Assessee granted opportunity to seek condonation for late filing to claim Section 80P deduction

Assessee granted opportunity to seek condonation for late filing to claim Section 80P deduction

Issue

Whether the assessee, a co-operative agricultural society, is eligible to claim a deduction of Rs. 13,62,092 under Section 80P(2)(a)(i) for Assessment Year 2019-20, despite filing the return of income after the due date prescribed under Section 139(1), in light of the restrictions imposed by Section 80AC.

Facts

• Entity Type: The assessee is a co-operative agricultural society.

• Assessment Year: The appeal relates to Assessment Year (AY) 2019-20.

• Initial Non-Filing: The assessee failed to file its return of income under Section 139(1) within the statutory due date.

• Reopening of Assessment: The Assessing Officer (AO) reopened the case under Section 147 read with Section 144B upon receiving information regarding cash deposits.

• Return Filed: In response to the notice under Section 148, the assessee filed a return on 17-05-2022, declaring ‘nil’ income after claiming a deduction of Rs. 13,62,092 under Section 80P(2)(a)(i).

• AO’s Denial: While the AO accepted the returned income, the deduction under Section 80P was denied. The AO invoked Section 80AC, which mandates that a return must be filed on or before the due date under Section 139(1) to claim such deductions.

• CIT(A) Ruling: The Commissioner of Income Tax (Appeals) upheld the AO’s order, noting that taxing statutes must be strictly construed and the statutory scheme requires timely filing for the deduction.

Decision

• Reliance on CBDT Circular: The Tribunal identified that the specific facts of the case are covered by CBDT Circular No. 13 of 2023 (dated 26-07-2023).

• Circular Provisions: This circular addresses the condonation of delay under Section 119(2)(b) for returns claiming Section 80P deductions for AY 2018-19 to AY 2022-23. It authorizes Chief Commissioners (CCsIT) or Directors General (DGsIT) to admit and decide on such applications on merits, specifically looking for genuine hardships like delays in state-mandated audits.

• Remand to CIT(A): The Tribunal restored the appeal back to the file of the Ld. CIT(A).

• Direction to Assessee: The assessee is permitted to approach the appropriate authority (CCsIT/DGsIT) to seek condonation of delay in filing the return as per the terms of the Circular.

• Final Adjudication Instruction: The CIT(A) is directed to re-adjudicate the appeal based on the outcome of the assessee’s condonation application.

• Outcome: The appeal is allowed for statistical purposes.

Key Takeaways

• Section 80AC Rigidity: Generally, Section 80AC strictly bars deductions under Chapter VIA Part-C (including Section 80P) if the return is not filed by the Section 139(1) due date.

• CBDT Relief Mechanism: CBDT Circular 13 of 2023 provides a specific relief window for co-operative societies for AYs 2018-19 through 2022-23, acknowledging that delays often occur due to factors beyond the society’s control (e.g., statutory audit delays under State laws).

• Procedural Remedy: When a co-operative society is denied 80P deduction solely due to late filing, the appropriate remedy is not immediate litigation on the merits of the deduction, but rather an application for condonation of delay under Section 119(2)(b).

• Authority to Condone: The power to condone such delays lies with the CCsIT or DGsIT, who must verify if the delay was caused by circumstances beyond the assessee’s control.