Section 80P deduction allowed on late return for AY 2017-18; cash deposits verification remanded

Issue

Unexplained Cash Credits: Whether the Commissioner (Appeals) erred in confirming additions under Section 68 for cash deposits made during demonetization without considering the documentary evidence (KYC, member lists) submitted by the co-operative society.
Section 80P Deduction: Whether the deduction under Section 80P is admissible for Assessment Year 2017-18 even if the return of income was not filed within the due date prescribed under Section 139(1).

Facts

Assessee Profile: The assessee is a credit co-operative society engaged in providing credit facilities to its members.
The Addition: Based on data analytics regarding cash transactions during the demonetization period (FY 2016-17), the Assessing Officer (AO) noted that the assessee had made substantial cash deposits.
AO’s Findings: The AO observed that the assessee had not filed a return of income and failed to establish the source of the cash deposits. Consequently, the deposits were treated as unexplained cash credits under Section 68.
Assessee’s Submission: Before the appellate authority, the assessee submitted details including financial statements, bank statements, and a list of members along with their Aadhar and PAN cards to establish the identity of contributors and the source of deposits.
CIT(A)’s Order: The Commissioner (Appeals) dismissed the appeal and confirmed the AO’s action without verifying the documents submitted.
Deduction Claim: The issue also involved the denial of deduction under Section 80P, presumably due to the late filing of the return.

Decision

I. Regarding Cash Deposits (Section 68)

Failure to Verify: The Tribunal noted that the assessee had actually filed relevant details (member lists, KYC documents) to explain the source of the cash deposits.
Natural Justice: The Commissioner (Appeals) erred by not considering these documents which were crucial to the assessee’s defense.
Remand: The matter was remanded back to the file of the AO. The AO is directed to verify and examine the financial statements and member details afresh to determine the genuineness of the cash credits.

II. Regarding Section 80P Deduction (Section 80AC)

Statutory Position: The Tribunal held that the provisions of Section 80AC (which bars deductions if the return is filed after the due date) did not include Section 80P within its scope for the Assessment Year 2017-18.
Amendment Effect: The restriction on claiming Section 80P deductions for late returns was introduced subsequently. For AY 2017-18, the deduction is statutorily available even if the return is filed after the due date under Section 139(1).
Ruling: The AO was directed to allow the claim of deduction under Section 80P.

Key Takeaways

Section 80AC Scope: For Assessment Years prior to 2018-19, filing a return within the due date was not a mandatory condition for claiming deductions under Section 80P. Late filers are eligible for the benefit for AY 2017-18.

Co-op Society Deposits: For credit societies, cash deposits are often explained by the contributions of members. If the society can produce a list of members along with KYC (PAN/Aadhar) and books of account, the source is generally considered explained, subject to verification.

Appellate Duty: An appellate authority cannot summarily dismiss an appeal without examining the additional evidence or submissions filed by the assessee to substantiate their claim.

IN THE ITAT PANAJI BENCH ‘SMC’

Basaveswar Co-Op Credit Society Niyamit

Income-tax Officer^*

Pavan Kumar Gadale, Judicial Member

IT Appeal Nos. 218 (PAN) of 2025
[Assessment year 2017-18]

NOVEMBER 10, 2025

Ms. Shree Raksha, AR. for the Appellant. Smt. Rijula Uniyal, Sr. DR. for the Respondent.

ORDER

Pavan Kumar Gadale, Judicial Member.- The appeal is filed by the assesse against the order of the ADDL/JCIT(A)-3 Chennai passed u/sec 250 of the Act. The assesse has raised the grounds of appeal challenging the order of the NFAC/ CIT(A) sustaining addition u/sec68 of the Act and the denial of claim of deduction under section 80P of the Act applying the provisions of section 80AC of the Act.

2. The brief facts of the case are that, the assessee is a credit cooperative society engaged in providing the credit facilities to members. The Assessing Officer (AO) based on the information and data analytics/ cash transactions data found that the assesse has made cash deposits in the Axis bank account in the F.Y 2016-17 and the assesse has not filed the return of income. Subsequently the case was selected for scrutiny and the A.O has issued notice u/sec 142(1) of the Act on various dates and there was a partial compliance. Whereas the A.O find that the assesse has made the cash deposits in the F.Y.2016-17 and explanations were called to substantiate the cash deposits and the assesse has furnished the clarifications and details in lieu of show cause on 26.08.2019 and the A.O was not satisfied with the explanations and observed that the assessee has failed to establish the source of cash deposits during the demonization period and made addition of Rs.12,00,000/- as unexplained cash deposits u/sec68 of the Act. Further the A.O found that for the A.Y.2015-16 the assessee has not filed the return of income u/sec 139(1) of the Act and the conditions stipulated under section 80AC of the Act are not complied by the assessee and the A.O has denied the claim of deduction u/sec80P of the Act of Rs.4,06,475/- and assessed the total income of Rs.16,06,475/- and passed the order u/sec144 of the Act dated 31.10.2019.

3. Aggrieved by the order, the assessee has filed an appeal before the CIT(A), whereas the CIT(A) has considered the grounds of appeal, statement of facts and findings of the AO and has issued notices of hearing and the assessee has filed the details and submissions. But the CIT(A) has confirmed the action of the A.O and dismissed the appeal. Aggrieved by the order of the CIT(A), the assessee has filed an appeal before the Hon’ble Tribunal.

4. At the time of hearing, the Ld.AR submitted that the CIT(A) has erred in confirming the action of the Assessing officer overlooking the information of the assessment proceedings.The assesse was asked to explain the sources of deposits and the assesee has filed the financial statements and supporting information in respect of deposits along with bank statement and members list but the addition of cash deposits u/sec68 of the Act was sustained by the CIT(A). Further the provisions of section 80AC of the Act are applicable to the cooperative societies from A.Y.2018-19 to claim deduction u/sec80P of the Act provided the return of income is filed within the due date u/sec139(1) of the Act and whereas the impugned assessment year is A.Y.2017-18. The Ld.AR supported the submissions with the factual paper book and judicial decisions. Per Contra, the Ld.DR supported the order of the CIT(A) and submissions.

5. Heard the rival submissions and perused the material on record. The crux of the disputed issues envisaged by the Ld.AR that the CIT(A) has erred in sustaining the addition of unexplained cash deposits made by the Assessing Officer without providing proper opportunity and overlooking the facts and material evidences. The assesse has filed the details before the lower authorities and the CIT(A) has not considered the documents and information supporting the claim of the assesse. The Ld.AR highlighted on the submissions made in the proceedings with Aadhar card and PAN card of members of society establishing the identity and source of cash deposits placed at page 22 to 116 of the paper book and the assesee has a good case on merits. Prima-facie, the CIT(A) has dealt on the findings of the AO and has not considered the submissions/evidences of the assesse filed in the proceedings referred and has not allowed the grounds of appeal. Therefore, considering the facts, circumstances and principles of natural justice shall provide with one more opportunity of hearing and accordingly restore the disputed issue along with the evidences for limited purpose to the file of the Assessing Officer for verification and examination and to adjudicate on merits and the assessing officer shall provide adequate opportunity of being heard to the assessee and the assessee should also cooperate in submitting the information. And these grounds of appeal of the assessee are allowed for statistical purpose.

6. On the second disputed issue, the provisions of section 80A(5) of the Act are not applicable as the deduction under section 80P of the Act was not included in the proviso till A.Y.2017-18 and therefore deduction u/sec80P of the Act can be claimed even after the due date u/sec139(1) of the Act. The Ld.AR relied on the decision of the Honble Tribunal Bangalore Bench Prathamika Krishi Pattina, Sahakara Sangha Ltd. v. ITO ITD 649 (Bangalore-Trib.). Similarly Hon’ble Tribunal Panaji bench Omkar urban cooperative credit society Ltd. v. ITO [IT Appeal No. 84/PAN/2022, dated 1-9-2023] A.Y. 2017-18 were the Honble Tribunal in Para 5.4 of the order had dealt on the similar issue were the assessee has filed the return of income disclosing total income Rs. Nil after claiming the deduction u/sec80P of the Act in pursuance to notice issued u/sec142(1) of the Act in the assessment proceedings and the Honble Tribunal concluded that the provisions of section 80AC of the Act shall not be applicable and the assessee is entitled deduction u/sec80P of the Act. Hence considering, the facts, circumstances and follow the judicial precedence and set aside the order of the CIT (A) on this disputed issue and direct the Assessing officer to allow the claim of deduction u/sec 80P of the Act. And these grounds of appeal of the assesse are allowed in favour of the assesse.

7. In the result, the appeal filed by the assesse is partly allowed for statistical purposes.