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Facts
The assessee, a cooperative society, filed its return of income within the extended due date for AY 2022-23. However, the return was verified after the due date. The CPC disallowed the claim for deduction under Section 80P on this ground.
Held
The Tribunal held that a delay in the verification of the return, which is a procedural formality, should not lead to the denial of a legitimate deduction, especially when the return was filed within the prescribed time. The delay was considered a technical default, not a willful non-compliance.
Key Issues
Whether a delay in verifying the return of income, filed within the due date, can lead to disallowance of deduction under Section 80P.
Sections Cited
80P, 143(1), 139(1), 80AC
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Income Tax Appellate Tribunal, ‘SMC’ BENCH: BANGALORE
Before: SHRI WASEEM AHMED
PER WASEEM AHMED, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order passed by the Addl/JCIT(A)-1, Ludhiana dated 27/03/2024 vide DIN No. ITBA/APL/S/250/2023-24/1063489234(1) for the assessment year 2022- 23.
The only issue raised by the assessee is that the learned CIT(A) erred in confirming the disallowance of deduction under section 80P of the Act made by the CPC in the intimation issue under section 143(1) of the Act.
The necessary facts are that the assessee, a cooperative society, is engaged in the activity of providing credit facilities to its members. The assessee, in the return filed for the year consideration, declared business income of Rs. 17,58,050/- which was claimed as deduction under section 80P(2)(a)(i) of the Act.
The CPC while processing the return under section 143(1) of the Act disallowed the claim of the assessee under section 80P of the Act for the reason that the return of income was filed after the expiry of time specified for filling of the return under section 139(1) of the Act.
Being aggrieved the assessee preferred an appeal before the learned CIT(A).
The assessee before the learned CIT(A) submitted that the extended due date for filling return under section 139(1) of the Act was expiring on 7th November 2022 and the return of income was filed before that date, but the return was verified after expiry of extended due date. Accordingly, the assessee contended the benefit extended under section 80P of the Act shall not be denied merely for the reason that the return was verified after the expiry of due date of filing of return. The assessee further contended that the provisions of section 80P of the Act are beneficial provisions enacted by the parliament to encourage and promote the movement of cooperative society, therefore the condition for availing the benefit of section 80P should be interpreted liberally.
6.1 However, the learned CIT(A) upheld the disallowance of the deduction under section 80P of the Act due to the appellant's failure to verify the ITR within the prescribed due date. Although the return was filed before the due date, the verification was completed afterward, leading to the disallowance of the claim. The appellant's reasons for the delay were deemed frivolous and contradictory, as there was no justifiable cause beyond its control. Moreover, no application for condonation of delay was filed before the CCIT/DGIT, which further indicated that the appellant was not aggrieved. The learned CIT(A) also referred to the provisions of section 80AC of the Act, which mandate that the return must be filed within the due date under section 139(1) of the Act to claim deductions. The learned CIT(A) found that the appellant cited CBDT Circular No. 13/2023, which allows condonation in specific cases for cooperative societies, but it failed to apply for condonation, making the argument inapplicable. Therefore, based on these findings, the ld. CIT(A) dismissed the appeal and confirmed the disallowance of the deduction under section 80P of the Act.
Being aggrieved by the order of the leaned CIT(A), the assessee is in appeal before the Tribunal.
The learned AR of the assessee before me argued that the CIT(A) had erred in both the factual and legal aspects of the case, rendering the first appellate order prejudicial to the appellant's interests. The AR contended that the deduction under section 80P of the Act, was wrongly disallowed by the CPC on the grounds that the return of income for AY 2022-23 was not filed within the due date. The AR further emphasized that, despite the CPC's disallowance, the appellant had indeed filed the . income tax return electronically within the due date. However, the disallowance was made solely because the return was not verified within the due date. The AR maintained that such a technical lapse should not result in the denial of a legitimate deduction, as the return was duly submitted on time. Thus, the learned AR contended that the disallowance under section 80P was unwarranted and should be reversed.
On the other hand, the learned DR before me vehemently supported the findings of lower authorities.
I have carefully considered the submissions of both parties and perused the materials on record. The undisputed facts of the case establish that the assessee electronically filed its return of income within the extended due date under section 139(1) of the Act. However, the verification of the return was completed after the said due date, leading to the disallowance of the deduction under section 80P of the Act by CPC.
10.1 The key issue to be examined is whether a delay in verification of the return should lead to the denial of deduction under section 80P of the Act when the return itself was filed electronically within the prescribed time limit. It is a settled legal principle that tax incentives and deductions provided under beneficial provisions should not be denied merely on technical or procedural lapses, provided the substantive conditions are met. In this case, the assessee has duly filed the return within time and complied with the substantive requirements for claiming the deduction under section 80P of the Act. The verification of the . return, while an essential formality, is a procedural aspect, and its delay should not prejudice the assessee’s claim. At this point it is also important to highlight the department itself allow 30 days’ time period for verification of return after filing of the return electronically.
10.2 It is further noted that section 80AC of the Act requires that the return be filed within the due date under section 139(1) to claim deductions under Chapter VI-A. The phrase “return filed” in this context must be interpreted in light of section 139(1) of the Act, which considers the date of electronic submission as the date of filing. The verification requirement is a separate step that does not, in itself, alter the date of filing. Therefore, the contention of the Revenue that a delay in verification is equivalent to non-filing of the return is misplaced and contrary to the intent of the law.
10.3 It is also noted that the assessee cited CBDT Circular No. 13/2023, which allows condonation of delay in verification for cooperative societies in genuine cases. While it is true that the assessee did not file a formal application for condonation, the CIT(A) ought to have considered the circular in the proper perspective instead of mechanically dismissing the claim. The intention behind such circulars is to prevent undue hardship to taxpayers due to minor procedural lapses, and in this case, the delay in verification was not willful but merely a technical default.
10.4 I find that various Hon’ble Courts and Tribunals have held that minor procedural lapses should not defeat a substantive claim when there is no mala-fide intent or deliberate for non-compliance. The .
Hon’ble Supreme Court in CIT v. Alom Extrusions Ltd. (2009) 319 ITR 306 (SC) held that tax provisions should be interpreted in a manner that furthers the purpose of the legislation rather than leading to unintended hardships. The assessee is a cooperative society, and the provisions of section 80P are specifically designed to provide relief to such entities. Denying the deduction on mere technical grounds runs contrary to the spirit of the legislation, which aims to encourage cooperative societies. Given that the return was filed within time, and the verification was done after expiry of due date, disallowing the entire deduction would be excessively harsh and contrary to the principles of equity and justice.
10.5 Considering the above findings, I hold that the assessee has substantially complied with the provisions of section 80P of the Act, and the delay in verification of the return should not lead to the denial of the deduction. Accordingly, we set aside the order of the learned CIT(A) and direct the Assessing Officer to allow the deduction under section 80P of the Act, as claimed by the assessee. Hence, the ground of appeal of the assessee is allowed.