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Facts
The assessee, a co-operative premises society, filed a revised return claiming deduction under Section 80P(2)(d) for interest income. The CPC disallowed this deduction due to perceived discrepancies in reporting interest and dividend income.
Held
The Tribunal held that the assessee's claim cannot be summarily rejected due to procedural errors in reporting. The intent and substance of the claim, along with supporting evidence, need detailed examination, adhering to natural justice principles.
Key Issues
Whether a deduction under Section 80P(2)(d) can be disallowed due to a procedural error in reporting income in the return, without examining the substantive claim and evidence.
Sections Cited
80P(2)(d), 143(1), 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAJ KUMAR CHAUHAN
This appeal by the assessee is directed against order dated 14.08.2024 passed by the Ld. Commissioner of Income-tax (Appeals) [in short ‘the Ld. CIT(A)’] for assessment year 2021-22, raising following grounds:
1. The order of the Commissioner of Income The order of the Commissioner of Income-tax (Appeals), tax (Appeals), hereinafter referred to as the hereinafter referred to as the "CIT (A)" is erroneous on the "CIT (A)" is erroneous on the facts and in the law. On the facts and in the circumstances facts and in the law. On the facts and in the circumstances facts and in the law. On the facts and in the circumstances in the present case he ought to allow the appeal on the in the present case he ought to allow the appeal on the in the present case he ought to allow the appeal on the merits of the case. merits of the case.
2. On facts and circumstances of the case and in law and on On facts and circumstances of the case and in law and on On facts and circumstances of the case and in law and on the merits of the case, the CIT the merits of the case, the CIT (A) has erred in not allowing (A) has erred in not allowing the deduction u/s 80P(2)(d) in respect of interest income the deduction u/s 80P(2)(d) in respect of interest income the deduction u/s 80P(2)(d) in respect of interest income received from Co received from Co-operative Bank to the tune of Rs. operative Bank to the tune of Rs. 61,53,757/ 61,53,757/-.
CIT(A) erred in denying the deduction solely based on CIT(A) erred in denying the deduction solely based on CIT(A) erred in denying the deduction solely based on incorrect filing of the income tax return, despite the incorrect filing of the income tax return, despite incorrect filing of the income tax return, despite appellant being legally entitled to the deduction under the appellant being legally entitled to the deduction under the appellant being legally entitled to the deduction under the provisions of the Income Tax Act, 1961. provisions of the Income Tax Act, 1961.
Your appellant further submits that the denial of the Your appellant further submits that the denial of the Your appellant further submits that the denial of the deduction based on a mere procedural lapse contravenes deduction based on a mere procedural lapse contravenes deduction based on a mere procedural lapse contravenes the principles of natural justice and the doctrine of the principles of natural justice and the the principles of natural justice and the substantial justice. Courts and appellate authorities have substantial justice. Courts and appellate authorities have substantial justice. Courts and appellate authorities have held time and again that tax benefits cannot be denied for held time and again that tax benefits cannot be denied for held time and again that tax benefits cannot be denied for technical or minor procedural errors if the taxpayer has technical or minor procedural errors if the taxpayer has technical or minor procedural errors if the taxpayer has fulfilled the substantive conditions required by the law. fulfilled the substantive conditions required by the law. fulfilled the substantive conditions required by the law.
Briefly stated, facts of the case are that assessee stated, facts of the case are that assessee, a co- stated, facts of the case are that assessee operative premises socie operative premises society, is engaged in collection of ty, is engaged in collection of maintenance charges, sinking funds, sinking funds, and repair funds etc. from its members from its members as per bye laws of society of society for various expenses such as housekeeping, for various expenses such as housekeeping, security charges and general ity charges and general upkeep of the society premises. The of the society premises. The assessee filed original return of income on 31.12.2021 which was assessee filed original return of income on 31.12.2021 which was assessee filed original return of income on 31.12.2021 which was further further further revised revised revised on on on 29.03.2022 29.03.2022 29.03.2022 declaring declaring declaring total total total income income income at Rs.13,75,000/-. The return of income filed by the assessee was . The return of income filed by the assessee was . The return of income filed by the assessee was processed by the Central Processing Centre (CPC), Banguluru and the Central Processing Centre (CPC), Banguluru and the Central Processing Centre (CPC), Banguluru and adjustment was proposed for disallowing the deduction claimed u/s adjustment was proposed for disallowing the deduction claimed u/s adjustment was proposed for disallowing the deduction claimed u/s 80P(2)(d) of the Income 80P(2)(d) of the Income-tax Act, 1961 (in short ‘the Act’) amounting tax Act, 1961 (in short ‘the Act’) amounting to Rs.61,53,751/-. In response to the intimation proposed . In response to the intimation proposed . In response to the intimation proposed, the assessee submitted that interest income ee submitted that interest income was earned from earned from deposit made with the co-operative bank operative bank, which is deemed to be interest deemed to be interest income earned from the co income earned from the co-operative societies and eligible for operative societies and eligible for deduction u/s 80P(2)(d) of the Act relying on the decision of the Co- deduction u/s 80P(2)(d) of the Act relying on the decision of the Co deduction u/s 80P(2)(d) of the Act relying on the decision of the Co ordinate Bench of the Tribunal in the case of dinate Bench of the Tribunal in the case of ITO v. Oberoi Spring ITO v. Oberoi Spring CHS Ltd., ITA No. 786/Mum/2019. CHS Ltd., ITA No. 786/Mum/2019. However, in the intimation However, in the intimation order passed u/s 143(1) of the Act dated 03.11.2022, the claim of u/s 143(1) of the Act dated 03.11.2022, the claim of u/s 143(1) of the Act dated 03.11.2022, the claim of the assessee was rejected and adjustment of Rs.61,53,751/- was the assessee was rejected and adjustment of Rs.61,53,751/ the assessee was rejected and adjustment of Rs.61,53,751/ made.
3. On further appeal, the Ld. CIT(A) upheld the adjustment On further appeal, the Ld. CIT(A) upheld the adjustment On further appeal, the Ld. CIT(A) upheld the adjustment observing as under:
4.1.5 The above case laws have been gone through resp 4.1.5 The above case laws have been gone through resp 4.1.5 The above case laws have been gone through respectfully. On perusal of each order, it is noticed that all the case laws deal On perusal of each order, it is noticed that all the case laws deal On perusal of each order, it is noticed that all the case laws deal with the issue raised in the assessment proceedings undertaken with the issue raised in the assessment proceedings undertaken with the issue raised in the assessment proceedings undertaken u/s. 143(3) of the Act except one case viz. Amore Commercial u/s. 143(3) of the Act except one case viz. Amore Commercial u/s. 143(3) of the Act except one case viz. Amore Commercial Premises Co-Op Society Ltd. Vs. CPC, Bangalore mention Op Society Ltd. Vs. CPC, Bangalore mentioned at Sr. Op Society Ltd. Vs. CPC, Bangalore mention No. 2 of above case laws. Therefore, all the case laws except No. 2 of above case laws. Therefore, all the case laws except No. 2 of above case laws. Therefore, all the case laws except Amore Commercial Premises Co Amore Commercial Premises Co-Op Society Ltd. are considered as Op Society Ltd. are considered as inapplicable to the instant case as the appellant has filed instant inapplicable to the instant case as the appellant has filed instant inapplicable to the instant case as the appellant has filed instant appea against intimation passed u/s.143(1) and not or appea against intimation passed u/s.143(1) and not or appea against intimation passed u/s.143(1) and not order passed 143(3) of the Act. Therefore, the only case remains to be dealt with 143(3) of the Act. Therefore, the only case remains to be dealt with 143(3) of the Act. Therefore, the only case remains to be dealt with is of Amore Commercial Premises Co is of Amore Commercial Premises Co-Op Society Ltd which deals Op Society Ltd which deals with the impugned issue raised u/s. 143(1) of the Act. The with the impugned issue raised u/s. 143(1) of the Act. The with the impugned issue raised u/s. 143(1) of the Act. The aforesaid case law has been perused. It is noticed that aforesaid case law has been perused. It is noticed that aforesaid case law has been perused. It is noticed that vide para 9 to the order dtd. 17 to the order dtd. 17-1-2023, the Hon'ble ITAT has adjudicated the 2023, the Hon'ble ITAT has adjudicated the matter in respect of availability of deduction u/s. 80P(2)(d) matter in respect of availability of deduction u/s. 80P(2)(d) matter in respect of availability of deduction u/s. 80P(2)(d) regarding income from investment of surplus funds in other co regarding income from investment of surplus funds in other co regarding income from investment of surplus funds in other co- operative bank. For the ease of reference and better operative bank. For the ease of reference and better operative bank. For the ease of reference and better clarity, the screenshot of relevant portion of the aforementioned order is screenshot of relevant portion of the aforementioned order is screenshot of relevant portion of the aforementioned order is reproduced hereunder: reproduced hereunder:
4. Aggrieved, the assessee is in appeal before the Tribunal raising Aggrieved, the assessee is in appeal before the Tribunal raising Aggrieved, the assessee is in appeal before the Tribunal raising the grounds as reproduced above. the grounds as reproduced above.
We have heard the rival submissions of both parties a We have heard the rival submissions of both parties a We have heard the rival submissions of both parties and perused the material placed on record. The matter pertains to the perused the material placed on record. The matter pertains to the perused the material placed on record. The matter pertains to the adjustment proposed by the Central Processing Centre (CPC) under adjustment proposed by the Central Processing Centre (CPC) under adjustment proposed by the Central Processing Centre (CPC) under Section 143(1)(a) of the Act Section 143(1)(a) of the Act. The CPC, while processing the return of The CPC, while processing the return of income filed by the assessee, observed discrepancies in the income filed by the assessee, observed discrepancies income filed by the assessee, observed discrepancies reporting of interest and dividend income. Specifically, the CPC reporting of interest and dividend income. Specifically, the CPC reporting of interest and dividend income. Specifically, the CPC noted that no income was offered under Serial Nos. 14(iii) and 14(iv) noted that no income was offered under Serial Nos. 14(iii) and 14(iv) noted that no income was offered under Serial Nos. 14(iii) and 14(iv) of the profit and loss account, while the gross total income of of the profit and loss account, while the gross total income of of the profit and loss account, while the gross total income of ₹75,28,657/- was reflected under Serial No. xiii was reflected under Serial No. xiii of Schedule DFLA. of Schedule DFLA. Based on its analysis, the CPC concluded that the gross total Based on its analysis, the CPC concluded that the gross total Based on its analysis, the CPC concluded that the gross total income did not include interest or dividend income and, therefore, income did not include interest or dividend income and, therefore, income did not include interest or dividend income and, therefore, disallowed the deduction claimed under Section 80P(2)(d) of the Act disallowed the deduction claimed under Section 80P(2)(d) of the Act disallowed the deduction claimed under Section 80P(2)(d) of the Act in its intimation order under Section 143 in its intimation order under Section 143(1)(a). The assessee (1)(a). The assessee contended that the disallowance arose due to an inadvertent contended that the disallowance arose due to an inadvertent contended that the disallowance arose due to an inadvertent mistake in presenting the interest and dividend income in its return mistake in presenting the interest and dividend income in its return mistake in presenting the interest and dividend income in its return of income. It was argued of income. It was argued before us that the adjustment made by the that the adjustment made by the CPC failed to consider the factual posi CPC failed to consider the factual position and the intent of the tion and the intent of the assessee to claim a legitimate deduction. We have carefully assessee to claim a legitimate deduction. We have carefully assessee to claim a legitimate deduction. We have carefully examined the matter and are of the opinion that the claim of the examined the matter and are of the opinion that the claim of the examined the matter and are of the opinion that the claim of the assessee cannot be summarily rejected merely due to incorrect assessee cannot be summarily rejected merely due to incorrect assessee cannot be summarily rejected merely due to incorrect reporting of interest and dividend income reporting of interest and dividend income in the return of income. in the return of income. The intent and substance of the claim, as well as the supporting The intent and substance of the claim, as well as the supporting The intent and substance of the claim, as well as the supporting evidence, need to be examined in detail. It is well settled that evidence, need to be examined in detail. It is well settled that evidence, need to be examined in detail. It is well settled that procedural errors in reporting should not override the substantive procedural errors in reporting should not override the substantive procedural errors in reporting should not override the substantive rights of the taxpayer. The princi rights of the taxpayer. The principle of natural justice demands that ple of natural justice demands that the claim of the assessee be duly considered by the Assessing the claim of the assessee be duly considered by the Assessing the claim of the assessee be duly considered by the Assessing Officer (AO) after providing a reasonable opportunity to the assessee Officer (AO) after providing a reasonable opportunity to the assessee Officer (AO) after providing a reasonable opportunity to the assessee to clarify and substantiate its claim. In view of the above, we restore to clarify and substantiate its claim. In view of the above, we restore to clarify and substantiate its claim. In view of the above, we restore the matter to the file of the AO for fresh adjudication. The AO is e file of the AO for fresh adjudication. The AO is e file of the AO for fresh adjudication. The AO is directed to:
(i) Examine the claim of interest and dividend income in detail, Examine the claim of interest and dividend income in detail, Examine the claim of interest and dividend income in detail, ensuring that all relevant evidence and explanations provided ensuring that all relevant evidence and explanations provided ensuring that all relevant evidence and explanations provided by the assessee are taken into account. by the assessee are taken into account. (ii) Examine the eligibility of th the eligibility of the deduction claimed under Section e deduction claimed under Section 80P(2)(d) of the Act in accordance with the law. 80P(2)(d) of the Act in accordance with the law. 80P(2)(d) of the Act in accordance with the law.
5.1 The AO is accordingly accordingly directed to decide the issue of interest directed to decide the issue of interest earned from cooperative banks after duly considering the provisions earned from cooperative banks after duly considering the provisions earned from cooperative banks after duly considering the provisions of the Act and judicial precedents, if of the Act and judicial precedents, if any. The grounds raised by the The grounds raised by the assessee are allowed for statistical purposes. assessee are allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for statistical purposes.