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Facts
The assessee, a cooperative society, failed to file its return of income for A.Y. 2017-18 within the due date, but later filed it manually. During demonetization, the assessee made cash deposits of Rs.28,89,339/-, leading the Ld. AO to issue notices. The Ld. AO completed assessment under Section 144, treated the belated return as non-est, made an addition of Rs.1,65,000/- under Section 69A, and denied deduction under Section 80P totaling Rs. 17,92,203/-.
Held
The Tribunal held that Section 80P is a beneficial provision, and its deduction cannot be denied merely on technical grounds of belated filing of the return, especially when the delay was unintentional and due to statutory audit. It clarified that the amendment to Section 80AC is prospective and does not apply retrospectively. The Tribunal directed the Ld. AO to allow the deduction under Section 80P as claimed by the assessee.
Key Issues
Whether deduction under Section 80P can be denied to a cooperative society for belated filing of the return of income, and whether the provisions of Section 80AC as amended are retrospective.
Sections Cited
144, 142(1), 69A, 80P, 80AC, 139(1), 80A(5)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, VISAKHAPATNAM “SMC” BENCH, VISAKHAPATNAM
Before: SHRI VEERAVALLI DURGA RAO, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
आदेश /O R D E R
PER SHRI S BALAKRISHNAN, ACCOUNTANT MEMBER:
This appeal is filed by the assessee against order of Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld. CIT(A)”] vide DIN & Order No.ITBA/NFAC/S/250/2024-
I.T.A.No.249/VIZ/2025 The Machilipatnam Postal Deptl& GDS Co-Op Credit Society Limited No. H164 25/1065947265(1) dated 24.06.2024 for the A.Y. 2017-18 arising out of the order passed under section 144 of Income Tax Act, 1961 [hereinafter in short “the Act”] dated 14.12.2019.
Briefly stated facts of the case are, assessee being a cooperative society with the employees of Postal Department and GDS as its members has not filed return of income for the A.Y. 2017-18. As per the information available with the department it was noticed that the assessee has made cash deposits of Rs.28,89,339/- with the bank account held with Krishna District Central Bank Limited, Machilipatnam during the demonetization period. Thereafter notices under section 142(1) of the Act was issued to the assessee on 01.12.2017 calling for the return of income. Since assessee has not responded, the Ld.Assessing Officer (hereinafter in short “Ld. AO") proceeded to complete the assessment under section 144 of the Act. Ld. AO during the scrutiny proceedings, issued notice under section 142(1) of the Act calling for information regarding the bank account statement and details of Specified Bank Notes (in short “SBN) deposited by the assessee into the accounts. Assessee produced books of accounts physically before the Ld. AO. Assessee also filed physical copy of the return of income and computation dated 03.10.2019. Ld. AO treated the return of income filed by the assessee as non-est since it was filed out of time. Show-cause notice was issued on 05.12.2019 to show-cause why the amount of Rs. 1,96,000/- deposited by the Page No. 2
I.T.A.No.249/VIZ/2025 The Machilipatnam Postal Deptl& GDS Co-Op Credit Society Limited No. H164 assessee during the demonetization period should not be treated as unexplained money under section 69A of the Act. In response to the show-cause notice, assessee uploaded his explanation on 11.12.2019. On perusal of the reply filed by the assessee, Ld. AO considered an amount of Rs.1,65,000/- as unexplained money under section 69A of the Act and added it to the total income of the assessee.
Further, Ld. AO also did not accept the explanation provided by the assessee with respect to deduction claimed by the assessee under section 80P of the Act amounting to Rs. 17,92,203/-. Ld. AO thus invoked the provisions of section 80AC of the Act and concluded that the assessee has not filed return of income with in the due date specified under section 139(1) of the Act and therefore not entitled to claim deduction under section 80P of the Act.
4. On being aggrieved by the order of the Ld. AO, assessee filed an appeal before Ld. CIT(A). Ld. CIT(A) considering the submissions made by the assessee confirmed the addition made by the Ld. AO with respect to the deduction under section 80P of the Act.
5. On being aggrieved by the order of the Ld. CIT(A), assessee is in appeal before us by raising following grounds in its appeal: -
“1. That the Learned AO erred in denying the deduction under Section 80P of the Income-tax Act, 1961, merely on the ground that the return of income was not filed within the prescribed time.
Page No. 3 I.T.A.No.249/VIZ/2025 The Machilipatnam Postal Deptl& GDS Co-Op Credit Society Limited No. H164 2. That the Appellant is eligible for deduction under Section 80P as per law, and non-filing of return is only a procedural lapse which does not disentitle the Appellant from claiming a rightful deduction.
3. That the Learned AO, having verified the books of accounts, the Statutory audit Report as per APCS Act,1964 and other supporting documents, has failed to appreciate that the Appellant meets all the conditions for eligibility under Section 80P and Id.AO erred in not allowing the statutory deduction.
That the denial of deduction u/S.80P is against the principles laid down by Hon'ble CBDT vide their Instructions and various judicial decisions.
That the Learned AO failed to appreciate that Section 80P is a beneficial provision aimed at promoting co-operative societies, and its denial on mere technical grounds is unjustified 6. That the impugned order is bad in law and liable to be set aside.
The appellant craves leave to add or amend the Grounds of Appeal.”
6. Even though the grounds are argumentative in nature, the only issue agitated by the assessee is with respect to the disallowance of deduction under section 80P of the Act. On this issue, Ld. Authorized Representative (hereinafter in short “Ld.AR”) submitted that assessee has filed return of income in response to notice under section 142(1) of the Act belatedly and physically on 03.10.2019 and Ld. AO treated the return as non-est. He further submitted that the assessee being a cooperative society of the postal department employees was subjected to Cooperative Audit under Andhra Pradesh Cooperative Societies Act, 1964, and was under the belief that the income is exempted under the Income Tax provisions and hence not filed return of income within the due date. However, on realizing the necessity for Page No. 4
I.T.A.No.249/VIZ/2025 The Machilipatnam Postal Deptl& GDS Co-Op Credit Society Limited No. H164 filing the return of income, assessee filed return of income on 03.10.2019. Further, he also reiterated that Ld. AO has not disputed the audited income but has not considered the return of income filed manually on 03.10.2019. Ld.AR pleaded that the non-filing of return of income within the prescribed time limit was unintentional and section 80P of the Act being a beneficial provision cannot be denied to the assessee.
On the other hand, Ld. Departmental Representative (hereinafter in 7. short “Ld. DR”) relied on the orders of the revenue authorities. She also placed reliance on the decision of the Jurisdictional ITAT wherein SMC Bench in the case of Maruthi Primary Agricultural Cooperative Credit Society Limited v. ITO in dated 28.02.2024 has held that deduction under section 80P of the Act is inadmissible in the absence of filing the return of income. She pleaded that the order of the revenue authorities be upheld.
We have heard both the sides and perused the material available on record. It is an undisputed fact that the assessee has not filed its return of income within the prescribed time limit, however, has filed return of income manually on 03.10.2019 before Ld. AO. The submissions of the Ld.AR that the assessee is registered under APCS Act, 1964 having the members of Machilipatnam Postal Department which is also subjected to statutory audit under the APCS Act, 1964. There is merit in the argument of the Ld.AR that Page No. 5
I.T.A.No.249/VIZ/2025 The Machilipatnam Postal Deptl& GDS Co-Op Credit Society Limited No. H164 the non-filing of the return of income within the prescribed time limit is unintentional and was delayed due to the delay in conducting the statutory audit as per APC Act, 1964. Section 80A(5) of the Act, extracted below, reads as follows: -
“80A(5) Where the assessee fails to make a claim in his return of income for any deduction under section 10-A or section 10-AA or section 10-B or section 10-BA or under any provision of this Chapter under the heading "C.-Deductions in respect of certain incomes", no deduction shall be allowed to him thereunder.”
Similarly, Section 80AC of the Act, prior to substitution by the Finance Act, 2018 w.e.f. 01.04.2018 is also extracted below: -
"80AC. Deduction not to be allowed unless return furnished.— Where in computing the total income of an assessee of the previous year relevant to the assessment year commencing on the 1st day of April, 2006 or any subsequent assessment year, 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, 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.” The italicised words were inserted by the Finance Act, 2007, w.e.f. 1-4-2008.”
On a bare reading of the above sections, it can be concluded that in order to claim deduction under section 80P of the Act assessee has to file return of income by making the claim while filing return of income. The Provisions of section 80AC of the Act has been amended by the Finance Act, 2018 w.e.f. 01.04.2018 by imposing condition that the return of income should be filed before the due date specified under section 139(1) of the Act. This amendment to section 80AC of the Act is prospective and cannot be Page No. 6
I.T.A.No.249/VIZ/2025 The Machilipatnam Postal Deptl& GDS Co-Op Credit Society Limited No. H164 considered as retrospective. In our opinion, the society cannot be denied the deduction of section 80P of the Act which is a beneficiary provision, based on the technicality of delay in filing the return of income. Further, we also notice that Ld. AO has considered the surplus income of Rs. 17,92,203/- and has not disputed the audited statement of accounts. In these circumstances, we are of the considered view that the deduction under section 80P of the Act shall not be denied to the assessee based on the technicalities of belated filing of return of income when various judicial pronouncements have held that section 80P is a beneficiary provision and is only directory in nature. The reliance placed by the Ld.DR in the case of Maruthi Primary Agricultural Cooperative Credit Society Limited v. ITO (supra) cannot be applied to the instant case as assessee has filed its return of income manually before the Ld.AO and hence the facts are distinguishable. We therefore direct the Ld.AO to allow deduction under section 80P of the Act as claimed by the assessee. Thus, grounds raised by the assessee are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 10th June,2025.