ITAT Bangalore Rules That Late ITR Verification Does Not Bar Section 80P Deduction

Background of the Dispute

The Income Tax Appellate Tribunal, Bangalore Bench, in the case of Vividoddesh Prathamika Grameena Vs CPC, examined whether a co-operative society can be denied deduction under Section 80P merely because the electronic verification of its return of income was completed after the prescribed 30-day window, even though the return itself was uploaded within the due date under Section 139(1).

The Centralized Processing Centre (CPC) had treated the date of verification as the actual date of filing, relying on CBDT Notification No. 5/2022 dated 29.07.2022, and consequently invoked Section 80AC to deny the assessee the benefit of deduction under Section 80P. The Tribunal rejected this approach and held that such procedural delay in verification cannot override the substantive right to claim deduction when the return was otherwise filed on time.

This decision is significant for assessees who file their returns within time but inadvertently delay e-verification, particularly in the context of beneficial provisions like Section 80P.

Facts of the Case

Filing and Verification Timeline

  • The assessee is a co-operative society.
  • For A.Y. 2022-23, the assessee electronically filed its return of income on 29.09.2022.
  • The return declared Nil income after claiming deduction under Section 80P of the Income Tax Act for Rs. 16,28,380/-.
  • However, the return was verified only on 30.12.2022, i.e., beyond the stipulated 30 days for verification.

CPC Processing and Disallowance

  1. The return was processed under Section 143(1).
  2. CPC noted that the e-verification was completed beyond 30 days from the date of electronic submission.
  3. Relying on para 6(ii) of CBDT Notification No. 5/2022 dated 29.07.2022, CPC treated the return as deemed to have been filed on 30.12.2022 (the date of verification) instead of 29.09.2022 (the date of upload).
  4. Since 30.12.2022 fell beyond the due date prescribed under Section 139(1), CPC regarded the return as belated.
  5. Based on this deemed belated filing, CPC invoked Section 80AC and disallowed the assessee’s claim of deduction under Section 80P.

The assessee filed multiple rectification applications before CPC contesting this treatment, but each rectification request was rejected, and the disallowance was sustained at the processing stage.

First Appeal Before CIT(A)

  • The assessee carried the matter in appeal before the CIT(A) under Section 250.
  • The CIT(A) observed that the assessee did not appear in response to hearing notices.
  • Nonetheless, the CIT(A) decided the matter on the basis of the grounds of appeal and the statement of facts already on record.

The CIT(A) held as follows:

  • The return was electronically submitted on 29.09.2022, but verified on 30.12.2022, outside the permitted 30-day window.
  • As per CBDT Notification No. 5/2022, if verification is not completed within 30 days, the return is deemed to be filed on the date of verification.
  • Therefore, the assessee’s return was treated as filed on 30.12.2022, which is beyond the due date under Section 139(1).
  • Consequently, the conditions of Section 80AC were not satisfied, and the deduction under Section 80P was rightly denied.
  • The CIT(A) also relied on the judgment of the Hon’ble Supreme Court in Checkmate Services P Ltd vs. CIT (Civil Appeal No. 2833 of 2016, dated 12.10.2022) to justify strict adherence to filing timelines for allowing deductions.

The CIT(A) therefore confirmed the disallowance made by CPC.

Grounds Raised Before the ITAT

Aggrieved by the order of the CIT(A), the assessee approached the ITAT, Bangalore.

Assessee’s Contentions

The learned Authorised Representative (AR) argued: