TYSPL 109 V KALATHUR PRIMARY AGRICULTURAL CO-OP,PERAMBALUR vs. ITO, PERAMBALUR

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ITA 2298/CHNY/2026Status: DisposedITAT Chennai23 June 2026AY 2019-208 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the denial of deduction under Section 80P solely due to a delay in filing the return, when the delay was due to genuine reasons like statutory audit completion and COVID-19 disruptions, is a procedural aspect against substantive entitlement. The Tribunal emphasized the benevolent object of Section 80P and the CBDT circulars aimed at mitigating genuine hardship for cooperative societies.

What were the facts?

The assessee, a cooperative society, filed its return of income belatedly after a notice under Section 148 was issued. The deduction claimed under Section 80P was disallowed by the AO and confirmed by the CIT(A) on the grounds that no return was filed within the due date under Section 139(1). The assessee's application for condonation of delay under Section 119(2)(b) was also rejected.

What were the issues?

Whether a belatedly filed return in response to a Section 148 notice can be considered for claiming deduction under Section 80P, and if the delay in filing the return, caused by circumstances beyond the assessee's control, should be condoned.

Which sections of the Income-tax Act were involved?

Section 80P,Section 139,Section 148,Section 80AC,Section 119(2)(b)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: HONOURABLE SHRI ABY T. VARKEY & SHRI GAGAN GOYAL

Hearing: 18.06.2026Pronounced: 23.06.2026

आयकर अपीलीय अधिकरण ‘सी’ न्यायपीठ, चेन्नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI माननीय श्री एबी टी. वर्की, न्याययक सदस्य एवं श्री गगन गोयल लेखा सदस्य के समक्ष BEFORE HONOURABLE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 2298/Chny/2026 ननिाारण वर्ा /Assessment Years: 2019-20 TYSPL 109 V Kalathur Primary v. The Income Tax Officer, Agricultural Cooperative Credit Society Ward-1, Limited, Perambalur. V Kalathur Post, Perambalur, Tamil Nadu-621 117. [PAN: AACAT5790P] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Assessee by : Mr. T. Vasudevan, Advocate, Ld. AR प्रत्यर्थी की ओर से /Revenue by : Mr. Chilaka Marthi Vijay Raju, Addl. CIT, Ld. DR सुनवाईकीतारीख/Date of Hearing : 18.06.2026 घोषणाकीतारीख /Date of Pronouncement : 23.06.2026 आदेश / O R D E R PER GAGAN GOYAL, AM: This is an appeal preferred by the assessee against the order of Ld. Commissioner of Income Tax (A) / NFAC, (hereinafter referred as the ‘Ld. CIT(A)’) dated 21.03.2026, for the Assessment Year (hereinafter referred as the ‘AY’) 2019-20.

GROUNDS OF APPEAL 1. The order of the Commissioner of Income Tax (Appeals) dismissing the appeal is contrary to law, erroneous and unsustainable on the facts of the case. 2. The CIT (A) NFAC erred in upholding the order of the department on jurisdiction and merits of the case.

3.

The Learned CIT (A), NFAC, erred in law and on facts in denying the appellant's claim for deduction under Section 80P of the Income-tax Act, 1961, without appreciating that the appellant had a valid and substantive statutory entitlement to such deduction. The Learned CIT (A), NFAC failed to appreciate the fact that the return filed under section 148 is deemed to be return filed under section 139(1).

4.

The Learned CIT (A), NFAC, failed to appreciate that the delay in filing the return of income was due to the belated completion of the statutory audit under the Co-operative Societies Act and delayed receipt of the audited financial statements on 28/10/2021, which was beyond the control of the appellant.

5.

The Learned CIT (A), NFAC, failed to consider that the delay in completion of the statutory audit was further aggravated by the disruptions caused due to the COVID-19 pandemic, which significantly impacted the functioning of co-operative societies and their auditors, thereby constituting a reasonable cause for the delay.

6.

The Learned CIT (A), NFAC, erred in not considering and adjudicating upon the judicial precedents relied upon by the appellant, which support the allowability of deduction under Section 80P even in cases of delayed filing of return where such delay is attributable to genuine and reasonable cause, thereby resulting in denial of legitimate relief.

7.

The CIT (A) NFAC has further failed to consider that the appellant operates on a principle of mutuality with a sole objective to provide credit facilities to members, without any profit motive. The delay in filing the return was neither willful nor intentional but only due to circumstances beyond the control of the appellant.

8.

The CIT (A) NFAC, in any event, ought to have seen that the requirements as per the provisions of the Act are not satisfied and hence the assessment is bad in law and thus allowed the appeal.

2.

The brief facts of the case are the assessee Agricultural Cooperative Society was amongst the non-filer of return u/s. 139 of the Act. Although as per the information received by the AO the assessee has made huge cash deposits amounting to Rs. 3, 80, 93, 567/-. In view of this fact, a notice u/s. 148 of the Act was issued on 30.03.2023. In compliance to the notice issued u/s. 148 of the Act, the assessee filed return of income on 12.12.2023 declaring nil income after claiming deduction of Rs. 5, 44, 288/- u/s. 80P of the Act. But the same was disallowed on the ground that no return has been filed by the assessee within the provisions of section 139(1) of the Act. The case of the assessee was assessed at a figure of Rs. 5, 44, 288/- in the status of AOP.

3.

The assessee being aggrieved with the above preferred an appeal before the Ld. CIT (A) who in turn dismissed the appeal of the assessee and confirmed the order of the AO. The assessee being further aggrieved preferred the present appeal before us. We have gone through the order of the AO, order of the Ld. CIT (A) and submissions of the assessee along with grounds taken before us. It is observed that the assessee filed an application u/s. 119(2) (b) of the Act before the Chief Commissioner of Madurai for condonation of delay in filing of the return of income claiming deduction u/s. 80P. But the same was also rejected vide order dated 03.10.2024. Now, a question before us is whether a return filed by the assessee (belatedly) in compliance to notice u/s. 148 of the Act will be suffice to claim deduction u/s. 80P of the Act. It is purely a question of law involved, as there is no challenge to the facts of the case by either party and to answer this question we deem it fit to analyze the provisions of section 80P, 80AC and section 139 along with section 148 of the Act with reference to CBDT Circular and Judicial Pronouncements as under: CONDONATION OF DELAY UNDER CLAUSE (b) OF SUB-SECTION (2) OF SECTION 119 OF THE INCOME-TAX ACT, 1961 FOR RETURNS OF INCOME CLAIMING DEDUCTION U/S 80P FOR VARIOUS ASSESSMENT YEARS FROM AY 2018-19 TO AY 2022-23 CIRCULAR NO. 13/2023 [F. NO. 173/21/2023-ITA-I], DATED 26-7-2023 Section 80P of the Income-tax Act, 1961 (hereafter referred to as 'Act') provides for deduction in respect of income of co-operative societies under Chapter VIA-Part-C ("Deductions in respect of certain incomes") of the Act. 2. In so far as section 80P of the Act is concerned, Finance Act, 2018 substituted section 80AC of the Act w.e.f. 1-4-2018 which provides as under - Deduction not to be allowed unless return furnished. 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 80-1A or section 80-1AB or section 80-IB or section 80- 1C or section 80-ID or section 80-IE; (ii) the 1st day of April, 2018, any deduction is admissible under any provision of this Chapter under the heading "C—Deduct ions 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. 3. Applications have been received in the Central Board of Direct Taxes (hereafter referred to as "the Board') from co-operative societies claiming deduction u/s 80P of the Act for various assessment years from AY 2018-19 to AY 2022-23, regarding condonation of delay in furnishing return of income and to treat such returns as 'returns furnished within the due date under sub- section (1) of section 139 of the Act stating that delay in furnishing return of income was caused due to delay in getting the accounts audited under respective State Laws. 4. In order to mitigate genuine hardship in cases referred to in para 3, the Board, in exercise of the powers conferred under section 119 of the Act, hereby directs that the Chief Commissioners of Income-tax (CCsIT)/Directors General of Income-tax (DGsIT) are authorised to deal with such applications of condonation of delay pending before the Board, upon transfer of such applications by the Board, and decide such applications on merits, in accordance with the law. 5. The Board hereby further directs that the CCsIT/DGsIT, henceforth, shall admit all pending as well as new applications for condonation of delay in furnishing returns of income claiming deduction u/s 80P of the Act, filed either in the Board or in field formation for the assessment years 2018-19 to 2022-23 and decide such applications on merits in accordance with the law where such person is required to get his accounts audited under respective State Laws. 6. In the context of para-5 above, the CCsIT/DGsIT white deciding such applications for condonation of delay in furnishing return of income, shall satisfy themselves that the applicant's case is a fit case for condonation under the existing provisions of the Act. The CCsIT/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-a-vis the due date of furnishing the return of income under sub-section (I) 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. 7. The CCsIT/DGsIT shall preferably dispose the application within three months from the end of the month in which such application is received from the applicant or transferred by the Board. No order rejecting the application under section 119(2) (b) of the Act shall be passed without providing the applicant an opportunity of being heard. 4. In the light of the above Circular, we have gone through the order of the Ld. CCIT, Madurai and observed that the assessee got its accounts audited on 29.03.2019 as per the Tamilnadu Co-operative Societies Act, 1983. But has not filed the return even thereafter. Hence, the application filed u/s. 119(2) (b) of the Act before the Chief Commissioner of Madurai for condonation of delay in filing of the return of income claiming deduction u/s. 80P was rejected vide order dated 03.10.2024. But, we came across the order of the Hon’ble Jurisdictional High Court in the case of [2026] 187 taxmann.com 97 (Mad.) T943 Vickrapandiyam Primary Agricultural Co-operative Credit Society Ltd. v. CCIT, wherein the Hon’ble High Court held as under:

■ “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. [Para 5.1] In all these cases, it is not disputed that the activities of the petitioner Cooperative Societies fall within the deductions permitted under Section 80P(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 80AC 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 non-filing of returns on time. [Para 5.2] 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. [Para 5.3] 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 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 v. Rajendra M. Shah [Civil Appeal No. 9108 of 2014, dated 20-7-2021], etc. In Daman Singh v. In State of Punjab [1985 SCC Online SC 11], 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 80P 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. [Para 5.4] 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 counsel for the petitioners, this Court in R. Seshammal v. ITO [1999] 237 ITR 185 (Mad) 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. [Para 5.5] 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. [Para 5.6] 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 hyper-technical 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. [Para 5.7] 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 Teleservices (P.) Ltd. case ([2025] 176 taxmann.com 712/ (All) (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, dated 13-8-2025, 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 and W.P. (MD) No.30146 of 2025 would also squarely govern the fact situations. [Para 5.8] At the same time, upon the arguments made by the 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. [Para 5.9] Accordingly, an affidavit was filed on 29.04.2026. [Para 5.10] 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. [Para 5.11] 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 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. [Para 5.12] 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. [Para 5.13] 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; (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. [Para 5.14]”

5.

In view of the above decision of the Hon’ble Madras High Court, we respectfully follow the same and restore the matter back to the file of the AO with a direction to consider the return filed by the assessee as a valid one in the light of the decision of the Hon’ble High Court discussed (supra) and pass final orders of assessment as per law after giving fresh opportunity of being heard to the assessee. The assessee is also directed to appear before the AO with all the relevant books of accounts, Audit Report and other relevant documents without seeking any adjournment and all the possible cooperation should be extended during the assessment proceedings.

6.

In view of the above, grounds raised by the assessee are allowed for statistical purposes.

7.

In the result, the appeal of the assessee is allowed for statistical purposes with the above observations and directions.

Order pronounced on the 23rd day of June, 2026, in Chennai.

Sd/- Sd/- (एबी टी. वर्की) (गगन गोयल) (ABY T. VARKEY) (GAGAN GOYAL) न्याययक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER चेन्नई/Chennai, ददनाांक/Dated: 23rd June, 2026. KB आदेश की प्रयतललपप अग्रेपषत/Copy to: 1. अपीलार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकर आयुक्त/CIT, Chennai /Madurai/Coimbatore/Salem 4. पवभागीय प्रयतयनधि/DR K Digitally signed by K BABU 5. गार्ड फाईल/GF Date: 2026.06.30 09:20:03 BABU +05'30'

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