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Facts
The assessee, a cooperative society, failed to file its original return of income. Information received indicated financial transactions, but in the absence of a return, the source remained unexplained. Notices were issued, and a return was eventually filed, but it was treated as non-est. The Assessing Officer disallowed deductions under sections 80P(2)(a) and 80P(2)(c) based on Section 80A(5), deeming the claim made outside the return invalid.
Held
The Tribunal held that while the filing of a return is mandatory, the claim for deduction under Chapter VI-A, such as under Section 80P, has a directory timing. The Tribunal referenced previous judgments, including a Supreme Court decision, which indicated that a claim made during assessment proceedings, even if not in the original return, should be allowed on merits.
Key Issues
Whether a deduction claim made during assessment proceedings, but not in the original return of income, is admissible when the original return was not filed or treated as non-est.
Sections Cited
80P(2)(a), 80P(2)(c), 80A(5), 148A, 148, 142(1), 144, 147, 144B, 80P, 80P2(a)(i), 80P2(c), 80P2(d)
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Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
Before: SHRI MANISH BORAD & SHRI VINAY BHAMORE
आदेश / ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is directed against the order dated 27.12.2024 passed by Ld. CIT(A)/NFAC for the assessment year 2015-16.
The appellant has raised the following grounds of appeal :-
“1] The learned CIT(A) erred in confirming the disallowance of deduction of Rs. 10,25,886/- u/s 80P(2)(a) and Rs.14,000/- u/s 80P(2)(c) on the ground that the assessee had not made the claim in the return of income and hence, in view of provisions of section 80A(5), the said deductions were not allowable to the assessee. 2] The learned CIT(A) erred in not appreciating that simply because the assessee had not made the claim in the return of income did not mean that it was not entitled to claim deduction u/s 80P of the Act and accordingly, it is submitted that the deduction u/s 80P should have been granted. 3] The learned CIT(A) erred in not appreciating that the assessee was entitled to deduction u/s 80P(2)(a) of Rs.10,25,886/- and u/s 80P(2)(c) of Rs.14,000/- and the same should have been allowed to the assessee. 4] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.”
facts of the case in brief, are, that the assessee is an AOP ie Cooperative Society duly registered under Maharashtra State Cooperative Societies Act, engaged in providing credit facilities to its members and has not furnished its original return of income. On the basis of information received through in site portal it was found that in-spite of various financial transactions the assessee had not filed its return of income and in absence of return of income, source of such financial transactions remained unexplained. Accordingly notice under section 148 A(b) of the IT act was issued to the assessee on 20 March 2022 but the assessee has not filed any reply to the above notice therefore order under section 148 A(d) was passed on 30 March 2022 and notice under section 148 was also issued to the assessee on 30 March 2022 after obtaining prior approval of the appropriate authority. Subsequently notices under section 142(1) were issued to the assessee. The assessee furnished its return of income in response to notice under section 148 of the income tax act but the said return was treated as non-est since it was not verified by the assessee within the stipulated time. However the assessee submitted the request before CPC for condonation of delay in furnishing ITR V. The assessee also participated in the assessment proceedings and furnished computation of income and reply to the notices issued by the assessing officer. According to the computation of income furnished by the assessee his income was Rs 10,39,886/- and after claiming deduction under section 80 P 2(a)(i) and 80P 2(c ) of the IT act, the remaining income was claimed as NIL. The assessing officer disallowed the claim of deduction under section 80 P, in the light of provisions of section 80 A(5) of the IT act, since the return filed by the assesse was treated as non est. The assessing officer completed the assessment under section 144/147 rws 144B of the IT Act by determining taxable income of Rs 10,39,890/-. The above said income includes disallowance of deductions claimed under section 80 P 2(a)(i) of RS 10,25,886/- & of Rs 14,000/- under section 80 P 2(c) of the IT act.
Aggrieved with the above order the assessee society preferred appeal before the learned CIT appeal(NFAC) who dismissed the appeal filed by the assessee.
Learned AR appearing from the side of the assessee submitted before us that the order passed by learned CIT appeal is unjustified. Learned AR submitted before us that the return of income was furnished by the assessee however the ITRV could not be verified within the stipulated time therefore a condonation request was forwarded to CPC prior to completion of assessment. Learned AR further submitted that the assessee duly claimed the deductions under section 80P2 (a)(i) & 80P 2(c) of the IT Act in the computation of income which was furnished before the assessing officer. Learned AR placed heavy reliance on decision passed by a coordinate bench of this tribunal in the case of Krushi Vibhag Karmchari Vrund Sahkari Pat Sanstha Maryadit vs ITO order dated 07-10-2022, wherein the Tribunal has accepted the contention of the assessee and allowed the deduction claimed under section 80P 2(a)(i) & 80P2( d) of the IT Act even when the same was not claimed in the return of income since no return of income was furnished by the assessee however the claim was made before the assessing officer during the course of assessment proceedings. The Tribunal by relying on the judgment passed by Hon’ble Supreme Court in the case of CIT versus GM knitting industries private limited (2015 ) 376 ITR 456 allowed the claim of the assesse. Accordingly learned AR requested before the bench to set aside the order passed by learned CIT appeal and further requested to allow the deduction u/s 80P2(a)(i) & 80P2(c) of the IT Act claimed by the assessee and also requested to delete the addition made by the AO.
Learned DR appearing from the side of the revenue relied on the orders passed by the subordinate authorities and requested to confirm the same.
We have heard the learned counsels from both the sides and perused the material available on record including the case law relied on by the Counsel of the assesse . In this regard we find that the assessee is a duly registered primary credit cooperative society. The assessee cooperative society has furnished return of income in response to the notice under section 148 of the IT act wherein deduction under section 80P2 (a)(i) of Rs 10,25,886/- and u/s 80P 2(c) of Rs 14,000/-was claimed. We further find that the ITR V could not be verified within the stipulated time limit however the assessee furnished a condonation request before CPC, the copy of which was also produced before the bench along with other documents. In this regard we find that the assessing officer disallowed the claim of deduction under section 80P 2(a)(i) and 80P2 (c )of the IT act as per the provisions of section 80A(5) which suggests that chapter VI A deduction claim is required to be made in the return of income . In this regard it was the contention of learned counsel of the assessee that it was also sufficient compliance if the assessee makes the claim before the assessing officer during the course of assessment proceedings also. In support of this contention learned counsel of the assessee placed heavy reliance on decision passed by the Nagpur bench of Tribunal in the case of Krushi Vibhag KarmchariVrund Sahkari Pat Sanstha Maryadit vs ITO order dated 07-10-2022. The tribunal allowed the appeal by observing as under 13. On going through the judgments in G.M. Knitting Industries (supra) in juxtaposition to Wipro Limited (supra), the principle which emerges is that the fulfillment of requirement of making a claim for exemption under the relevant sections of Chapter III in the return of income is mandatory, but when it comes to the claim of a deduction, inter alia, under the relevant sections of Chapter VI-A, such requirement becomes directory. In the latter case, the making of a claim even after the filing of return but before completing the assessment, meets the directory requirement of making a claim in the return of income. The instant case involves deduction u/s 80P and hence, would be governed by the principle laid down in G.M. Knitting Industries (supra), as per which the making of a claim of deduction is mandatory but the timing is directory. Even if the claim is made during the course of assessment proceedings, such a claim has to be allowed. In view of the foregoing discussion, I am satisfied that the authorities below were not justified in rejecting the assessee’s claim of deduction u/s 80P only on the ground that such a claim was not made in the return but during the course of assessment proceedings. The impugned order is ergo set aside and the matter is remitted to the file of the AO for examining the claim of deduction u/s 80P on merits.
In the result, the appeal is allowed for statistical purposes.
The above decision of Nagpur Tribunal was also followed by the bench of Pune Tribunal in order dated 21-12-2022 in the case of Shri Cha Raj Shahu Gra Bigar Sheti Sah Pat Sanstha Mydt vs ITO in ITA NO 131/PUN/2022 order dated 21-12-2022 & was again followed in a recent decision passed by the bench of Pune Tribunal in ITA No 2432 & 2433/PUN/2024 06-01-2025 in the case of Sanchar Gramin Bigar Sheti Sahkari Pat Sanstha Mydt. 8.1. Accordingly Respectfully following the above decision passed in the case of Krushi Vibhag Karmchari Vrund Sahkari Pat Sanstha Maryadit vs ITO order dated 07- 10-2022, herein Judgement passed by Hon’ble Supreme court was followed, We hold that the order passed by LD CIT (A) is not correct & the assesse is entitled to claim deduction under section 80P 2(a)(i) of RS 10,25,886/- and u/s 80P 2 (c) of Rs 14,000/- . In the light of above discussion we set aside the order passed by learned CIT appeal and direct the assessing officer to allow the claim under section 80P2(a)(i) and 80P2 (c) of the IT act as made by the assessee. The grounds of appeal raised by the assessee are accordingly allowed.
In the result, the appeal filed by the assessee is allowed.
Order pronounced on this 31st day of July, 2025.