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Facts
The appellant, a primary agricultural credit co-operative society, did not file its return of income for AY 2015-16 under Section 139(1), claiming exemption under Section 80P. The AO made an assessment under Section 147, adding various sums including disallowing the Section 80P deduction. The CIT(A) dismissed the appeal for non-prosecution.
Held
The Tribunal upheld the disallowance of the Section 80P deduction, noting that the assessee failed to file a return of income within the due date as mandated by Section 80AC and established by jurisdictional High Court decisions. However, other additions challenged in Grounds 2-5 were remanded back to the CIT(A) for fresh adjudication on merits, as the CIT(A) had erroneously dismissed them in limine without addressing the merits.
Key Issues
1. Whether a cooperative society is entitled to Section 80P deduction if no return of income is filed within the due date specified under Section 139(1). 2. Whether the CIT(A) can dismiss an appeal for non-prosecution without deciding on the merits of the additions.
Sections Cited
139(1), 147, 144, 144B, 69A, 115BBE, 68, 41(1), 80P, 80A(5), 80AC, 250(6)
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI PRAKASH CHAND YADAV, JM
O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 29.03.2025 for Assessment Year (AY) 2015-16. Stay Application was also filed by the assessee seeking stay of collection of outstanding demand of Rs. 17,57,52,058/-.
Brief facts of the case are that the appellant is a co-operative society registered under the Kerala State Co-operative Societies Act, 1969. It is classified as a primary agricultural credit co-operative SA 53/C/2025 Ambalapuzha Service Co-op. Bank Ltd. society. Appellant is carrying on the business of providing credit facilities to its members. The return of income for AY 2015-16 was not filed under the provisions of section 139(1) of the Income Tax Act, 1961 (the Act). The ITO, Ward-2, Alappuzha (hereinafter called "the AO"), based on the information that the appellant made cash deposit of Rs. 58,00,000/- formed an opinion that income escaped assessment to tax. Accordingly, notice u/s. 148 of the Act. In response to the notice the appellant submitted that the appellant is a primary agricultural co-operative society and the income is exempt u/s. 80P of the Act. Therefore no return of income was filed. However, the AO completed the assessment vide order dated 11.01.2024 passed u/s. 147 r.w.s. 144 and 144B of the Act at a total income of Rs. 17,76,69,258/- after making addition the following additions/disallowances: -
1 Unexplained money u/s. 69A r.w.s. 115BBE 5,14,79,696 of the Act on account of cash deposits and other deposits 2 Disallowance of deduction claimed u/s. 80P 25,88,593 of the Act 3 Unexplained cash credit in the books of 4,44,09,710 account u/s. 68 r.w.s. 115 BBE on account of unsecured loan taken other deposits 4 Unexplained money u/s. 69A r.w.s. 115BBE 5,87,91,516 of the Act on account of source loan/ advances given 5 Cessation of liability u/s. 41(1) of the Act 1,57,54,371 6 Disallowance of provisions debited in Profit 46,45,372 & Loss A/c. Total 17,76,69,258 SA 53/C/2025 Ambalapuzha Service Co-op. Bank Ltd. 3. Being aggrieved, an appeal was filed before the CIT(A). who vide the impugned order dismissed the appeal for non prosecution.
Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal.
The learned counsel for the assessee submits that the AO as well as the CIT(A) had not given adequate opportunity to present the case. It is further submitted that the cash deposits were made out of the money received from members and made during ordinary course of business of the appellant society. Therefore, not addition is called for. If is further submitted that the CIT(A) ought not have confirmed the disallowance claimed for deduction u/s. 80P placing reliance on section 80AC of the Act.
On the other hand, the learned Sr. DR submits that the order passed by the CIT(A) is in consonance with the settled position of law and requested no interference by the Tribunal.
We have heard the rival contentions and perused the material 7. available on record. The 6th ground of appeal challenges the disallowance of claim for deduction u/s. 80P of the Act on the ground that no return of income was filed by the appellant. Admittedly, the appellant is a co-operative society classified as a primary agricultural credit co-operative society. It is admitted fact that no return of income was filed by the appellant either under the provisions of section 139(1) or in response to the notice issued u/s. SA 53/C/2025 Ambalapuzha Service Co-op. Bank Ltd. 148 of the Act. It only amounts that there was no claim made in the return of income for deduction u/s. 80P of the Act. The issue is now stands covered by the decision of the Hon'ble Jurisdictional High court in the case of Nileshwar Range Kallu Chethu Vyavasaya Thozihilali Sahararana Sangham [2023] 459 ITR 730 (Ker) wherein it was 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 SA 53/C/2025 Ambalapuzha Service Co-op. Bank Ltd. 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 precondition 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 The 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 pre-condition 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.” In the light of this decision of the Hon'ble Jurisdictional High Court, we are of the considered opinion that the appellant is not entitled for deduction u/s. 80P of the Act. Thus, ground No. 6 stand dismissed.
SA 53/C/2025 Ambalapuzha Service Co-op. Bank Ltd.
Ground Nos. 2 to 5 challenges several disallowances made by the AO and confirmed by the CIT(A). From the reading of the order of the CIT(A) it is evident that the CIT(A) dismissed the appeal in limine for non prosecution. As contemplated u/s. 250(6) of the Act the CIT(A) is required to frame points of determination followed by a detailed discussion thereupon before passing the order. It is the settled position of law that the CIT(A), even while disposing of the appeal exparte, is duty bound to dispose of the appeal on merits. Reliance in this regard can be placed on the decision of the Hon'ble Bombay High Court in the case of PCIT vs. Premkumar Arjundas Luthra 279 CTR 614. Therefore, in the light of the above legal position we are of the considered view that the matter requires to be remanded to the file of the CIT(A) with the direction to dispose of the appeal de novo on merits after affording reasonable opportunity of hearing to the assessee. Ground Nos. 2 to 5 of the appeal are allowed.
Since the appeal is disposed of in above terms, the stay application filed by the assessee becomes infructuous.
In the result, the appeal filed by the assessee stands partly allowed the and stay application stands dismissed.
Order pronounced in the open court on 23rd June, 2025.
Sd/- Sd/- (PRAKASH CHAND YADAV) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER Cochin, Dated: 23rd June, 2025