Deduction under Section 80P denied when claimed in belated return filed after due date under Section 139(1)

ITAT Ahmedabad dismissed the appeal challenging denial of deduction under Section 80P. The assessee failed to file return within the due date prescribed under Section 139(1) and claimed the deduction only in a belated return filed pursuant to notice under Section 148. The tribunal held that under amended Section 80AC effective from AY 2018-19, deduction under Section 80P is admissible only when claimed in returns filed on or before the due date. The tribunal noted CBDT Circular No.13/2023 provides a mechanism for condonation of delay by the Competent Authority, suggesting the assessee pursue that remedy instead.

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Issues Involved:
1. Denial of deduction under Section 80P in the computation sheet.
2. Issuance of a notice of demand despite the assessment order being passed at Nil variation.
3. Disallowance of deduction under Section 80P for the assessment year 2019-20.

Detailed Analysis:

Issue 1: Denial of Deduction under Section 80P in the Computation Sheet (A.Y. 2018-19)
The assessee did not file a return of income for the assessment year 2018-19 within the due date prescribed under Section 139(1) of the Income-tax Act, 1961. The Assessing Officer (AO) reopened the assessment under Section 147/148 based on the information that the assessee had deposited significant cash and time deposits. The assessee subsequently filed a return declaring Nil income in response to the notice under Section 148. However, the AO denied the deduction under Section 80P amounting to Rs. 3,92,061/- in the computation sheet attached to the reassessment order and issued a demand notice under Section 156 for Rs. 2,58,357/-.

The CIT(A) upheld the AO's decision, citing that the return was not filed within the due date under Section 139(1), and therefore, the claim for deduction under Section 80P could not be allowed. This decision was based on the statutory scheme under Section 80A(5) and Section 80AC, which mandates that deductions under Section 80P are admissible only if the return is filed within the due date specified under Section 139(1).

Issue 2: Issuance of Notice of Demand Despite Nil Variation (A.Y. 2018-19)
The AO assessed the income at Nil but denied the deduction under Section 80P in the computation sheet, resulting in a demand notice under Section 156. The Tribunal noted that the AO's failure to mention the disallowance of deduction under Section 80P in the body of the assessment order was an irregularity. However, this irregularity did not invalidate the disallowance since the deduction was claimed in a return filed beyond the due date under Section 139(1), making it an ex-facie incorrect claim per the substituted provisions of Section 80AC, effective from the assessment year 2018-19.

Issue 3: Disallowance of Deduction under Section 80P (A.Y. 2019-20)
For the assessment year 2019-20, the facts were similar to those of the previous year, with the AO explicitly mentioning the disallowance of the deduction under Section 80P in the assessment order. The Tribunal applied the same reasoning as for the assessment year 2018-19, affirming that the deduction under Section 80P could not be allowed since the return was filed beyond the due date specified under Section 139(1).

Conclusion:
The Tribunal dismissed the appeals for both assessment years 2018-19 and 2019-20. The Tribunal emphasized that the statutory scheme under Section 80AC, as amended by the Finance Act, 2018, mandates that deductions under Section 80P are admissible only if the return is filed within the due date specified under Section 139(1). The Tribunal also highlighted a circular issued by the CBDT allowing for the condonation of delay in filing returns for claiming deductions under Section 80P, suggesting that the assessee could seek relief through this mechanism.

Final Order:
The appeals of the assessee in ITA Nos. 884 & 885/Ahd/2024 for the assessment years 2018-19 and 2019-20 were dismissed.

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