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Income Tax Appellate Tribunal, “SMC - B” BENCH : BANGALORE
This is an appeal filed by the assessee against the order passed by the National Faceless Appeal Centre (NFAC), Delhi, ( DIN & Order No. ITBA/NFAC/S/250/2022-23/1043435535(1)) on 14.06.2022, on the following grounds of appeal:
1. On the facts and in the circumstances of the case, the ld. CIT (A) erred in upholding the order of the Assessing officer.
2. On the Facts and circumstances of the case the Ld. CIT(A) erred in upholding the deduction claimed under section 80P of the Act as computed by the AO (Rs. 29,39,414/- as against Rs. 36,44,859/-claimed by the Appellant. 3. The Ld. CIT (A) as well as the authorities below erred in denying the benefit claimed u/s 80P of the Act to the extent of Rs. 705,445/- being interest incomeearned (pl. see pg 2 of AO order).
4. For these and other grounds that may be urged at the time of hearing of the appeal the appellant prays that the appeal may be allowed.
The brief facts of the case are that the assessee filed return of income on 09.11.2018 showing Nil income. The case was selected for scrutiny and statutory notices were issued to the assessee through National e-Assessment Centre (NEAC). The assessee is a Co-operative Society engaged in the business of providing credit facilities to its Members. The gross total income of the assessee is Rs.36,44,859/- and the assessee claimed deduction under section 80P(2)(a)(i) of the Income Tax Act, 1961 (hereinafter called ‘the Act’), of the entire amount of Rs.36,44,859/-. The assessee had also earned interest and dividends from various banks and others of Rs.7,04,445/-. During the course of assessment proceedings, the assessee submitted that the assessee is a Co- operative Society and dealing with the members of the society only hence the entire income has to be allowed as deduction under section 80P(2)(a)(i) of the Act. The AO, after examining section 80P of the Act, held that the assessee’s income from business falls under section 80P(2)(a)(i) of the Act. Therefore, income received from the members for giving credit facilities of Rs.29,39,404/- was allowed and the interest and dividend received by the assessee which was not received from the members was treated as income from other source earned by the Co-operative Society and calculated the income of the assessee at Rs.7,05,445/- and completed the assessment.
Aggrieved from the order of the AO, the assessee filed appeal before the CIT(A). During the course of appellate proceedings, the CIT(A) issued various notices on different dates viz., 08.11.2021, 03.12.2021, 23.12.2021, 18.01.2022, 12.04.2022, 07.04.2022, 18.05.2022 and 26.05.2022. But no response was submitted by the assessee for any of the notices. Therefore, the CIT(A) decided the issue on the basis of the materials available on record before him. The CIT(A) noticed that while processing the return of income under section 143(1) of the Act, the assessee filed return of income on 09.11.2018 whereas the extended due date was 31.10.2018. Accordingly, as per the amended provision of section 80AC of the Act, the CPC did not allow the deduction claimed under section 80P of the Act. whereas the AO, during the course of scrutiny proceedings under section 143(3) of the Act allowed deduction as per section 80P(2)(a)(i) of the Act and disallowed only Rs.7,05,450/- treating it as an income from other sources. The CIT(A) gave enhancement notice to the assessee mentioning the reasons for enhancement in the notice but the assessee did not respond. Accordingly, the CIT(A) following the amended section 80(AC)(ii) of the Act and observing that the assessee did not file its return of income within the due date for claiming deduction, disallowed the claim of deduction u/s 80P(2)(a)(i) & enhanced the income determined by the AO and dismissed the appeal of the assessee by holding as under:
“5.4 Enhancement notice Therefore, during the appellate proceedings, the appellant was given an opportunity to explain why the income should not be enhanced to the extent of Rs. 29,39,414/-. The enhancement notice dated 12 April 2022 is reproduced below: On perusal of the intimation u/s 143 (1) dated 01.07. 2019 for AY 2018- 19, it is seen that the appellant filed ITR on 9 November 2018. Therefore, the AO, CPC disallowed deduction u/s 80P of Rs. 36,44,859/-. However, the AO while completing the assessment u/s 143 (3) dated 22.02.2021 ignored the fact that the ITR was filed belatedly and restricted the deduction u/s 80P to Rs. 7,05,450/- only as against the total deduction of Rs.36,44,859/- claimed in ITR. In effect, the AO allowed deduction of Rs 29,39,414/- u/s 80P. As per the provisions of section 80AC, (wef AY 2018-19) to avail the benefits of deduction u/s 80P, ITR shall be filed on or before the due date specified u/s 139(1). It is undisputed that the appellant filed the original ITR for the AY 2018-
19 on 09.11.2018 beyond the due date. Therefore. you are hereby given an opportunity to explain why the income should not be enhanced to the extent of Rs 29,39,414/- on or before 20.04.2022. 5.5 The appellant did not bother to respond to even the enhancement notice. In addition to regular notices of hearing, the following reminders to the enhancement notice were also issued. 12.04.2022 Enhancement notice Heccs.ylb@gmail.com& No response mdreehanylb@gmail.co submitted Delivere m d 07.05.2022 Reminder Heccs.ylb@gmail.com&r submitted toEnhancement ndreehanylb@gmail.co Delivere notice m d
No response Reminder to Heccs.ylb@gmail.com&md submitted 18.05.2022 Delivere Enhancement notice reehanylb@gmail.com d
No response Reminder to Heccs.ylb@gmail.com&md submitted 26.05.2022 Delivere Enhancement notice reehanylb@gmail.com d
5.6 In all, the appellant was served with 8 hearing notices/enhancement notice/ reminders to the enhancement notice between 08.11.2021 to 26.5.2022. The appellant failed to respond to all of the above till date of passing this order, which were properly delivered to the email of the appellant provided in form 35. Therefore, the appeal is decided on the basis of material available on record.
5.7 At this juncture, it is necessary to go through the provisions of section 80AC of the Act, which are as under: [Deduction not to be allowed unless return furnished43. 80AC. Where in computing the total income of an assessee of any previous year relevant to the assessment year commencing on or after— i. the 1st day of April, 2006 but before the 1st day of April, 2018, any deductionis admissible under section 80-lA or section 80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80-1E; ii. the 1st day of April. 2018, any deduction is admissible under any provision ofthis Chapter under the heading "C.—Deductions in respect of certain incomes 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.]
5.8 The language of the section 80AC is very clear and unambiguous. As per the provisions of section 80AC, which is effective from AY 2018-19, to avail the benefits of deduction u/s 80P, the ITR shall be filed on or before the due date specified u/s 139(1). In the instant case, the appellant filed the original ITR for the AY 2018-19 on 09.11.2018 beyond the due date (extended due date being 31 October 2018). The AO while passing the order u/s 143(3) ignored the fact that the appellant filed the return beyond the due date specified u/s 139(1) and allowed the deduction u/s 80P of Rs 29,39,414/- as against the claim of Rs.36,44,860/-. Therefore the enhancement notice was issued. The appellant not responded to the enhancement notice and the subsequent reminders issued to the appellant till the date of passing of this order. 5.9 Taking into consideration the provisions of section 80AC, which are effective from AY 2018-19, I am of the considered view that to avail the benefits of deduction u/s 80P, the ITR shall be filed on or before the due date specified u/s 139(1). Therefore, the appellant is not entitled for deduction of Rs.36,44,860/- u/s 80P as the ITR was filed beyond the due date specified u/s 139(1). The AO assessed the income at Rs 705,445. Hence, the income of the appellant needs to be enhanced to the extent of Rs 29,39,414/-. Thus the assessed income would be Rs 36,44,860/-. The AO is hereby ordered accordingly. 5.10 All the grounds of the appellant are in connection with the disallowance of Rs 7,05.450/- made by the AO in respect of the interest and dividend received from cooperative banks. These grounds are not relevant as the appellant failed to file the return within the due date specified u/s 139(1). The first condition to be fulfilled for claiming deduction u/s 80P- is the ITR shall be filed within the due date u/s 139(1). The appellant filed the ITR on 09.11.2018 after the due date i.e 31.10.2018. Therefore, all the grounds of the appellant are hereby rejected. 5.11 At this juncture, it is necessary to give complete picture of the appeals in the case of the appellant. In the case of the appellant another appeal against the order u/s 143(1) for AY 2018-19 was also filed. This appeal was allowed as the sub clause 143(1)(a)(v) speaks of disallowance of deduction claimed only u/s 10AA, 80-IA. 80- IAB, 80-IB, 80-IC, 80-ID & 80-IE for AY 2018-19, if the return is filed beyond the due date prescribed u/s 139(1). The disallowance of deduction claimed u/s 80P of the Act is not included in the said sub-clause relevant to AY 2018-19. Therefore, I am of theview that the AO was not empowered to make an adjustment of disallowance u/s 80P while processing the ITR u/s 143(1) of the Act, even if the return of income was filed beyond due date for AY 2018-19. However, the AO is empowered to disallow deduction u/s 80P during scrutiny proceedings u/s 143(3) rws 80AC rws 80P for AY 2018-19.”
Aggrieved from the above order, the assessee filed appeal before the Tribunal. At the outset of hearing, it was observed that the appeal has been filed belatedly by 24 days and on being asked to the AR of the assessee he submitted that the reason for delay in filing appeal before the Tribunal has been duly explained in affidavit & which is placed on record. On going through the reasons on explaining the delay has sufficient cause and, therefore, I condone the delay.
The learned AR submitted that the CIT(A) issued notice on various dates but it was not received by the assessee and being a Co-operative Society and it is a group of members therefore the case was not represented. He also submitted that the CIT(A) has wrongly enhanced the income of the assessee and the matter was not before him in regard to deduction under section 80P(2)(a)(i) of the Act. The issue was raised only for claiming deduction on interest and dividend income received from various banks and others. The AO allowed the deduction under section 80P(2)(a)(i) of the Act. He further requested that the matter may be sent back to the CIT(A) for giving an opportunity for explaining the reasons.
The learned DR relied on the order of the CIT(A) and he submitted that the assessee did not file his return of income within the extended due date. Accordingly, he is not liable for claiming deduction as per amended section 80AC of the Act. The AO, ignoring the disallowance for deduction as per section 143(1)(a) of the Act and allowed the deduction under section 80P(2)(a)(i) of the Act which is not as per the law. He relied on the judgment of Co-ordinate Bench of the Bangalore ITAT in the case of M/s. Syndicate Bank Staff Co-operative Society Ltd., Vs. DCIT, CPC in ITA No.1062/Bang/2022.He further submitted that the CIT (A) has rightly enhanced the income since the issue relate to the subject matter of assessment, it is within the power of CIT(A) u/s 251(1)(a) read with explanation, therefore the arguments advanced by the learned AR is not sustainable.
Considering the rival submissions, I noticed that the assessee filed return of income on 09.11.2018 and extended due date was 31.10.2018, after claiming deduction on the entire income earned by the assessee. The return was processed under section 143(1) of the Act on 01.07.2019 and the entire deduction claimed by the assessee of Rs.36,44,861/- disallowed. The AO on assessment proceedings allowed deduction under section 80P(2)(a)(i) of the Act of Rs.29,39,414/- and rest amount was confirmed. On appeal before the CIT(A), the CIT(A) issued various notices on different dates as noted supra and before enhancing the income of the assessee, he also issued notices to the assessee on 12.04.2022 and 3 other occassions for giving opportunity to the assessee but he assessee did not avail any opportunity before the CIT(A). Accordingly, the CIT(A) as per section 80AC of the Act not accepted the deduction claimed by the assessee. Since, the appeal was completed before the CIT(A) ex-parte, therefore in the interest of the justice and considering the submissions of the AR of the assessee, this file is remitted back to the CIT(A) for a fresh consideration after giving 3 effective opportunity to the assessee. . The assessee is directed to appear before him with cogent materials for substantiating his case and also directed to avoid unnecessary adjournments for early disposal of the case.
In the result, appeal of the assessee is allowed for statistical purposes.