2025 (5) TMI 1771 - AT - Income Tax

Section 80AC does not bar section 80P deductions for cooperative societies filing belated returns

ITAT Lucknow held that section 80AC does not bar deduction claims under section 80P even when returns are filed belatedly. The tribunal followed ITAT ... Deduction u/s 80P(ii)(vi) - return of income had been filed belatedly - HELD THAT:- The provisions of section 80AC of the Act would not be a bar for allowing the benefit of claim of deduction u/s 80P of the Act even if the return of income was filed belatedly. It is seen that the issue before me is squarely covered in favour of the Assessee by order of ITAT Delhi Benc in the case of Sahkari Ganna Vikas Samiti, Chandausi, Sambal [2023 (8) TMI 1060 - ITAT DELHI] Appeal of the assessee stands allowed. The core legal questions considered in this case are:1. Whether the assessee, a cooperative society, is entitled to claim deduction under section 80P(ii)(vi) of the Income Tax Act, 1961, for the assessment year 2019-20, despite filing the return of income belatedly under section 139(4) rather than within the due date prescribed under section 139(1).2. Whether the provisions of section 80AC(ii) of the Act, which restrict deductions under Chapter VIA if the return is not filed within the due date, apply to deny the deduction under section 80P in this case.3. Whether the Centralized Processing Center (CPC) and the Commissioner of Income Tax (Appeals) were correct in denying the deduction under section 80P on the ground of late filing of the return and absence of a revised return or condonation of delay application.4. Whether the late fee paid under section 234F validates the belated return for the purpose of claiming deduction under section 80P.5. Whether the Assessing Officer and CIT(A) had jurisdiction and power to deny the deduction under section 80P during the processing of the return under section 143(1), given the statutory framework and judicial precedents.Regarding the entitlement to deduction under section 80P despite late filing, the Tribunal examined the interplay between sections 80P, 80AC, 139, 143(1), and 234F of the Income Tax Act. Section 80P provides deduction for income of cooperative societies, subject to conditions. Section 80AC(ii), effective from assessment year 2018-19, states that no deduction under Chapter VIA shall be allowed if the return is not filed within the due date under section 139(1). The assessee filed the return belatedly on 30.11.2019 under section 139(4), after the due date under section 139(1), but claimed deduction under section 80P in the return.The CPC, during processing of return under section 143(1), disallowed the deduction under section 80P on the ground of late filing and invoked section 80AC(ii). The CIT(A) upheld this view, emphasizing the need for either filing a revised return or seeking condonation of delay to claim the deduction. The CIT(A) also noted that under section 80AC(ii), deduction is not allowable if the return is belated.The assessee challenged this denial before the Tribunal, relying on several judicial precedents from various Benches of the Tribunal (Rajkot, Delhi, Chandigarh, Raipur), which held that the denial of deduction under section 80P on account of late filing of return is not justified for assessment years prior to AY 2021-22. These decisions interpreted that the amendment in section 143(1)(a)(v), which explicitly empowers denial of deduction under Chapter VIA for late filing, is effective only from 1.4.2021 (AY 2021-22 onwards) and was not applicable to AY 2019-20.The Tribunal analyzed the statutory provisions and precedents in detail. It noted that section 143(1)(a)(v) was introduced by the Finance Act, 2021, effective from 1.4.2021, allowing disallowance of deduction under Chapter VIA if the return is filed late. For AY 2019-20, this provision was not in force. Further, section 143(1)(a)(ii) permits adjustment only for incorrect claims apparent from the return, which does not include denial of deduction solely on account of late filing. The Tribunal also referred to the Explanation to section 143(1)(a)(ii), which enumerates specific cases of incorrect claims, none of which cover denial of deduction due to late filing.Judicial precedents were relied upon extensively. The Kerala High Court in Chirakkal Service Co-Operative Bank Ltd. held that returns filed beyond prescribed periods can be accepted for entertaining claims under section 80P if proceedings are pending. The Hyderabad ITAT in ASR Engg. & Projects Ltd. held that claims under Chapter VIA can be made in revised returns filed after notices. The Chandigarh ITAT in Lanjani Co-Operative Agri Service Society Ltd. held that the amendment to section 143(1)(a)(v) cannot be applied retrospectively to deny deductions for AYs prior to 2021-22.The Tribunal observed that the assessee had filed the return within the extended time permissible under section 139(4) and had claimed deduction under section 80P in the return itself. The late fee under section 234F was paid, rendering the return valid for processing. The Tribunal found no legal basis to deny the deduction under section 80P solely due to late filing for AY 2019-20.The Tribunal further held that the CPC's adjustment of income by denying the deduction under section 80P during processing under section 143(1) was a prima facie error and beyond the scope of permissible adjustments for the relevant assessment year. The CIT(A) erred in refusing to entertain the claim or condone delay, as the statutory framework did not empower such denial for AY 2019-20.In addressing the competing arguments, the Tribunal gave due consideration to the Revenue's reliance on section 80AC(ii) and the CIT(A)'s reasoning but found these inapplicable in the absence of the retrospective effect of section 143(1)(a)(v). The Tribunal gave precedence to the consistent judicial view that denial of deduction under section 80P for late filing was not permissible for AY 2019-20. The Tribunal also rejected the argument that the deduction could be denied because no revised return or condonation application was filed, as the original return itself claimed the deduction and was validly filed under section 139(4).Consequently, the Tribunal concluded that the assessee was entitled to the deduction under section 80P for AY 2019-20 despite the late filing of the return. The intimation issued under section 143(1) denying the deduction was held to be invalid and quashed. The order of the CIT(A) was set aside, and the matter was remanded with directions to allow the deduction claimed under section 80P.The significant holdings include the following verbatim excerpt from the Tribunal's order:'Accordingly, in our considered view, denial of claim under section 80P of the Act would not come within the purview of prima facie adjustment under section 143(1)(a)(v) of the Act, for the simple reason that the section was not in force during the period under consideration i.e. assessment year 2019-20.''A joint reading of the above provisions makes it evident that the claim of deduction under section 80P of the Act cannot be allowed the assessee, if the assessee does not file its return of income within the due date stipulated under section 139(1) of the Act w.e.f. assessment year 2018-19 onwards. However, we also note that amendment has been introduced in section 143(1)(a)(v) of the Act to provide that the claim of deduction under section 80P of the Act can be denied to the assessee, in case the assessee does not file its return of income within the time prescribed under section 139(1) of the Act with effect from 01- 04-2021 and does not apply to the impugned assessment year i.e. assessment year 2019-20 relevant to financial year 2018-19.''We note that the instant case, there was a delay in filing the return of income by the assessee for the assessment year 2019-20 and return of income was filed within due date permissible u/s 139(4) of the Act, in which the claim for deduction u/s 80P of the Act was made. Therefore, looking into the totality of facts, we are of the view that claim of deduction u/s 80P of the Act cannot be denied to the assessee only on the basis that the assessee did not file its return of income its return of income within due date u/s 139(1) of the Act, in light of the discussion and judicial precedents highlighted above.''Accordingly, respectfully following the same, I direct the Assessing Officer to allow the claim of the assessee.'The core principles established are:For assessment years prior to AY 2021-22, denial of deduction under section 80P on the ground of late filing of return under section 139(1) is not permissible, as the relevant amendment to section 143(1)(a)(v) was not yet in force.Returns filed under section 139(4) with payment of late fee under section 234F are valid returns for the purpose of claiming deductions under Chapter VIA, including section 80P.The Assessing Officer and CIT(A) cannot deny deductions under section 80P during processing under section 143(1) unless the claim is an incorrect claim as defined under section 143(1)(a)(ii), which does not include denial on account of late filing.Judicial precedents support the view that the statutory provisions must be read in conjunction with the effective dates of amendments, and retrospective application of amendments is not warranted.In final determination, the Tribunal allowed the appeal of the assessee, set aside the orders of the CIT(A) and the CPC denying the deduction under section 80P, quashed the intimation issued under section 143(1), and directed the Assessing Officer to allow the deduction claimed by the assessee for AY 2019-20.