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2025 (5) TMI 332 - AT - Income TaxDenial of deduction u/s 80P(2)(a)(i) - assessee did not file the return of income within the due date which is specified in Section 139(1) - CIT(A)/NFAC dismissed the appeal on the ground that the assessee is hit by section 80AC of the Act which provides that from AY 2018-19 onwards the deductions that come under part C of Chapter VI A can be allowed only if the assessee has furnished a return on or before the due date u/s.139 of the Act. HELD THAT - PCCIT Kerala has condoned the delay in filing the return of income for the AY 2019-20 beyond the due date specified u/s. 139(1) of the Act in exercise of the powers conferred upon him under clause (b) of subsection (2) of section 119 of the Act r.w.s. CBDT Circular No. 13/2023 dated 26.07.2023 with a direction that the assessee is not eligible for interest on refund if any arising on such return of income filed belatedly. Being so in the interest of justice and equity we remit the issue in dispute to the file of the AO with a direction to give effect of the above order of the ld. PCCIT Kerala vide its order dated 02.01.2025 and pass necessary order after the due verification allowing the deduction as claimed by the assessee u/s. 80P in accordance with the law. It is ordered accordingly. Appeal filed by the assessee is partly allowed for statistical purposes.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this appeal include:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1 & 2: Eligibility for Deduction under Section 80P(2) The appellant, being a cooperative society registered under the Kerala Co-operative Societies Act, 1969, claimed deduction under section 80P(2)(a)(i) on profits and gains from banking or credit facilities business. The legal framework under section 80P(2) provides deductions to cooperative societies on profits derived from specified activities, including banking or providing credit facilities to members. The Court acknowledged the appellant's status as a cooperative society and the claim for deduction under section 80P(2). However, the denial of deduction was primarily linked to the applicability of section 80AC, which restricts deductions if the return of income is not filed within the due date specified under section 139(1). Hence, the substantive eligibility under section 80P(2) was not disputed but was contingent upon compliance with timely filing requirements. The Court did not find merit in the assessing officer's denial of deduction on the basis of substantive eligibility, but rather focused on procedural compliance under section 80AC. Issue 3: Validity of Assessment Proceedings under Section 147 The appellant challenged the assessment proceedings initiated under section 147, contending that they were against facts and law. Section 147 permits reassessment where income has escaped assessment. The Court noted that the return of income was filed belatedly in response to the notice under section 148. The assessing officer proceeded to complete the reassessment under section 147 read with section 144B, disallowing the deduction under section 80P due to late filing. The Court did not explicitly annul the reassessment proceedings but indicated that the validity of the assessment was linked to the procedural issue of return filing and consequent applicability of section 80AC. Issue 4 & 5: Applicability of Section 80AC and Condonation of Delay under Section 119(2)(b) Section 80AC, introduced from AY 2018-19, mandates that deductions under Chapter VI-A (Part C) are allowable only if the return of income is furnished on or before the due date specified under section 139(1). The assessing officer denied deduction under section 80P on the ground that the appellant's return was filed belatedly. The appellant filed a condonation petition under section 119(2)(b) before the PCCIT, invoking CBDT Circular No. 13/2023, which provides guidelines for condonation of delay in filing returns. The PCCIT condoned the delay by order dated 02.01.2025, exercising powers under section 119(2)(b) and directing that the appellant would not be eligible for interest on any refund arising from the belated return. The CIT(A)/NFAC, however, dismissed the appeal on the ground that the appellant had not informed about the outcome of the condonation petition and that the return was filed in response to the section 148 notice, not pursuant to any order under section 119(2)(b). The Tribunal, upon considering the condonation approval order, held that the delay in filing the return was condoned in accordance with CBDT Circular No. 13/2023 and section 119(2)(b). Consequently, the return should be treated as filed within the due date for the purpose of section 80AC. The Tribunal directed remand of the matter to the assessing officer to give effect to the condonation order and allow the deduction under section 80P after due verification. Application of Law to Facts and Treatment of Competing Arguments The assessing officer and CIT(A) relied heavily on the strict application of section 80AC, emphasizing the legislative intent to disallow deductions if returns are not filed on time. The appellant countered by invoking the condonation powers under section 119(2)(b) and the CBDT Circular, which provide administrative relief for delays caused by genuine reasons. The Tribunal gave precedence to the condonation order passed by the PCCIT, recognizing the discretionary power to condone delay and its effect on the applicability of section 80AC. The Tribunal balanced the procedural compliance with substantive rights, ensuring that the appellant was not unduly penalized for delayed filing when condonation was granted. 3. SIGNIFICANT HOLDINGS "On going through the above approval letter, we find that ld. PCCIT, Kerala has condoned the delay in filing the return of income for the AY 2019-20 beyond the due date specified u/s. 139(1) of the Act in exercise of the powers conferred upon him under clause (b) of subsection (2) of section 119 of the Act r.w.s. CBDT Circular No. 13/2023, dated 26.07.2023 with a direction that the assessee is not eligible for interest on refund if any, arising on such return of income filed belatedly." "Being so, in the interest of justice and equity, we remit the issue in dispute to the file of the AO with a direction to give effect of the above order of the ld. PCCIT, Kerala vide its order dated 02.01.2025 and pass necessary order after the due verification allowing the deduction as claimed by the assessee u/s. 80P of the Act amounting to Rs. 91,23,250/- in accordance with the law." The Tribunal established the principle that condonation of delay under section 119(2)(b) and CBDT Circular No. 13/2023 can validate a belated return for the purpose of claiming deductions under Chapter VI-A, overriding the strict timing requirements of section 80AC. Final determinations:
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