Section 80P Deduction Cannot Be Denied Solely for Lack of Documentary Evidence: ITAT

The ITAT Chennai holds that the lower authorities cannot disallow deduction under Section 80P(2)(a)(i) of the Income Tax Act for the only reason of absence of documentary evidence. The case has been remanded for fresh examination of the claim.

The A2455 Madurai Electricity System PSCS (assessee) is a cooperative credit society registered under the Tamil Nadu Cooperatives Societies Act, 1983, and filed its income tax return (ITR) for the Assessment Year 2022-23, declaring NIL income, after availing a deduction amounting to Rs 2.03 crore under Section 80P(2)(a)(i) of the Act. During the scrutiny of the return, the assessee was asked to appear for the personal hearing; however, none appeared. In conclusion, the claimed deduction under Section 80P(2)(a)(i) was disallowed by the tax authorities on the grounds of the non-serving of relevant documentary evidence proving the impugned interest has been generated as a result of the credit facilities provided to its members.

The aggrieved assessee filed an appeal before the ITAT Chennai, claiming that its primary activity is to provide credit facilities to its needy members by collecting deposits from members, and due to the lack of professional assistance to represent the case, it could not submit the relevant documents before the lower authorities. Hence, the assessee requested one more chance to present its case before the lower authorities. The tribunal noted that the mere reason to disallow the deduction in question was the absence of documentary evidence and not the nature of the activity itself.

Considering the aforementioned findings, the tribunal decided to grant the assessee one more opportunity to present its case before the lower authorities; hence, the case has been sent back for fresh examination of the claim made after collecting all necessary documents. The assessee has been instructed to cooperate and furnish all the documents as asked by the tax authorities. In conclusion, the appeal has been for statistical purposes.