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Facts
The appellant, a co-operative society, did not file a regular return of income for AY 2017-18. Based on AIMS information regarding cash deposits during demonetization, the AO initiated reassessment proceedings, issued a notice under Section 142(1), and eventually assessed income by disallowing the claim for deduction under Section 80P, which the CIT(A) upheld. The assessee did not appear during the tribunal hearing.
Held
The Tribunal upheld the disallowance of the Section 80P deduction, affirming that the assessee co-operative society was not entitled to it because no return of income was filed, which is a mandatory precondition under Section 80A(5) of the Act. This decision was in line with the jurisdictional High Court's ruling in Nileshwar Range Kallu Chethu Vyavasaya Thozhilali Sahakarana Sangham.
Key Issues
Whether a co-operative society is entitled to a deduction under Section 80P of the Income Tax Act if it fails to file a return of income as mandated by Section 80A(5).
Sections Cited
139(1), 142(1), 80P, 80A(5), 80AC, 139(4), 148
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Inturi Rama Rao & Shri Sandeep Singh Karhail
:Asst.Year 2017-2018 Edamalayar Service Co-operative The Income Tax Officer Society No.IX-103A v. Ward – 1 & TPS Kothamangalam Thodupuzha. Ernakulam – 686 694. PAN : AAAAE4549F. (Appellant) (Respondent) Appellant by : --- None --- Respondent by : Smt.Leena Lal, Sr.AR Date of Date of Hearing : 24.03.2025 Pronouncement : 14.05.2025 O R D E R
Per Inturi Rama Rao, AM :
This is an appeal filed by the assessee co-operative society directed against the order of the National Faceless Appeal Centre / Commissioner of Income-tax (Appeals) [“the CIT(A)”] dated 09th April, 2024 for the assessment year 2017-2018.
Briefly, the facts of the case are that the appellant is a co- operative society duly registered under the Kerala Co-operative Societies Act, 1969. It is formed with the object of lending money to its members. No regular return of income was filed under the provisions of section 139(1) of the Income-tax Act, 1961 (“the Act”). However, the Assessing Officer (“the AO”) based on the AIMS information that the . Edamalayar Service Co-op Society. appellant co-operative society made cash deposits of Rs.58,01,000 during the demonetization period formed an opinion that the income escaped assessment to tax. The AO issued notice u/s.142(1) of the Act calling upon the appellant to file the return of income for the year. However, the appellant had not complied with the notice u/s.142(1) of the Act. However, the appellant filed certain information as called for by the Assessing Officer during the course of assessment proceedings. The AO accepting the explanation offered by the appellant-society that the cash deposits were made out of the business receipts of the appellant-society. However, made certain disallowances and assessed the income under the head “business” amounting to Rs.1,04,66,425 and also not allowed the claim made u/s.80P of the Act.
Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order, confirmed the disallowance u/s.80P of the Act by holding that that the appellant did not file the return of income placing reliance on the provisions of section 80A(5) of the Act and also the decision of the Hon’ble jurisdictional High Court in the case of Nileshwar Range Kallu Chethu Vyavasaya Thozhilali Sahakarana Sangham v. CIT (2023) 459 ITR 730 (Ker.)
Being aggrieved, the appellant is in appeal before us in the present appeal. When the appeal was called upon, none appeared on behalf of the appellant. Therefore, we proceed to dispose of the appeal on merits after hearing the learned Senior DR.
. Edamalayar Service Co-op Society.
We heard the learned Sr.DR and perused the material available on record. The issue in the present appeal relates to the deduction u/s.80P of the Act. No doubt, the appellant co-operative society is incorporated with the object of accepting deposits from its members and lending money to its members, and the appellant is classified as a primary agricultural credit society. No return of income was filed either under the provisions of sec.139(1) of the Act nor in response to the notice issued u/s.142(1) of the Act. In terms of the provisions of sec.80A(5) of the Act, in order to claim deduction u/s.80P of the Act, it is mandated that the appellant should make the claim in the return of income for deduction u/s.80P of the Act. Since the appellant had not filed the return of income, the provisions of sec.80A(5) of the Act is squarely applicable in view of the ratio laid down by the Hon’ble jurisdictional High Court in the case of Nileshwar Range Kallu Chethu Vyavasaya Thozhilali Sahakarana Sangham v. CIT (2023) 459 ITR 730 (Ker.), wherein the Hon’ble Court 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 . Edamalayar Service Co-op Society. 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 on the part of an assessee to comply with the pre-condition 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 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 . Edamalayar Service Co-op Society. 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 the latest judgment of the Hon’ble jurisdictional High Court in the case of Nileshwar Range Kallu Chethu Vyavasaya Thozhilali Sahakarana Sangham (supra), we hold that the appellant-co- operative society is not entitled for deduction u/s.80P of the Act. Thus, we do not find any reason to interfere with the orders of the authorities below. The same is accordingly upheld.
In the result, the appeal filed by the assessee stands dismissed. Order pronounced on this 14th day of May, 2025.