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Facts
The assessee did not file its return of income by the due date, despite having significant cash deposits. A notice under section 148 was issued, and the assessee filed a belated return claiming deduction under section 80P. The AO denied this deduction.
Held
The Tribunal held that the assessee's claim for deduction under section 80P was not allowable because the return of income was filed belatedly, and not within the due date prescribed under section 139(1) of the Act. This position is supported by the judgment of the Kerala High Court.
Key Issues
Whether a belatedly filed return of income can be accepted for claiming deduction under Section 80P of the Income Tax Act, especially in light of Section 80AC.
Sections Cited
139(1), 148, 143(2), 142(1), 80AC, 80P, 143(1), 139(4), 144
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Income Tax Appellate Tribunal, “SMC - B” BENCH : BANGALORE
Before: SHRI. LAXMI PRASAD SAHU
ORDER
Per Laxmi Prasad Sahu, Accountant Member :
This appeal filed by the assessee is against the Order passed by the NFAC, vide DIN and Order No.ITBA/NFAC/S/250/2024-25/1068011872(1) dated 27.08.2024, for the Assessment Year 2018-19.
Briefly stated, the facts of the case are that the assessee did not file return of income within due date prescribed under section 139(1) of the Act. As per the data available with the Income Tax Department, inspite of having huge cash deposits in bank account of the assessee of Rs.9,79,75,176/- the assessee did not file return of income. Accordingly, a notice under section 148 of the Act dated 07.04.2022 was issued to the assessee and assessee was allowed to file return of income withing 30 days from the receipt of notice. In response to the notice, assessee filed its return of income on 31.01.2023 belatedly declaring gross total income of Rs.13,76,926/- and claimed deduction under Chapter VI-A of Rs.13,76,926/- under section 80P of the Act. After filing return of income, notice under section 143(2) of the Act was issued to the assessee on 07.02.2023 and subsequently other statutory notices were issued to the assessee. The AO issued several notices for compliance of different dates but there was no response from the assessee's side. Finally, notice under section 142(1) of the Act was issue to the assess on 06.03.2023 requesting to explain the details of cash deposits and its utilization. Against this issue, assessee filed reply on 16.07.2023 stating that the assessee is registered under Karnataka State Co-operative Societies Act, 1959 with registration No.AR/7RSR/UOG/19001/97-98 dated 19.06.1997 and further stated that assessee earns income from interest on loan advanced to Members and any cash received with interest is kept with other Co-operative Banks and the assessee is providing credit facilities to its Members and receiving cash deposits from Members and the same is deposited into bank account and where there is requirement, the money is withdrawn from the bank and financial statements were also submitted as and when required. The AO noted that the assessee has claimed deduction under section 80P of the Act which is not allowable because of the amended provision of section 80AC of the Act. Since assessee did not file return of income under section 139(1) of the Act and return has been filed by the assessee in response to the notice under section 148 of the Act even belatedly and the entire deduction claimed by the assessee was denied. Against the Order of Assessment, assessee filed appeal before the learned CIT(A). The learned CIT(A), discussing in detail the entire issues raised by the assessee and following the judgment of Hon'ble Kerala High Court in the case of Nileshwar Rangekallu Chethu Vyavasaya Thozhilali Sahakarana Sangham Vs. CIT reported in 459 ITR 730 (Kerala) (14.03.2023) and distinguishing the earlier judgment of Hon'ble Kerala High Court in the case of Chirakkal Service Co-operative Bank Ltd., [2016] 384 ITR 490 (Kerala) which was relied on by the assessee. He also noted that the assessee did not file return under section 139(1) of the Act and upheld the Order of the AO and he also noted that the assessee did not file its return of income under section 139(1) of the Act. Therefore, prima facie adjustment under section 143(1) of the Act does not arise as raised by the assessee in its grounds of appeal.
3. Aggrieved from the Order of the learned CIT(A), assessee filed appeal before the Tribunal. The learned Counsel reiterated the submissions made before the lower authorities and learned Counsel submitted that the reopening made by the AO has not been justified and he had no tangible material for exercising power under section 144 of the Act and she also submitted that the basic ingredients for reopening of the case is absent in the present case of the assessee. Therefore, the reopening is bad in law. She further submitted that the lower authorities have wrongly not given the benefit of deduction under Chapter VI-A under section 80Pof the Act as claimed by the assessee merely the appellant did not file return of income within time allowed u/s 139(1). The learned CIT(A) has wrongly interpreted section 80AC of the Act. For claiming deduction under Chapter VI-A as per section 80AC is directory in nature and not mandatory. She relied on the judgment of Hon'ble Kerala High Court in the case of Chirakkal Service Co-operative Bank Ltd., (supra) and submitted that the claim for deduction under section 80P of the Act where a return of income has been filed by the assessee beyond stipulated period under sections 139(1) or 139(4) or 144 or 148 of the Act, under such circumstances, the lower authorities cannot deny the deduction under section 80P of the Act on the mere ground of belated filing of return of income of the assessee and the return filed belatedly can be accepted and acted upon for further proceedings in relation to such assessments are statutory hierarchy in terms of the provisions of Income Act, 1961, cannot be treated that return filed at any stage of such proceedings could be treated as non- est in law and invalid for the purpose of deciding under section 80P of the Act.
4. On the other hand, the learned DR relied on the Order of the lower authorities and submitted that assessee has raised baseless arguments for reopening of the case as well as for claiming of deductions under section 80P of the Act inspite of having taxable income and huge cash deposits in various bank accounts and it has taxable income before claiming deduction under chapter VI- A of the Act. On verification of the data, it was noted that assessee has deposited huge cash of Rs.9,79,75,176/- despite it did not file return of income which is a prima facie reason for reopening of the case of the assessee after confirming the due procedure reopening the case of the assessee under section 147/148 of the Act. Therefore, the entire arguments raised by the assessee for reopening of the assessment is unjustified. Further, in the case of denying deduction claimed under Chapter VI-A , the assessee did not file its return of income within the due date as per section 139(1) of the Act, the learned DR relied on the judgment of Hon'ble Kerala High Court in the case of Nileshwar Rangekallu Chethu Vyavasaya Thozhilali Sahakarana Sangham Vs. CIT (supra) dated 14.03.2023 (supra) and he also relied on the judgment of Syndicate Co-operative Bank Staff Co-operative Society Ltd., in Order dated 03.01.2023 and in for the Assessment Year 2018-19 Order dated 17.10.2024 and strongly submitted that these case laws are very much applicable to the present facts of the case of the assessee.
5. Learned DR further submitted that the judgment of Hon'ble Kerala High Court in the case of Chirakkal Service Co-operative Bank Ltd., (supra) is a prior judgment and the same has been considered by the Hon'ble Kerala High Court in the case of Nileshwar Rangekallu Chethu Vyavasaya Thozhilali Sahakarana Sangham Vs. CIT (supra) reported in 459 ITR 730 (Kerala) (14.03.2023). Therefore, the case law relied on by the learned AR is not applicable.
6. Considering the rival submissions, it is noted that as per the data sheet of the Income Tax Department, it was noted that despite having huge cash deposits in its bank account of more than Rs.9 Crores, therefore, the AO after following the due procedure for reopening of the case issued notice under section 148 of the Act and the assessee also had taxable income before claiming deduction under Chapter VI-A. Therefore, the reopening is justified. Regarding claiming of deduction under Chapter VI-A, assessee did not file return of income as per section 139(1) of the Act that is why the deduction claimed by the assessee under Chapter VI-A under section 80P of the Act has been denied to the assessee of Rs.13,76,926/- as income declared by assessee and claimed deduction under section 80P of the Act. This issue has been settled by the Hon'ble Kerala High Court in the case of Nileshwar Rangekallu Chethu Vyavasaya Thozhilali Sahakarana Sangham Vs. CIT (supra) in which it has been held as under:
"11. On a consideration of the rival submissions and on a perusal of the statutory provisions, we find that a reading of section 80A(5) and Section 80AC of the IT Act as they stood prior to 1-4-2018, when the latter provision was amended by Finance Act 2018, would reveal that the statutory scheme under the IT Act was to admit only such claims for deduction under section 80P of the IT Act as were made by the assessee in a return of income filed by him. That return can be under sections 139(1), 139(4), 142(1) or section 148, and to be valid, had to be filed within the due date contemplated under those provisions. Under section 80A(5), the claim for deduction under section 80P could be made by an assessee in a return filed within the time prescribed for filing such returns under any of the above provisions. The amendment to Section 80AC with effect from 1-4- 2018, however, mandated that for an assessee to get a deduction under section 80P of the IT Act, he had to furnish a return of his income for such assessment year on or before the due date specified in section 139(1) of the IT Act. In other words, after 1-4-2018, even if the assessee makes his claim for deduction under section 80P in a return filed within time under sections 139(4), 142(1) or section 148, he will not be allowed the deduction, unless the return in question was filed within the due date prescribed under section 139(1). Thus, it is clear that the statutory scheme permits the allowance of a deduction under section 80P of the IT Act only if it is made in a return recognised as such under the IT Act, and after 1-4-2018, only if that return is one filed within the time prescribed under section 139(1) of the Act. As the return in these cases, for the assessment years 2009-10 and 2010-11, were admittedly filed after the dates prescribed under sections 139(1) and 139(4) or in the notices issued under section 142(1) and section 148, the returns were indeed non- est and could not have been acted upon by the Assessing Officer even though they were filed before the completion of the assessment.
There is yet another aspect of the matter. The requirement of making the claim for deduction in a return of income filed by the assessee can be seen as a statutory pre-condition for claiming the benefit of deduction under the IT Act. It is trite that a provision for deduction or exemption under a taxing Statute has to be strictly construed against the assessee and in favour of the Revenue. Thus viewed, a failure on the part of an assessee to comply with the pre-condition for obtaining the deduction cannot be condoned either by the statutory authorities or by the courts.
It is in the backdrop of the aforesaid discussion that we must consider the findings of a Division Bench of this Court in Chirakkal Service Co- operative Bank Ltd. [supra]. The findings therein, that appear to suggest that a claim for deduction under section 80P can be entertained even if it is made in a return filed beyond the time permitted under the IT Act, ignores the perspective that sees the requirement of the claim for deduction being made in a valid return as a pre-condition for obtaining the benefit of the statutory deduction. The said findings also fly in the face of the express statutory provisions that requires the claim to be made in a return filed by the assessee, by which term is meant a valid return under the Act, and therefore have necessarily to be seen as per incuriam. We also find that the subsequent amendments to section 80AC by the Finance Act 2018 fortifies the view that we have taken for, it makes the claim for deduction under section 80P conditional on filing a return within the due date prescribed under section 139(1) of the IT Act. In other words, the precondition for claiming the deduction under section 80P of the IT Act has now been made more stringent by reducing the time available to an assessee for making the claim."
Respectfully following the above judgment of Hon’ble Kerala High Court and other judgments as relied on by the learned DR cited supra, I dismiss the grounds raised by the assessee.
In the result, appeal filed by the assessee is dismissed.
Pronounced in the court on the date mentioned on the caption page.