SHIVASHARANE HEMARADDI MALLAMMA PATTIN SAHAKAR SANGH NI TALIKOTI,VIJAYAPUR vs. INCOME TAX OFFICER, WARD-1 & TPS, BIJAPUR

That the learned Commissioner of Income Tax (Appeals) erred on law and on facts in not allowing the deduction u/s 80P on the ground that the appellant has not filed his return. 3. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in not allowing the interest and dividend income of INR 4,03,945as deduction u/s 80P(2)(a)(i) of the Act even though the investments were made out of the surplus fund and attributable to business activities of the appellant. 4. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in not allowing the interest and dividend income earned from Co-operative Banks as deduction u's 80P(2)(d) of the Act. 5. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in not allowing expenditure incurred for earning the interest and dividend income from the investments. 6. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in not adjudicating the grounds on addition u/s. 69A of the Act. 7. That the learned lower authorities erred in law and on facts in confirming the addition of INR 10,36,000 u/s 69A of the Act and bringing to tax u/s. 115BBE of the Act even though the appellant had explained the source of income and submitted complete details of the beneficiary members who had deposited cash with the Appellant during the demonetization period. 8. That the learned lower authorities erred in law and on facts in making an addition u/s 69A of the Act on the ground that the appellant transacted in demonetized notes. 9. That the learned lower authorities erred in law and on facts in holding that the appellant was not allowed to accept Specified Bank Notes after 08.11.2016 and such a finding is perverse. 10. Without prejudice to the above ground and even assuming but without admitting that a person cannot accept Specified Bank Notes on or after 09.11.2016, the lower authorities erred in law

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. 12. 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 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. 15. Respectfully following the above judgment the assessee is not eligible for claim of deduction under Chapter VI-A of the Act on its income.

Before the First Appellate Authority, the assessee submitted the details of the members who were claimed to have been the source of deposit during demonetization. The same is appearing from pages 72-76 of the paper book filed before us. However the PAN and KYC in respect of such members of the assessee’s society was not furnished either before the AO or before the CIT(A) which could assist the authorities below to consider the genuineness of the income in its proper perspective. 7. Hence we are not satisfied with the order passed by the Ld.CIT(A) in granting relief to the assessee since no such proper verification is found to have been done. Having regard to this particular facts and circumstances of the matter, we set aside the issue to the file of the Ld.AO for consideration of the genuineness of the deposit of Rs.65,55,000/- during demonetization by the assessee, upon verification of the details mainly PAN & KYC of the members of the assessee society to be furnished by the assessee before him. The Ld.AO is also directed to grant an opportunity of being heard to the assessee and to consider the evidence on record or any other evidence which the assessee may choose to file at the time of hearing of the matter. We also make it clear that in the event, the assessee does not co- operate with the revenue officer, he will be at liberty to dispose of the matter strictly in accordance with law. 17. Respectfully following the above decision, we remit this issue to the AO in above terms.