ITAT Hyderabad: Section 80P deduction barred for late return after 2018 amendment to Section 80AC

Background of the dispute

The Income Tax Appellate Tribunal, Hyderabad Bench, in the case of Chillakuru Primary Agricultural Cooperative Society Limited Vs ITO, examined whether a co-operative society could validly claim deduction under Section 80P when the return of income was not filed within the due date prescribed under Section 139(1) for Assessment Year 2018–19.

The assessee, a co-operative society, did not file any return of income within the statutory time limit under Section 139(1) or even belatedly under Section 139(4). The return was eventually filed only in response to a reassessment notice issued under Section 148, wherein the assessee declared NIL income after claiming deduction under Section 80P. The Assessing Officer rejected the claim of deduction by invoking the amended Section 80AC, and the CIT(A)-NFAC upheld this view.

The assessee carried the matter in appeal to the ITAT, which has now confirmed the disallowance and dismissed the appeal.

Procedural history before the Tribunal

  • The appeal was filed against the order dated 28.07.2025 passed by the CIT(A)-NFAC, Delhi for AY 2018–19.
  • On multiple dates of hearing before the Tribunal (13.11.2025, 09.12.2025, 07.01.2026, 11.02.2026 and 17.03.2026), neither the assessee nor any authorised representative appeared.
  • Even after issue of fresh notices by email and speed post, there was no representation from the assessee.
  • In view of continued non-appearance, the Bench proceeded to decide the appeal ex parte, based on material available on record and the orders of the lower authorities.

Grounds raised by the assessee

The assessee challenged the order of the CIT(A) broadly on the following lines:

  1. General challenge

    • The order of the CIT(A) dated 28.07.2025 was alleged to be contrary to law and facts and sought to be set aside.

  2. Challenge to denial of deduction under Section 80P

    • It was contended that:
      • The deduction under Section 80P amounting to Rs. 22,39,393/- was wrongly refused merely because the return was not filed within the time under Section 139(1).
      • Section 80P itself does not contain any condition that the return must be filed within that due date.
      • The benefit of Section 80P was claimed to be a substantive right of co-operative societies and should not be denied on procedural defaults.
      • The assessee argued that the amendment to Section 80AC introduced by Finance Act, 2018 was substantive in nature and could not be used to curtail what it described as a vested right for AY 2018–19.

  3. Validity of return filed pursuant to Section 148

    • The assessee argued that:
      • A return submitted in response to a notice issued under Section 148 ought to be treated on par with a return under Section 139(4) for all purposes.
      • On that basis, all legitimate claims, including a deduction under Section 80P, should be admissible.
      • Reliance was placed on decisions such as:
        • Chirakkal Service Co-operative Bank Ltd. v. CIT (384 ITR 490, Kerala HC)
        • Muvattupuzha Agricultural Co-op Bank Ltd. v. ITO (Ker HC, WP 17739/2024) and other similar rulings.

  4. Delay attributed to statutory audit and CBDT Circular

    • The assessee pleaded that:
      • The delay in filing the return arose due to late completion of statutory audit mandated under the Andhra Pradesh Co-operative Societies Act.
      • Reference was made to CBDT Circular No. 13/2023 dated 26.07.2023, which recognises delay in audit of co-operative societies as a ground for condonation of delay under Section 119(2)(b).
      • It was argued that the CIT(A) should have extended the benefit of this circular and condoned the delay indirectly by allowing the deduction.

  5. Reliance on principle of mutuality

    • The assessee further submitted that:
      • The surplus arose solely from dealings with its own members.
      • On application of the doctrine of mutuality, such surplus would not constitute taxable income at all.
      • The assessee cited CIT v. West Godavari District Rice Millers Association (150 ITR 394, AP HC) and other authorities to argue that no person can earn profit from themselves and, therefore, mutuality exempts the income.