Court sets aside CCIT's order that wrongly relied on a general circular instead of the specific CBDT Circular No.13/2023 meant for cooperative societies seeking Section 80P deduction, citing COVID-19 hardship as valid ground
Chandigarh, September 16, 2026: In a significant ruling offering relief to cooperative societies across the country, the Punjab and Haryana High Court on Tuesday condoned a 34-day delay in filing of income tax return (ITR) by Alaknanda Cooperative Group Housing Society Ltd. for the Assessment Year 2020-21, holding that the delay was caused due to the unprecedented COVID-19 pandemic and the statutory requirement of routing audit reports through State departments — circumstances entirely beyond the petitioner's control.
A Division Bench comprising Justice Deepak Sibal and Justice Sunish Bindlish set aside the order dated June 15, 2026 passed by the Chief Commissioner of Income Tax (CCIT), Panchkula, which had rejected the society's application for condonation of delay, and directed the Income Tax Department to reconsider the petitioner's claim for deduction under Section 80P of the Income Tax Act, 1961.
Background of the Case
The petitioner, a cooperative society registered under the Societies Registration Act, 1860, was required to file its ITR for AY 2020-21 by February 15, 2021 — a date that had already been extended by authorities from the original deadline of July 31, 2020 owing to the COVID-19 pandemic. However, the society received its mandatory audit report only on February 22, 2021. Thereafter, it filed an application on March 9, 2021, seeking condonation of delay, following which the Income Tax authorities advised it through a letter dated March 17, 2021 to file a belated return under Section 139(4) of the Act. Accordingly, the petitioner filed its ITR on March 20, 2021 — a delay of merely 34 days from the extended deadline.
Despite this, the Assessment Order dated September 19, 2022 denied the society's claim for deduction under Section 80P, invoking Section 80AC(ii) of the Act, which bars deductions under Chapter VI-A (Part C) if the ITR is not filed within the due date under Section 139(1).
The society's appeal before the Commissioner of Income Tax (Appeals) was dismissed on December 12, 2025, and its subsequent appeal before the Income Tax Appellate Tribunal (ITAT) was also dismissed on March 19, 2026. However, the ITAT granted liberty to the petitioner to pursue its application for condonation of delay before the CCIT, specifically in terms of CBDT Circular No.13/2023 dated July 26, 2023.
Despite this liberty, the CCIT rejected the condonation application on June 15, 2026 — ironically without even referring to Circular No.13/2023 and instead relying on the general CBDT Circular No.09/2015, which applies to delayed returns claiming refunds or carry forward of losses — a category entirely different from the petitioner's case.
Court's Observations
The High Court was unsparing in its criticism of the CCIT's order, observing that it reflected "complete non-application of mind," given that the petitioner had based its entire application solely on CBDT Circular No.13/2023. The Court held that this specific circular, which was issued to address genuine hardships faced by cooperative societies in filing delayed ITRs claiming Section 80P deductions for AY 2018-19 to AY 2022-23, would squarely override and "elbow out" the applicability of the general Circular No.09/2015 in the petitioner's case.
The Bench noted that COVID-19 had imposed severe restrictions in February-March 2021, including lockdowns and prohibition on public gatherings, which contributed directly to the delay in the receipt of audit reports — reports that are statutorily required to be routed through the State Audit Department. The Court found that both clauses 6(i) and 6(ii) of CBDT Circular No.13/2023 were clearly satisfied in this case, making it a fit case for condonation on grounds of genuine hardship.
The Court also disapproved of the CCIT's reliance on the CIT(A)'s earlier order rejecting Section 80P deduction as a basis for refusing condonation, noting that such reliance was impermissible given the ITAT's express liberty to the petitioner to pursue its condonation application independently.
Drawing support from a recent judgment of the Madras High Court in Vickrapandiyam Primary Agricultural Co-operative Credit Society Ltd. v. Chief Commissioner of Income-tax, (2026) 187 taxmann.com 97, the Bench emphasised that CBDT circulars issued under Section 119(2)(b) are meant to be interpreted liberally and purposively, keeping in mind their benevolent objective of alleviating genuine hardship.
The Court categorically held: "While applying circulars issued by the CBDT under Section 119(2)(b) of the Act, the income tax authorities should be liberal because these circulars apply to cases of genuine hardships being faced by the assessees."
Ruling
The Court set aside the CCIT's order, condoned the 34-day delay in filing the ITR for AY 2020-21, and directed the Income Tax Department to reconsider the petitioner's claim for deduction under Section 80P in accordance with law.
The petition was allowed.
Bottom Line:
Income Tax - Delay of 34 days in filing income tax return by a cooperative society due to COVID-19 restrictions and delay in receiving the audit report - Held, the case is covered under CBDT Circular No.13/2023 dated 26.07.2023, which provides for condonation of delay in such cases - CCIT's order rejecting condonation of delay based on an incorrect circular (No.09/2015) set aside - Delay condoned, and claim under Section 80P directed to be reconsidered.
Statutory Provisions:
Section 80P, 139(1), 119(2)(b) and 246A of the Income Tax Act 1961; Section 1 of the Societies Registration Act 1860.
