SHRI SAJADIALI SARDAR PATEL SEVA SAHKARI MANDLI LTD. ,RAJKOT V. THE ITO WARD-2(1)(2), RAJKOT., RAJKOT

ITA 607/RJT/2024

AI Insights

The case involves Shri Sajadiali Sardar Patel Seva Sahkari Mandali, a cooperative society based in Rajkot, which appealed against the orders denying them a deduction under Section 80P of the Income Tax Act, 1961, for the Assessment Year 2018-19. The deduction was initially denied due to the late filing of the income tax return and the audit report. The Tribunal considered the arguments and evidence presented, including a relevant judgment from the Gujarat High Court, and decided to remand the case back to the Assessing Officer for a detailed examination of the belatedly filed audit report.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126584 (ITAT-RAJKOT)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2018-2019
• Other Referred Cases: Commissioner of Income Tax (Exemptions) v. Laxmanarayan Dev Shrishan Seva Khendra, Customs Commissioner v. Dileep Kumar and Company, Nileshwar Range Kallu Chethu Vyavasaya Thozhilali Sahakarana Sangham v. CIT, Veerappampalayam Primary Agricultural Co-operative Credit Society Ltd. v. DCIT, State of Uttar Pradesh v. Mohammad Nooh, L. Chandra Kumar v. Union of India, Union of India v. R. Gandhi, President, Madras Bar Association, Best Ready Mix Concrete v. PCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIMANYU SINGH YADAV; LD
• Assessee Lawyers: D.M. RINDANI; LD; WAY OF AN INTIMATION
• Keywords: Condonation of delay; Principle of natural justice; Charitable institution; Co-operative Credit Society
• Section: 143(1); 139(1); 22; 13; 80P; 2(A); 119(2)(b); 10B

Judgement Text

"ITA NO. 607-RJT-2024 SHRI SAJADIALI SARDAR PATEL SEWA SAHKARI MANDALI, RAJKOT - 360001 Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE DR. ARJUN LAL SAINI, AM. & DINESH MOHAN SINHA, JM आयकरअपीलसं./ITA No.607/RJT/2024 Ǔनधा[रणवष[ / Assessment Year: (2018-19) (Hybrid Hearing) Shri Sajadiali Sardar Patel Seva Sahkari Mandali Ltd. At Sajadiyali – Rajkot At Sajadiyali Taluka, Jamkandorana, Dist, Sajadiyali – Rajkot 360001 Gujrat Vs. ITO Ward-2, (1) (2) Rajkot – 360001 New Aayakar bhavan, Race Course Ring Road, Rajkot – 360001 èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AAAAS2374L (Appellant) (Respondent) Appellant by : Shri D.M. Rindani, Ld. AR Respondent by : Shri Abhimanyu Singh Yadav , Ld .Sr. DR Date of Hearing : 28 / 01 /2025 Date of Pronouncement : 22 / 04/2025 आदेश / O R D E R PER DINESH MOHAN SINHA JM; Captioned appeal filed by assessee pertaining to Assessment Year 2018-19, is directed against order passed by Commissioner Of Income Tax (Appeal), vide ITA NO. 607-RJT-2024 SHRI SAJADIALI SARDAR PATEL SEWA SAHKARI MANDALI, RAJKOT - 360001 Page | 2 order dated 20/06/2024, which in turn arises out of an order passed by the Assessing Officer dated 31/05/2019 u/s 143(1) of the Income Tax Act, 1961. GROUNDS OF APPEALS:- 1. The learned CIT(A), ADDL/ICIT (A)-2, Nagpur erred in confirming action of CPC, Bangalore in disallowing claim of deduction of Rs. 5,09,030/ u/s 80P of the Act by failing to appreciate that provisions of Sec. 143(1)(a)(v) do not provide for denial of deduction u/s 80P of the Act when the return of income is not filed within time allowed u/s 139(1) of the Act but u/s 139(4), 2. The learned CIT(A), ADDL/JCIT (A)-2, Nagpur erred in upholding action of the CPC, Bangalore in making adjustment to the returned income of the Appellant by way of an intimation u/s 143(1) and in denying the benefit of Sec. 80P of the Act of Rs. 5,09,030/- to the Appellant by failing to appreciate that this was not a prima facie adjustment permissible u/s 143(1)(a) of the Act. 3. The learned CIT(A), ADDL/JCIT (A)-2, Nagpur erred in holding that in view of Sec. 80AC, benefit of deduction u/s 80P has been denied by CPC Bangalore, by failing to appreciate that this was not a prima facie adjustment permissible u/s 143(1)(a) of the Act during the year under appeal. 4. The learned Commissioner (Appeals), ADDL/JCIT (A)-2, Nagpur erred in not adjudicating ground of disallowance of claim of deduction of Rs. 5,09,030/- u/s 80P of the Act on merits. 5. The appellant craves leave to add, amend, alter or withdraw all or any ground of appeal at any time upto the date of hearing of the appeal. Facts of the case:- That the assessee is Co-operative society doing the business at Rajkot, filed return of income for 18-19, declaring total income of Rs. 5,09,030 claiming deduction u/s 80P of the Act. The Return was processed u/s 143(1) of the Act disallowing deduction u/s 80P for not filing return of Income within due date i.e. 31-08-2018. ITA NO. 607-RJT-2024 SHRI SAJADIALI SARDAR PATEL SEWA SAHKARI MANDALI, RAJKOT - 360001 Page | 3 The assessee file an appeal against the intimation order dated 31/05/2019. The Ld. CIT(A) has pass an order with following observations: “As assessee has filed return of income after due date, exemption u/s 80P can’t be granted to it. Hence as discussed above, appeal of the assessee is not considered. In result appeal of the assessee is dismissed.” The assessee has filed an appeal against the impugned order of the Ld. CIT(A) dated 20/06/2024 before us. (i) During the course of hearing the Ld. AR has submitted that the assessee has filed return of income on 18/10/2018 which is well in time & order since the Books of account of the assessee was to be Audited under the Gujrat Co-Operative society Act. u/s 84 r.w.s. 139(1) explanation 2 (a) (ii) of the Income Tax Act 1961. The assessee has filed Audit report online on 21/12/2024. That the Ld. AR submitted that the Audit report now file online with the department be considered & AO be directed to grant deduction u/s 80P of the Act. and prayed that the CPC Bangalore may kindly be directed to consider for granting the deduction. During the course of argument the AR has also submitted a copy of judgement delivered Hon’ble by Gujrat High Court in the case of Commissioner of Income Tax (Exemptions) v. Laxmanarayan Dev Shrishan Seva Khendra. [2024 167 taxmann.com 548 (Gujrat) 10.09.2024] (ii) The DR has written submission on behalf of revenue for denial of deduction under Section 80P due to belated filing of return and the same is reproduce. ITA NO. 607-RJT-2024 SHRI SAJADIALI SARDAR PATEL SEWA SAHKARI MANDALI, RAJKOT - 360001 Page | 4 “1. Introduction: The Revenue contends that the assessee claim for deduction under Section 80P of the Income Tax Act, 1961, is untenable due to the belated filing of the return of income. This position is supported by the strict interpretation of exemption provisions as mandated by the Supreme Court in Customs Commissioner v. Dileep Kumar and Company [(2018) 9 SCC 1], and reinforced by judgments from the Kerala and Madras High Courts. A. Strict Interpretation of Exemption Provisions: In Customs Commissioner v. Dileep Kumar and Company, a Constitution Bench of the Supreme Court held that exemption notifications must be construed strictly, and the burden of proving eligibility for exemption lies on the assessee. The Court emphasized that any ambiguity in exemption provisions should be resolved in favor of the Revenue. This principle necessitates that taxpayers adhere meticulously to the conditions prescribed for claiming exemptions or deductions. B. Mandatory Filing of Return within Prescribed Time: Section 80A(5) of the Income Tax Act stipulates that deductions under Chapter VI-A, which includes Section 80P, are allowable only if the claim is made in the return of income. Furthermore, Section 80AC mandates that such returns must be filed within the due date specified under Section 139(1). Failure to file the return within the prescribed time renders the assessee ineligible for the deduction. ITA NO. 607-RJT-2024 SHRI SAJADIALI SARDAR PATEL SEWA SAHKARI MANDALI, RAJKOT - 360001 Page | 5 C. Judicial Precedents Supporting Revenue's Position: * Kerala High Court in Nileshwar Range Kallu Chethu Vyavasaya Thozhilali Sahakarana Sangham v. CIT: The Court held that a return filed by a co-operative society after the due date is non-est, and the assessee is not entitled to claim deduction under Section 80P. The Court observed that the statutory scheme permits allowance of a deduction under Section 80P only if it is made in a return recognized under the Act, i.e., filed within the prescribed time. * Madras High Court in Veerappampalayam Primary Agricultural Co-operative Credit Society Ltd. v. DCIT: The Court dismissed the writ petition challenging the denial of deduction under Section 80P, reiterating that the return of income must be filed within the stipulated time under Section 139(1) to qualify for such deductions. The Court underscored that belated returns do not meet the statutory requirements for claiming deductions under Chapter VI-A. D. Application to the Present Case: The assessee filed the return of income beyond the due date prescribed under Section 139(1). In light of the aforementioned statutory provisions and judicial pronouncements, the belated return is non-est for the purpose of claiming deductions under Section 80P. The strict interpretation principle, as elucidated by the Supreme Court, mandates that the conditions for exemption must be fulfilled precisely. Therefore, the assessee's failure to comply with the statutory timeline disentitles it from availing the deduction. ITA NO. 607-RJT-2024 SHRI SAJADIALI SARDAR PATEL SEWA SAHKARI MANDALI, RAJKOT - 360001 Page | 6 2. Legal Principles on Exhaustion of Remedies and Jurisdiction of ITAT in Matters Under Section 119(2)(b) of the Income Tax Act i). The Supreme Court of India has addressed the issue of whether an affected party can simultaneously pursue two remedies-one administrative and the other judicial in several cases. One significant judgment on this subject is \"State of Uttar Pradesh v. Mohammad Nooh, AIR 1958 SC 86\". This case establishes the principle that if an alternative remedy is available, particularly a statutory remedy, the party must exhaust that remedy before approaching the court. ii). In this case, Mohammad Nooh, a government servant, was dismissed from service following a departmental inquiry. He challenged the dismissal order before the Allahabad High Court through a writ petition under Article 226 of the Constitution of India, without first exhausting the departmental remedies available to him. iii). Whether the party could approach the High Court directly without exhausting the alternative administrative remedies available. iv). The Supreme Court held that where a statutory remedy is provided by law, it should be exhausted before a party can invoke the jurisdiction of the High Court under Article 226 of the Constitution. The Court observed that when two remedies are available, one being administrative and the other judicial, the party must first exhaust the administrative remedy before approaching the judicial forum. ITA NO. 607-RJT-2024 SHRI SAJADIALI SARDAR PATEL SEWA SAHKARI MANDALI, RAJKOT - 360001 Page | 7 v). However, the Court also held that this rule is not absolute. In cases where the statutory remedy is not adequate or is ineffective, or if there is a violation of principles of natural justice, the aggrieved party may directly approach the courts. vi). (a) \"Exhaustion of Statutory Remedies\": The Court reiterated the doctrine of exhaustion of remedies, which requires that when a statutory remedy is available, it must be utilized before approaching the courts. (b) \"One Remedy at a Time\": The judgment emphasized that a party cannot simultaneously pursue two remedies-one administrative and one judicial-for the same cause of action. If a party opts for one remedy, it should exhaust that remedy before moving to the other. (c) \"Exception to the Rule\": The Court clarified that this rule is not absolute and does not bar the invocation of judicial remedies if the administrative remedy is inadequate or if there has been a violation of fundamental rights or principles of natural justice. vii). The Court observed, \"Where the law provides for the determination of issues by an administrative or quasi-judicial authority, the High Court in the exercise of its writ jurisdiction will not normally interfere before the statutory remedy is exhausted.\" viii). The principle laid down by the Supreme Court in \"State of Uttar Pradesh v. Mohammad Nooh\" remains a critical precedent in determining whether a party can simultaneously ITA NO. 607-RJT-2024 SHRI SAJADIALI SARDAR PATEL SEWA SAHKARI MANDALI, RAJKOT - 360001 Page | 8 pursue administrative and judicial remedies. The affected party is generally required to exhaust the available statutory or administrative remedies before invoking the jurisdiction of the court, except in cases where the remedy is inadequate or there is a breach of natural justice principles. ix). This judgment is a key reference point in cases involving the election of remedies and serves to guide the legal strategy when dealing with matters where multiple remedies are available to a party. x). Apart from this judgement there are certain very serious nature legal implications which are attached with this matter which are discussed below:- xi). The jurisdiction of the Income Tax Appellate Tribunal (ITAT) is limited to matters explicitly provided for within the Income Tax Act, 1961. It does not extend to powers reserved for the High Courts or actions taken under specific statutory provisions like Section 119(2)(b) of the Income Tax Act, 1961. This argument is substantiated by various landmark judgments, including State of Uttar Pradesh v. Mohammad Nooh (AIR 1958 SC 86), L. Chandra Kumar v. Union of India (1997) 3 SCC 261, and Union of India v. R. Gandhi, President, Madras Bar Association (2010), as well as the constitutional provisions under Article 323B. xii). L. Chandra Kumar v. Union of India (1997) 3 SCC 261 The Supreme Court in this case clarified that tribunals, including ITAT, are subordinate to the High Courts and ITA NO. 607-RJT-2024 SHRI SAJADIALI SARDAR PATEL SEWA SAHKARI MANDALI, RAJKOT - 360001 Page | 9 cannot exercise the powers of judicial review that are constitutionally vested in the High Courts under Article 226. The High Courts retain the ultimate authority to oversee and correct tribunal decisions, particularly where fundamental rights or constitutional issues are concerned. xiii). Union of India v. R. Gandhi, President, Madras Bar Association (2010): This judgment emphasized the distinction between the powers of tribunals and those of High Courts. It reaffirmed that tribunals are statutory bodies with jurisdiction limited to the statutes that created them. They cannot assume powers that are inherently within the purview of constitutional courts, such as High Courts. xiv). Article 323B of the Constitution of India: Article 3238 allows the establishment of tribunals for the adjudication of disputes, but it does not allow these tribunals to encroach upon the powers vested in the High Courts, particularly concerning judicial review and matters of constitutional significance. xv). The Kerala High Court in the case of Best Ready Mix Concrete v. PCIT (WP(C) 37648/2023) reinforced that the correct legal remedy for challenging an order under Section 119(2)(b) is through a writ petition before the High Court. The High Court has the jurisdiction to review the legality and merits of the administrative decision, particularly where the ITA NO. 607-RJT-2024 SHRI SAJADIALI SARDAR PATEL SEWA SAHKARI MANDALI, RAJKOT - 360001 Page | 10 merits of the claim or the procedural fairness of the decision are in question. xvi). Latin Maxim: \"Quando aliquid prohibetur ex directo, prohibetur et per obliquum.\" (Translation: When something is prohibited directly, it is also prohibited indirectly.) In the context of the Income Tax Appellate Tribunal's (ITAT) jurisdiction under Section 119(2)(b) of the Income Tax Act, the principle of \"Quando a liquid prohibetur ex directo, prohibetur et per obliquum\" is highly relevant. Section 119(2)(b) empowers the Central Board of Direct Taxes (CBDT) and its delegated authorities to consider applications for condonation of delay and related reliefs in cases of genuine hardship. The section clearly outlines the administrative procedure for such cases, directing that any grievances against decisions under this provision must be addressed through a writ petition to the High Court.\" xvii) Application of the Doctrine:  Direct Limitation: ITAT does not have the jurisdiction to entertain cases related to orders passed under Section 119(2)(b). The law directly restricts ITAT from stepping into the domain of the High Courts, which are the proper judicial authorities for reviewing such decisions.  Indirect Attempts: Any attempt by ITAT to entertain cases related to Section 119(2)(b) would be an indirect encroachment on the High Court's ITA NO. 607-RJT-2024 SHRI SAJADIALI SARDAR PATEL SEWA SAHKARI MANDALI, RAJKOT - 360001 Page | 11 jurisdiction. Following the principle laid down in McDowell & Co. Ltd. v. CTO and CIT v. A. Raman & Co., ITAT cannot do indirectly what it is prohibited from doing directly. This means that ITAT cannot use any form of legal interpretation or procedural loophole to assume jurisdiction over matters explicitly reserved for the High Courts. 3. Conclusion: The Revenue submits that the assessee's claim for deduction under Section 80P should be disallowed due to the belated filing of the return of income. This position is consistent with the strict interpretation of exemption provisions as mandated by the Supreme Court and reinforced by the Kerala and Madras High Courts. Allowing the deduction despite non-compliance with statutory requirements would contravene established legal principles and undermine the integrity of the tax system. The application of the doctrine of substance over form ensures that the legal boundaries between various judicial and administrative bodies are respected. In the case of ITAT's jurisdiction, the tribunal is clearly limited by the Income Tax Act and relevant legal principles from overstepping its boundaries to address issues related to Section 119(2)(b). Thus, any such attempt would be void ab initio, as it would violate the principle that what cannot be done directly cannot be done indirectly. The correct legal ITA NO. 607-RJT-2024 SHRI SAJADIALI SARDAR PATEL SEWA SAHKARI MANDALI, RAJKOT - 360001 Page | 12 course remains to approach the High Court for any grievances arising under Section 119(2)(b). 4. Prayer: In view of the above, the Revenue prays that the Hon'ble ITAT uphold the disallowance of the deduction claimed under Section 80P and accept the M.A. filed by the revenue and accordingly amend its own previous order and restore the order of CPC as the provision of act U/s 80 AC (ii) are very clear on this point that for seeking chapter VIA part C deduction, income tax return need to be filed within time and as in case of assessee the ITR was a belated ITR, deduction should not be allowed and tax demand raised by CPC should be restored.” We have heard the rival contention of both the party and perused the material available on record. We note that the return was filed on 31/08/2018. However registered society accounts required to be audited u/s 84 of Gujrat Co-operative society Act. r.w.s. u/s139 (1) explanation 2(a) (ii) of the Act & 139(1) explanation 2 (b) of the Act. We further note that assessee has submitted the Audit Report in form 3CA-3CD online on e-filing portal of the Department. One of submission made by the assessee that since the assessee now filed Audit Report, the AO should be directed to grant exemption u/s 80P of the Act as claimed by the assessee. That there is the only single issue involved which is that the deduction u/s 80P of the Act. was denied to assessee. The Ld. AR referred to the judgement of the Gujarat High Court [2024] 167 taxmann.com 548 (Gujrat) [10-09-2024] where in it was observed. ITA NO. 607-RJT-2024 SHRI SAJADIALI SARDAR PATEL SEWA SAHKARI MANDALI, RAJKOT - 360001 Page | 13 “Where assessee, a public charitable trust, did not upload audit report in Form 10B along with its return of income and CPC processed return under section 143(1) denying benefit of section 11, since assessee had already filed audit report in Form 10B electronically during pendency of appellate proceedings along with copy of audited financial statements, delay in filing said form was to be condoned.” After careful consideration we find weightage in the submission of Ld. AR for the assessee. We note that no doubt the return of income was filed in time however, we find that assessee has not filed the Audit Report in form 3CA/3CD before the lower authorities, neither before AO nor Before Ld. CIT Appeal we further find that Audit Report was filed by the assessee before this tribunal first time on 24-01-2025 which needs to be verified by the AO, Non submission of Audit report may attract the denial of deductions u/s 80P of the Act. Thus, we note that assessee filed the Audit Report after period of 5 years before this tribunal. Which needs to be examined by the AO. We set-aside the order of the Ld. CIT dated: 20/06/2024 & order dated 31/05/2019 of the Ld. AO and remand the matter back to AO for fresh adjudication need to mention that the AO shall give necessary opportunity to the assessee to explain the case if required. In result the appeal of the assessee allowed for statical purpose. Order pronounced in the open court on 22 / 04 /2025. Sd/- Sd/- (Dr. A.L. SAINI) (DINESH MOHAN SINHA) ACCOUNT MEMBER JUDICAL MEMBER Rajkot Ǒदनांक/ Date:22 /04 /2025 Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr. CIT 5. DR/AR, ITAT, Rajkot 6. Guard File ITA NO. 607-RJT-2024 SHRI SAJADIALI SARDAR PATEL SEWA SAHKARI MANDALI, RAJKOT - 360001 Page | 14 By Order Assistant Registrar/Sr. PS/PS ITAT, Rajkot "