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Facts
The assessee, a co-operative credit society, did not file its income tax return within the prescribed time for AY 2017-18. Consequently, the Assessing Officer disallowed a deduction of Rs. 7,21,430/- under Section 80P(2). The CIT(A) upheld this disallowance.
Held
The Tribunal held that the amendment to Section 80AC, which makes timely filing of return a precondition for claiming deductions under Chapter VIA, came into effect from AY 2018-19. Therefore, it was not applicable for AY 2017-18. Prior to this amendment, timely filing was not mandatory for claiming deduction u/s 80P.
Key Issues
Whether the disallowance of deduction u/s 80P for AY 2017-18 is justified solely on the ground of not filing the return within the due date, considering that the relevant amendment to Section 80AC was not applicable for that assessment year.
Sections Cited
250, 80P(2), 139(1), 142(1), 139(4), 80AC, 143(1)(a)(v), 80A(5), 10B(8)
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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:-
This appeal has been filed by the Assessee against the order dated 28.01.2025 passed by the Ld. ADDL/JCIT(A)-2, Visakhapatnam (‘Ld. CIT(A)’ in short), under Section 250 of the Income-tax Act, 1961 (‘the Act’ in short), relating to the Assessment Year 2017-18.
The assessee has raised the following grounds of appeal :- “1.1 The order passed by U/s.250 passed on 28.01.2025 for A.Y. 2018-19 by NFAC, [CIT(A)], Delhi (for short CIT(A)" upholding the disallowance made by A.O. of deduction u/s 80P(2) of Rs. 7,21,430/- on account of non-filing of ITR within the prescribed time u/s 139(1) is wholly illegal, unlawful and against the principles of natural justice. 2.1 The ld. CIT(A), has grievously erred in law and or on facts in not appreciating that there could not be compliance to the notices claimed to be issued mainly on account of failure of the tax consultant. Thus, there was a sufficient cause for failure to comply with the notices claimed to be issued by NFAC.
Dholka Nagaric Bachat Sahakari Mandli Ltd. Vs. ITO Asst. Year : 2017-18 - 2– 3.1 The Id. CIT(A) has grievously erred in law and or on facts in upholding the disallowance made by A.O of deduction u/s 80P(2) of Rs. 7,21,430/- on account of non-filing of ITR within the prescribed time u/s 139(1). 3.2 That the in the facts and circumstances of the Id. CIT(A), ought not to have upheld the disallowance made by A.O of deduction u/s 80P(2) of Rs. 7,21,430/- on account of non-filing of ITR within the prescribed time u/s 139(1). 3.3 The Id. CIT(A) has failed to appreciate that the office bearers of the appellant society being unaware about the complicated tax laws and residing in a small town and under a genuine belief that the income of the cooperative society was exempt. It is, therefore, prayed that the disallowance made by A.O of deduction u/s 80P(2) of Rs. 7,21,430/- and upheld by the CIT(A) may kindly be deleted.”
The assessee is a co-operative credit society registered under the Gujarat Co-operative Societies Act. It is engaged in the business of providing credit facilities to its members and accepting deposits from them. The assessee maintains regular books of account, which are audited by the Sub-Registrar, Co-operative Societies. For the year under consideration, the assessee did not file its return of income within the time prescribed under section 139(1). Subsequently, a notice under section 142(1) was issued on 09.01.2018, but no return was filed. A show-cause notice was later issued on 06.12.2019, and in response, the assessee submitted that since its income after deduction u/s 80P was below the taxable limit, return filing was not mandatory. The Assessing Officer, however, held that under the sixth proviso to section 139(1), if the gross total income before the exemption u/s 80P exceeds the taxable limit, the assessee is mandatorily required to file its return within the prescribed time. Since the assessee failed to do so, the deduction u/s 80P was disallowed and tax was computed accordingly.
Aggrieved by the order of the Assessing Officer, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) upheld the disallowance on Dholka Nagaric Bachat Sahakari Mandli Ltd. Vs. ITO Asst. Year : 2017-18 - 3– similar reasoning as made by the Assessing Officer and passed an ex- parte order, as the assessee did not respond to notices issued.
Aggrieved, the assessee is now in appeal before the Tribunal.
Before us, the Ld. AR submitted that the assesseet is a co- operative society engaged in providing credit facility to its members and it qualifies for deduction u/s 80P(2)(a)(i) of the Act. The Ld. AR submitted that the assessee was under a bona fide belief that its income was exempt and return was not required. The Ld. AR also submitted that that the amendment to section 80AC requiring timely filing of return as a pre-condition for availing deduction under Chapter VIA was made by the Finance Act, 2018 and came into effect from AY 2018-19 onwards; therefore, the said condition was not applicable for AY 2017-18.
The Ld. DR, on the other hand, relied upon the orders of the authorities below.
We have heard the rival contentions and perused the material available on record. The undisputed facts are that the assessee is a co- operative society eligible for deduction u/s 80P(2)(a)(i) of the Act, and it failed to file its return of income u/s 139(1) of the Act within the prescribed due date. Based on this, the Assessing Officer denied the deduction citing the sixth proviso to section 139(1) of the Act.
8.1 Now, the key question for our consideration is whether the assessee was eligible for deduction u/s 80P(2)(a)(i) for A.Y. 2017-18 despite not filing its return within the due date prescribed under section 139(1) or not.
8.2 In our considered view, the disallowance made by the Assessing Officer and upheld by the Ld. CIT(A) is not justified, as the requirement of filing the return within the due date to claim deductions under Chapter VIA was only introduced through the amendment to section 80AC by the Finance Act, 2018. The relevant portion of section 80AC, as amended, reads as under: 80AC. Where in computing the total income of an assessee of any previous year relevant to the assessment year commencing on or after—
(i) the 1st day of April, 2006 but before the 1st day of April, 2018, any deduction is admissible under section 80-IA or section 80- IAB or section 80-IB or section 80-IC or section 80-ID or section 80- IE; (ii) the 1st day of April, 2018, any deduction is admissible under any provision of this Chapter under the heading "C.—Deductions in respect of certain incomes", 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.
8.3 We have gone through the notes given by the NADT on this issue. It reads as under: -
“Chapter-3 Common issues emerging during assessment of Co-operative Societies.
Issue-1: Delayed filing of return and denial of deduction u/s 80P.
Whether filing of return of income is mandatory for claiming deduction u/s 80P of the Act?
OR Whether filing the return of income within the due date specified u/s 139(1) of the Act is mandatory for allowing deduction u/s 80P of the Act?
OR Can the deduction u/s 80P be denied in processing u/s 143(1)(a) by way of 'prima facie adjustment?
Cooperative Societies are required to file ITR within the prescribed time u/s 139(1) of the Income tax Act, in order to claim relief or exemption/deduction.
The relevant legal provisions that make claiming of deduction u/s 80P by filing the return of income within the due date mandatory are as under: i) Sec. 143(1)(a)(v) ii) Sec. 80AC iii) Sec. 80A(5)
Sec. 143(1)(a)(v): At the time of processing of the return of income, the total income or loss of the assessee shall be computed after adjusting/disallowing the deduction claimed under sec.80P, if the return is furnished beyond the due date specified under sub-section (1) of section 139 of the Act. This enabling provision was introduced into the Act vide Finance Act, 2021 w.e.f. 01.04.2021.
Supporting Case law The Hon'ble Supreme Court in the case of PCIT Vs Wipro Ltd (2022) 140 taxmann.com 223 has disregarded arguments of the assessee and decided appeal in favour of the Revenue on the following counts: i) The exemption provisions are to the complied with strictly and literally and the same cannot be construed as procedural requirement. ii) Filing a revised return u/s 139(5) and taking a contrary stand and/or claiming the exemption which was specifically not claimed earlier while filing the original return of income is not permissible. ⅲ) For claiming the benefit u/s 10B(8) the twin conditions of furnishing the declaration to the AO in writing and that the same must be furnished before the due date of filing the return of income under sub-section 1 of section 139 are required to be fulfilled i.e. both the conditions are mandatory in nature.
The above decision clearly denotes that under the income-tax Act in order to claim relief exemption/deduction returns are needed to be filed u/s 139(1) which is a mandatory and not directory. Therefore, applying the ratio of the above decision it is imperative that to claim deduction u/s 80P assessee needs to file return as per due date prescribed u/s 139(1).
Dholka Nagaric Bachat Sahakari Mandli Ltd. Vs. ITO Asst. Year : 2017-18 - 6– Deduction under section 80P will not be allowed for belated return filed under section 139(4). Sec. 80AC The provisions of section 80AC have been amended w.e.f. 01.04.2018 as per which the deduction u/s 80P is allowable only in case the assessee has filed its return of income for the relevant assessment year on or before the due date of filing of return u/s 139(1) of the Act.”
8.3 This amendment came into effect from 01.04.2018 and applies from Assessment Year 2018–19 onwards. In the present case, the relevant assessment year is 2017–18, and hence, the amended provisions of section 80AC do not apply. Prior to this amendment, the law did not mandate filing of return within the prescribed time as a precondition for availing deduction u/s 80P of the Act. In view of the above, we are of the opinion that the deduction u/s 80P(2)(a)(i) cannot be denied to the assessee for AY 2017–18 merely on the ground that the return was not filed within the time prescribed under section 139(1) of the Act. Accordingly, the disallowance of deduction u/s 80P(2)(a)(i) of the Act of Rs.7,21,430/- is directed to be deleted.
In the result, the appeal of the assessee is allowed.
The order is pronounced in the open Court on 16.09.2025.