INCOME TAX ACT, 1961

--Deduction under section 80PAllowability Assessee under alleged bona fide non filed return--Assessee was a co-operative society it did not filed return of income under section 139(1) or 139(4) or even in compliance with notice under section 142(1) but filed return belatedly during pendency of assessment proceeding. Assessee contended that it was under bona fide belief that due to exemption of income assessee could not filed return of income. Assessee contended that assessing officer ought to have issue notice under section 148 to regularise return of income. As before issuing notice under section 148 assessing officer would be formation of belief that income was escaped assessment. Thus, contention of assessee was not taxable. In belated return assessee claimed deduction under section 80P(2)(a)(i). Assessing officer did not allow deduction under section 80(P)(2)(a)(i). Held :Rightly so. Assessing officer was justified in disallowing deduction under section 80P(z)(a)(i) as according to section 80A(5) belated return filed beyond time limit under section 139(1) or section 139(4) or in compliance with notice under section 142(1) could not considered as return for purpose of claiming deduction under section 80P.

Unless the Central Government by a notification in the Official Gazette exempts the co-operative societies from filing the returns, they have to file the returns of income. Therefore, it may not be correct to say that the co-operative societies were under the impression that they need not file their returns of income since their income was exempted. A statutory liability of filing the return under the Income Tax Act cannot be disowned on the ground that they were under a bona fide impression. Furthermore, section 276CC makes it a punishable offence in case the return of income which is required to be filed under section 139(1) or on issuance of a notice under section 142(1), etc. is not filed. Therefore, it is obvious that the return has to be filed within the time-limit prescribed under section 139(1) or at least within the time specified in the notice under section 142(1). If the return was not filed by the taxpayers, then the consequential penal provisions as provided in section 276CC would follow. [Para 11] While introducing section 80A(5) the legislature was conscious that for the purpose of claiming deductions under sections 10A and 10B the taxpayer has to file a return of income within the time prescribed under section 139(1). In spite of that in section 80A(5), the time-limit provided in section 139(1) was not mentioned. The legislature simply says that the claim for deduction shall be made in the return of income. [Para 19] In section 80A(5) the legislature obviously omitted to mention the words 'in due time'. What it says is where the taxpayer fails to make a claim in the return of income, no deduction shall be allowed. It does not say that the return of income shall be furnished in due time. Therefore, it is obvious that for the purpose of section 276CC, the return has to be filed in due time, i.e. within the time-limit prescribed under section 139(1). However, for the purpose of claiming deduction under section 80P, in view of the language employed in section 80A(5) what is required is to make a claim in the return of income. The return may be filed either under section 139(1) or 139(4) or in pursuance of a notice issued under section 142(1) or 148. In view of the absence of the words 'in due time' in section 80A(5), this Tribunal is of the considered opinion that the return filed under section 139(1) or 139(4) or within the time-limit specified in section 142(1) or 148 can also be considered as return of income within the meaning of section 80A(5). [Para 20] wherever it is necessary for the taxpayer to file the return of income within a specified date, the legislature has made it clear by inserting the words 'before the due date specified' or 'in due time' or 'within the time-limit'. In section 80A(5) the legislature expressly omitted to include the words 'within the time-limit' or 'before the due date specified' or 'in due time'. Therefore, for the purpose of Chapter VI-A, the legislature intended not to make it compulsory the filing of return of income within the specified time or in due time as provided in section 139(1). In fact, section 80 read write section 139(3) which provides for carry forward of losses makes the taxpayer to file the return of income within the time allowed under section 139(1) as the law stood as of now. However, as section 80 stood earlier there was no time-limit provided in section 80 for filing the return of income to make a claim for carry forward of losses. While introducing section 80A(5) the legislature was well aware that not only for carry forward of losses but also for deductions under sections 10A, 10B the taxpayer has to file the return of income within the time-limit prescribed under section 139(1). In spite of that the legislature omitted to mention the words 'within due time' in section 80A(5J). Therefore, this Tribunal is of the considered opinion that the return of income filed within the time-limit provided in section 139(1) or 139(4) or time specified in the notice under sections 142(1) or 148 can be considered as return of income. However, the belated return filed beyond the time-limit provided under section 139(1) or 139(4) or time specified in notice under section 142(1) or 148 cannot be considered as return of income for deduction under section 80P. [Para 22] Admittedly, all the taxpayers' income exceeded the maximum amount which is not chargeable to income-tax before grant of deduction under Chapter VI-A 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 under section 139(1). If there was any failure on the part of the taxpayer to furnish the return of income, the legislature has made it a punishable offence under section 276CC. Therefore, it is obvious that it is mandatory to file the return of income as required under section 139(1) if the total income exceeds the maximum amount which is not chargeable to income-tax before grant of deductions under sections 10A, 10B and under Chapter VI-A. When it is mandatory for the taxpayer to file the return of income, the taxpayers cannot claim that they are entitled for the benefit available under the Act when the return itself was not filed. Under section 80A(5), the legislature made it mandatory that the claim under Chapter VIA under the heading 'C.—Deductions in respect of certain income' has to be made in the return. If the contention of the senior counsel 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. This Tribunal is of the considered opinion that this is not the intention of the legislature at all. The persons, who complied with the provisions of the Income Tax Act by filing the return, however, failed to make a claim in the return either by ignorance or otherwise cannot be put in a worse position than a person who has not filed return as required under section 139 of the Income Tax Act. The intention of the legislature in enacting section 80A(4) and 80A(5) is to avoid multiple deduction in respect of the same profit. The legislature prescribed three conditions in section 80A(4) and 80A(5). [Para 23] Section 80P is admittedly a beneficial provision. It is settled principles of law that in order to avail benefits under the beneficial provision, the conditions provided by the legislature have to be complied with. Therefore, this Tribunal is of the considered opinion that in view of the mandatory provisions contained in section 139(1) r/w section 80A(5) it is mandatory for every co-operative society for claiming deduction under section 80P to file the return of income and to make a claim of deduction under section 80P in the return itself. In view of the above discussion, if the return was not filed either under section 139(1) or 139(4) or in pursuance of notice issued under section 142(1) or under section 148, the taxpayer is not entitled for any deduction under section 80P. [Para 25] Admittedly, the taxpayer has not filed any return of income within the time-limit specified under section 139(1) or 139(4). Moreover, no return was filed in compliance to the notice issued under section 142(1) either. The contention of the taxpayer is that the return was filed belatedly but before completion of the assessment proceedings. In the case before us, admittedly, the notice under section 142(1) was issued and the assessing officer directed the taxpayer to file the return of income. Since the return was not filed, the assessing officer proceeded further to assess the income under section 144 of the Act. Therefore, when the so-called return said to have been filed by the taxpayers, the assessment proceedings were already pending. When the assessment proceedings are admittedly pending on the date of filing of belated return no one could say that any income chargeable to tax has escaped assessment. Unless and until the assessment proceedings initiated by the assessing officer by issuing notice under section 142(1) culminated either by an assessment order or otherwise by operation of law, we may not be able to say that any part of income chargeable to tax has escaped assessment. Therefore, the assessing officer had no jurisdiction at all to issue notice under section 148 for assessing the income of the taxpayer. In other words, no income could be said to have escaped assessment at that point of time. Therefore, the contention of the representative for the taxpayer that notice ought to have been issued under section 148 for regularizing the returns filed under section 139(4) has no merit at all.[Para 26] Furthermore, a bare reading of section 147 clearly shows that the assessing officer has to believe that the income chargeable to tax has escaped assessment. Section 148(2) makes it mandatory to record reason for such belief. Therefore, the jurisdiction to issue notice under section 147 is the belief of the assessing officer with regard to escapement of income from assessment. Therefore, the taxpayer cannot compel the assessing officer to issue notice under section 148 for regularization of the return filed belatedly. [Para 27] The assessment year under consideration is 2009-10. One year from the end of the relevant assessment year expires on 31-3-2011. Admittedly, all the returns were filed beyond 31-3-2011. Therefore, the returns said to be filed by the taxpayers cannot be treated as returns filed under section 139(4). Therefore, the assessing officer has rightly disallowed the claim of the taxpayers under section 80P. [Para 28] The contention of taxpayers is that all these taxpayers being co-operative societies are functioning in the remote villages in the State of Kerala. Therefore, taxpayers prayed that a sympathetic view may be taken. Tribunal is conscious that sympathy is essential for justice. Tribunal is also conscious that sympathy cannot replace or substitute the provisions of the Act. Therefore, even though Tribunal has sympathy with the taxpayers, in view of the specific and mandatory provisions of section 139 read write section 80A(5), this Tribunal do not find any merit in the claim of the taxpayer.[Para 29]