Section 80P deduction denied where no return was filed and assessment proceeded on books and audit material.

Where an assessee did not file a return under section 139 or comply with notice under section 142(1), the assessment was completed under section 144 on the basis of the books of account and audit material. On that footing, the claim for deduction under section 80P(2)(a)(i) was not accepted, and the income reflected in the records was brought to tax. The appellate authority found no infirmity in this approach and sustained the disallowance of section 80P deduction.

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Issues: Whether the disallowance of deduction under section 80P of the Income-tax Act, 1961 was justified where the assessee did not file a return of income and the assessment was completed on the basis of books and audit material.

Analysis: The assessee had not filed a return under section 139 and did not respond to the notice under section 142(1) by filing a return. The assessment was completed under section 144 on the basis of the material available, including the trading account, profit and loss account, income and expenditure account, balance sheet and audit report. In these circumstances, the claim under section 80P(2)(a)(i) was not accepted and the income reflected in the books was brought to tax. The appellate authority found no infirmity in that approach.

Conclusion: The disallowance of deduction under section 80P was upheld and the assessee failed on the sole substantive issue.

Final Conclusion: The appeal was dismissed and the assessment as confirmed by the appellate authority was sustained.

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