ITAT Chennai: Once delay in return filing is condoned u/s 119(2)(b), bar under Section 80AC cannot deny Section 80P deduction
Background and Context
The Chennai Bench of the Income Tax Appellate Tribunal has clarified an important issue affecting co-operative societies and other assessees claiming deductions under Chapter VIA of the Income Tax Act 1961. The decision in Andevanapally Primary Agricultural Co-op. Credit Society Limited vs ITO addresses whether the embargo under Section 80AC continues to apply when the competent authority has already condoned the delay in filing the return under Section 119(2)(b).
The Tribunal categorically held that once the delay in furnishing the return is condoned by the authority empowered under Section 119(2)(b), the disqualification arising from Section 80AC for belated returns cannot be pressed into service. As a result, the claim for deduction under Section 80P must be examined on merits by the Assessing Officer, instead of being rejected solely on the ground of late filing.
Core Issue in Dispute
The controversy centred around one specific question:
Whether an assessee can be denied deduction under
Section 80Ponly because the return of income was filed after the due date specified underSection 139(1), even though the delay in filing such return has subsequently been condoned by the competent authority underSection 119(2)(b)?
The Tribunal answered this in favour of the assessee, holding that the condonation order effectively removes the rigour of Section 80AC, thereby requiring the Assessing Officer to examine the Section 80P claim substantively.
Facts of the Case
Nature of assessee and assessment year
- The assessee is Andevanapally Primary Agricultural Co-op. Credit Society Limited, a Primary Agricultural Co-operative Credit Society.
- The dispute relates to
Assessment Year 2018-19. - The assessee had not originally filed its return of income within the due date prescribed in
Section 139(1).
Reopening of assessment and notice u/s 148
Based on information available with the department, the Assessing Officer (AO) noticed substantial cash transactions in the assessee’s bank account with Dharmapuri DCC Bank Limited, namely:
- Cash deposits aggregating to
Rs.68,46,680/- - Cash withdrawals totalling
Rs.22,83,803/-
Considering these transactions, the AO reopened the assessment under Section 147 and issued a notice under Section 148 dated 31.03.2022.
Filing of return in response to notice u/s 148
In response to the Section 148 notice:
- The assessee filed its return of income on
08.11.2022. - The return declared nil income, after claiming deduction of
Rs.5,88,859/-underSection 80P. - The assessee claimed deduction under
Section 80P(2)(a)in respect of income from its co-operative credit activities.
The AO issued statutory notices and called for details and supporting documents, which were provided by the assessee.
Assessment order and denial of Section 80P deduction
After examining the records, the AO completed the assessment by passing an order under Section 143(3) r.w.s 147 dated 18.01.2023. In that order, the AO:
- Disallowed the entire deduction of
Rs.5,88,859/-claimed underSection 80P. - The sole basis for disallowance was that the return had been filed after the due date prescribed under
Section 139(1). - By applying
Section 80AC, the AO concluded that deduction underSection 80Pis not available where the return is not furnished within the prescribed time limit.
No adverse finding was rendered on the nature of income or the eligibility of the society under Section 80P; the disallowance was purely technical, based on delayed filing.
Proceedings before CIT(A)
Appeal and explanation by assessee
The assessee carried the matter in appeal before the Commissioner of Income Tax (Appeals), NFAC, Delhi, by filing Form 35 on 26.04.2023. In the appellate proceedings, the assessee contended:
- It is a Primary Agricultural Co-operative Credit Society, entitled to the benefit of deduction under
Section 80Pon its income from providing credit to members.