ITAT: Late ITR Filing Bars Rs 83.89 Lakh Section 80P Deduction Despite Return Filed Under Section 148

The ITAT Bangalore has quashed an appeal filed by M/s. Kassia Credit Co-operative Society Limited, holding that it is not eligible to claim a deduction under Section 80P of the Income Tax Act because it failed to file its income tax return within the time limit prescribed under Section 139(1) of the Act.

The cooperative society (assessee) had not initially filed any income tax return (ITR) for the Assessment Year 2018-19 under section 139(1) of the Act. The tax authorities noted that the assessee had made certain cash deposits on the interest earned on securities. In conclusion, reassessment proceedings were initiated against the assessee. Subsequently, a Section 148 notice dated March 31, 2022, was issued after taking approval from the competent authority.

In response to the notice, the assessee filed an ITR declaring an income of Rs 5.14 lakh after claiming a deduction of Rs 83.89 lakh under section 80P of the Act. However, the tax authorities disallowed the deduction on the ground that the return was not filed within the due date prescribed under Section 139(1) and made an addition of the same to the assessee’s income. The society argued that Section 80P is a beneficial provision intended to support cooperative societies and that the deduction claim made in the return filed under Section 148 should be considered on merits.

The assessee claimed that “the provisions of section 80AC of the Act w.e.f. 01.04.2018 cannot be applied to the assessee. He submitted that the returns were furnished in response to notice under section 148 of theAct on 29.04.2022. He also submitted that the claim for deduction under section 80P of the Act was made while filing the return of income under section 148 of the Act. He therefore pleaded that since section 80P of the Act being a beneficial provision, disallowance of the claim under section 80P of the Act is not justifiable.”

However, the tribunal noted that Section 80AC was amended with effect from Assessment Year 2018-19. Under the amended provision, deductions available under Chapter VI-A, including Section 80P, can be claimed only if the return of income is filed on or before the due date specified under Section 139(1).

Since the assessee filed its return only after receiving a notice under Section 148 and not within the original due date, the Tribunal held that the statutory condition under Section 80AC was not satisfied. Accordingly, the tribunal sustained the CIT(A)’s ruling and dismissed the assessee’s appeal, denying the deduction of Rs 83.89 lakh claimed under Section 80P.

The tribunal held that, “According to section 80AC(ii) of the Act, the assessee has to file his return of income under section 139(1) of the Act to claim the benefit under Chapter ‘C.—Deductions in respect of certain incomes’. In the instant case, the assessee has not filed the return of income on or before the due date prescribed under section 139(1) of the Act; however, has filed belatedly in response to the notice under section 148 of the Act. In these circumstances, we are of the opinion that the assessee is not entitled to a deduction under section 80P of the Act for the claim made in the returns filed under section 148 of the Act on 29.04.2022 for the AY 2018-19.”