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Facts
The assessee's appeal was delayed by 465 days due to technical glitches on the new Income Tax portal, preventing timely filing. The assessee is a cooperative credit society that filed its return late due to the delayed completion of its statutory audit. The return was processed under section 143(1) with a disallowance of deduction under section 80P invoking section 80AC, leading to a demand.
Held
The Tribunal held that the disallowance of deduction under section 80P while processing the return under section 143(1) was not justified as the amended provisions allowing such adjustments were effective from April 1, 2021, which was subsequent to the assessment year in question. Section 80AC could only be invoked in scrutiny assessments, not in prima facie adjustments under 143(1).
Key Issues
Whether disallowance of deduction u/s 80P under section 143(1) is permissible prior to the amendment effective from April 1, 2021, especially when section 80AC is invoked.
Sections Cited
143(1), 154, 143(1)(a)(v), 80P, 80AC, 234A, 234B, 234C, 139(1), 143(3)
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Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH AT KOLKATA
Before: SHRI SONJOY SARMA & SHRI RAKESH MISHRA
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of the Addl/JCIT(A)-Bhubaneswar [hereinafter referred to as Ld. ‘Addl/JCIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2019-20 dated 12.06.2024. 1.1 The Registry has informed that the appeal is barred by limitation by 465 days. The assessee has filed a petition along with an affidavit for condonation of delay explaining the reasons that the account of the assessee was under scrutiny for AY 2019-20 and the assessee filed reply whenever a notice was served. Since no physical order was sent or intimated via SMS, the assessee was unaware of the delivery of the appellate order which resulted in a demand of ₹10,11,840/-. The assessee submitted that due to glitches in the new portal, they were not able to view, download any order. However, the assessee has requested ITA No(s). 3023/KOL/2025 Assessment Year(s) 2019-20 Pandaveswar Colliery Employees Co-Operative Credit Society Limited. to condone the delay in filing of the appeal before the Tribunal since the assessee was facing technical errors and glitches in the newly launched Income Tax Portal while submitting the appeal/reply. After perusing the same, we are satisfied that the assessee had a reasonable and sufficient cause and was prevented from filing the instant appeal within the statutory time limit. We, therefore, condone the delay and admit the appeal for adjudication.
The assessee is in appeal before the Tribunal raising the following grounds of appeal: “a) For that the intimation passed under section 143(1) as well as rectification order u/s 154 was issued in violation of provisions 143(1)(a)(v) of Income Tax Act, 1961 for the time being in force and as applicable for the Asst, year 2019-20 and hence the said intimation as issued is illegal and bad in law. b) For that the learned CIT (Appeals) erred in confirming the disallowance of deduction of 323,21,461/- claimed under section 80P of the Act which is not justified and thus the same be reversed. c) For that the learned CIT (Appeals) erred in dismissing the appeal on merits without following the provisions of law under section 143(1)(a)(v) of the Act as applicable for Asst. Year 2019-20. Thus, order of the CIT (Appeals) be reversed. d) For that the learned CIT (Appeals) erred in confirming the interest u/s 234 A/B/C the same was unjustified and hence the same be deleted. e) For that the appellant craves leave to produce additional evidences in terms of Rule 29 of the Income Tax (Appellate Tribunal) Rules 1963. f) For that the appellant craves leave to press new, additional grounds of appeal or modify, withdraw any of the above grounds at the time of hearing of the appeal."
Brief facts of the case as mentioned in the appeal memo are that assessee is an Employees’ Credit Cooperative Society (ECCS), registered under the West Bengal Cooperative Societies Act, 1983. The area of operation and activities of the society are confined to ECL ITA No(s). 3023/KOL/2025 Assessment Year(s) 2019-20 Pandaveswar Colliery Employees Co-Operative Credit Society Limited. Employees Pandaveswar Colliery only. The society is an autonomous independent body run and managed by the members and all activities of the society are confined to members only. The day-to- day activities of the society are being managed by the Board of Directors elected from the members of the society and the only business activity of the society is to provide credit facilities and loans to members. In accordance with Section 97(b) of The West Bengal Cooperative Societies Act, 2006, the accounts of every Cooperative Society registered in the state of West Bengal need to be audited by the Director of Cooperative Audit (Cooperative Auditor) mandatorily for each financial year. The audit of annual accounts for the financial year 2019-2020 was completed by the Cooperative Auditor on 22- 03-2021, which is beyond the due date for furnishing the income tax return for financial year 2018-2019 (A. Y. 2019-2020). Due to the delay in completion of the annual/statutory audit by the Cooperative Auditor, the assessee couldn't file the ITR within the due date. The return was processed after adjustment u/s 143(1)(a) of Income Tax Act, 1961 dated 28-11-2020, disallowing deduction under section 80P by invoking section 80AC and thereby raising a demand under section 143(1) amounting to ₹10,11,840. 00. Aggrieved with the intimation, the assessee filed an appeal before the Ld. CIT(A) who vide order dated 12.06.2024 dismissed the appeal by giving his findings as under:
“5. In the case of the assessee the order u/s 143(1) of the Act was passed on 13.01.2021. The date of limitation for filing appeal was 12.02.2021. Due to the order by the Hon’ble Supreme Court, the limitation date for filing of appeal (Ref: Mise application No: 21/2022 in MA 665/2021 in SMW (C) No. 3/2022) date of order 10.01.2022 where is held that in these cases where limitation period expired in between 15.03.2020 to 28.02.2022, the period ITA No(s). 3023/KOL/2025 Assessment Year(s) 2019-20 Pandaveswar Colliery Employees Co-Operative Credit Society Limited. of limitation shall extend to 90 days from 01.03.2022 i.e. till 01.06.2022. Since the limitation date of filing of appeal in the case of the assessee was falling in the aforesaid period, the date of limitation for filing of appeal was 01.06.2022. However, the assessee filed appeal on 13.12.2022 almost after 195 days without any justifiable cause. No reasonable ground/explanation was provided which can be treated as a sufficient or good reason for condoning inordinate delay of almost 195 days for the appeal under consideration. It has been stated by the assessee that the person in charge of affair was not aware about income tax Act so there was inordinate delay. However it is not a justifiable argument in view of the fact that ignorance of law is not an excuse. If the actual limitation date in the case of the assessee is to be considered it is ending on 13.02.2021 excluding extension of limitation period by the Hon’ble Supreme Court. So from the original limitation date the appeal is delayed by one year and eleven months. Such inaction in the part of the assessee cannot be explained from the extended date i.e 01.06.2022 also there has been delay of 195 days. Under these circumstances, as the appeal is filed beyond the due date prescribed under law and sufficiency of the reasons for the delay are not established. Therefore, delay in filing of appeal is not condoned. In the result, appeal stands dismissed.
In view of the fact that appeal has been dismissed on the ground of rejection of petition for condonation of delay, merit of the case is not being discussed.
In result, the appeal is dismissed.”
Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.
Rival contentions were heard and the submissions made have been examined. The Ld. AR submitted that in intimation issued, the deduction claimed under section 80P was disallowed whereas the provision in this regard was amended with effect by the Finance Act of 2021 and therefore, the amendment is applicable with effect from a later date and the adjustment made by the CPC is therefore, bad in law. The Ld. DR, on the other hand submitted that since the return was delayed, the deduction claimed under section 80P was disallowed. The Ld. DR ITA No(s). 3023/KOL/2025 Assessment Year(s) 2019-20 Pandaveswar Colliery Employees Co-Operative Credit Society Limited. relied upon the order of the appellate authority and requested that the same may be confirmed.
We have considered the submissions made. Similar issue arose in the case of Panisheola Samabay Krishi Unnayan Samity Limited vs. Deputy Commissioner of Income Tax, Circle 4(2), Kolkata [ ITA No. 1181/Kol/2024 for the Assessment Year 2019-20] order dated 14.10.2024 and it has been held that the provisions relating to Chapter VI-A adjustments are applicable from 01.04.2021 and prior to that there was no power available to the Ld. AO to disallow the claim under the head “C.- Deductions in respect of certain incomes” under section 80P of Chapter VI-A of the Act. The relevant extract from the order is as under:
“4. During the course of the hearing, it was submitted by the Ld. AR that the amendment in sub-clause (v) of Section 143(1)(a) of the Act which has substituted “sections 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or section 80-IE, if” with “sections 10AA or under any of the provisions of Chapter VI-A under the headings “C.- Deductions in respect of certain incomes”, if” was inserted by the Finance Act, 2021 w.e.f. 01.04.2021. The Ld. AR also relied upon the decision of the coordinate Benches of the Tribunal in the cases of Bisharpara Kodalia 1248/Kol/2023, AY 2018-19, dated 06.02.2024 and The Commercial Taxes ITA No. 204/Kol/2024, AY 2020-21, dated 19.04.2024. The Ld. Sr. DR relied upon the order of the Addl./JCIT(A).
We have heard the rival contentions and perused the material available on record. A perusal of the relevant provision shows that the power to make disallowance of deduction under the head “C.- Deductions in respect of certain incomes” under section 80P of Chapter VIA while processing the return u/s 143(1) has been given to the assessing officer only by the Finance Act, 2021 with effect from 01.04.2021. Prior to that there was no power available with the Ld. AO to disallow the claim made under head “C.-Deductions in respect of certain incomes” under Chapter VI-A of the Act. Similar issue also came up in the case of Bisharpara Kodalia Coop. Credit Society Ltd. Vs. Income Tax Officer, Ward 49(2), Kolkata (supra) in which the coordinate Bench has held as under: ITA No(s). 3023/KOL/2025 Assessment Year(s) 2019-20 Pandaveswar Colliery Employees Co-Operative Credit Society Limited. “4. We have heard rival submissions and have gone through the record placed before us. We notice that the assessee is a Co-operative Society engaged in the business of providing credit to its members. The assessee is required under law to get its account audited under the rules and regulations of West Bengal Cooperative Societies Act, 2006 by the auditor appointed by Directorate of Cooperative Societies. For the AY 2018-19 due date for filing the return was 30.09.2018. However, the return was submitted on 25.11.2018. 5. We note that the Central Processing Centre denied the deduction u/s. 80P of the Act solely for the reason that return was not filed within the due date. Provisions of section 143(1)(a)(v) provides that - “(v) disallowance of deduction claimed under section 10AA or under any of the provisions of Chapter VIA under the heading “C - Deductions in respect of certain incomes”, if the return is furnished beyond the due date specified under subsection (1) of section 139;”
In the above provision, an amendment brought is in by Finance Act from 01.04.2021 w.e.f. 1.4.21 and before such amendment in place of the phrase section 10A or in any of the provisions of Chapter VIA under the head e - the words “deductions in respect of certain income, previously which was provided as section 10AA, 80IA, 80IB, 80IC, 80ID or section 80IE of the Act were appearing.”
From perusal of the said amendment, we note that before 01.04.2021 there was no mechanism for the CPC to prima facie disallow the claim u/s. 80P of the Act. It was only from 01.04.2021 that such powers have been conferred with the CPC to make prima facie disallowance in case of the claim made u/s 10AA or deduction claimed under any of the provisions in Chapter VIA which, inter alia, includes 80P of the Act.
We note that section 80AC of the Act puts a bar against claiming of deduction in respect of certain income provided under the head (C) of Chapter VIA which includes section 80P of the Act also if the return of income are not filed before the due date prescribed u/s. 139(1) of the Act. Had it been a case of scrutiny proceeding u/s. 143(3) of the Act, the situation certainly would have been against the assessee subject to the approval by the authorities for condonation of delay in filing the return. However, before us, the issue is regarding prima facie adjustment made u/s. 143(1)(a)(v) of the Act and as discussed above, such power of making the prima facie adjustment towards deduction u/s. 80P of the Act came to CPC only from 1.4.2021 and thus, the alleged disallowance by CPC is beyond its juri iction. Therefore, the assessee deserves relief. We are thus inclined to hold that the Ld. CIT(A) erred in denying the deduction u/s 80P of the Act for Rs.19,42,264/-. We, therefore, set aside the order of the Ld. CIT(A) and allow the grounds of appeal raised by the ITA No(s). 3023/KOL/2025 Assessment Year(s) 2019-20 Pandaveswar Colliery Employees Co-Operative Credit Society Limited. assessee for the claim of deduction u/s. 80P of the Act at Rs.19,42,264/- .”
Therefore, respectfully following the decision of the co-ordinate Bench, on facts of the case which are identical to the cases relied upon by the Ld. AR, the Ld. AO was not justified in disallowing the claim for deduction u/s 80P while making prima facie adjustments u/s 143(1)(a)(v) of the Act as the amended provisions were not available for the impugned assessment year and no such adjustment was legally permissible. Section 80AC could have been invoked in the assessment u/s 143(3) of the Act only. Hence, the Ld. AO is directed to delete the disallowance made in the intimation u/s 143(1) of the Act and allow the deduction u/s 80P of the Act as per law. Thus, Ground Nos. 1 to 6 are allowed.
In the result, the appeal of the assessee is allowed.”
Thus, respectfully following the decision in the case of Panisheola Samabay Krishi Unnayan Samity Limited (supra) and other cases relied upon by the assessee, we hereby hold that for the impugned AY 2020-21 the disallowance u/s 80P of the Act r.w.s. 80-AC of the Act could have been made only in the course of the scrutiny assessment but not in the course of processing of return u/s 143(1) of the Act. Therefore, the Ground Nos. a, b, c, & d are allowed while Ground Nos. e and f are general in nature and do not require any separate adjudication. The Ld. AO is directed to delete the addition made and allow the claim of deduction u/s 80P of the Act made by the assessee.
In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 17th April, 2026. [Sonjoy Sarma] [Rakesh Mishra] Judicial Member Accountant Member Dated: 17.04.2026 Bidhan (Sr. P.S.) ITA No(s). 3023/KOL/2025 Assessment Year(s) 2019-20 Pandaveswar Colliery Employees Co-Operative Credit Society Limited. Copy of the order forwarded to:
Pandaveswar Colliery Employees Co-Operative Credit Society Limited, Pandaveswar Colliery, P.O.- Pandaveswar, Andal, Durgapur, West Bengal, 713346. 2. ITO, Ward-2(4), Durgapur.
Addl/JCIT(A)- Bhubaneswar.
CIT-
CIT(DR), Kolkata Benches, Kolkata.
Guard File. //// By order