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Facts
The assessee, a cooperative society, did not file its return of income for AY 2012-13. The AO reopened the assessment based on information about cash deposits and disallowed the claim for deduction under Section 80P, invoking Section 80A(5). The CIT(A) upheld the AO's order.
Held
The Tribunal held that the assessment order was bad in law as the AO issued only one notice u/s 148 and did not issue a fresh notice when the reason for reopening (cash deposit) was found to be explained. Further, Section 80A(5) is not applicable when no return of income is filed. Therefore, the denial of deduction u/s 80P was not justified.
Key Issues
Whether the reassessment proceedings were validly initiated and conducted, and whether the denial of deduction u/s 80P for non-filing of return is justified.
Sections Cited
147, 148, 144, 250, 80P, 80A(5), 142(1), 80AC, 139
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Income Tax Appellate Tribunal, PUNE BENCHES “SMC”, PUNE
Before: DR.MANISH BORAD
आदेश / ORDER
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
This appeal filed by the assessee pertaining to the assessment year 2012-13 is directed against the order dated 27.11.2024 of National Faceless Appeal Centre (NFAC), Delhi passed u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) which inturn is arising out of the Assessment Order dated 30.12.2019 passed u/s.144 r..w.s.147 of the Act.
Assessee has raised following grounds of appeal :
“1. On the facts and in the circumstances of the case and in law, Ld. AO erred in passing an order u/s. 144 res 147 by making a disallowance of the claim made u/s 80P of Rs. 30,51,273/-, especially in view of the fact that the case was reopened u/s 147 for the reason of cash deposit and no addition is made on account of cash deposit and therefore the action of disallowance of claim is not warranted, in view of Jurisdictional High court judgment in case of CIT V/S. Jet Airways (() Ltd. [2011] 331 ITR 236 (Bombay).
Rajya Rakhiv Police Karmachari Sahakari Patsanstha Maryadit 2. Without prejudice to the above ground, on the facts and in the circumstances of the case and in law, Ld. AO erred in making an addition of Rs.30,51,273/- being deduction claimed u/s 80P of the IT Act by disregarding the appellant's contention that appellant is a credit co- operative society and it is entitled for the deduction claimed u/s 80P. Your appellant prays for allowing such deduction. Your appellant prays for deletion of entire addition. Your appellant craves for to add, alter amend, modify, delete any or all grounds of appeal before or during the course of hearing in the interest of natural justice.”
3. Brief facts of the case are that the assessee is a Cooperative Society registered under Maharashtra Cooperative Societies Act, 1960 with the main object of providing credit or loan to its Members and collect deposits from its Members by way of Fixed Deposits, Saving deposits and daily recurring deposits. Return of income for A.Y. 2012-13 was not filed and even PAN was also not obtained. Learned Assessing Officer (AO) based on the information about the cash deposit of Rs.35,00,821/- in the bank account held with Central Bank of India invoked the provisions of section 147 after taking prior approval of the competent authority and issued notice u/s.148 of the Act which was duly served upon. Thereafter, notice u/s.142(1) of the Act was issued and submissions filed by the assessee were examined. Ld. AO observed that the assessee is maintaining regular books of account and financial statements are prepared and that in the computation of income filed during the course of assessment proceedings assessee claimed deduction u/s.80P of the Act. Ld. AO was satisfied with the details filed about the source of cash deposit but denied the deduction u/s.80P of the Act as the assessee did not file the return of income and accordingly assessed the income at Rs.30,51,270/-.
4. Assessee challenged this addition before ld.CIT(A) but failed to succeed. Aggrieved assessee is now in appeal before this Tribunal.
Rajya Rakhiv Police Karmachari Sahakari Patsanstha Maryadit 5. Ld. Counsel for the assessee referring to the legal issue raised in Ground No.1 stated that in view of judgment of Hon’ble Jurisdictional High Court in the case of CIT Vs. Jet Airways (I) Ltd. reported in (2011) 331 ITR 236 (Bombay) the impugned assessment proceedings deserves to be quashed as the reason for which re- assessment proceedings were initiated no additions were made and the addition has been made for the other issue, i.e. denial of deduction u/s.80P of the Act.
So far as merits of the case are concerned, he submitted that eventhough the assessee did not file the return of income but the activity of the assessee society has been accepted by the ld. AO and that the eligibility of the assessee for deduction u/s.80P of the Act has been denied solely for not filing the return of income invoking section 80A(5) of the Act. He however submitted that section 80AC of the Act is applicable where the assessee files the return but fails to make the claim of deduction/exemption. Section 80AC of the Act which provides that for claiming deduction u/s.80P of the Act return is to be filed within the statutory time limit has been inserted from 01.04.2018 and is not applicable in the instant case as it pertains to A.Y. 2012-13. In support of the contention, reliance was placed on the decision of this Tribunal in the case of Sanchar Gramin Bigarsheti Sahakari Patsanstha Maryadit Vs. ITO in and 2433/PUN/2024 order dated 06.01.2025 as well as the decision of Coordinate Bench, Bangalore in the case of Prathamika Krishi Pattina Sahakara Sangha Ltd. Vs. ITO reported in (2022) 142 taxmann.com 405.
On the other hand, ld. Departmental Representative vehemently argued supporting the orders of the lower authorities.
Rajya Rakhiv Police Karmachari Sahakari Patsanstha Maryadit 8. We have heard the rival contentions and perused the record placed before us. So far as the legal issue raised vide Ground No.1 in the grounds of appeal is concerned, we find that the reason for carrying out the re-assessment proceedings was regarding explanation about the source of cash deposit of Rs.35,00,821/-. It is noticed that assessee neither had PAN nor has filed any return of income for the year under consideration. It was only during the course of re-assessment proceedings that ld. AO was able to examine the details in the form of Annual Report and Books of account. In the assessment order, ld. AO has nowhere doubted the source of alleged cash deposit which was from the Members of the society and therefore no addition was made on this account. Ld. AO has disallowed the deduction u/s.80P of the Act by applying section 80A(5) of the Act. Under these given facts, judgment of Hon’ble Jurisdictional High court in the case of Jet Airways (I) Ltd. (supra) comes to the rescue of the assessee wherein it was held that “if after issuing a notice under section 148, he (AO) accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under section 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee”. Considering the judgment of Hon’ble Jurisdictional High Court, we find that in the instant case ld. AO has issued only one show cause notice u/s.148 along with the reasons to believe of the escapement of income with regard to unexplained cash deposit. During the course of assessment proceedings, ld. AO was satisfied with the source of cash deposit and therefore if he intended to make addition on some other ground he was required to issue a fresh Rajya Rakhiv Police Karmachari Sahakari Patsanstha Maryadit show cause notice u/s.148. Since this exercise has not been carried out by the ld. AO the assessment order framed on 30.12.2019 is held to be bad in law and deserves to be quashed. Legal issue raised in Ground No.1 stands allowed.
9. Though we have dealt with the legal issue and have allowed the ground in favour of the assessee we still deem it proper to deal with merits of the case raised in Ground No.2 through which it has been contended that even if the assessee has not filed the return of income but since it has carried out the activity as a cooperative society which is duly registered under Maharashtra Cooperative Societies Act, 1960 and has maintained the details of Income and Expenditure Account during the year, the assessee is eligible for deduction u/s.80P(2)(a)(i) of the Act and that section 80A(5) of the Act is not applicable as it is applicable only in case return of income is filed. We observe that the assessee has referred and relied on the decision of Coordinate Bench, Bangalore in the case of Prathamika Krishi Pattina Sahakara Sangha Ltd. (supra) wherealso similar issue was there where the assessee did not file the return of income for A.Y. 2017-18 and the deduction u/s.80P of the Act claimed subsequently during the course of assessment proceedings was denied by the AO referring to section 80A(5) of the Act. Coordinate Bench after considering the judicial precedents held as under :
“7. 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. 1-4-2018 reads as follows:
"80AC. Deduction not to bs allowed unless return furnished-Where in computing the total income of an assessee of the previous year relevant to the assessment year commencing on the 1st day of April, 2006 or any subsequent assessment year, any deduction is admissible under section 80-1A or section 80-1AB or section 80-IC or section 80-ID or section 80-IE, 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."
He pointed out that the aforesaid provisions contemplate filing of return of income to claim deductions under certain provisions of Chapter VI "A" of the Act and 80P is not one of the section which is mentioned in section 80AC of the Act. He therefore submitted that the deduction under section 80P of the Act cannot be denied to the assessee for non filing of return of income. Learned DR, on the other hand, reiterated the stand of the Revenue as reflected in the order of the CIT(A).
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.”
Similar issue was also taken by this Tribunal in the case of Sanchar Gramin Bigarsheti Sahakari Patsanstha Maryadit (supra). We therefore following the judicial precedents and taking consistent view are of the considered view that ld. AO erred to invoke section 80A(5) of the Act in the instant case and therefore Rajya Rakhiv Police Karmachari Sahakari Patsanstha Maryadit assessee’s claim of deduction u/s.80P of the Act deserves to be allowed as ld. AO has not disputed the carrying out of the activity of the cooperative society as per its objects coupled with all the necessary details and the quantum of income earned during the year. Thus, Ground No.2 raised by the assessee is allowed.
In the result, appeal of the assessee is allowed.
Order pronounced on this 16th day of June, 2025.