HC Condones Delay for 80P Deduction; Late Audit by State Appointee is “Genuine Predicament”

By | November 25, 2025
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HC Condones Delay for 80P Deduction; Late Audit by State Appointee is “Genuine Predicament”

Issue

Whether the delay in filing the Income Tax Return (ITR) by a co-operative society, which resulted in the denial of the Section 80P deduction, should be condoned under Section 119(2)(b) when the delay was caused by the late appointment of the statutory auditor by the State authorities.

Facts

  • Assessee: A co-operative society eligible for deduction under Section 80P.

  • The Default: The assessee filed its return of income for AY 2018-19 belatedly on 29.11.2018 (after the due date). Because the return was late, the deduction under Section 80P was denied (as per Section 80AC).

  • The Reason: The assessee explained on affidavit that under the State Co-operative Societies Act, the auditor is appointed by the Registrar/State. The sub-auditor was not appointed until 31.10.2018, making it impossible to audit the accounts and file the return by the original due date. The audit report was eventually prepared in 2019.

  • The Rejection: The assessee filed an application for condonation of delay under Section 119(2)(b) to save the deduction. The authority rejected this application.

Decision

  • The High Court ruled in favour of the assessee and set aside the rejection order.

  • Genuine Predicament: The Court held that the delay in getting accounts audited was due to the late appointment of the sub-auditor by the State. This was a circumstance beyond the control of the assessee and constituted a “genuine predicament” or hardship.

  • Circular No. 13/2023: The Court found that this situation fell squarely within the purview of CBDT Circular No. 13 of 2023 (dated 26.07.2023), which provides guidelines for condoning delays in claiming deductions/exemptions to avoid genuine hardship.

  • Direction: The impugned order rejecting the condonation was quashed. The delay was condoned, and the assessee was allowed to file a fresh return within one month to claim the Section 80P benefits.

Key Takeaways

    • State-Controlled Audits: For co-operative societies, where the audit process is controlled by the Registrar of Societies, delays caused by the government machinery (late appointment of auditors) are valid grounds for condonation. The taxpayer cannot be penalized for the State’s lethargy.

    • Section 80P and Due Dates: While Section 80AC mandates timely filing for claiming 80P, Section 119(2)(b) empowers the CBDT/Commissioners to condone the delay to prevent genuine hardship.

  • Circular 13/2023: This circular is a crucial tool for taxpayers seeking condonation. It emphasizes a liberal approach where the delay is due to “reasonable cause” and the merits of the claim are otherwise genuine.

HIGH COURT OF GUJARAT
Mahernagar Co-Op. Housing Service Society Ltd.
v.
Chief Commissioner of Income-tax*
A.S. Supehia and Pranav Trivedi, JJ.
R/SPECIAL CIVIL APPLICATION NO. 14175 of 2024
NOVEMBER  10, 2025
Jaimin A. Gandhi for the Petitioner. Karan G. Sanghani for the Respondent.
JUDGMENT
A.S. Supehia, J.- Amendment filed by learned advocate Mr.Gandhi is allowed in terms of draft. The same shall be carried out forthwith.
2. In view of a short question involved in the present writ petition, the same is taken for final hearing today.
3. RULE. Learned advocate Mr.Sanghani waives service of notice of rule for and on behalf of the respondent-Department.
4. In the present writ petition, the petitionerSociety has made following prayers:
“11.(A) The Hon’ble Court may be pleased to quash and set aside the order dated 27/06/2024 (Annexure A) passed by the Respondent and condone the delay of 29 days in filing return of income for A.Y. 2018-19.
*** *** ***
(D). The Hon’ble Court may be pleased to quash and set-aside the intimation order dated 16/05/2019 passed u/s 143(1) (annexure D) and permit the petitioner to file fresh return of income within 1 month for A.Y. 2018-19.”
5. Learned advocate Mr.Gandhi appearing for the petitioner-Society has submitted that by the impugned order, the respondent-Department has denied to condone delay of 29 days caused in filing the return of income under the provision of section 139(1) of the Income Tax Act, 1961 (for short “the Act”) for the Assessment Year 2018-19. In support of his submissions, he has placed reliance on the Circular No.13 of 2023 dated 26.07.2023, which deals with the condonation of delay in filing the return of income for the purpose of permitting deduction under section 80P of the Act.
6. Learned advocate Mr.Gandhi has also pointed out the Audit Report dated 06.03.2019 prepared by the Sub-auditor of the Cooperative Societies, Surat for the period from 01.04.2014 to 31.03.2018 and it is admitted that the Subauditor of the Cooperative Societies did not make any appointment of the Auditor till 31.10.2018 and hence, the Return of Income (ROI) was not filed within prescribed time limit. He has submitted that subsequently, on an advice of the Income Tax Consultant, the petitioner-Society filed return of income on 29.11.2018, without waiting further for completion of audit however, the respondent-Department issued intimation order under section 143(1) of the Act dated 16.05.2019 holding that the gross total income in the hand of the petitioner-Society is Rs.3,62,115/- and thereafter, disallowed deduction under section 80P of the Act. It is submitted that the petitioner-Society filed an application on 16.02.2024 for the purpose of condoning delay under section 119(2)(b) of the Act for filing return of income for the Assessment Year 2018-19 and also to claim deduction under section 80P of the Act, however, the same has been rejected by the impugned order.
7. Learned advocate Mr.Gandhi has submitted that the aforesaid facts of non-appointment of the Auditor and the filing of the Audit Report in the year 2019 is not denied by the respondentDepartment and hence, the impugned order may be quashed and set aside and the respondents may be directed to re-examine the application of the petitioner-Society seeking condonation of delay and also set aside the order dated 16.05.2019 passed under section 143(1) of the Act and they may be allowed to file a fresh return of income.
8. In response to the aforesaid submissions, learned Senior Standing Counsel Mr.Sanghani appearing for the respondent-Department has submitted that the present writ petition may not be allowed since unquestionably, the petitionerSociety has filed its return and the same is further also assessed. It is submitted that shelter taken by the petitioner-Society under the Audit Report is inappropriate since the petitioner-Society is a habitual late filer of the return of income. He has referred to the contents of the affidavit-in-reply and has submitted that it was the duty of the petitionerSociety to get its account audited in time and file its return within a due time limit and since it has failed to establish that, the order under section 119(2)(b) of the Act may not be set aside. He has submitted that it cannot be said that the petitioner-Society has faced genuine hardships on merits.
9. We have heard the learned advocates appearing for the respective parties at length and also perused the documents, as pointed out by them.
10. The entire case of the respective parties hinges on the provisions of Section 119(2)(b) of the Act. The same are as under:
“119. Instructions to subordinate authorities
(2) Without prejudice to the generality of the foregoing power,—
(b) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorise 11[any income-tax authority, not being [a Joint Commissioner (Appeals) or] a Commissioner (Appeals)] to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law;”
11. It is not in dispute that the Audit Report of the Sub-auditor of Cooperative Societies, Surat is dated 06.03.2019 and Audit is undertaken for the period from 01.04.2014 to 31.03.2018, which is apparent from the said report. Thus, for the consolidated four years’ Audit Report has been prepared on 06.03.2019. The petitioner-Society in the writ petition more particularly, in paragraph Nos.3 and 4 has categorically stated on affidavit that the Sub-auditor of Cooperative Societies did not make the appointment of the Auditor till 31.10.2018 and on the advice of the Income Tax Consultant, the petitioner-Society filed its return of income on 29.11.2018. Such assertions made in the writ petition have not been denied by the respondent-department. Thus, in wake of the fact that the Auditor Report is of the year 2019, the respondent-department ought to have allowed the application filed by the petitioner-Society for condonation of delay instead of rejecting the same.
12. At this stage, we may refer to the provisions of the Circular No.13 of 2023 dated 26.07.2023 more particularly, paragraph No.6(ii). The same are as under:
“6. In the content of para-5 above, the CCsIT/DGsIT while deciding such applications for condonation of delay in furnishing return of income, shall satisfy themselves that the applicant’s case is a fit case for condonation under the existing provisions of the Act. The CCsIT/DGsIT shall examine the following while deciding such applications-
(i)*** *** ***
(ii)where delay in furnishing return of income was caused due to delay in getting the accounts audited by statutory auditors appointed under the respective state Law under which such person is required to get his accounts audited, the date of completion of audit vis-a-vis the due date of furnishing the return of income under sub-section (1) of section 139 of the Act; and”
13. In our considered opinion, paragraph No.6(ii) of the Circular dated 26.07.2023 will come to the rescue of the petitioner-society. The delay of getting the accounts audited and filing of Audit Report belatedly by the Sub-auditor appointed by the State will come within the purview of the provisions of paragraph No.6(ii) of the said Circular. Thus, the respondent-Department was supposed to invoke the provisions of the aforesaid Circular and in wake of the undisputed fact of the Audit Report having been prepared in the year 2019, the petitioner’s application was ought to be allowed as indubitably, filing of the report in the year 2019 belatedly by the Subauditor can be said to be genuine predicament.
14. Hence, we hereby quash and set aside the order dated 27.06.2024 rejecting the application of the petitioner-Society seeking condonation of delay of 29 days caused in filing the return of income. As a sequel thereof, we quash and set aside the intimation order dated 16.05.2019 passed by the respondent-Department under section 143(1) of the Act. The respondent-Department shall allow the petitioner-Society to file a fresh return of income within a period of one month for the Assessment Year 2018-19, as per section 139(1) of the Act.
15. The present writ petition stands allowed. Rule made absolute.