SHREE ANJANA CO. OP. CREDIT SOC. LTD.,GANDHINAGAR V. THE ITO, WARD-5, GANDHINAGAR

ITA 630/AHD/2025

AI Insights

The case involves Shree Anjana Co-Op. Credit Soc. Ltd., a registered co-operative credit society, which appealed against the order of the Commissioner of Income Tax (Appeals), Gandhinagar, for the assessment year 2017-18. The primary contention was the denial of deductions under section 80P(2)(a)(i) and section 80P(2)(d) of the Income-tax Act, 1961, due to the late filing of the income tax return. The Assessing Officer had completed the assessment ex parte under section 144, disallowing the deductions and assessing the income at Rs. 5,40,088. The CIT(A) upheld this decision, leading to the appeal before the Tribunal. The Tribunal examined the applicability of section 80A(5) and section 80AC, particularly focusing on whether the condition of timely filing of the return for claiming deductions under Chapter VI-A applied to section 80P for the assessment year 2017-18.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 772778 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2017-2018
• Other Referred Cases: Principal Commissioner of Income Tax v. Totagars Co-operative Sale Society, Chirakkal Service Co-operative Bank Ltd. v. CIT, Kuthuparamba Range Kalluchethu Vyavasaya Thozhilali Sahakarana Sangham Ltd. v. CIT, Nileshwar Rangekallu Vyavasaya Thozhilali Sahakarana Sangham v. CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: UMESH KUMAR AGRAWAL
• Assessee Lawyers: S N DIVETIA
• Keywords: Principle of natural justice; Co-operative Credit Society
• Section: 144; 142(1); 139

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदाबाद Ɋायपीठ “ SMC”, अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “ SMC ” BENCH, AHMEDABAD सुŵी सुिचũा काɾले, Ɋाियक सद˟ एवं ŵी मकरंद वसंत महादेवकर, लेखा सद˟ क े समƗ। ] ] BEFORE Ms SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर अपील सं /ITA No. 630/Ahd/2025 िनधाŊरण वषŊ /Assessment Year : 2017-18 Shree Anjana Co-Op. Credit Soc. Ltd., 11 Nagar Palika Shopping, Opp Bhagawati Dinning, Mansa, Gandhinagar-382845. (Gujarat) बनाम/ v/s. The Income Tax Officer, Ward-5, Gandhinagar. ̾थायी लेखा सं./PAN: AAIAS9767M अपीलाथŎ/ (Appellant) Ů̝ यथŎ/ (Respondent) Assessee by : Shri SN Divetia, with Shri Samir Vora, ARs Revenue by : Shri Umesh Kumar Agrawal, Sr-DR सुनवाई की तारीख/Date of Hearing : 23/07/2025 घोषणा की तारीख /Date of Pronouncement: 28/08/2025 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, AM: ] ] This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals), Gandhinagar [hereinafter referred to as “CIT(A)”] dated 21.02.2025 for the assessment year 2017–18, arising out of the assessment order passed under section 144 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”] by the Income-tax Officer, Ward 5, Printed from counselvise.com ITA No.630/Ahd/2025 Shree Anjana Co-op Credit Soc. Ltd. Vs. ITO Assessment Year 2017-18 2 Gandhinagar [hereinafter referred to as “Assessing Officer or AO”], dated 01.10.2019. Facts of the Case 2. The brief facts leading to the present appeal are that the assessee, a registered Co-operative Credit Society, is engaged in providing credit facilities to its members and in accepting deposits from members. For the year under consideration, the assessee was required to furnish its return of income within the time prescribed under section 139(1) of the Act. However, the assessee did not file its return of income within such prescribed time, nor was any return filed within the extended period under section 139(4). Thereafter, a notice under section 142(1) dated 12.03.2018 was issued calling upon the assessee to furnish its return of income. The assessee again failed to comply. 3. Thereafter, a further statutory notice under section 142(1) dated 05.08.2019 was issued. In response to the latter notice, the assessee submitted a reply enclosing a statement of total income of Rs. 5,40,088/- and the working of deduction under section 80P, with the specific plea that only bank interest of Rs. 26,194/- was chargeable to tax and the balance was deductible in terms of section 80P having regard to its status as a co-operative credit society. 4. Subsequently, a show-cause notice dated 24.09.2019 was issued proposing to deny deduction under section 80P of the Act Printed from counselvise.com ITA No.630/Ahd/2025 Shree Anjana Co-op Credit Soc. Ltd. Vs. ITO Assessment Year 2017-18 3 and intimating that assessment would be completed under section 144 in the absence of compliance. The assessee did not respond to the said show-cause notice either. 5. The Assessing Officer completed the assessment ex parte under section 144. He recorded that the assessee had earned interest on deposits with scheduled banks and co-operative banks and that deduction under section 80P(2)(d) is confined to interest derived from investments with other co-operative societies. He relied on Principal Commissioner of Income Tax v. Totagars Co- operative Sale Society, Karnataka High Court, to hold that interest from scheduled banks and co-operative banks is not eligible under section 80P(2)(d). The Assessing Officer further held that, by virtue of section 80A(5) read with sections 139 and 142, a deduction under Chapter VI-A cannot be allowed unless it is claimed through a return of income furnished within the time allowed. Referring to Kerala High Court decisions including Chirakkal Service Co-operative Bank Ltd. v. CIT and Kuthuparamba Range Kalluchethu Vyavasaya Thozhilali Sahakarana Sangham Ltd. v. CIT, he concluded that in the absence of a return filed within the prescribed time the assessee was not entitled to deduction under section 80P. He therefore assessed the gross total income at Rs. 5,40,088 as total income without allowing any deduction and initiated penalty proceedings under sections 270A and 271F. Printed from counselvise.com ITA No.630/Ahd/2025 Shree Anjana Co-op Credit Soc. Ltd. Vs. ITO Assessment Year 2017-18 4 6. In appeal, the assessee submitted before the learned CIT(A) that the order under section 144 was passed without granting adequate and effective opportunity, notwithstanding its reply to the notice dated 05.08.2019 under section 142(1) and the e-filed return dated 30.09.2019 enclosing the statement of total income and computation of deduction. It was urged that the assessee, being a co-operative credit society, was otherwise eligible under section 80P and that for A.Y. 2017–18 the restriction in section 80AC, as it then stood, did not extend to claims under section 80P. It was argued that the enlargement of section 80AC by the Finance Act, 2018 to cover the entire Chapter VI-A including section 80P is applicable only from A.Y. 2018–19 and later. Reliance was placed on decisions including Chirakkal Service Co- operative Bank Ltd., ITAT Ahmedabad in Randheja Dudh Utpadak Sahakari Mandli, and ITAT Bangalore in Rathnamika Krishi Pattina Sahakara Sangha Ltd. It was also reiterated that only bank interest of Rs. 26,194 was taxable on merits and that the balance qualified for deduction. 7. The learned CIT(A) rejected the plea. After noticing the assessee’s non-filing within section 139(1) and 139(4) and examining the subsequent filing on 30.09.2019, he held that section 80A(5) creates a statutory pre-condition that a deduction under Chapter VI-A shall not be allowed unless claimed through a return furnished within the time permitted. He further observed that the amended section 80AC now covers Chapter VI-A deductions, and though the amendment operates from A.Y. 2018– Printed from counselvise.com ITA No.630/Ahd/2025 Shree Anjana Co-op Credit Soc. Ltd. Vs. ITO Assessment Year 2017-18 5 19, the pre-existing mandate of section 80A(5) itself was sufficient to deny the claim for A.Y. 2017–18. Placing reliance inter alia on Kerala High Court in Nileshwar Rangekallu Vyavasaya Thozhilali Sahakarana Sangham v. CIT [(IT Appeal No. 120 of 2019/11 of 2022), (2023) 152 taxmann.com 347], he affirmed the action of the Assessing Officer in not allowing the deduction under section 80P and sustained the assessed income at Rs. 5,40,088. The ground on merits was dismissed and the other ground was treated as general. 8. Aggrieved by the order of CIT(A), the assessee is in appeal before us raising following grounds of appeal: 1.1 The order passed by U/s.250 passed on 21.02.2025 for A.Y. 2017-18 by NFAC, [CIT(A)], Delhi (for short CIT(A)\" upholding the disallowance made u/s 80P(2)(d) and 80P(2)(a)(i) of RS 5,40,088/-by the ITO, Ward-5, Gandhinagar in order passed on 01.10.2019 u/s 144 is wholly illegal, unlawful and against the principles of natural justice. 2.1 The Id. CIT(A), has grievously erred in law and or on facts in not appreciating that since the provision of Sec. 80AC was amended by Finance Act 2018 w.e.f. 1-4-2018, it was applicable from A.Y. 2018- 19 and it was not condition precedent to file ITR within the prescribed time u/s 139(1)/(4)/142(1)/148 in order to claim this deduction. Thus, the orders passed by both the lower authorities of disallowing this deduction was grossly erroneous and illegal. 3.1 The Id. CIT(A) has grievously erred in law and or on facts in upholding that the disallowance made u/s 80P(2)(d) and 80P(2)(a)(i) of RS 5,40,088/- by the ITO, Ward-5, Gandhinagar in order passed on 01.10.2019 u/s 144. 3.2 That the in the facts and circumstances of the Id. CIT(A), ought not to have upheld disallowance made u/s 80P(2)(d) and 80P(2)(a)(i) of RS 5,40,088/- by the ITO, Ward-5, Gandhinagar in order passed on 01.10.2019 u/s 144. Printed from counselvise.com ITA No.630/Ahd/2025 Shree Anjana Co-op Credit Soc. Ltd. Vs. ITO Assessment Year 2017-18 6 It is, therefore, prayed that the disallowance u/s 80P(2) upheld by the CIT(A) may kindly be deleted. 9. The learned Authorised Representative (AR), reiterating the grounds of appeal, submitted that the lower authorities have grossly erred in denying the benefit of deduction under section 80P(2)(a)(i) and 80P(2)(d) of the Act solely on the ground of delay in filing the return of income. It was pointed out that the assessee is a registered co-operative credit society and engaged in providing credit facilities to its members. Its principal income is from lending business to its members, and such income squarely falls within section 80P(2)(a)(i). Further, to the extent of interest income derived from investments with co-operative banks, the same is eligible for deduction under section 80P(2)(d). Thus, on merits, the assessee is fully entitled to deduction under section 80P. 10. The AR submitted that the Assessing Officer was not justified in treating the assessee as disentitled to deduction merely on account of alleged failure to file a valid return within the time stipulated. It was emphasised that in response to the statutory notice dated 05.08.2019 issued under section 142(1), the assessee had duly filed its reply enclosing the statement of total income and computation of deduction under section 80P. Thereafter, the assessee also e-filed the return of income on 30.09.2019 disclosing claim of deduction of Rs. 4,31,055. Once the claim was before the Assessing Officer in the course of assessment proceedings, it was incumbent upon him to examine Printed from counselvise.com ITA No.630/Ahd/2025 Shree Anjana Co-op Credit Soc. Ltd. Vs. ITO Assessment Year 2017-18 7 the same on merits and not to disallow summarily on technical grounds. 11. The AR further submitted that reliance placed by the Assessing Officer and the CIT(A) on section 80A(5) is misplaced. Section 80A(5) merely provides that where no return of income has been furnished by the assessee within the time allowed under section 139(1), deduction under Chapter VI-A shall not be allowed. However, this restriction was never intended to apply to claims under section 80P in the years prior to the amendment of section 80AC by the Finance Act, 2018. Prior to its substitution, section 80AC covered only deductions under sections 80-IA to 80- IE, and it was only with effect from 01.04.2018 that section 80AC was expanded to cover the entire Chapter VI-A, including section 80P. Therefore, for A.Y. 2017–18, the assessee cannot be denied deduction under section 80P merely because the return was filed belatedly. The amendment is prospective and not retrospective. 12. The AR also contended that the principles of natural justice have been violated. The Assessing Officer issued a show-cause notice dated 24.09.2019 requiring compliance by 27.09.2019 but hurriedly proceeded to complete the assessment on 01.10.2019 under section 144 without properly considering the assessee’s reply dated 05.08.2019 and the return filed on 30.09.2019. Thus, the assessment was completed in undue haste without affording reasonable opportunity, which itself vitiates the order. Printed from counselvise.com ITA No.630/Ahd/2025 Shree Anjana Co-op Credit Soc. Ltd. Vs. ITO Assessment Year 2017-18 8 13. The learned Departmental Representative, on the other hand, supported the orders of the Assessing Officer and the CIT(A). It was submitted that the assessee had failed to file its return of income within the time prescribed under section 139(1) and even within the extended period under section 139(4). The so- called return filed on 30.09.2019 was long after the due dates had expired and, therefore, could not entitle the assessee to any deduction under Chapter VI-A in view of the mandate of section 80A(5). 14. We have heard the rival submissions and carefully considered the orders of the lower authorities as well as the material placed on record. The short controversy before us is whether the assessee, a registered co-operative credit society, is entitled to deduction under section 80P(2)(a)(i) and section 80P(2)(d) of the Act for A.Y. 2017–18, when admittedly the return of income was not filed within the due date prescribed under section 139(1) or under section 139(4). 15. It is an undisputed fact that in response to the statutory notice under section 142(1) dated 05.08.2019, the assessee furnished a reply enclosing the statement of total income and computation clearly claiming deduction under section 80P. The assessee also e-filed its return of income on 30.09.2019, albeit belatedly. The Assessing Officer, however, brushed aside the claim relying on section 80A(5) and completed assessment ex parte Printed from counselvise.com ITA No.630/Ahd/2025 Shree Anjana Co-op Credit Soc. Ltd. Vs. ITO Assessment Year 2017-18 9 under section 144, disallowing the entire deduction and assessing income at Rs. 5,40,088. The CIT(A) upheld the action. 16. The learned AR has pressed before us that section 80AC as it stood prior to its amendment by the Finance Act, 2018 applied only to deductions under sections 80-IA to 80-IE and did not cover section 80P. The enlarged provision of section 80AC, covering the entire Chapter VI-A including section 80P, has been made operative only with effect from 01.04.2018, i.e., from assessment year 2018–19 onwards. For A.Y. 2017–18, therefore, belated filing of return was not fatal to the claim of deduction under section 80P. 17. At this stage, it is pertinent to note the scheme of section 80A(5) and section 80AC. Section 80A(5), as it stood during the relevant assessment year, provided that where no return of income has been furnished by the assessee within the time allowed under section 139(1), no deduction under Chapter VI-A shall be allowed. This provision has to be read in harmony with section 80AC. Prior to its substitution by the Finance Act, 2018 with effect from 01.04.2018, section 80AC mandated timely filing of return only in cases where deduction was claimed under sections 80-IA to 80-IE. It was only after the amendment by Finance Act, 2018 that section 80AC was expanded to cover “any deduction under the heading C of Chapter VI-A”, thereby including section 80P within its scope. The legislative intent is thus clear that up to assessment year 2017–18, the condition of Printed from counselvise.com ITA No.630/Ahd/2025 Shree Anjana Co-op Credit Soc. Ltd. Vs. ITO Assessment Year 2017-18 10 filing return within the time prescribed under section 139(1) was not a bar for claiming deduction under section 80P. To apply section 80A(5) in isolation, without reference to the contemporaneous scope of section 80AC, would render the 2018 amendment otiose and lead to unintended denial of substantive relief. 18. In the light of the above, we are unable to agree with the reasoning of the Assessing Officer and the CIT(A). Their reliance on section 80A(5) is misplaced because for the year under appeal the bar of section 80AC, as it then stood, did not extend to section 80P. Once the assessee has placed its claim before the Assessing Officer in response to notice under section 142(1) along with the statement of total income and has also e-filed the return, the Assessing Officer was duty bound to examine the claim on merits. The denial of deduction in limine on the ground of belated filing cannot be sustained. 19. We also find merit in the plea of violation of natural justice. The show-cause notice dated 24.09.2019 fixed compliance by 27.09.2019 and the assessment was completed on 01.10.2019 without due consideration of the assessee’s reply dated 05.08.2019 and the return filed on 30.09.2019. Such haste, in our considered view, deprived the assessee of adequate opportunity and further vitiates the assessment order. 20. Considering the factual position, we hold that the assessee is entitled to deduction under section 80P(2)(a)(i) and section Printed from counselvise.com ITA No.630/Ahd/2025 Shree Anjana Co-op Credit Soc. Ltd. Vs. ITO Assessment Year 2017-18 11 80P(2)(d) in respect of its income other than bank interest of Rs. 26,194/- which it has itself admitted to be taxable. The orders of the lower authorities denying such deduction are unsustainable in law. 21. In the result, the appeal of the assessee is allowed, and the Assessing Officer is directed to grant deduction under section 80P(2)(a)(i) and section 80P(2)(d) as claimed, except to the extent of bank interest of Rs. 26,194 which is taxable. Order pronounced in the Open Court on 28thAugust, 2025 at Ahmedabad. Sd/- Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER (MAKARAND V.MAHADEOKAR) ACCOUNTANT MEMBER (True Copy) Ahmedabad, Dated 28/08/2025 Manish, Sr. PS आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / Concerned CIT 4. आयकर आयुƅ ) अपील ( / The CIT(Exemption)-Ahmedabad 5. िवभागीय Ůितिनिध , आयकर अपीलीय अिधकरण , राजोकट/DR,ITAT, Ahmedabad, 6. गाडŊ फाईल /Guard file. आदेशानुसार/ BY ORDER, सȑािपत Ůित //True Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad Printed from counselvise.com "