ITAT Mumbai allows delayed appeal and revives Section 80P(2)(d) deduction claim of co‑operative housing society

Background and context

In this case, the “SMC” Bench of the Income Tax Appellate Tribunal, Mumbai dealt with an unusual situation where a co-operative housing society’s appeal was filed with an extraordinary delay of more than 13 years. Despite this long delay, the Tribunal condoned it and directed a fresh examination of the assessee’s claim for deduction under Section 80P(2)(d) of the Income Tax Act, 1961.

The assessee, Bakhtawar Co-Operative Housing Society Ltd., had originally filed its return of income for Assessment Year 2012-13 claiming deduction under Section 80P(2)(d) to the tune of ₹13,77,502. The return was processed by CPC, Bengaluru under Section 143(1) on 27.02.2013, and the deduction was disallowed by way of adjustment in the intimation.

Subsequently, the assessee attempted to contest this disallowance, but the first appellate authority, the Commissioner of Income Tax (Appeals), refused to entertain the appeal solely on the ground that it was time-barred by more than 13 years. The assessee then approached the ITAT, Mumbai, challenging the refusal to condone the delay and seeking adjudication on the merits of its Section 80P deduction.

Appeal before the ITAT and issues raised

The assessee filed an appeal before the Tribunal against the order of the Commissioner of Income Tax Appeal, ADDL/JCIT (A), Thiruvanantpuram dated 10.02.2026, arising out of the intimation under Section 143(1) dated 27.02.2013 passed by CPC, Bengaluru for A.Y. 2012-13.

The primary grounds taken in the appeal were:

  • The Ld. CIT(A) erred in law and on facts in dismissing the appeal on the ground of limitation, without condoning the delay despite reasonable cause being demonstrated.
  • The Ld. CIT(A) committed an error by rejecting the appeal in limine, without touching the merits of the claim under Section 80P.
  • The assessee’s specific grounds on the correctness of the CPC’s adjustment and the denial of deduction under Section 80P(2)(d) aggregating to ₹13,77,502 were not examined at all.

The computation aspect highlighted that CPC assessed total income at ₹14,80,720 as against the returned income of ₹1,03,210, purely due to the disallowance of the assessee’s claim under Section 80P(2)(d).

Nature of dispute: Section 80P(2)(d) disallowance under Section 143(1)

The core dispute relates to whether the assessee, a co-operative housing society, was rightly denied deduction under Section 80P(2)(d) by CPC while processing the return under Section 143(1).

The assessee’s case was that:

  • It was eligible for deduction under Section 80P(2)(d) on interest and related income derived from investments with co-operative banks/co-operative societies.
  • The denial was carried out summarily as a prima facie adjustment under Section 143(1) without affording an opportunity to explain the factual and legal basis of the claim.

The Tribunal noted that, based on the material on record and existing judicial precedents for similar co-operative housing societies, the assessee appeared prima facie entitled to the deduction. Consequently, a mechanical denial through an intimation under Section 143(1) warranted a proper factual and legal examination rather than being buried at the stage of limitation.

Explanation for 13-year delay in filing first appeal

As the appeal before the Ld. CIT(A) had been filed after more than 13 years from the date of the Section 143(1) intimation, the assessee filed an affidavit explaining in detail the reasons for the delay. The material reasons stated were:

  1. Reliance on part-time accountant

    • The society’s tax and compliance affairs were managed by a part-time accountant.
    • When the Section 80P(2)(d) claim was rejected by CPC, the accountant assumed that the issue could be resolved directly with the Ld. AO without filing an appeal.

  2. Assurances by Assessing Officer for rectification

    • The assessee asserted that the Ld. AO indicated that rectification action would be taken to grant the claim.
    • On this understanding, the society did not initiate appellate proceedings immediately.