them to ensure that all Primary Agricultural Co-operative Societies under their jurisdiction file Income Tax returns within the prescribed time, as failure to do so will attract penal consequences with personal responsibility fixed on the concerned Secretaries, and that returns are filed without waiting for completion of audit to avail exemption under Section 80P of the Income Tax Act. 6. It is also submitted that, The Registrar of Cooperative Societies issued instructions to all Regional Joint Registrars through R.C.No.2160/2026/S11(PACCS-B) dated 20.04.2026, to ensure all Cooperative Societies under their control to file Income Tax Returns for 2025-2026 before 31st October, 2026, It is respectfully submitted that all cooperative societies were instructed to file Income Tax Returns for the Financial Year 2025-26 on or before 31.10.2026, and in cases where statutory audit is pending, to file returns based on Tentative Balance Sheet within the due date, thereafter submit Revised Retums upon audit

ITA No. 1177/Chny/2026 (AY 2019-20) Y47 Arumanai PACCS :: 8 :: completion wherever necessary, failing which delay beyond the statutory timeline may result in loss of deduction under Section 80P unless condonation is obtained from the Income Tax Department. 7. It is respectfully submitted that the Cooperative Department has developed an e-RCS software to administer and monitor the functioning of Cooperative Societies, complying the Statutory obligations regularly. One such module called Annual Return/IT/GST Filing, through which the cooperative societies are mandated to update the filing of IT returns promptly which is captured and displayed in the Dash Board of Circle Deputy Registrar/Regional Joint Registrar/Registrar of Societies. This would enable the regulatory authorities to ensure the compliance of cooperative societies in filing statutory returns including the IT returns periodically. This software would be fully functional by September 2026.” 5.11. Therefore, it can be seen that a circular has now been issued to file the returns even before the completion of the statutory audit, on or before 31st October of every year. It must be noted that the circular has been issued specifically for the current assessment year to file the returns before 31.10.2026. It is further submitted that e- RCS software is being implemented, with a module developed for annual return/IT/GST filing, under the supervision of higher authorities, and it was undertaken that this software would be fully functional by September 2026. 5.12. It is further stated in paragraph No.3 of the affidavit that the Cooperative Societies, through the Regional Supervisory authorities, are free to engage Chartered Accountants and Audit firms for the purpose. Thus, when this Court has been showing benevolence towards the Cooperative Societies in the matter of delay in filing the returns, as rightly contended by Mr. Dhilip Kumar, the learned Senior Standing Counsel, the larger public interest in the completion of the statutory tax assessment proceedings cannot be delayed. Similarly, though the Cooperative Societies are now filing the returns without awaiting the statutory audit, it would be desirable that the statutory audit under the Tamil Nadu Cooperative Societies Act, 1983, should also be completed well before 31.10.2026, so as to avoid further litigation and discrepancies in the matter. 5.13. The software, as undertaken, should be put in place at the earliest, and it will be the responsibility of the supervising officials to ensure that the Cooperative Societies file returns with the income tax authorities or the Goods and Services Authorities, as the case may be, well in time, and that due professional help is rendered to them with reference to technical assistance, filing of returns and statements, etc., in the appropriate forms. The undertaking given by the Registrar of Cooperative Societies in this regard is recorded. 5.14. In view thereof, all these Writ Petitions are allowed, on the following terms, (i) the respective orders impugned in these Writ Petitions, passed by the concerned Chief Commissioner of Income Tax, rejecting the applications made under circular No.13/2023 dated 26.07.2023, read with circular No.14/2024 dated 30.10.2024, are set aside; (ii) Consequently, the respective applications filed by the petitioners – Cooperative Societies shall stand allowed; (iii) It will be open to the Cooperative Societies to produce a copy of this order wherever the assessment proceedings are pending, so that the assessment authority concerned will take into account the returns filed by the Cooperative Societies and pass final orders of assessment as per law;

ITA No. 1177/Chny/2026 (AY 2019-20) Y47 Arumanai PACCS :: 9 :: (iv) Wherever assessment orders have already been passed, and appeals are pending, upon production of a copy of this order, the appellate authority concerned shall treat the delay in filing the returns as condoned pending the appeal proceedings, and accordingly pass appropriate orders in the appeals, remanding the matter back to the original authority for completion of the assessment proceedings, as the case may be; (v) Wherever the assessment orders are passed and no appeals are filed, it will be open for the Cooperative Societies to file appeals, along with condonation of delay in filing the appeal, as the case may be. The delay shall be condoned, and the appellate authority shall treat the delay in filing the returns as condoned by the respective Chief Commissioner of Income Tax under the circulars mentioned supra. Accordingly, the appeals shall be considered in accordance with law, and wherever necessary, the matter shall be remanded back to the original authorities for completion of the assessment, taking into consideration the returns filed by the petitioners – Cooperative Societies; (vi) The undertaking by the Registrar of Cooperative Societies, Chennai, detailed supra, is recorded, and all such steps shall be taken by the Supervising Authorities to ensure that the Cooperative Societies file the returns within the due date, enabling the statutory authorities to complete the assessment proceedings well in time; (vii) No costs. Consequently, the connected miscellaneous petitions are closed. 6. In the light of the aforesaid decision of the Hon’ble Jurisdictional High Court, the Ld. AR submitted that merely because there was a delay in filing of the return within the due date u/s.139(1) of the Act, the assessee’s claim u/s 80P should not be denied and hence prayed that the assessee’s claim u/s.80P(2) of the Act be allowed.

ITA No. 1177/Chny/2026 (AY 2019-20) Y47 Arumanai PACCS :: 10 :: authority. Hence, we set aside the impugned order of the Ld. CIT(A) and restore the assessment back to the file of the Jurisdictional Assessing Officer (JAO) with a direction to await the decision of the Chief Commissioner of Income Tax on the application filed by the assessee for condoning the delay in filing of the return. In any case, the Jurisdictional High Court in similar cases (supra) have directed the assessing authority to process the return by treating the delay in filing the return as condoned and complete the assessment order by considering the claim of section 80P of the Act.

Order pronounced on the 20th day of August, 2026, in Chennai.

Sd/- Sd/- (गगन गोयल) (एबी टी. वक�) (GAGAN GOYAL) (ABY T. VARKEY) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER चे�नई/Chennai, �दनांक/Dated: 20th August, 2026. YS आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF YASHVI Digitally signed by R YASHVIR SINGH Date: 2026.09.03 16:03:05 -07'00' SINGH