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Facts
For AY 2020-21, the assessee, a cooperative society, failed to file original/belated income tax returns and subsequently filed an updated return under Section 139(8A) claiming deduction under Section 80P(2)(a)(i). The CPC declared this updated return invalid due to procedural non-compliance (non-payment of tax under Section 140B and non-filing of Part-B-ATI) and later disallowed the Section 80P claim via an intimation under Section 143(1).
Held
The Tribunal held that the intimation under Section 143(1) was without jurisdiction as it was based on an updated return that the CPC itself had previously declared invalid. A valid return is a prerequisite for processing under Section 143(1), and any disallowance in the absence of a valid return must be pursued through regular assessment proceedings under Section 144. Therefore, the intimation and subsequent disallowance were deemed void ab initio.
Key Issues
Whether an intimation under Section 143(1) is valid when it is based on an updated return that was previously declared invalid by the CPC itself. Whether a disallowance can be made through summary processing under Section 143(1) if the underlying return is not legally valid.
Sections Cited
80P, 80P(2)(a)(i), 139(1), 139(4), 139(8A), 140B, 143(1), 144
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 Addl/JCIT(A)-2, Mumbai dated 16/05/2024 in DIN No.ITBA/APL/S/250/2024-25/1064929499(1) for the assessment year 2020-21.
The assessee has raised as many as 12 grounds of appeal which are interconnected and pertain to the disallowance of the claim of deduction u/s 80P of the Act amounting to Rs. 35,86,483/- only.
The relevant facts are that the assessee is a cooperative society and engaged in the business of providing credit facility to the members. The assessee for the year under consideration i.e. A.Y. 2020-21 did not file return of income as per section 139(1) of the Act. The time limit for filing the belated return as per section 139(4) of the Act was also lapsed. Hence, the assessee filed updated return as per the provision of section 139(8A) of the Act as on 26th September 2022 wherein declared total income at NIL after claiming deduction under section 80P(2)(a(i) of the Act for Rs. 35,86,483/- only.
The return filed under section 139(8A) was held invalid by the CPC vide intimation dated 28th March 2023 for the reason that tax as per section 140B of the Act not paid and Part-B-ATI was also not filed.
Subsequently, the CPC vide communication/intimation dated 25th 5. December 2023 sought clarification from the assessee regarding the incorrect claim under section 80P of the Act for the reason that return was not filed under section 139(1) of the Act. Thereafter, the CPC passed intimation order under section 143(1) of the Act dated 29-12- 2023 disallowing the assessee’s claim of deduction under section 80P(2)(a(i) of the Act for Rs. 35,86,483/- only.
The aggrieved assessee preferred an appeal before the learned CIT(A).
The assessee before the learned CIT(A) raised various grounds challenging the action of the CPC. However, the learned CIT(A) confirmed the disallowances made by the CPC.
Being aggrieved by the order the learned CIT(A) the assessee is in appeal before the Tribunal.
The learned AR before me filed a written submission, paper book and case law compilation running from pages 1 to 13, 1 to 23 and 1 to 98 and contended that once the return has been held invalid, the same cannot be used for drawing any adverse inference against the after processing under section 143(1) of the Act.
On the other hand, the learned DR before me supported the order of the authorities below by making refence to various case laws. It was contended by the ld. DR that the assessee has paid the requisite tax in compliance to Part-B-ATI of the updated return of income.
I have heard the rival contentions of both the parties and perused the materials available on record. In the present appeal, the core issue relates to the disallowance of the assessee’s claim for deduction under section 80P of the Act, amounting to ₹ 35,86,483/-, as processed under section 143(1) of the Act. The assessee is a cooperative society engaged in the business of providing credit facilities to its members. For the assessment year 2020-21, the assessee failed to file its return within the due date prescribed under section 139(1) of the Act. Furthermore, the time limit for filing a belated return under section 139(4) had also lapsed. Consequently, the assessee filed an updated return under .
Page 4 of 5 section 139(8A) of the Act on 26th September 2022, declaring a total income of Rs. NIL after claiming the said deduction under section 80P(2)(a)(i) of the Act. However, this updated return was held invalid by the Centralized Processing Centre (CPC) through an intimation dated 28th March 2023, citing non-compliance with section 140B of the Act, particularly the failure to pay tax under the updated return scheme and omission to file Part B-ATI in the return of income.
11.1 Subsequently, the CPC issued another intimation on 25th December 2023, raising a query on the correctness of the deduction claimed under section 80P of the Act, reasoning that such a claim is not admissible when a return is not filed under section 139(1) of the Act. Thereafter, CPC passed an intimation under section 143(1) of the Act on 29th December 2023, disallowing the entire deduction claimed by the assessee. The assessee’s appeal before the learned CIT(A) was unsuccessful, as the ld. CIT(A) upheld the CPC’s view and sustained the disallowance.
11.2 Upon a careful and thorough examination of the facts and applicable law, I find that the intimation issued under section 143(1) of the Act is without jurisdiction, as it was based on a return that was already held invalid by CPC itself. A foundational requirement for processing a return under section 143(1) of the Act is that such return must be a valid return as per the Act. Once the updated return filed under section 139(8A) of the Act was declared invalid by CPC for non- compliance with procedural requirements, it ceased to exist for legal purposes, and therefore could not form the basis for any further intimation or adjustment under section 143(1) of the Act. I further . observe that where no valid return exists, any disallowance of claims must be undertaken through regular assessment proceedings under section 144, not through summary processing under section 143(1) of the Act. Accordingly, the impugned intimation dated 29th December 2023 issued by CPC is held to be bad in law and void ab initio. The disallowance made therein is therefore liable to be set aside. Consequently, the appeal of the assessee is allowed, and the orders of the CPC as well as the learned CIT(A) are reversed. Hence, the ground of appeal of the assessee is hereby allowed.
In the result, the appeal of the assessee is hereby allowed.