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Facts
The assessee, a co-operative society, filed its return for AY 2013-2014 declaring income and claiming deductions under Section 80P. The CPC processed the return under Section 143(1) and made an adjustment disallowing the deduction, leading to the appeal.
Held
The Tribunal held that for assessment years prior to 2021-2022, no adjustment could be made under Section 143(1) for disallowing deductions under Section 80P, as the relevant amendment was made effective from AY 2021-2022. The initial adjustment made by the CPC was deemed bad in law.
Key Issues
Whether the CPC could disallow deductions under Section 80P via a Section 143(1) adjustment for assessment years prior to AY 2021-2022.
Sections Cited
143(1), 139(1), 80P, 250, 234A, 234B, 234C, 10AA, 801A, 801AB, 801B, 801C, 80ID, 801E
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
order : 31.10.2025 O R D E R [ Per Rahul Chaudhary, Judicial Member:
1. 1. The present appeal preferred by the Assessee is directed against the order, dated 24/06/2025, passed by the Additional/Joint Commissioner of Income Tax (Appeals), Panaji [hereinafter referred to as ‘the CIT(A)’] whereby the Ld. CIT(A) had dismissed the appeal against the Intimation Order, dated 03/08/2014, passed under Section 143(1) of the Income Tax Act, 1961 for the Assessment Year 2013-2014.
2. The Assessee has raised following grounds of appeal : “The appellant objects to the order dated 24 June 2025 passed under Section 250 of the Income tax Act by the ADDL/JCIT (A), Panaji Assessment Year 2013-2014 [CIT(A)] for the aforesaid assessment year on the following among other grounds:
1. The learned CIT(A) erred in not directing the learned CPC/AO to delete the additional tax demand as the same is not permissible under Section 143(1) of the Income tax Act and such adjustment cannot be made without issuing intimation to the assessee.
2. The learned CIT(A) erred in not directing the CPC/AO to allow deductions of INR 50,000 claimed under Section 80P(2)(c) and INR 1,99,792 under Section 80P(2)(d) of the Income tax Act in respect of interest earned on deposits kept with nationalized bank and cooperative banks respectively.
3. The learned CIT(A) erred in directing the CPC/AO to delete the interest charged under Sections 234A, 234B and 234C of the Income tax Act.
4. Each one of the above grounds of appeal is without prejudice to the above.”
3. The brief facts of the case are that the Assessee, a co-operative society, filed return of income for the assessment year 2013-2014 on 18/02/2014 declaring total income of INR.2,21,247/- and claimed deduction of INR.50,000/- under Section 80P(2)(c) and INR.1,99,792/- under Section 80P(2)(d) of the Act. The aforesaid return of income was processed and Intimation under Section 143(1) of the Act was issued on 03/08/2014 whereby an adjustment of INR.2,21,247/- was made denying the deduction for the aforesaid amount claimed in the return of income. The appeal preferred by the Assessee challenging the aforesaid addition was admitted by the Learned CIT(A) after condoning the delay. However, no relief was granted to the Assessee as the said appeal was dismissed vide, Order dated 26/04/2025, impugned by way of the present appeal on the Grounds reproduced in paragraph 2 above.
The Learned Authorised Representative for the Assessee appearing before us submitted that the Learned CIT(A) had failed to appreciate 2 Assessment Year 2013-2014 that the deduction claimed by the Assessee under Section 80P of the Act was denied while processing return of income under Section 143(1) of the Act on the ground that the return of income was filed belatedly. It was submitted that the Learned CIT(A) had dismissed the appeal giving the reasoning that on merits that the Assessee was not entitled to claim deduction under Section 80P of the Act even though the while processing the return of income deduction claimed under Section 80P of the Act was denied merely on account of the fact that the income tax return was not filed within the time prescribed in Section 139(1) of the Act and that too without giving any intimation/notice to the Assessee as mandated by Section 143(1) of the Act. It was submitted that prior to Assessment Year 2021-2022 no adjustment could have been made under Section 143(1) of the Act for the purpose of denying deduction claimed under Section 80P of the Act. Reliance in this regard was placed on the decision of the Tribunal in the case of New Shangrilla Cooperative Housing Society Ltd. Vs. Centralized Processing Centre/Income Tax Officer, Ward 25(3)(1), Mumbai, dated 28/06/2024, passed in & 755/Mum/2024 pertaining to Assessment Years 2014-2015 & 2015-2016, respectively.
Per contra the Learned Departmental Representative opposed the submissions made by the Assessee and stated that the Assessee was not entitled to claim deduction under Section 80P of the Act on merits and on account of belated filing of income tax return. Therefore, disallowance made while processing return of income under Section 143(1) of the Act should be sustained. It was submitted that the contention of the Assessee that no intimation was issued to the Assessee before processing of the return of income under Section 143(1) of the Act cannot be accepted without any supporting evidence. Therefore, the order passed by the Learned CIT(A) should be sustained.
3 Assessment Year 2013-2014
We have considered the rival submissions and perused the material on record. We find that the Learned CIT(A) has reproduced the submission made by the Assessee in the order impugned. We find that at Page No.13 to 16 of the order impugned, the Learned CIT(A) has reproduce the decision of Mumbai Bench of the Tribunal in the case of New Shangrilla Cooperative Housing Society Ltd. (Supra). On perusal of the same we are of the view that the said decision applies the facts and circumstances of the present case. In the said case the Co-ordinate Bench of the Tribunal has held that for assessment years prior to Assessment Year 2021-2022, no adjustment could have been made under Section 143(1) of the Act for disallowing the claim of deduction under section 80P of the Act. The relevant extract of the decision of the Tribunal readers under:
“2. At the outset, Ld. Counsel for the assessee submitted that in so far as A.Y.2014-15 is concerned, there is a delay in filing of appeal for 8 years before the First Appellate Authority where as similar delay for the A.Y.2015-16 has been condoned by the Id. CIT(A). Ld. Counsel submitted here in this case that Ld. AO has made primafacie adjustment u/s.143(1). In both the years disallowance of interest of Rs.16,550/- in A.Y.2014-15 and Rs.4,49,697/- in the A.Y.2015-16 has been made. He submitted that, against such primafacie adjustment, assessee has filed petition for rectification u/s.154, however, the same was not disposed of by the CPC and therefore, assessee was under bonafide belief that adjustment would be rectified. It was further submitted that assessee was very belatedly advised that since rectification application has not been disposed of and therefore, the appeal should be filed when assessee society approached a different Counsel. Thus, he submitted that appeal should have been condoned because primafacie on merits itself, no adjustment was called for. We find that since the assessee was under a bonafide belief that it has filed rectification application 4 Assessment Year 2013-2014 therefore there is no requirement to file the appeal. Assessee being Cooperative Housing Society and management committee keeps on changing, therefore it was advise belateledly that since rectification order has not been passed then appeal should have been filed. Accordingly we condone the delay in filing of first appeal.
On merits, after hearing both the parties and on perusal of the impugned order and the material placed on record we find that CPC has made adjustment for disallowance of interest claimed u/s.80P despite the fact that no such primafacie adjustment could have been made for disallowing the deduction u/s.80P within the scope and ambit of Section 143(1)(a) in the A.Y.2014- 15 and 2015-16. The primafacie adjustment as provided in Section 143(1)(a) Clause v was with respect to deductions claimed u/s.10AA, 801A, 801AB, 801B, 801C, 80ID or Section 801E. The amendment was brought by the Finance Act 2021 w.e.f. A.Y.2021-22 to include disallowance of deduction claimed under Chapter VIA. Thus, prior to A.Y.2021-22, no adjustment could have been made for disallowing the claim u/s.80P/Thus, at the threshold, the adjustment itself was bad in law. Moreover, the CPC has proceed on the ground that return of income has been filed beyond the due date of Section 139(1) which is not correct because since assessee is a co-operative housing society governed by Maharashtra Co-operative Society's Act 1960, it is mandatorily required to get its account audited. The due date for filing of return of income in the case of audited accounts was on 31/10/2014 and 31/10/2015. Thus, on this ground also, the CPC was not justified disallowing the claim of deduction. Accordingly, adjustment made u/s.143(1) is deleted.”
The present appeal pertains to assessment year 2013-2014 and deduction claimed by the Assessee under Section 80P of the Act was denied while processing return of income under Section 143(1) of the Act. The aforesaid action of the Central Processing Centre/Assessing 5 Assessment Year 2013-2014 Officer is contrary to the above decision of the Tribunal and cannot be sustained. Accordingly, Ground No.1 raised by the Assessee is allowed and the addition of INR.2,21,247/- is deleted. In view of the aforesaid, Ground No. 2 to 4 raised by the Assessee are dismissed as having being rendered infructuous.
In terms of Paragraph 7 above, the present appeal is allowed.