ITAT Chandigarh Upholds Section 80P(2)(d) Deduction for Co-operative Society Filing Return by October 31 Due to Statutory Audit Mandate

Background of the Dispute

The Income Tax Appellate Tribunal, Chandigarh Bench, has delivered a significant ruling in favor of Madanpur Co-operative House Building Society Limited Vs ITO, clarifying the applicable due date for filing income tax returns by co-operative societies that are mandated to undergo statutory audit under state-specific co-operative legislation. The Tribunal permitted a deduction amounting to ₹98.04 lakh under Section 80P(2)(d) of the Income Tax Act, 1961, reversing the decisions made by the Centralized Processing Centre (CPC) and the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC].

The core issue revolved around determining whether the assessee's return of income, filed on October 31, 2019, met the statutory deadline requirements, thereby making the co-operative society eligible for the claimed deduction. The revenue authorities had initially contended that the applicable deadline was August 31, 2019, and consequently denied the deduction on grounds of belated filing.

Facts Leading to the Appeal

The assessee, a co-operative housing society, had filed its income tax return for Assessment Year 2019-20 on October 31, 2019. The society claimed a deduction of ₹98.04 lakh under the provisions of Section 80P(2)(d) of the Income Tax Act, 1961. However, the Centralized Processing Centre issued a rectification intimation under Section 154 on December 28, 2020, disallowing the claimed deduction.

The CPC took the position that the due date for filing the return for the assessee was August 31, 2019, as per the general provisions applicable to non-corporate assessees. Since the return was filed on October 31, 2019, the tax authorities deemed it to be belated, thereby making the assessee ineligible for the deduction under Section 80P(2)(d).

Subsequently, the assessee appealed before the Commissioner of Income Tax (Appeals), NFAC, challenging the disallowance. The CIT(A), vide order dated October 4, 2024, upheld the CPC's decision. The CIT(A) reasoned that the assessee had failed to get its accounts audited by the Inspector (Audit) of the Registrar of Co-operative Societies for the relevant assessment years, specifically Assessment Years 2018-19 and 2019-20. According to the CIT(A), in the absence of completion of such statutory audit, the assessee could not claim the benefit of the extended due date of October 31, and therefore, the deduction was rightly denied.

Aggrieved by this decision, the assessee approached the Income Tax Appellate Tribunal, Chandigarh, seeking relief.

Contentions Raised by the Assessee

The co-operative society presented a well-reasoned argument based on the statutory framework governing its audit obligations. The assessee contended that being a co-operative society registered under the Punjab State Co-operative Societies Act, 1961, it was mandatorily required to have its accounts audited under Section 48 of the said Act. This statutory audit obligation arose from state legislation and was not discretionary.

The assessee further argued that the provisions of Explanation-2(a)(ii) to Section 139(1) of the Income Tax Act, 1961, specifically extend the due date for filing returns to October 31 for entities whose accounts are required to be audited under the Income Tax Act or under any other law currently in force. The phrase "any other law" would encompass audit requirements mandated by state co-operative legislation, including the Punjab State Co-operative Societies Act, 1961.

Additionally, the assessee placed on record that pending the statutory audit by the Inspector (Audit) of the Registrar of Co-operative Societies, it had engaged M/s Gautam Jain & Associates, an independent chartered accountant firm, to conduct a special audit. This special audit was completed on May 31, 2019, and the audit report was duly submitted. Based on this audited financial information, the return of income was filed on October 31, 2019.

The assessee emphasized that the existence of a statutory audit requirement under state law was sufficient to attract the extended due date, irrespective of whether such audit had been physically completed by the state-appointed Inspector by the time of filing the return. The legislative intent behind Explanation-2(a)(ii) was to provide adequate time to entities subject to mandatory audit requirements, recognizing the practical difficulties in completing audits and filing returns within the shorter timeframe.

Observations and Findings of the Tribunal

The Tribunal carefully analyzed the statutory provisions, the factual matrix, and the submissions made by both parties before arriving at its conclusion.

Statutory Audit Requirement Under State Law

The Tribunal acknowledged that the assessee, being a co-operative society registered under the Punjab State Co-operative Societies Act, 1961, was undisputedly required to have its accounts audited by the Inspector (Audit) of the Registrar of Co-operative Societies under Section 48 of the Punjab State Co-operative Societies Act, 1961. This was a mandatory statutory obligation imposed by state legislation and not a voluntary arrangement.