ITAT Bangalore Rules Against Late-Filed Section 80P Deduction Claim

Background of the Dispute

In the case of Kassia Credit Co-operative Society Ltd. Vs DCIT, the Income Tax Appellate Tribunal, Bangalore Bench, examined whether an assessee could validly claim deduction under Section 80P when the return of income was not filed within the time limit prescribed under Section 139(1) of the Income Tax Act 1961, but only later in response to a notice under Section 148.

The appeal arose from an order of the Commissioner of Income Tax (Appeals) [NFAC], who had confirmed the Assessing Officer’s decision to deny deduction under Section 80P for Assessment Year (AY) 2018-19.

Key Facts

  • The assessee, Kassia Credit Co-operative Society Ltd., did not file its return of income for AY 2018-19 within the due date specified under Section 139(1).
  • The jurisdictional Assessing Officer had access to information indicating:
    • Substantial cash deposits, and
    • Interest income on securities.
  • On the basis of this information, a show cause notice under Section 148A(b) was issued on **14.03.2022`.
  • After considering the assessee’s reply, the Assessing Officer passed an order under Section 148A(d) and issued a notice under Section 148 on **31.03.2022`, with proper approval.
  • In response to the Section 148 notice, the assessee filed a return on 29.04.2022, declaring total income of ₹5,14,250 after claiming a deduction of ₹83,89,567 under Section 80P.
  • During reassessment, notices under Section 142(1) and Section 143(2) were issued and partly complied with by the assessee.

The core issue in reassessment was whether the deduction under Section 80P could be allowed when the original return was never filed within the time permitted under Section 139(1) and the only return on record was one filed belatedly in response to a Section 148 notice.

Stand of the Assessing Officer

Reason for Disallowance

After analyzing the submissions and records, the Assessing Officer concluded:

  • Since the assessee failed to file a return within the due date under Section 139(1),
  • And considering the amended framework of Section 80AC applicable from AY 2018-19,
  • The assessee was not eligible to claim deduction under Section 80P.

Accordingly, the deduction of ₹83,89,567 claimed under Section 80P was fully disallowed, and the total income was assessed at a much higher figure than what was returned.

Proceedings Before the CIT(A)

The assessee challenged the reassessment and disallowance before the Commissioner of Income Tax (Appeals) [NFAC].

Submissions by the Assessee

The Authorized Representative for the assessee argued before the CIT(A) that:

  • Section 80AC did not apply in the manner interpreted by the Assessing Officer;
  • Consequently, deduction under Section 80P could not be rejected solely because the return was not filed under Section 139(1);
  • The assessee, being a co-operative society, was otherwise fully eligible on merits for deduction under Section 80P(2)(a)(i).

Decision of the CIT(A)

The CIT(A):