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Facts
The assessee, a Primary Agricultural Credit Society, made substantial cash deposits during the demonetization period for AY 2017-18 but failed to file its return of income by the due date. Subsequently, a belated return was filed which the AO considered invalid. The AO consequently assessed the income under Section 144, denied the Section 80P deduction, and made an addition under Section 69A, leading to an assessed income of Rs. 21,12,281/-.
Held
The Tribunal upheld the orders of the lower authorities, dismissing the assessee's appeal. It ruled that since the assessee failed to file a valid return of income within the prescribed time as per Section 139, the claim for deduction under Section 80P(2)(a)(i) was not admissible as per Section 80A(5) of the Act. The Tribunal found no error in the Revenue Authorities' decision to deny the deduction, citing similar previous decisions.
Key Issues
1. Whether deduction under Section 80P is admissible to an assessee who fails to file a valid return of income within the prescribed time under Section 139. 2. The applicability of Section 80A(5) of the Income Tax Act for denying deductions in the absence of a validly filed return of income. 3. The validity of the assessment made under Section 144 and the addition made under Section 69A.
Sections Cited
144, 139(1), 142(1), 80P, 80P(2)(a)(i), 80A(5), 139(4), 69A, 80AC, 250, 10A, 10AA, 10B, 10BA
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Income Tax Appellate Tribunal, VISAKHAPATNAM “DIVN” BENCH, VISAKHAPATNAM
Before: SHRI VIJAY PAL RAO, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
This appeal is filed by the assessee against the order of the Ld. CIT(A)-NFAC, Delhi in DIN & Order No. ITBA/NFAC/S/250/2023-24/1053823161(1), dated 20/06/2023 arising out of the order passed U/s. 144 of the Income Tax Act, 1961 [the Act], dated 27/12/2019 for the AY 2017-18.
Briefly stated the facts of the case are that the assessee is Primary Agricultural Credit Society Ltd [PACS]. During the AY 2017-18, as per the information available with the Department, it is noted that the assessee has made substantial cash deposits during the demonetization period in its account with the Krishna District Central Co-operative Bank, Krishna District. By observing that the assessee did not file its return of income before the due date U/s 139(1) of the Act, a notice U/s 142(1) of the Act was issued on 23/11/2017 and served on the assessee on 23/02/2018 and called for the assessee to file the return of income. However, the assessee did not comply with the notice and failed to file the return of income. Further, show cause notice was issued on 09/07/2019, 20/09/2019 and in response the assessee has submitted certain basic information only. Thereafter, another notice U/s. 142(1) was issued on 15/11/2019 and in response, the assessee has filed the information of list of members, bank statements and details of sales of fertilizers etc. Later on, show cause notice was issued on 20/12/2019 requiring the assessee to furnish the information as mentioned therein failing which the total income for the AY 2017-18 will be assessed as per the provisions of section 144 of the Act. In response, the assessee has furnished Trading Account, P & L Account and Balance Sheet as on 31/3/2017. From the information filed by the assessee, the Ld. AO noted that during the FY 2016-17 the assessee society derived net profit of Rs. 21,10,281/- and claimed the same as deduction U/s. 80P of the Act since it is a cooperative society. Assessee filed its return of income on 18/11/2019 declaring income at NIL. The Ld. AO also further observed that the return of income filed by the assessee is invalid as it was neither filed U/s. 139(1) of the Act nor U/s. 139(4). Hence, the same is treated not filed. The Ld. AO further observed that since the assessee has not filed a valid return of income the provisions of section 80A(5) of the Act are clearly applicable and the assessee failed to make a claim of deduction U/s. 80P(2)(a)(i) of the Act in a valid return of income, the net profit shown in the P & L Account of Rs. 21,10,281 is computed as income assessee and accordingly made addition. The Ld. AO also made another addition of Rs. 2000/-U/s. 69A of the Act. Thus, the assessed income of the assessee was determined at Rs. 21,12,281/- and passed the assessment order U/s. 144 of the Act. Aggrieved by the order of the Ld. AO, the assessee is in appeal before the Ld. CIT(A). On appeal, the Ld. CIT(A)-NFAC dismissed the appeal of the assessee. Aggrieved by the order of the Ld. CIT(A)-NFAC, the assessee is in appeal before the Tribunal by raising the following grounds of appeal:
“1. The order passed U/s. 144 of the Act which is confirmed by CIT(A) U/s. 250of the Act is contrary to the provisions of law and facts of the case.
2. The Ld. CIT(A) under the facts and circumstances of the case, erred in confirming the action of the AO in denying the claim of deduction U/s. 80P of the Act amounting to Rs. 21,10,281/-.
3. The Ld. CIT(A) ought to have known that AO rejected the claim U/s. 80P of the Act solely for the reason that assessee failed to file a valid return in response to notice U/s. 142(1) dated 23/11/2017, said to have been issued by the AO, when in fact no such notice was issued on 23/11/2017 u/s. 142(1) of the Act.
4. The Ld. CIT(A) under the facts and circumstances of the case, ought to have known that AO for the first time issued notice U/s. 142(1) dated 15/11/2019 for which the assessee society responded by filing the tax return on 18/11/2019 duly making the claim U/s. 80P of the Act when that is so, the claim U/s. 80P ought to have been allowed. Without prejudice to Ground No. 3 & 4: 5. The Ld. CIT(A) ought to have allowed the benefit U/s. 80P of the Act since the claim was made in the return filed on 18/11/2019 in response to alleged notice U/s. 142(1) of the Act dated 23/11/2017 since 80P is a beneficial section and judiciary in several cases held that such technicalities of delayed filing of return cannot be a reason for denying the claim of deduction U/s. 80P of the Act.
6. The Ld.CIT(A) ought to have examined the issue of allowing or not allowing the claim U/s. 80P of the Act from the perspective of provisions of section 80AC of the Act as it was in existence prior to the amendment made by Finance Act, 2018 if he has done so he would not have taken adverse view against the assessee.
7. The Ld. CIT(A) while taking adverse view against the assessee relied on the decision of Hon’ble Kerala High Court in of 2019 dated 14/03/2014 while so failed to take into cognizance the decision of the same Hon’ble Kerala High Court reported in [2016] 68 taxmann.com 298 (Kerala) and in this process, overlooked the judicial precedence set by the judiciary that where there are two views of judicial on the same issue, the view in favour of the assessee is to be considered. The Ld. CIT(A) himself being aquasi- judicial authority deviated himself from the precedence set by the higher judicial authority.
The Ld.CIT(A) erred in confirming the addition made by AO U/s. 69A of the Act.
For these and such other submissions that are to be urged at the time of hearing of the appeal the appellant prays that the claim made by the assessee U/s. 80P of the Act be allowed in the interest of justice.”
At the outset, the Learned Authorized Representative [Ld. AR] argued that the assessee is a Primary Agricultural Credit Society Limited and claimed deduction U/s. 80P of the Act for the AY 2017-18. The Ld. AR further submitted that as per section 80P(2)(a)(i) of the Act, the assessee is entitled for deduction as the assessee is carrying on the business of providing credit facilities to its members. The Ld. AR further submitted that section 80A(5) cannot be applied in the instant case due to the fact that it does not mention within which period the return should be filed. The Ld.AR further submitted that section 80AC(ii) which was inserted w.e.f. 1/4/2018 specifies that “any Deduction is admissible under any provisions of this Chapter under 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 of the Act. The Ld. AR argued that since the heading “C-deductions in respect of certain incomes” has been segregated from the other deductions it has to be applied to the instant case also. The Ld. AR further argued that as per the Finance Act, 2018 which came into effect w.e.f 01/04/2018, the substitution to section 80AC is only applicable from the AY commencing on or after 01/04/2018 ie., AY 2018-19 and not applicable to the earlier assessment years ie., AY 2017-18 as in the case of the assessee. Therefore, the assessee is entitled to claim deduction U/s. 80P(2)(a)(i) of the Act. The Ld. AR relied on the decision of this Tribunal in in the case of Maruthi Primary Agricultural Cooperative Credit Society Limited vs. ITO order dated 28/02/2024.
Per contra, the Ld. DR submitted that the assessee has not filed a valid return of income in accordance with the provisions of section 139(1) or 139(4) of the Act in order to claim deduction u/s. 80P of the Act. The Ld. DR further submitted that as per section 80A(5) of the Act when no valid return of income is filed, the assessee has failed to make a claim of deduction u/s. 80P(2)(a)(i) of the Act, and therefore no deduction is permissible under the Act. The Ld. DR strongly relied on the orders of the Ld. Revenue Authorities.
5. We have heard both the parties perused the material available on record and the orders of the authorities below. Admitted facts are that the assessee has not filed its return of income U/s. 139 of the Act within the prescribed time limit for the impugned assessment year but has submitted trading account, P & L Account, account and balance sheet as on 31/3/2017. Therefore, the Ld. AO applied the provisions of section 80A(5) of the Act since the assessee has not filed a valid return of income as per the provisions of section 139 of the Act and disallowed the claim of deduction u/s. 80P of the Act. Under similar facts and circumstances, the SMC Bench of this Tribunal in in the case of Maruthi Primary Agricultural Cooperative Credit Society Limited vs. ITO order dated 28/02/2024 (supra) has held as under: “4. I have heard both the parties perused the material available on record and the orders of the authorities below. Admitted facts are that the assessee has not filed its return of income U/s. 139 of the Act within the prescribed time limit for the impugned assessment year but has submitted trading account, P & L Account, income and expenditure account and balance sheet as on 31/3/2017 during the assessment proceedings only after issuance of show cause notice U/s. 144 of the Act. Therefore, the Ld. AO applied the provisions of section 80A(5) of the Act since the assessee has not filed a valid return of income as per the provisions of section 139 of the Act and disallowed the claim of deduction u/s. 80P of the Act. Section 80A(5) of the Act is extracted below for reference: Section 80A(5) of the Act is extracted below for reference:
Sec. 80A (5) Where the assessee fails to make a claim in his return of income for any deduction under section 10A or section 10AA or section 10B or section 10BA 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.’;”
As per sub-section (5) of section 80A of the Act it is imperative to the assessee to make a claim in its valid return of income for any deduction under any provisions of the Chapter under the heading “C- deduction in respect of certain incomes”. Since the assessee has failed to file its valid return of income within the prescribed time for the relevant assessment year claiming the deduction prima facie no deduction is permissible under the Act. Similarly, the assessee has not filed its valid return of income either U/s. 139(1) or U/s. 139(4) of the Act as observed by the Ld. AO as well as Ld. CIT(A)-NFAC and therefore, the Ld. AO held that the assessee failed to make the claim of deduction U/s. 80P(2)(a)(i) of the Act. I cannot appreciate the argument of the Ld. AR that the provisions of section 80AC are not applicable to the case of the assessee as the substitution came into effect from 01/04/2018 ie., for the AY 2018-19 on wards because even after the substitution by Finance Act, 2018, to claim the deduction U/s. 80P(2)(a)(i) of the Act, the assessee has to file a valid return of income within the stipulated time as per the provisions of section 139 of the Act which is missing in the instant case. Further, on perusal of the case law relied on by the Ld. AR in the case of Saidatar Co-operative Credit Society Limited (supra), I find that there is no discussion about the applicability of the provisions of section 80A(5) which goes to the root of the matter. Further, on identical issue, the Division Bench of this Tribunal in the case of The Vatsavai Primary Agricultural Cooperative Credit Society Limited vs. ITO in (AY 2017-18) has observed as under: “6. We have heard both the parties perused the material available on record and the orders of the authorities below. Admitted facts are that the assessee has not filed its return of income for the impugned assessment year but has submitted trading account, P & L Account, income and expenditure account and balance sheet as on 31/3/2017 during the assessment proceedings. Section 80A(5) of the Act is extracted below for reference: “Sec. 80A (5) Where the assessee fails to make a claim in his return of income for any deduction under section 10A or section 10AA or section 10B or section 10BA or under any provision of this Chapter under the heading "C.—Deductions in respect of certain in- comes", no deduction shall be allowed to him thereunder.’;”
7. As per sub-section (5) of section 80A of the Act it is imperative to the assessee to make a claim in its return of income for any deduction under any provisions of the Chapter under the heading “C-deduction in respect of certain incomes”. Since the assessee has failed to file its return of income
claiming the deduction prima facie no deduction is permissible under the Act. Similarly, the assessee has filed return of income manually on 5/3/2022 which was sent by speed post to CPC, Bangalore on 15/3/2022. It is noticed from the submissions made by the Ld.AR that the return has been filed U/s. 139(4) of the Act. As per section 139(4) of the Act “Any person who has not furnished a return within the time allowed to him under sub-section (1), may furnish the return for any previous year at any time before three months prior to the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.” It is noted from the paper book page no. 21 the assessee has filed its return of income for the AY 2017-18on 5/3/2022 u/s. 139(4) of the Act. We are of the view that since the return of income has been filed after completion of the assessment, the return should have been held as invalid and hence the claim made by the assessee for deduction U/s. 80P(2)(a)(i) cannot be held as an admissible deduction under the Act. The decision of the Hon’ble Kerala High Court in the case of Chirakkal Service Cooperative Bank vs. CIT (supra) relied on by the Ld. AR cannot be accepted due to the fact that in that case, the assessee has filed the belated return within the due dates. Similarly, in the decision of Hon’ble Madras High Court in the case of CIT vs. Sri Vasavi Gold & Bullion Pvt Ltd (supra) there was a technical issue in the e-filing of the appeals. But in the instant case the assessee has never filed its return of income. We therefore are inclined to uphold the order of the Revenue Authorities and dismiss the appeal of the assessee.” The above decision of this Tribunal on similar issue being Division Bench decision is binding on me. Therefore, I am of the view that since the return of income has not been filed in accordance with the provisions of section 139 of the Act, it was rightly held by the Ld. Revenue Authorities that the claim made by the assessee for deduction U/s. 80P(2)(a)(i) cannot be held as an admissible deduction under the Act. I am therefore inclined to uphold the orders of the Revenue Authorities and dismiss the appeal of the assessee.”
Respectfully following the decision of this Bench on identical facts and circumstances of the case, we have no hesitation to come to a conclusion that the Ld. Revenue Authorities have rightly held that the claim of the assessee for deduction U/s. 80P(2)(a)(i) of the Act cannot be held as an admissible deduction as per the provisions of the Act. Accordingly, we are inclined to uphold the orders of the Ld. Revenue Authorities thereby dismissing the grounds raised by the assessee.
In the result, appeal filed by the assessee is dismissed.
Pronounced in the open Court on 20th May, 2025.