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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
O R D E R आदेश आदेश आदेश The present appeal has been filed by the assessee against order passed by the Commissioner of Income Tax(Appeals), National Faceless Appeal Centre, Delhi [in short referred to as ld.CIT(A)] under section 250 of the Income Tax Act, 1961 dated 22.11.2021 pertaining to Asst.Year 2017-18.
2. The Registry has notified that the appeal of the assessee is barred by limitation by 581 days. In order to explain the reasons for the impugned delay, the ld.counsel for the assessee submitted that the CIT(A)/NFAC order was passed against the assessee on 22.11.2021. However, due to COVID-19 pandemic limitation for filing appeal before the Court of law was extended till February, 2022. Therefore, after expiry of the limitation for filing of the appeal on Feb., 2022, the assessee was required to file appeal within 60 days of the same i.e. by April, 2022. But the assessee could file the appeal on 2 25.8.2023 resulting in delay in all of 581 days. The ld.counsel for the assessee further submitted that the delay is attributable to the Chartered Accountant of the assessee, Shri Nilesh Pandya who did not communicate the passing of the order by the ld.CIT(A) to the assessee for necessary action at their end, and it was only when a new professional was engaged by the Society in the financial year 2023-24 that the assessee-society became aware of the delay in filing of the appeal, and immediately engaged an Advocate for the same. The contents of the application seeking condonation of delay in the form of an affidavit by the Secretary of the Society is reproduced herein below:
The affidavit of the CA of the assessee-society on whose delay is attributable was also filed before us, which reads as under:
4 4. The ld.counsel for the assessee referred to the decision of the Hon’ble Gujarat High Court in the case of Nimesh Dilipbhai Brahmbhatt Vs. Hitesh Jayantilal Patel in SCA No.6547 of 2020 dated 2.5.2022 for the proposition that the delay attributable to the professionals or the CA of the assessee needs to be condoned. My attention has drawn to para-14 of the said judgment of the Hon’ble High Court, which reads as under:
“14. In the aforesaid backdrop, the Court is of the considered view that valuable right of the defendant Nos.3 and 4, and petitioners herein should not be defeated by declining to condone the delay which has occurred for the in action on the part of their advocate. More so when, despite service the respondents herein have chosen not to appear before this Court and to controvert the petition. Accordingly, the Court is inclined to exercise discretion in favour of the petitioners, however with some exemplary cost.”
The ld.DR opposed the condonation of the delay.
Heard both the parties and perused pleadings of the assessee supported by the affidavits of the assessee and their Chartered Accountant, Shri Nilesh Pandya. I am of the view that in view of the affidavit filed by the assessee and the CA of the society, it is undisputed fact that the impugned delay in filing appeal before the Tribunal by 581 days is attributable to their earlier Chartered Accountant, Shri Nilesh Pandya, who has stated to be suffering from COVID and office work had come to standstill during that period, and therefore was unable to inform the assessee regarding passing of the impugned order of the ld.CIT(A). Taking note of the decision of the Hon’ble Gujarat High Court in the case of Nimesh Dilipbhai Brahmbhatt (supra), I therefore consider it as a fit case for condonation of delay since the assessee-society surely should not be penalized for the inaction of the professional engaged by the assessee. Therefore, I condone the impugned delay of 581 days in filing appeal
5 before the Tribunal, and proceed to take up the appeal of the assessee for adjudication on merit.
The grievance of the assessee against the impugned order are given in the grounds of appeal, which read as under:
“1. That on facts, and in law, the learned NFAC has grievously erred in not granting sufficient and reasonable opportunity of hearing to the appellant, and in dismissing the appeal ex-parte.
That on facts, and in law, the learned NFAC has grievously erred in holding that the assessment is valid, even though no notice u/s 143(2) of the Act is issued by the AO.
3. That on facts, and in law, the learned NFAC has grievously erred in confirming the disallowance of claim of deduction u/s 80P (2) of the Act of Rs.17,97,494/- made by AO.
The appellant craves liberty to add, alter, amend any ground of appeal.”
Solitary issue in the present appeal is against denial of deduction under section 80P(2) of the Act. The assessee is a cooperative society providing certain services to its members, such as, supply of milk, ghee, kapas etc.
No return of income was filed by the assessee either under section 139(1) or even belatedly in terms of section 139(4) of the Act. It was only subsequently through a letter dated 22.11.2019 that a return of income was filed claiming deduction under section 80P of the Act amounting to Rs.17,97,494/- . The same was denied by the Assessing Officer invoking section 80A(5) of the Act , which requires such claims to be made in the returns of income to be allowable. The AO finding no return of income having been filed by the assessee, he accordingly denied the claim of deduction u/s 80P of the Act.
The matter was carried in appeal before the ld.CIT(A). The ld.CIT(A) confirmed the disallowance noting that there was no valid return of income was filed by the assessee. The Ld.CIT(A) applied and 6 interpreted the provisions of section 80AC of the Act while denying the claim and held that in the impugned year, i.e A.Y 2017-18, the claim would have been allowable to the assessee even if the claim is made in return of income which is not filed by due date u/s 139(1) of the Act but filed belatedly or by way of a revised return filed. In the present case however finding that no valid return had been filed by the assessee, the assessee having claimed deduction in return filed during assessment, the Ld.CIT(A) held that the assessee was not entitled to claim deduction u/s 80P of the Act. The relevant finding of the ld.CIT(A) at para 5.3 of his order is as under:
Aggrieved by this confirmation of denial of deduction u/s 80P of the Act by the Ld.CIT(A), the assessee has come in appeal before us.
The contention of ld. Counsel for the assessee was that this denial of deduction was against the provisions of law as interpreted by higher judicial authorities. He drew my attention first to the fact that the return of income was filed by the assessee in response to notice u/s 142(1) of the Act. He thereafter referred to the decision of Hon’ble Kerala High Court in the case of Chirakkal Services Co-
7 operative Bank Ltd. Vs. CIT, 68 taxmann.com 298 (Ker), wherein he pointed out that the Hon’ble Court held that the claims for deduction made in the return filed beyond the period stipulated under section 139(1) or 139(4) and made in returns filed u/s 142(1) or even u/s 148 of the Act cannot be denied in terms of section 80A(5) of the Act. Copy of the decision was placed before us and my attention was drawn to the relevant finding of the Hon’ble Court in this regard from para – 18 onwards .
Thereafter, reference was made to the decision of the ITAT, Surat Bench in the case of Wanka Vividh Karyakari Seva Sahkari Mandali Ltd. Vs., 156 taxmann.com 68 (Surat-Trib), pointing out therefrom the findings of the ITAT that the requirement of claiming deduction in a return filed as per the provisions of section 80A(5) of the Act was only directory in nature and was to be allowed even if not claimed in return of income but claimed otherwise during assessment proceedings. My attention was drawn to para 8 onwards of the said decision.
The ld.counsel for the assessee also drew my attention to the decision of Nagpur Bench of the ITAT in the case of Krushi Vibhag Karmchari Vrund Sahakari Pat Sanstha Maryadit Vs. ITO, 147 taxmann.com 449 (Nag-Trib) which was referred to by the ITAT, Surat bench in the above mentioned decision for holding that the requirement of claim of deduction in return of income under section 80A(5) of the Act was directory in nature.
On the other hand, the ld.DR relied on the order of the ld.CIT(A) and stated that the provisions of law are plain and clear, and there is no scope for any such interpretation that even without claiming any 8 deduction in the return of income, the assessee is still entitled to the same, in terms of provisions of section 80A(5) of the Act.
I have heard both the parties. The issue to be adjudicated is relating to denial of deduction claimed by the assessee u/s 80P of the Act. The Assessing Officer denied the same noting no return of income being filed by the assessee and therefore invoking Section 80A(5) of the Act which requires such claims to be made in the returns of income filed to be allowable. The ld. CIT(A) upholding the disallowance made by the Assessing Officer invoking Section 80AC of the Act, noting that in terms of the said section the claim would have been allowable to the assessee even if the same is claimed in a belated or revised return, however, since the assessee having not filed a valid return of income in the instant case, such deduction was not allowable to the assessee.
The entire controversy of allowability of claim of deduction u/s 80P of the Act therefore rests on the fact of whether or not a valid return of income was filed by the assessee. Admittedly, no return of income was filed by the assessee in terms of Section 139(1) or 139(4) or for that matter even Section 139(5) of the Act, i.e. no return of income was filed by the assessee either by the due date of filing of return of income or a belated return or a revised return respectively. The fact noted in the orders of the authorities below is that the assessee filed return during the assessment proceedings in response to notice u/s 142(1) of the Act and claimed deduction u/s 80P in the same.
Having noted this fact, I have also noted that both the authorities below have invoked different sections for denying the claim
9 of deduction, the Assessing Officer having invoked Section 80A(5) of the Act and the ld. CIT(A) having invoked Section 80AC of the Act.
I have gone through the provisions of both these sections, and I have noted that these sections operate in different scope and the correct section to be invoked in the present case for allowing or denying claim of deduction is Section 80A(5) of the Act, as done by the Assessing Officer. This is evident from a bare perusal of the provisions of Section 80A(5) and Section 80AC of the Act, which are being reproduced hereunder for clarity:-
Section 80A(5) …… …… (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.]
Section 80AC 80AC. Where in computing the total income of an assessee of any previous year relevant to the assessment year commencing on or after— (i) the 1st day of April, 2006 but before the 1st day of April, 2018, 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; (ii) the 1st day of April, 2018, any deduction is admissible under any provision of this Chapter under the 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.]
As is evident from a bare reading of the sections, while section 80A(5) of the Act allows claims of deduction in respect of incomes, which includes deduction claimed under section 80P of the Act, only if claimed in a return of income, Section 80AC of the Act stipulates a 10 further condition that certain claims of deductions will be allowed only if the returns of income are filed within the due dates specified u/s 139(1) of the Act. Thus, while the mandatory requirement for claiming any deduction under Chapter VI of the Act or the other sections specified u/s 80A(5) of the Act is that the claim has to be made in the return of income, Section 80AC further imposes a condition in relation to certain deductions that the returns of income in which the claims are so made have to be filed within the due dates specified u/s 139(1) of the Act.
Having said so, in the facts of the present case, the ld. CIT(A) has noted that Section 80P of the Act has been included in the purview of Section 80AC of the Act only with effect from the subsequent assessment year, i.e. AY 2018-19; the impugned assessment year before us is AY 2017-18. The ld. CIT(A) himself has ruled out the applicability of Section 80AC of the Act to the fact of the present case, and I concur with him. Therefore, the rigor of claim being made in a return of income filed by the due date prescribed under the Act is not applicable for claims made u/s 80P of the Act as in the case of the assessee.
19. It is only the mandatory condition prescribed by Section 80A(5) of the Act of the claim to have been made in a return of income to be allowable, which is applicable. At the cost of repetition, I may state that what Section 80A(5) only stipulates is that, for the claim to be allowable, it has to be made in the return of income filed by the assessee. It does not specify that the return of income has to be filed u/s 139(1) or 139(4) or 139(5) of the Act. The only condition is that the claim has to be made in a return of income filed – which means a valid return of income filed. In the facts of the present case, the assessee has filed return of income, admittedly in response to notice
11 u/s 142(1) of the Act. This is a valid return of income, since in terms of the provisions of Section 142(1) of the Act, the assessee can be directed to file a return of income where he has not otherwise made a return. Sub-section (i) of Section 142(1) of the Act are reproduced hereunder for clarity:-
“S.142. (1) For the purpose of making an assessment under this Act, the [Assessing] Officer may serve on any person who has made a return [under section 115WD or section 139 [or in whose case the time allowed under sub-section (1) of section 139] for furnishing the return has expired] a notice requiring him, on a date to be therein specified,— [(i) where such person has not made a return [within the time allowed under sub-section (1) of section 139] [or before the end of the relevant assessment year], to furnish a return of his income or the income of any other person in respect of which he is assessable under this Act, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed, or :]
20. Therefore, the fact of the matter is that the assessee had made a claim of deduction u/s 80P of the Act in a valid return filed u/s 142(1) of the Act. In terms of provisions of Section 80A(5) of the Act, as interpreted above by us, the assessee’s claim having been made in a return of income, it is allowable.
21. The above findings are supported by the decision of the Hon’ble Kerala High Court in the case of Chirakkal Service Co-operative Bank Ltd., Kannur Vs. CIT, reported in [2016] 68 taxmann.com 298 (Kerala), wherein the Hon’ble High Court categorically noted that, for the purposes of Section 80A(5) of the Act, even a return filed in response to notice u/s 142(1) of the Act was a valid return and any claim made therein, therefore, was allowable. Paragraph No. 18 to 21 of the said order are reproduced hereunder:-
“18. Questions B and C relate to denial of exemption on ground referable to belated filing of return, that is to say, returns filed beyond the period stipulated under section 139(1) or section 139 (4), as the case may be, as well as section 12 142 (1) or section 148, as the case may be. There are no cases among these appeals where returns were not filed. There are cases where claims have been made along with the returns and the returns were filed within time. Still further, there are cases where returns were filed belatedly, that is to say, beyond the period stipulated under sub-section 1 or 4 of section 139; and, there are also returns filed after the period with reference to sections 142(1) and 148 of the IT Act.
Section 80A(5) provides that where the assessee fails to make a claim in his return of income for any deduction, inter alia, under any provision of Chapter VIA under the heading "C.-Deductions in respect of certain incomes", no deduction shall be allowed to him thereunder. Therefore, in cases where no returns have been filed for a particular assessment year, no deductions shall be allowed. This embargo in section 80A(5) would apply, though section 80P is not included in section 80AC. This is so because, the inhibition against allowing deduction is worded in quite similar terms in sections 80A(5) and 80AC, of which section 80A(5) is a provision inserted through the Finance Act 33/2009 with effect from 1.4.2013 after the insertion of section 80AC as per the Finance Act of 2006 with effect from 1.4.2006. This clearly evidences the legislative intendiment that the inhibition contained in sub-section 5 of section 80A would operate by itself. In cases where returns have been filed, the question of exemptions or deductions referable to section 80P would definitely have to be considered and granted if eligible.
Here, questions would arise as to whether belated returns filed beyond the period stipulated under section 139(1) or section 139(4) as well as following sections 142(1) and 148 proceedings could be considered for exemption. If those returns are eligible to be accepted in terms of law, going by the provisions of the statute and the governing binding precedents, it goes without saying that the claim for exemption will also stand effectuated as a claim duly made as part of the returns so filed, for due consideration.
When a notice under section 142(1) is issued, the person may furnish the return and while doing so, could also make claim for deduction referable to section 80P. Not much different is the situation when pre-assessment enquiry is carried forward by issuance of notice under section 142 (1) or when notice is issued on the premise of escaped assessment referable to section 148 of the IT Act. This position notwithstanding, when an assessment is subjected to first appeal or further appeals under the IT Act or all questions germane for concluding the assessment would be relevant and claims which may result in modification of the returns already filed could also be entertained, particularly when it relates to claims for exemptions. This is so because the finality of assessment would not be achieved in all such cases, until the termination of all such appellate remedies. Under such circumstances, the Tribunal was not 13 justified in denying exemption under section 80P of the IT Act on the mere ground of belated filing of return by the assessee concerned. A return filed by the assessee beyond the period stipulated under section 139(1) or 139(4) or under section 142(1) or section 148 can also be accepted and acted upon provided further proceedings in relation to such assessments are pending in the statutory hierarchy of adjudication in terms of the provisions of the IT Act. In all such situations, it cannot be treated that a return filed at any stage of such proceedings could be treated as non est in law and invalid for the purpose of deciding exemption under section 80P of the IT Act. We thus answer substantial questions of law B and C formulated and enumerated above.”
In view of the above, I hold that the assessee has been wrongly denied claim of deduction u/s 80P of the Act. The Assessing Officer is directed to allow the said claim to the assessee. The appeal of the assessee is accordingly allowed.
In effect, the appeal of the assessee is allowed.
Order pronounced in the open Court on 27/06/2024 at Ahmedabad.