Return filed after Section 142(1) notice valid for claiming Section 80P deduction despite missing due date

The ITAT Ahmedabad held that a return filed in response to notice u/s 142(1) constitutes a valid return for claiming deduction u/s 80P. The AO had denied the deduction arguing no return was filed by the due date. The tribunal ruled that Section 80A(5) only requires the claim to be made in a return of income, without specifying it must be filed u/s 139(1) or by due date. The decision was supported by Kerala HC precedent in Chirakkal Service Co-operative Bank Ltd. case. The assessee's claim was allowed, deciding against revenue.

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Issues Involved:

1. Condonation of delay in filing the appeal.
2. Denial of deduction under Section 80P(2) of the Income Tax Act.
3. Validity of assessment without issuance of notice under Section 143(2).

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:

The appeal was filed by the assessee with a delay of 581 days. The delay was attributed to the Chartered Accountant, who failed to communicate the order passed by the CIT(A) to the assessee. The assessee argued that due to the COVID-19 pandemic, the limitation period for filing the appeal was extended, and the delay was unintentional. The assessee cited a decision by the Gujarat High Court, which condoned delays caused by the inaction of professionals. The Tribunal, considering the affidavit and circumstances, condoned the delay, emphasizing that the assessee should not be penalized for the professional's inaction.

2. Denial of Deduction under Section 80P(2) of the Income Tax Act:

The primary issue in the appeal was the denial of deduction under Section 80P(2). The assessee, a cooperative society, claimed deduction on income earned from services provided to its members. However, the return of income was filed late, and the Assessing Officer denied the deduction under Section 80A(5), which requires claims to be made in the returns of income. The CIT(A) upheld this disallowance, noting that no valid return was filed. The Tribunal examined the provisions of Sections 80A(5) and 80AC, concluding that Section 80A(5) was applicable, which mandates that claims be made in a return of income. The Tribunal found that the return filed in response to a notice under Section 142(1) is a valid return, and thus, the claim should be allowed. The Tribunal relied on the Kerala High Court's decision, which supported the view that returns filed in response to Section 142(1) are valid for claiming deductions under Section 80P.

3. Validity of Assessment without Issuance of Notice under Section 143(2):

The assessee contended that the assessment was invalid as no notice under Section 143(2) was issued. However, the judgment primarily focused on the denial of deduction under Section 80P and did not provide a separate analysis on this issue. The Tribunal's decision to allow the deduction implicitly addressed the assessment's validity, as the deduction was allowed based on the return filed under Section 142(1), which was considered valid for the purpose of claiming deductions.

Conclusion:

The Tribunal allowed the appeal, condoning the delay and directing the Assessing Officer to allow the deduction under Section 80P. The decision emphasized the validity of returns filed in response to Section 142(1) notices for claiming deductions, aligning with judicial precedents that support such claims even if the returns are filed beyond the stipulated period.

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