2024 (10) TMI 300 - AT - Income Tax

Deduction u/s 80P - AO finding no return of income having been filed by the assessee - validity of return filed in response to notice u/s 142(1) - HELD THAT - As rigor of claim being made in a return of income filed by the due date prescribed under the Act is not applicable for claims made u/s 80P of the Act as in the case of the assessee. It is only the mandatory condition prescribed by Section 80A(5) of the Act of the claim to have been made in a return of income to be allowable, which is applicable. At the cost of repetition, may state that what Section 80A(5) only stipulates is that, for the claim to be allowable, it has to be made in the return of income filed by the assessee. It does not specify that the return of income has to be filed u/s 139(1) or 139(4) or 139(5) of the Act. The only condition is that the claim has to be made in a return of income filed which means a valid return of income filed. In the facts of the present case, the assessee has filed return of income, admittedly in response to notice u/s 142(1) of the Act. This is a valid return of income, since in terms of the provisions of Section 142(1) of the Act, the assessee can be directed to file a return of income where he has not otherwise made a return. Therefore, the fact of the matter is that the assessee had made a claim of deduction u/s 80P of the Act in a valid return filed u/s 142(1) of the Act. In terms of provisions of Section 80A(5) of the Act, as interpreted above by us, the assessee s claim having been made in a return of income, it is allowable. The above findings are supported by the decision of the Hon ble Kerala High Court in the case of Chirakkal Service Co-operative Bank Ltd., Kannur 2016 (4) TMI 826 - KERALA HIGH COURT where in the Hon ble High Court categorically noted that, for the purposes of Section 80A(5) of the Act, even a return filed in response to notice u/s 142(1) of the Act was a valid return and any claim made therein, therefore, was allowable. Assessee has been wrongly denied claim of deduction u/s 80P - Decided against revenue.

Summary

Issues Involved:

1. Condonation of delay in filing the appeal.
2. Denial of deduction under Section 80P(2) of the Income Tax Act.
3. Validity of assessment without issuance of notice under Section 143(2).

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:

The appeal was filed by the assessee with a delay of 581 days. The delay was attributed to the Chartered Accountant, who failed to communicate the order passed by the CIT(A) to the assessee. The assessee argued that due to the COVID-19 pandemic, the limitation period for filing the appeal was extended, and the delay was unintentional. The assessee cited a decision by the Gujarat High Court, which condoned delays caused by the inaction of professionals. The Tribunal, considering the affidavit and circumstances, condoned the delay, emphasizing that the assessee should not be penalized for the professional's inaction.

2. Denial of Deduction under Section 80P(2) of the Income Tax Act:

The primary issue in the appeal was the denial of deduction under Section 80P(2). The assessee, a cooperative society, claimed deduction on income earned from services provided to its members. However, the return of income was filed late, and the Assessing Officer denied the deduction under Section 80A(5), which requires claims to be made in the returns of income. The CIT(A) upheld this disallowance, noting that no valid return was filed. The Tribunal examined the provisions of Sections 80A(5) and 80AC, concluding that Section 80A(5) was applicable, which mandates that claims be made in a return of income. The Tribunal found that the return filed in response to a notice under Section 142(1) is a valid return, and thus, the claim should be allowed. The Tribunal relied on the Kerala High Court's decision, which supported the view that returns filed in response to Section 142(1) are valid for claiming deductions under Section 80P.

3. Validity of Assessment without Issuance of Notice under Section 143(2):

The assessee contended that the assessment was invalid as no notice under Section 143(2) was issued. However, the judgment primarily focused on the denial of deduction under Section 80P and did not provide a separate analysis on this issue. The Tribunal's decision to allow the deduction implicitly addressed the assessment's validity, as the deduction was allowed based on the return filed under Section 142(1), which was considered valid for the purpose of claiming deductions.

Conclusion:

The Tribunal allowed the appeal, condoning the delay and directing the Assessing Officer to allow the deduction under Section 80P. The decision emphasized the validity of returns filed in response to Section 142(1) notices for claiming deductions, aligning with judicial precedents that support such claims even if the returns are filed beyond the stipulated period.