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Facts
The assessee, a housing cooperative society, filed its return of income for AY 2018-19 declaring a total income of Rs. 27,910/- after claiming a deduction of Rs. 7,14,251/- under Section 80P(2)(d) of the Act. However, the return was filed beyond the due date. The CPC disallowed the deduction under Section 80AC(ii) due to the delayed filing.
Held
The Tribunal held that once a regular assessment under Section 143(3) is completed, the intimation order under Section 143(1) ceases to be operative. The disallowance made by the CPC solely through the intimation order, without reaffirmation in the final assessment order, is not legally sustainable.
Key Issues
Whether the disallowance made by the CPC in the intimation order under Section 143(1) for delayed filing of return can sustain when a regular assessment under Section 143(3) was subsequently completed without any variation.
Sections Cited
80P(2)(d), 139(1), 143(1), 80AC(ii), 143(2), 142(1), 143(3), 143(3A), 143(3B)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘SMC’ BENCH, BANGALORE
Before: SHRI WASEEM AHMED
PER WASEEM AHMED, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order passed by the NFAC, Delhi dated 23/11/2023 in DIN No. ITBA/NFAC/S/250/2023-24/1058193856(1) for the assessment year 2018-19.
The relevant facts are that are that the assessee is a housing cooperative society. The assessee for the year under consideration (A.Y. 2018-19) filed return of income as on 31st December 2018 declaring total income at Rs. 27,910/- after claiming deduction under section 80P(2)(d) of the Act for Rs. 7,14,251/- only.
The return was processed by the CPC vide intimation order under section 143(1) of the Act dated 12th February 2019. In the intimation order, the CPC in pursuance to the provision of section 80AC(ii) of the Act disallowed the claim of deduction under section 80P(2)(d) of the Act as the assessee has not filed the return of income within the prescribed due date as per section 139(1) of the Act.
Subsequently, the return of the assessee was selected for limited scrutiny vide notice under section 143(2) dated 22nd September 2019. During the assessment proceeding, the National E-assessment Centre (NeAC) issued various notices under section 142(1) of the Act calling for necessary details. The assessee, in response to the notices duly furnishes the details called for. The AO (NeAC) after verifying the details called for completed the assessment under section 143(3) r.w.s. 143(3A) and 143(3B) of the Act vide order dated 2nd March 2021, accepting the return income of Rs. 27,910/- only. In other words, the income of the assessee was assessed at Rs. 27,910/- only. However, the AO in the income computation sheet forming part of assessment order computed the income at Rs. 7,42,160/- and raised the demand of tax for Rs. 3,26,441/- only.
The aggrieved assessee preferred an appeal before the learned CIT(A)/NFAC.
The assessee contended that once notice under section 143(2) of the Act has been issued for regular assessment, the intimation order issued earlier under section 143(1) of the Act becomes unsustainable. It was contended that NeAC (AO), after calling for various details and after verifying them, completed the assessment accepting the return income without any variation. During the assessment proceedings, no question was raised for disallowing the claim of deduction under section 80P of the Act on account of delay in filing return of income. Therefore, the AO demand raised by the AO based on computation sheet is unjustified.
The assessee further submitted that the delay in filing of return was not intentional. The assessee explained that society board appointed one of its employees as honorary secretary and authorised him to look after the accounts, auditing and filing of return of income. The books of account were finalised and signed by the auditor on 8 August 2018 i.e. well within the time. However, the secretary was hesitant to sign the books and return out of the fear of legal accountability & responsibility. He further failed to express his unwillingness for signing the return of income to the board for almost 3 to 4 months. Thereafter, the auditor intimated the board and accordingly the board convinced the said secretary and get the return filed as on 31st December 2018. Accordingly, the assessee prayed that the delay in filing of the rerun was due to reason beyond the control. Hence, such delay should be condoned.
The learned CIT(A)/NFAC after considering the facts in totality held that the disallowances of deduction was made by the CPC in the intimation order and not in the assessment order under section 143(3) of . the Act. Therefore, the assessee should have filed the return appeal against the intimation order and not against the assessment order where no addition or disallowance was made.
Further, the learned CIT(A) found that the provision of section 80AC of the Act was amended by the Finance Act 2018 where it is provided that from A.Y. 2018-19 onward deduction under chapter VIA- C “Deduction in respect of certain income” shall only be allowed if the return of income is filed within the prescribed time limit as specified under section 139(1) of the Act. The provision of section 80P of the Act covered under chapter VIA-C, therefore to claim the deduction under section 80P of the Act for the year under consideration, the assessee was required to file the return of income within the due date prescribed under section 139(1) of the Act whereas the assessee filed the return after the due date. Hence, the CPC rightly disallowed the incorrect claim apparent from the information provided in the return.
Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before the Tribunal.
The learned AR for the assessee before me made similar argument as made during the appellate proceeding before the learned CIT(A)/NFAC. In addition, the learned AR submitted that the assessee in earlier years as well as in the subsequent years has filed return of income well within the due date prescribed under section 139(1) of the Act. The delay in filing of return of income for the year under consideration was due to reasonable cause as explained before the learned CIT(A)/NFAC. The ld. AR also submitted that there cannot be . raised any demand in the intimation issued under section 143(1) of the Act, once the income declared in the return has been accepted in the assessment framed under section 143(3) of the Act.
On the other hand, the learned DR before me submitted that both the proceedings are separate and independent to each other i.e. processing of return under section 143(1) of the Act and the income determined in the assessment framed under section 143(3) of the Act. It was also contended that there was no appeal preferred by the assessee against the intimation issued under section 143(1) of the Act. Thus, the issue has reached to finality and therefore the same cannot be agitated in the assessment proceedings under section 143(3) of the Act. The ld. DR vehemently supported the order of the authorities below.
I have heard the rival contentions of both the parties and perused the materials available on record. At the outset, it is noted that the assessee, a housing cooperative society, filed its return of income for the Assessment Year 2018-19 declaring a total income of ₹27,910/- after claiming a deduction of ₹7,14,251/- under section 80P(2)(d) of the Act. However, the return was filed on 31st December 2018, beyond the due date prescribed under section 139(1) of the Act. The CPC subsequently disallowed the deduction under section 80P(2)(d) of the Act relying on the amended provisions of section 80AC(ii) introduced by the Finance Act, 2018, which clearly mandates that deductions under Chapter VIA-C (including section 80P) shall be allowed only if the return is filed within the time prescribed under section 139(1) of the Act.
Page 6 of 8 13.1 Although the case of the assessee was later selected for limited scrutiny and assessed under section 143(3) of the Act by the National E- assessment Centre (NeAC), which accepted the returned income without any modifications. Nevertheless, the computation sheet erroneously reflected an increased taxable income of ₹7,42,160/-, leading to a demand of ₹3,26,441/- only. This inconsistency between the assessment order and the computation sheet is the core of the assessee’s grievance. I find merit in the assessee’s contention that once a regular assessment under section 143(3) is completed, the original intimation under section 143(1) ceases to be operative. It is settled law that a subsequent regular assessment supersedes the earlier intimation, and any disallowance made under section 143(1) must be revisited or reaffirmed, if at all, in the regular assessment. In holding so, I draw support and guidance from the judgment of Hon’ble Gujarat High court in the case of Gauravbhai Hargovindhai Dave vs. Tax Recovery officer reported in 110 taxmann.com 33 where it was held as under: 36. We are of the view that the phrase "order giving rise to a demand" in Rule 68B should be construed as the final assessment order, determining the tax liability of the assessee with interest, fine, penalty or any other sum. With the commencement of the proceedings under Section 143(2) of the Act, the intimation under Section 143(1)(a) of the Act, which in the absence of the proceedings under Section 143(2) read with Section 143(3) would have taken the shape of regular assessment. But once the proceedings commenced under Section 143(3), the intimation under Section 143(1)(a) remains an intimation only of self-assessment with prima facie adjustments, if any, made by the Assessing Officer and becomes adjustable as per the regular assessment. The initial intimation under Section 143(1) of the Act, which according to the learned counsel appearing for the assessee, should be understood as an order giving rise to a demand for the purpose of Rule 68B merges into the regular assessment and once the proceedings for the regular assessment under Section 143(3) is commenced, there cannot be any recourse to bring into existence any order under Section 143(1)(a) of the Act. See CIT v. Udaipur Distillery Co. Ltd. [2003] 133 Taxman 383/[2004] 267 ITR 358 (Raj.)
13.2 Since, the AO in the present case did not raise any issue regarding the delay in filing the return or the eligibility of deduction during the scrutiny/regular assessment proceedings. Moreover, it is also noted that the AO neither made any addition or disallowance nor reaffirmed disallowances made in the intimation order in the operative part of the assessment order. Therefore, in the given facts and circumstances, the CPC’s earlier disallowance in intimation order under section 143(1) of the Act cannot survive independently.
13.3 In conclusion, the I hold that the disallowance of the deduction under section 80P(2)(d) of the Act solely through the intimation under section 143(1) of the Act, without further scrutiny or reaffirmation in the final assessment under section 143(3), is not legally sustainable. Consequently, the demand raised based on the computation sheet, which is inconsistent with the final assessment order, is liable to be set aside. Hence the ground of appeal of the assessee is hereby allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in court on 13th day of May, 2025