Deduction u/s. 80P can’t be denied merely for non filing of ITR

By CA Milind Wadhwani

Executive Summary

Deduction u/s. 80P can’t be denied merely for non filing of ITR

Name of the Case
Prathamika Krishi Pattina Sahakara Sangha Ltd. vs. ITO ITA No.614/Bang/2021

Brief Facts of the Case:-
1. The case pertains to AY 2016-17and the assessee is a PACS and derives income from providing credit facilities to its members and farmers. The assessee also distributes fertilizers, manure and PDS products.
2. The assessee did not file ITR
3. The AO issued a notice u/s. 142(1) calling upon the assessee to file ITR which remained uncomplied.
4. Thereafter a summon u/s 131 was issued, in response to which assessee appeared and produced books as per which the assessee had surplus of Rs.1, 89,165/-.
5. The since the assessee had not filed ITR AO denied the benefit of deduction u/s. 80P and he assessed the total income of Rs.1,89,165/- as income from business.
6. That the assessee thereafter filed an appeal before CIT (A) but did not succeed.
Relevant Provision
That for ready reference the provisions of section 80A (5) and 80AC are reproduced which read as follows:
”80A(5) Where the assessee fails to make a claim in his return of income for any deduction under section 10A or section 10AA or section 10B or section 10BA or under any provision of this Chapter under the heading “C.—Deductions in respect of certain incomes”, no deduction shall be allowed to him thereunder.”
80AC prior to its substitution by FA 2018 w.e.f 1.4.2018
“80AC. Deduction not to bs allowed unless return furnished—Where in computing the total income of an assessee of the previous year relevant to the assessment year commencing on the 1st day of April, 2006 or any subsequent assessment year, any deduction is admissible under section 80-IA or section 80-IAB or section 80-IC or section 80- ID or section 80-IE, no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139.”

Arguments Advanced by the assessee:-
1. That statutory audit was carried out by the Co-operative Audit Department and there was no proper guidance with regard to filing of ITR. Therefore, not filing of ITR was unintentional and the same may be condoned.
2. That the action of AO to disallow deduction u/s. 80P for not filing ITR by invoking provisions of section 80A (5) is incorrect as provisions of section 80P are incentive provisions meant to help PACS which act for the benefit of farmers.
3. That the provisions of section 80A (5) of the Act are directory and not mandatory and therefore deduction u/s. 80P cannot be denied under section 80A (5) of the Act.
4. The assessee relied on the decision of ITAT Delhi in the case of Fibrefill Engineers vs. CIT (2017) 177 TTJ 556 (Del.) wherein it was held that the provision of sec. 80A (5) are directory in nature and not mandatory. The said section cannot be invoked for denying the deduction u/s.80P even if ITR is not filed.
5. The assessee relied on the decision of Hon’ble Kerala High Court in ITA No. 57/2016 – in the case of Chirakkal Service Co-operative Bank Ltd. Kannur Vs. CIT.
6. The assessee also relied on decision of ITAT, Cochin Bench in ITA No. 340/Coch/2012 rendered on 05/10/2017 in Kodiyeri service Cooperative Bank Ltd. Thalassery Vs. ITO, Kannur.
7. That the provisions of section 80A(5) of the Act will come into play only when an ITR is filed and the claim for deduction under Chapter VIA of the Act is not claimed therein.
8. that as per sec. 80AC which contemplates filing of ITR to claim deductions under Chapter VI “A” of the Act and 80P is not one of the section which is mentioned in section 80AC therefore the deduction u/s. 80P of the Act cannot be denied to the assessee for non filing of ITR.

Observations of the Hon. Tribunal
1. That section 80A(5) is applicable only when ITR is filed by an assessee and a deduction under Chapter VI “A” of the Act, is not claimed therein.
2. That section 80A(5)will not apply to a case where no return of income is filed.
3. Section 80AC contemplates denial of deduction in respect of certain provisions of Chapter VI “A” of the Act, ifITR is not filed. Those provisionsdo not apply to the claim for deduction u/s. 80P. Therefore, the Revenue authorities were not justified in denying the claim of deduction u/s. 80P was made by the assessee.

About the Author: CA Milind Wadhwani DISA(ICAI), FAFD(ICAI), CCCA(Cert.)Research (Ph.D.) Scholar Mobile +91 9826273333 Mail ID: - MILIND.WADHWANI20@GMAIL.COM

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Posted on: January 7th, 2023

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