PRATHAMIKA KRISHI PATTINA SAHAKARA SANGHA LIMITED,HASSAN vs. INCOME TAX OFFICER, WARD-2, HASSAN

In response to the said proposal, the assessee filed reply dated 25.09.2019 in which the assessee contended that in the Financial Year 2016-17, statutory audit was carried out by the Co-operative Audit Department and there was no proper guidance with regard to filing of income tax returns. Therefore, not filing of income tax return was unintentional and the same may be condoned. The assessee also submitted that the proposal of the AO to disallow deduction under section 80P of the Act for not filing of return of income by invoking provisions of section 80A(5) of the Act would not be appropriate as provisions of section 80P of the Act are incentive provisions meant to help primary agricultural co- operative societies which act for the benefit of farmers.

The request of the assessee was however not acceded to by the AO and he denied the benefit of deduction to the assessee under section 80P of the Act for the following reasons: “6. The submissions of the assessee were carefully examined. Further, the assessee furnished the copies of the balance sheet as on 31/03/2017, profit & loss account audited by co-operative department. And as per the details furnished, the assessee has earned total income of Rs. 1,89,165/- on which the assessee should have paid taxes or claimed any deductions by filing valid return of income within the due date prescribed. However, as the assessee has not filed any such valid return, no deduction shall be allowed as per section 80A(5) of the I T Act. Hence, the total business income of the assessee is treated at Rs. 1,89,165/-.”

The assessee preferred appeal before the CIT(A) against the benefit of deduction under section 80P of the Act. The primary contention of the assessee before the CIT(A) was that the provisions of section 80A(5) of the Act are directory and not mandatory and therefore deduction under section 80P cannot be denied by making the provisions of section 80A(5) of the Act. The assessee relied on th decision of ITAT Delhi in the case of Fibrefill Engineers Vs. CIT (2017) 177 TTJ 556 (Del.) wherein it was held that the provision of sec. 80A(5) are directory in nature and not mandatory. The said section can not be invoked for denying the deduction u/s.80P even if ITR is not filed. The assessee contended that the deduction available to a Co-operative Society u/s80P is in the nature of incentive provided which cannot be denied by invoking sec. 80A(5). The assessee relied on the decision of Hon’ble Kerala High Court in – in the case of Chirakkal Service Co-operative Bank Ltd. Kannur Vs. CIT. The assessee relied on another decision of ITAT, Cochin Bench in ITA No. 340/Coch/2012 rendered on 05/10/2017 in Kodiyeri service Cooperative Bank Ltd. Thalassery Vs. ITO, Kannur.

The CIT(A), however, rejected the contentions of the assessee by holding that the provisions of section 80A(5) of the Act are unambiguous and filing of return is a precondition for claiming deduction under section 80P of the Act. The CIT(A) also distinguished the cases cited on behalf of the assessee. I do not propose to discuss those aspects because in my view the case laws and the discussions are not germane to the issue that required consideration by the CIT(A). The CIT(A) ultimately upheld the order of the AO. Hence this appeal by the assessee before the Tribunal.

I have heard the rival submissions. The learned Counsel for the assessee submitted that the provisions of section 80A(5) of the Act will come into play only when a return of income is filed by an assessee and the claim for deduction under Chapter VIA of the Act is not claimed in the said return. It was contended that since the assessee did not file return of income for Assessment Year 2017-18, there was no question of invoking the provision of section 80A(5) of the Act. His further submission was that section 80AC of the Act as it existed prior to its substitution by the Finance Act, 2018 w.e.f. 01.04.2018 reads as follows:

I have given a careful consideration to the rival submissions. I agree with the submissions of the learned Counsel for the assessee that section 80A(5) of the Act is applicable only when a return of income is filed by an assessee and a deduction under Chapter VI “A” of the Act, is not claimed in such return of income. It will not apply to a case where no return of income is filed. The provisions of section 80AC of the Act, as we have already seen, contemplates denial of deduction in respect of certain provisions of Chapter VI “A” of the Act, if a return of income is not filed by an assessee. Those provisions, as rightly contended by the learned Counsel for the assessee, do not apply to the claim for deduction under section 80P of the Act. Therefore, the Revenue authorities were not justified in not entertaining the claim of the assessee for deduction under section 80P of the Act as made by the assessee. Since neither the AO nor the CIT(A) have examined the other conditions for allowing deduction under section 80P of the Act, I deem it fit and proper to remand the issue of the assessee’s eligibility to claim deduction under section 80P of the Act, in the sense with regard to the quantum of deduction and also with regard to the other conditions for allowing deduction under section 80P of the Act, for examining afresh by the AO. I therefore allow the appeal of the assessee for statistical purposes.

In the result, appeal of the assessee is treated as allowed for statistical purposes.