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Facts
The assessee, a primary agricultural credit co-operative society, did not file its income tax return for AY 2017-18, believing its income was exempt under Section 80P. The Assessing Officer completed the assessment under Section 144, rejecting the Section 80P deduction claim, which was upheld by the CIT(A) on the grounds that no claim was made in a filed return. The total income was computed at Rs. 1,70,27,604/-.
Held
The Tribunal upheld the decisions of the lower authorities, ruling that the assessee was not entitled to the deduction under Section 80P of the Income Tax Act because it failed to file its return of income within the due date. The Tribunal relied on the jurisdictional High Court judgment in NileshwarRangekalluChethuVyavasayaThozhilaliSahakarana Sangham Vs. CIT, which stated that filing a return within the due date is a statutory pre-condition for claiming such deductions.
Key Issues
Whether deduction under Section 80P of the Income Tax Act is admissible if the assessee has not filed its return of income within the prescribed due date, or if a belated return is filed.
Sections Cited
80P, 250, 80P(2), 144, 156, 80AC(ii), 80A(5), 139(1), 139(4), 142(1), 143, 144B, 148, 119(2)(b), 234A, 44AB, Chapter VIA
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Income Tax Appellate Tribunal, COCHIN BENCH:COCHIN
Before: SHRI INTURI RAMA RAO & SHRI KESHAV DUBEY
Appellant by : None Respondent by : Smt. Leena Lal, Sr. D.R. Date of Hearing : 18.02.2025 Date of Pronouncement : 16.05.2025 O R D E R PERKESHAV DUBEY, JUDICIAL MEMBER: This appeal at the instance of the assessee is directed against the order of CIT(A)/NFAC dated 4.7.2024 vide DIN & Order No.ITBA/NFAC/S/250/2024-25/1066424090(1) for the AY 2017- 18 passed u/s 250 of the Income Tax Act, 1961 (in short “The Act”).
The assessee has raised the following grounds of appeal:
Brief facts of the case are that ChennithalaThripperumthura Service Co-operative Bank Ltd is a Primary agricultural credit co- operative society having registered office in Mavelikara, Alappuzha District.As per the specific information available with the department that during the demonetization period i.e. from ChennithalaThripperumthura Service Co-op. Bank Ltd., Chennithala Page 6 of 10 8.11.2016 to 31.12.2016, the assessee had deposited an amount of Rs.1,12,12,000/- with the Allappuzha District Co-operative Bank Ltd., Mannar branch in cash. As the assessee had not filed the return of income voluntarily u/s 139(1) of the Act a notice u/s 142(1) of the Act was issued to the assessee requiring to file true and correct income tax return. However, the assessee did not comply with the notice. During the course of assessment proceedings, in response to show cause notice, the assessee submitted cash book, bye-law and audit report from the Co- operative Department. The AO also verified the bank accounts with the cash deposits and accordingly the AO held that source of cash deposits have been explained. However, on verification, it appears that assessee co-operative bank has shown a net profit of Rs.3,72,800/- in audit report from the co-operative department. But as the assessee did not furnish the return of income in time, and also not furnished the audit report u/s 44AB of the Act, accordingly, the AO computed the total income amounting to Rs.1,70,27,604/- u/s 144 of the Act.
Aggrieved by the order of the Assessing Officer, the assessee had preferred appeal before ld. CIT Appeals/NFAC.
The ld. CIT(A)/NFAC dismissed the appeal of the assessee on the ground that assessee is not eligible for deduction u/s 80P of the Act where no claim has been made in the return of income. Further, ld. CIT(A) observed that 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 I.T. Act. It is trite that a provision for deduction or exemption under a taxing statute has to be strictly construed and accordingly dismissed the appeal of the assesse.
Before us ld. A.R. of the assessee vehemently submitted that the assessee was under honest and bonafide belief that being a co- operative bank the entire income is exempt and hence not liable to file income tax return. Further, ld. A.R. of the assessee also draw our attention to CBDT circular no.14(XL-35) dated 11.4.1955 wherein the CBDT observed that Officers of the department must not take advantage of ignorance of an assessee as to his rights. Further, ld. A.R. of the assessee submitted that the assessee is fully entitled for deductions enumerated u/s 80P of the Act and the denial of deduction on the sole ground that the return were not filed for the AY 2017-18 is illegal and bad in law.
Ld. D.R. on the other hand, supported the order of the ld. CIT(A)/NFAC and vehemently submitted that the case of the assessee is squarely applicable by the judgement of the jurisdictional High Court in the case of NileshwarRangekalluChethuVyavasayaThozhilaliSahakarana Sangham Vs. CIT reported in (2023) 459 ITR 730.
We have heard the rival submissions and perused the materials available on record. The only issue that is raised before us is whether the authorities below justified in rejecting the claim of deduction u/s 80P of the Act on the sole ground that return of income has not been filed within the due date? Undisputedly, the assessee had not filed the return of income voluntarily as stipulated u/s 139(1) of the Act. Further, as observed from the assessment order, we also take a note of the fact that inspite of issuing notice u/s 142(1) of the Act requiring the assessee to file true and correct income tax return on or before 26.1.2018, the assessee did not ChennithalaThripperumthura Service Co-op. Bank Ltd., Chennithala Page 8 of 10 comply with the notice. We also take a note of the fact that AO passed the order u/s 144 of the Act on the best of its judgement. Therefore, in view of the judgement of Hon’ble jurisdictional High Court in the case of NileshwarRangekalluChethuVyavasayaThozhilaliSahakarana Sangham Vs. CIT cited (supra), we are of the view that the assessee is not entitled for claim of deduction u/s 80P of the Act as the assessee has not filed the return of income within the due date. The relevant extract of the judgement is reproduced below for ease of reference and record.:
“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 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 ChennithalaThripperumthura Service Co-op. Bank Ltd., Chennithala Page 9 of 10 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.
Before parting with these cases, we must also address the arguments of the learned counsel for the appellant/assessee relying on the provisions of Section 139(8)/(9) and Section 234A of the IT Act. A reading of the provisions of Section 139(8) and (9) of the IT Act clearly reveals that even under those provisions, the restrictions placed with regard to the accrual of interest on amounts assessed on an assessee is with regard to the date of filing of a return within the time prescribed under the IT Act. Under Section 234A of the IT Act, however, although the provision suggests that even a return filed beyond the time prescribed under any of the provisions of the IT Act can have the effect of limiting the accrual of interest on the amounts assessed against an assessee, we have to see the said provision as permitting a filing of a belated return for the limited purpose of conferring a specific benefit of limiting the accrual of interest, on an assessee, and for no other purpose. We cannot accept the contention of the appellant/assessee that the said provisions which are intended for a specific purpose and are not general in nature, have to be seen as manifesting a statutory scheme that enables the Department to act upon a belated return for allowing the claim of an assessee for deduction under Section 80P of the IT Act. In the light of the aforesaid discussion, we find that the above questions of law have to be answered in favour of the Revenue and against the assessee, and we do so. Thus, these I.T. Appeals are disposed by answering the substantial questions of law raised therein, in favour of the Revenue and against the assessee.” 9.1. Respectfully following the above judgement of the jurisdictional High Court we held that assessee is not entitled to claim for deduction u/s 80P of the Act as the assessee has not filed the return within the due date.
In the result, appeal filed by the assessee is dismissed.
Order pronounced in the open court on16th May, 2025 Sd/- Sd/- (Inturi Rama Rao) (Keshav Dubey) Accountant Member JudicialMember Bangalore, Dated 16th May, 2025. VG/SPS Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file By order
Asst. Registrar, ITAT, Cochin.