Cooperative society wins Section 80P deduction despite 61-day ITR filing delay after proving circumstances beyond control

Karnataka HC allowed a cooperative society's petition challenging denial of Section 80P deductions due to 61-day delay in filing ITR. The court held that Section 80AC does not expressly bar deductions when delay is condoned under Section 119(2)(b). Relying on CBDT Circular 13/2023, the court found the delay was due to circumstances beyond the petitioner's control related to mandatory electoral processes under Karnataka Co-operative Societies Act. The court quashed the impugned order, condoned the delay, and allowed the deductions while extending the assessment timeline accordingly.

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Issues Involved:
The judgment involves the condonation of delay in filing Income Tax Returns (ITR) by a co-operative society under the Karnataka Co-operative Societies Act, 1959, and the subsequent implications on deductions under Section 80P of the Income Tax Act, 1961.

Issue 1: Condonation of Delay in Filing ITR:
The petitioner, a co-operative society, filed an application for condonation of the delay in filing the ITR for the assessment year 2018-19 under Section 119(2)(b) of the IT Act. The Assessing Officer's report highlighted the reasons for the delay, including engagement in election-related activities and the potential undue hardship on society members from rural backgrounds. However, the third respondent rejected the condonation request citing lack of proof of hardship beyond the control of the assessee.

Issue 2: Implications on Deductions Under Section 80P:
The respondents argued that condonation of the delay would enable the petitioner to avail benefits under Section 80P of the IT Act, despite the provisions of Section 80AC(ii) which require timely filing of ITR for deductions. The court noted that the delay between the audit of accounts in August 2018 and the elections in January 2019 was not satisfactorily explained, potentially impacting the admissibility of deductions.

Key Observations and Decision:
The court examined the provisions of Section 80AC and the power of condonation under Section 119(2)(b) of the IT Act. Referring to a Circular allowing condonation of delay for genuine hardship cases, the court emphasized the need to consider reasons beyond the petitioner's control for the delay. Ultimately, the court quashed the impugned order, condoning the 61-day delay in filing the ITR for the assessment year 2018-19. The demand issued based on the delayed filing was also quashed, and the limitation for assessment purposes was set from the end of 31.12.2023.

This summary outlines the legal judgment's focus on the condonation of delay in filing Income Tax Returns by a co-operative society, the implications on deductions under Section 80P of the IT Act, and the court's decision to quash the impugned order while considering factors of genuine hardship and statutory provisions.

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