Appeal success for Co-operative Society on tax exemption denial due to late filing

The appeal was allowed in favor of the assessee, a Co-operative Society, regarding the denial of exemption claimed under Section 80P of the Income Tax Act for the Assessment Year 2020-21. The denial of the deduction under Section 80P(2)(b) due to late filing of returns was overturned. The delay in filing the return was deemed justified due to circumstances beyond the control of the assessee, such as delayed audit by the Government Auditor. The assessee was found entitled to the deduction under Section 80P, and the disallowance solely based on the delay in filing the return was deemed unjustified.

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Issues Involved:
The appeal against the order passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2020-21 regarding the denial of exemption claimed under Section 80P of the Income Tax Act, 1961.

Grounds of Appeal:
1. The CIT(A) upheld the non-grant of exemption claimed under Section 80P(2)(b), 80P(2)(d), 80P(2)(c) aggregating Rs. 4,18,340/- due to late filing of the return of income.
2. The appellant argued that due to Covid and delayed Government Audit, exemption under Section 80P should have been allowed.
3. Claimed reasonable cause for late submission of return due to late audit by the Government Auditor.
4. Disallowance under Section 80P was challenged citing that clause 143(1)(v) was not applicable for AY 2020-21.
5. Exemption under Section 80P should not have been denied based on late filing of the return.
6. Disagreement with the application of the decision of Madras High Court in a similar case.

Judgment Details:
The assessee, a Co-operative Society, filed the return of income on 31.03.2021 claiming a deduction of Rs. 4,18,340/- under Section 80P. The CPC denied the claim, leading to a demand of Rs. 1,61,860. The appeal was filed before the CIT(A) after which the appeal was dismissed.

The CIT(A) and Assessing Officer denied the deduction under Section 80P(2)(b) due to the late filing of returns. The return was filed on 31.03.2021, delayed by about one and a half months. The claim included dividend and interest, entitling the assessee to the deduction under Section 80P. Despite extensions granted, the return was filed belatedly. The Government Auditor's delayed report was cited as a reasonable cause for the delay.

After hearing both parties, it was concluded that the assessee was entitled to the deduction under Section 80P, and the delay in filing the return was due to circumstances beyond the control of the assessee. The applicability of the mandate for filing returns on the due date from A.Y. 2021-22 onwards was noted. Therefore, the disallowance of the deduction under Section 80P solely based on the delay in filing the return was deemed unjustified.

The appeal of the assessee was allowed, and the order was pronounced on 9th August 2023.

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