Appellate authorities can allow Section 80P deductions even when not claimed in original return if raised before AO

ITAT Surat held that appellate authorities can entertain claims for deduction under Section 80P even when not made in the original return of income, provided the claim was raised before the AO and facts emerge from lower authority records. The tribunal relied on precedents establishing that Section 80AC restrictions don't apply to Section 80P deductions and that filing requirements under Section 80A(5) are directory, not mandatory. Since the nature and quantum of deduction were undisputed, the AO was directed to allow the Section 80P deductions. The assessee's appeal was allowed for statistical purposes.

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Issues Involved:
1. Validity of assessment order passed under section 144 of the Income Tax Act.
2. Denial of deduction under section 80P of the Income Tax Act.
3. Eligibility of the assessee for deduction under section 80P(2)(a)(i) and 80P(2)(d) despite not filing a return of income.

Summary:

Validity of Assessment Order:
The assessee contested the order passed by the National Faceless Appeal Centre, Delhi, which upheld the Income Tax Officer's assessment under section 144 of the Income Tax Act. The assessee argued that the assessment was based on misleading, misconception, arbitrary, and perverse observations, and thus, was without jurisdiction, invalid, illegal, and unwarranted.

Denial of Deduction under Section 80P:
The assessee, a Primary Agricultural Co-Operative Credit Society, claimed deductions under section 80P(2)(a)(i) and 80P(2)(d) of the Income Tax Act. The Assessing Officer denied these deductions solely because the assessee failed to file a return of income. The assessee argued that due to an error in PAN issuance, it was unable to file the return of income as a co-operative society. Despite this, the assessee submitted profit and loss accounts, balance sheets, and computation of total income during the assessment proceedings.

Eligibility for Deduction Despite Not Filing Return:
The assessee argued that the denial of deductions under section 80P was unjustified as the claim was made during the assessment proceedings, citing the Hon'ble Supreme Court's decision in CIT vs. G.M. Knitting Industries (P.) Ltd., which held that filing a return of income is not mandatory for claiming deductions under Chapter VI-A. The Tribunal noted that the assessee's claim was raised during the assessment proceedings and thus could be entertained by the appellate authorities.

Tribunal's Decision:
The Tribunal referred to various case laws, including the Bangalore Tribunal's decision in Prathamika Krishi Pattina, Sahakara Sangha Ltd. vs. ITO, which held that section 80AC's provisions do not apply to claims under section 80P, and the Nagpur Tribunal's decision in Krushi Vibhag Karmachari Vrund Sahakari Pat Sanstha Maryadit vs. ITO, which stated that the requirement of making a claim in the return of income under section 80A(5) is directory. The Tribunal concluded that the authorities were not justified in rejecting the assessee's claim of deduction under section 80P solely because the claim was not made in the return but during the assessment proceedings.

Conclusion:
The Tribunal directed the Assessing Officer to allow the deductions under section 80P(2)(a)(i) and 80P(2)(d) as claimed by the assessee. The appeal was allowed for statistical purposes.

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