2014 (11) TMI 843 - AT - Income Tax

Denial of deduction u/s 80P by invoking section 80A(5) Taxpayers have not filed the returns of income within the time limit provided u/s 139(1) or 139(4) or within the time specified in the notice u/s 142(1) - Whether such taxpayers are entitled for deduction u/s 80P - Held that - Following the decision in Kadachira Service Co-op. Bank Ltd. Versus Income-tax Officer, Ward-1, Kannur 2013 (2) TMI 208 - ITAT COCHIN - Section 139(1) make it mandatory for every taxpayer whose total income exceeds the maximum amount which is not chargeable to income-tax before grant of deductions u/s 10A, 10B and deduction under Chapter VIA of the Act to file the return of income - all the taxpayers income exceeded the maximum amount which is not chargeable to income-tax before grant of deduction under Chapter VIA therefore, it is not only mandatory but also statutory requirement that all the taxpayers have to file the return of income before the due date prescribed u/s 139(1). Whether filing of return of income and making a claim in respect of deduction u/s 80P is mandatory or discretionary Held that - If the contention of the assessee is accepted, then the person, who files the return of income and fails to make a claim of deduction in the return of income either by ignorance or otherwise may not get the benefit, but a person who has not filed the return of income may be in a better position to claim the benefit - in order to avail benefits under the beneficial provision, the conditions provided by the legislature has to be complied with - the mandatory provisions contained in section 139(1) r.w.s. 80A(5) it is mandatory for every cooperative society for claiming deduction u/s 80P to file the return of income and to make a claim of deduction in the return itself Decided against assessee. Whether the return could be treated as return of income or not Held that -No loss which has not been determined in pursuance of a return filed within the time provided u/s 139(1) shall be carried forward and set off but before amendment of section 80 by Taxation Laws Amendment Act, 1984 with effect from 01-04-1985 there was no requirement for filing the return of income within the time limit provided u/s 139(1) - the legislature made it mandatory for filing the return of income within the due date prescribed in section 139(1) as far as carry forward of loss u/s 80 is concerned - the return of income filed within the time limit provided in section 139(1) or 139(4) or time specified in the notice u/s 142(1) or 148 can be considered as return of income - However, the belated return filed beyond the time limit provided u/s 139(1) or 139(4) or time specified in notice u/s 142(1) or 148 of the Act cannot be considered as return of income for deduction u/s 80P of the Act. Whether the taxpayer is entitled for deduction u/s 80P Held that - All the taxpayers income exceeded the maximum amount which is not chargeable to income-tax before grant of deduction under Chapter VIA of the Act - Therefore, it is not only mandatory but also statutory requirement that all the taxpayers have to file the return of income before the due date prescribed u/s 139(1) of the Act - in order to avail benefits under the beneficial provision, the conditions provided by the legislature has to be complied with - in view of the mandatory provisions contained in section 139(1) r.w.s. 80A(5) of the Act it is mandatory for every cooperative society for claiming deduction u/s 80P to file the return of income and to make a claim of deduction u/s 80P of the Act in the return itself - if the return was not filed either u/s 139(1) or 139(4) or in pursuance of notice issued u/s 142(1) or u/s 148, the taxpayer is not entitled for any deduction u/s 80P decided against assessee.

Summary

Issues Involved:
1. Denial of deduction under Section 80P of the Income Tax Act.
2. Validity of return filing under Sections 139(1), 139(4), and 142(1) of the Income Tax Act.
3. Applicability of Section 80A(5) for claiming deductions.
4. Assessment proceedings and the issuance of notice under Section 148.

Detailed Analysis:

1. Denial of Deduction under Section 80P:
The core issue in this appeal was the denial of deduction under Section 80P of the Income Tax Act by invoking the provisions of Section 80A(5). The assessee, a Co-operative Bank, failed to file the return of income within the prescribed time limits under Section 139 or in response to the notice under Section 142(1). Consequently, the Assessing Officer initiated a best judgment assessment under Section 144 and disallowed the deduction claim under Section 80P, invoking Section 80A(5).

2. Validity of Return Filing:
The Tribunal examined whether the returns filed beyond the time limits specified under Sections 139(1), 139(4), or in response to notices under Section 142(1) could be considered valid for claiming deductions. The Tribunal referred to the case of Kadachira Service Co-op Bank Ltd. vs. ITO, which established that returns must be filed within the prescribed time to claim deductions under Section 80P. The Tribunal reiterated that the return of income must be filed within the time limit specified in Section 139(1) or 139(4) or the time specified in the notice under Section 142(1) or 148.

3. Applicability of Section 80A(5):
Section 80A(5) was introduced to prevent multiple deductions for the same profit and mandates that a claim for deduction must be made in the return of income. The Tribunal emphasized that the language of Section 80A(5) is clear and unambiguous, requiring the claim to be made in the return of income. The Tribunal noted that the legislature intentionally omitted the words "in due time" in Section 80A(5), indicating that a return filed under Sections 139(1), 139(4), or in response to notices under Section 142(1) or 148 could be considered a valid return for claiming deductions.

4. Assessment Proceedings and Issuance of Notice under Section 148:
The Tribunal addressed the contention that the Assessing Officer should have issued a notice under Section 148 to regularize the returns filed belatedly. It was clarified that Section 148 enables the Assessing Officer to serve a notice for furnishing a return of income when there is a belief that income has escaped assessment. However, the Tribunal noted that the assessment proceedings must come to an end either by an order under Section 143(3) or otherwise by operation of law before considering any income as escaped assessment. Since the assessment proceedings were already pending when the belated returns were filed, the Tribunal held that the Assessing Officer had no jurisdiction to issue a notice under Section 148 at that point.

Conclusion:
The Tribunal concluded that the assessee was not entitled to the deduction under Section 80P as the return of income was not filed within the prescribed time limits. The Tribunal dismissed the appeal, emphasizing the mandatory nature of filing returns within the specified time to claim deductions under Section 80P, consistent with the provisions of Section 80A(5) and the precedent set in the Kadachira Service Co-op Bank Ltd. case. The appeal filed by the assessee was dismissed, and the order was pronounced in the open court on 21-11-2014.