Belated return did not bar section 80P deduction; claim had to be examined on merits, and natural justice was violated.

Belated filing of the return did not, for assessment year 2017-18, bar deduction under section 80P(2)(a)(i) and section 80P(2)(d) where the claim was raised before the Assessing Officer during assessment proceedings; the denial on technical delay was therefore unsustainable. The assessment framed under section 144 was also found vitiated because the assessee had responded to notice and filed its return, yet the material was not properly considered and the assessment was completed without effective opportunity, offending natural justice. The deduction was thus allowed on merits, except for the bank interest element admitted as taxable, and the disallowance was set aside to that extent.

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Issues: (i) Whether deduction under section 80P(2)(a)(i) and section 80P(2)(d) of the Income-tax Act, 1961 could be denied for assessment year 2017-18 merely because the return of income was filed belatedly. (ii) Whether the assessment under section 144 sustained by the lower authorities was vitiated for want of adequate opportunity and non-consideration of the assessee's reply and return filed during assessment proceedings.

Issue (i): Whether deduction under section 80P(2)(a)(i) and section 80P(2)(d) of the Income-tax Act, 1961 could be denied for assessment year 2017-18 merely because the return of income was filed belatedly.

Analysis: The assessee had placed its claim for deduction before the Assessing Officer in response to the notice under section 142(1) and also e-filed the return during the assessment proceedings. For the relevant assessment year, the expanded scope of section 80AC, by which the timeliness condition was extended to deductions under Chapter VI-A including section 80P, had not yet come into force. The earlier position did not justify denial of section 80P relief solely on the ground of delay in filing the return. The authorities below, therefore, erred in treating belated filing as an absolute bar to the claim.

Conclusion: The assessee was entitled to deduction under section 80P(2)(a)(i) and section 80P(2)(d) for assessment year 2017-18, and the disallowance on the ground of belated return was not sustainable.

Issue (ii): Whether the assessment under section 144 sustained by the lower authorities was vitiated for want of adequate opportunity and non-consideration of the assessee's reply and return filed during assessment proceedings.

Analysis: The record showed that the assessee had responded to the statutory notice and later filed its return, but the assessment was completed in undue haste without proper consideration of the material placed before the Assessing Officer. The short interval between the show-cause notice and completion of assessment, along with non-application of mind to the filed reply and return, amounted to denial of effective opportunity and offended the principles of natural justice.

Conclusion: The ex parte assessment and the appellate affirmation of the disallowance could not be sustained on the ground of violation of natural justice.

Final Conclusion: The appeal succeeded in substance, with the assessee obtaining deduction under section 80P except to the extent of bank interest admitted as taxable, and the disallowance made by the authorities below was set aside to that extent.

Ratio Decidendi: For assessment year 2017-18, belated filing of the return did not by itself bar a claim for deduction under section 80P, and a deduction claim placed before the Assessing Officer during assessment proceedings had to be examined on merits rather than rejected solely on technical delay.

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