ITAT Allows Section 80P Relief Despite Clerical Error in Return

The Nagpur Bench of the Income Tax Appellate Tribunal (ITAT) held that a co-operative credit society cannot be denied deduction under Section 80P merely because of an inadvertent error in selecting the relevant clause while filing its income tax return. A Bench comprising Judicial Member Anubhav Sharma and Accountant Member Khettra Mohan Roy directed the Revenue to allow deduction of Rs.76.75 lakh claimed by Buldana Zilla Parishad Employees Co-operative Society Ltd. for AY 2018-19.

The assessee, a co-operative credit society registered under the Maharashtra Co-operative Societies Act, was engaged in providing credit facilities to its members. In its return of income, the society claimed deduction under Section 80P and declared nil taxable income. However, during assessment proceedings, the Assessing Officer denied the deduction on the ground that the assessee had mentioned Section 80P(2)(c) in the return instead of Section 80P(2)(a)(i), which specifically grants deduction to co-operative societies engaged in providing credit facilities to members.

The Assessing Officer treated the incorrect mention of the clause as a fatal defect and assessed the total income at Rs.76.25 lakh. The Commissioner (Appeals) upheld the disallowance.

Before the Tribunal, the assessee contended that it was undisputedly carrying on the business of providing credit facilities to its members and had consistently been granted deduction under Section 80P(2)(a)(i) in preceding as well as subsequent assessment years. It was further submitted that the deduction was duly claimed in the return and certified by the tax auditor, and that the dispute arose only because of a clerical error in selecting the relevant provision in the return form.

The Tribunal noted that the tax audit report had specifically certified the admissibility of deduction under Section 80P and that the assessee had been granted the same deduction in assessments completed under Sections 143(3) and 143(1) for other years on identical facts.

“The deduction has been denied merely on account of wrong mention of the relevant clause in return of income and not on account of any failure of assessee to satisfy the conditions prescribed under Section 80P(2)(a)(i).”

The Bench further observed that the Commissioner (Appeals) had reproduced the assessee’s submissions in detail but failed to point out any defect in them. It also noticed that a portion of the appellate order discussed Sections 14A and 36(1)(iii), which had no connection with the issue under consideration, indicating lack of proper application of mind.

Relying on the Bombay High Court’s decision in Infospectrum India Pvt. Ltd., the Tribunal reiterated that a mere wrong mention of a section does not disentitle an assessee from claiming a deduction that is otherwise legally available.

“Mere wrong mention of section does not disentitle an assessee from claiming and obtaining relief otherwise allowable under the Act.”

Holding that the assessee had fulfilled the substantive conditions for deduction and that the denial was based solely on a technical mistake in the return, the Tribunal directed the Assessing Officer to allow deduction under Section 80P(2)(a)(i) amounting to Rs.76.75 lakh. Accordingly, the appeal of the assessee was allowed.

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