Loading judgment…
Facts
The assessee, a cooperative society, filed its Income Tax Return for AY 2019-20 claiming deduction under Section 80P, which the Centralised Processing Centre (CPC) disallowed under Section 143(1) citing late filing of the return. The First Appellate Authority upheld this disallowance. The assessee filed an appeal before the Tribunal with a delay of 290 days, for which a condonation request was made, citing communication issues and the President's medical condition.
Held
The Tribunal condoned the delay in filing the appeal, adopting a justice-oriented approach. It held that the CPC exceeded its jurisdiction by disallowing the Section 80P deduction under Section 143(1) for AY 2019-20. Prior to the Finance Act, 2021 (effective 01.04.2021), Section 143(1)(a)(v) did not include Section 80P, and specific provisions prevail over general provisions (Section 143(1)(a)(ii)). Consequently, the disallowance was deleted.
Key Issues
Whether the Centralised Processing Centre (CPC) was justified in disallowing deduction under Section 80P of the Income Tax Act via an adjustment under Section 143(1) for the Assessment Year 2019-20, given the non-retrospective application of subsequent amendments.
Sections Cited
143(1), 143(1)(a), 143(1)(a)(ii), 143(1)(a)(v), 80P, 139, 139(1), 142(1), 234A, 234B, 234C, 80AC, 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID, 80-IE, Chapter VI-A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘ SM ‘ Bench, Hyderabad
Before: Shri Ravish SoodShri Madhusudan Sawdia
आदेश/ORDER Per Madhusudan Sawdia, A.M.: This appeal is filed by the Federation of AP Cooperative Urban Banks and Credit Societies Ltd, Hyd (“the assessee”), feeling aggrieved by the order passed by the Learned Addl/JCIT(A), Kochi, (“Ld. First Appellate Authority”) dated 31.03.2024 for the A.Y. 2019-20.
At the outset, it is observed that there is a delay of 290 days in filing of the present appeal before the Tribunal. The assessee has filed a petition for condonation of delay along with an affidavit explaining the reasons for the same. The Learned Authorised Representative (“Ld. AR”) submitted that the assessee- society had filed its appeal before the Ld. First Appellate Authority on 03.03.2021 and had mentioned in Form No. 35 the e-mail address belonging to Shri K.S. Venkat Rao, a senior member of the society who was designated as Chief Executive Officer, for communication of notices. In the year 2024, after the retirement of Shri Venkat Rao, the society updated its official e-mail ID. However, in the interregnum, the Ld. First Appellate Authority passed the appellate order on 31.03.2024 and transmitted it to the earlier e-mail ID associated with Shri K.S. Venkat Rao. Since he had already left the society, the order did not reach the management of the assessee-society. After the retirement of Shri K.S. Venkat Rao, Shri Raghavendra Rao, the President of the society was looking after the tax matters of the society. The assessee came to know of the appellate order only on 30.12.2024, when it received a recovery communication from the Revenue authorities. It was explained that during the intervening period Shri Raghavendra Rao had been suffering from cardiac problems followed by spinal disorder, for which he was under medical treatment and temporarily incapacitated. After his recovery, he arranged to file the appeal without further delay. Medical records substantiating his condition have been placed on record. The Ld. AR therefore submitted that the delay was neither deliberate nor
Page 2 of 11 intentional but occurred due to circumstances beyond the control of the assessee. It was prayed that, in the interest of justice, the delay be condoned and the appeal admitted for adjudication on merits.
Per contra, the Learned Departmental Representative (“Ld. DR”) opposed the condonation, contending that there was an inordinate delay of 290 days, and that the assessee has not demonstrated sufficient cause for such prolonged inaction. The Ld. DR, therefore, prayed that the delay should not be condoned.
We have considered the rival submissions and perused the material placed on record. The explanation tendered by the assessee-society is that the appellate order of the Ld. First Appellate Authority dated 31.03.2024 was sent to the earlier e- mail ID of Shri K.S. Venkat Rao, who had retired from the society, and thus the communication never reached the present management. The assessee became aware of the order only upon receipt of a recovery notice dated 30.12.2024 from Revenue. Thereafter, the President of the society, who had been under medical treatment for cardiac problems followed by spinal disorder, promptly arranged to file the present appeal. The supporting medical certificates and affidavit have been examined. In our considered view, the reasons stated constitute a reasonable and bona-fide cause for the delay. The explanation does not show any element of negligence or malafide intention. Further, we find that the Hon’ble Supreme Court, in the case of Vidya Shankar Jaiswal vs. The Income Tax Officer, Ward-2, Ambikapur in Special
Page 3 of 11 Leave Petition (Civil) Nos. 26310-26311/2024, dated 31st January, 2025, has held that a justice-oriented and liberal approach should be taken while dealing with the application filed by an appellant seeking condonation of the delay in filing of the appeal. Accordingly, taking a judicial and liberal approach, we condone the delay of 290 days in filing the appeal and admit the same for adjudication on merits.
5. The assessee has raised the following grounds of appeal:
“1. The order issued u/s 143(1) of the Act is contrary to the facts and also to the law applicable to the facts of the case.
2. The disallowance of deduction of Rs. 36,70,431/- claimed by the appellant u/s 80P of the Act is outside the scrap of adjustments that can be made in the intimation u/s 143(1) of the Act.
3. Without prejudice to the above, the disallowance of the deduction of Rs. 36,70,431/- claimed u/s 80P of the Act is not justified.
4. Further, without prejudice to Ground No. 2 and Ground No. 3 the income of the appellant is exempt as per the ‘Principle of Mutuality’ and hence the same is not liable tax.
Charging of interest of Rs. 1,71,300/- u/s 234A, Rs. 2,51,354/- u/s 234B and Rs. 57,672/- u/s 234C of the Act is not justified.
6. Any other grounds that may be urged at the time of hearing with the leave of the Hon’ble Tribunal.”
The brief facts of the case are that the assessee is a cooperative society which filed its return of income for the Assessment Year 2019–20 on 27.11.2020, declaring total income
Page 4 of 11 at Nil, after claiming deduction under Section 80P of the Income Tax Act, 1961 (“the Act”) amounting to Rs.36,70,431/-. The return of income of the assessee was processed under Section 143(1) of the Act by the Centralised Processing Centre (“CPC”) on 02.02.2021, wherein the CPC disallowed the deduction claimed under Section 80P of the Act, on the ground that the assessee had not filed its return within the due date prescribed under Section 139(1) of the Act, as the extended due date for filing the return was 31.08.2019. Consequently, the CPC determined the total income of the assessee at Rs.36,70,431/-.
Aggrieved by the said adjustment of CPC, the assessee preferred an appeal before the Ld. First Appellate Authority. The Ld. First Appellate Authority, however, was not convinced with the submissions made by the assessee and upheld the disallowance made by the CPC.
Aggrieved by the order of the Ld. First Appellate Authority, the assessee is now in appeal before this Tribunal. At the outset, the Ld. AR submitted that the sole issue arising out of the present appeal of the assessee relates to the disallowance of deduction of Rs.36,70,431/- claimed under Section 80P of the Act through adjustment made by the CPC under Section 143(1). In this regard, the Ld. AR invited our attention to Section 143(1)(a)(v) and submitted that this sub-clause was amended by the Finance Act, 2021 with effect from 01.04.2021, and therefore, the same would not be applicable to the assessment year under consideration. The Ld. AR contended that prior to the amendment,
Page 5 of 11 the scope of adjustment under Section 143(1)(a)(v) was restricted to disallowance of deductions claimed under Sections 10AA, 80- IA, 80-IAB, 80-IB, 80-IC, 80-ID or 80-IE, and did not include Section 80P of the Act within its ambit. Accordingly, the CPC exceeded its jurisdiction by making such disallowance while processing the return under Section 143(1). The Ld. AR further submitted that the Ld. First Appellate Authority had wrongly upheld the disallowance by referring to sub-clause (ii) of clause (a) of Section 143(1), which is a general clause authorising adjustment of incorrect claims apparent from the return. He submitted that specific provisions override general provisions, and therefore, sub-clause (v) of clause (a) being a specific clause dealing with disallowance of deductions under sections 10AA, 80- IA, 80-IAB, 80-IB, 80-IC, 80-ID or 80-IE, should prevail over the general clause. As such, the disallowance of deduction under Section 80P of the Act not covered by the specific sub-clause (v) could not have been made under the general sub-clause (ii). Further, in support of his submissions, the Ld. AR placed reliance on the decisions of the Coordinate Benches of the Tribunal in the case of Narhari Maharaj Manjoor Sahakari Sanstha Ltd. v. ITO, order dated 16.07.2025 and Pahalampur Samabay Krishi Unnayan Ltd. v. ITO, order dated 02.09.2025, wherein under identical facts, the Tribunal held that disallowance of deduction under Section 80P of the Act cannot be made through adjustment under Section 143(1). Finally, the Ld. AR prayed before the Bench to delete the addition of Rs.36,70,431/-.
Per contra, the Learned Departmental Representative (“Ld. DR”) supported the order of the Ld. First Appellate Authority and submitted that the CPC had rightly disallowed the deduction under Section 80P of the Act since the assessee failed to file its return within the due date prescribed under Section 139(1) of the Act. He contended that the disallowance was in conformity with Section 143(1)(a)(ii) which permits adjustment in respect of incorrect claims apparent from the return of income. Accordingly, the Ld. DR prayed before the Bench to uphold the order of the Ld. First Appellate Authority.
We have carefully considered the rival submissions and perused the material available on record. The short issue for consideration before us is whether the CPC was justified in disallowing the deduction claimed under Section 80P of the Act while processing the return under Section 143(1) of the Act. In this regard, it is crucial to refer to provisions of sections 143(1) (a), which is to the following effect:
“143. (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:— (a) the total income or loss shall be computed after making the following adjustments, namely:— (i) any arithmetical error in the return; (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; (iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished
Page 7 of 11 beyond the due date specified under sub-section (1) of section 139; (iv) disallowance of expenditure 68[or increase in income] indicated in the audit report but not taken into account in computing the total income in the return; (v) disallowance of deduction claimed under sections 10AA, 80-IA, 80-IAB, or 80-IB, 80-IC, 80-ID section 80-IE, if the return is furnished beyond the due date specified under sub- section (1) of section 139; or (vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return: Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode: Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made: Provided also that no adjustment shall be made under sub- clause (vi) in relation to a return furnished for the assessment year commencing on or after the 1st day of April, 2018;”
On a perusal of above, it is evident that Section 143(1)(a)(v) empowered the CPC to make adjustment for disallowance of deductions claimed under Sections 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or 80-IE only, and did not extend to Section 80P of the Act. We further observed that the said sub- clause was amended by the Finance Act, 2021 with effect from 01.04.2021, to expand its scope to include any deduction claimed under the provisions of Chapter VI-A under the heading “C— Deductions in respect of certain incomes”, which thereby brought Section 80P of the Act within its fold. In the present case, the assessment year involved is 2019–20; therefore, the amended provision would not apply retrospectively. Hence, the CPC had no Page 8 of 11 jurisdiction to make the impugned adjustment under Section 143(1) of the Act disallowing deduction under Section 80P of the Act. In this regard, we have gone through the relevant portion of the order of the Ld. First Appellate Authority placed at page no.7 and 8 of the appellate order, which is to the following effect:
On perusal of the above, we find that the reliance placed by the Ld. First Appellate Authority on sub-clause (ii) of clause (a) of Section 143(1) is misplaced, since that clause is a general provision enabling correction of apparent mistakes in the return, whereas sub-clause (v) is a specific provision dealing with disallowance of deductions under sections10AA, 80-IA, 80-IAB, 80- IB, 80-IC, 80-ID or 80-IE. It is a well-settled principle of law that specific provisions override general provisions, and accordingly, sub-clause (ii) cannot be invoked where a specific sub-clause exists. We have also gone through para no.5 of the order of Coordinate
Page 9 of 11 Bench of the Tribunal in the case of Narhari Maharaj Manjoor Sahakari Sanstha Ltd. (supra), which is to the following effect:
“5. I have heard rival contentions and perused the record placed before me. Admittedly the assessee society has filed the return of income on 06.12.2018 which is after the due date of filing the return u/s 139(1) i.e. 30.09.2018. As per section 80AC of the Act for claiming deduction u/s 80P of the Act assessee is required to furnish the return of income within the due date prescribed u/s 139(1). However the return of the assessee has been processed by CPC, u/s 143(1) of the Act. Now CPC has to process the return strictly as per section 143(1)(a) and in the said section upto 31.03.2021 there had been no specific provisions for making Prime Facie adjustments for disallowing deduction claimed u/s 80P of the Act. Therefore prior to 01.04.2021, CPC could not make Prime-Facie adjustments by disallowing deduction u/s 80P of the Act for delay in filing the return. This issue has been dealt by this Tribunal on number of occasions. In the written submissions, assessee has referred and relied on the decision of this tribunal in the case of NRB Bearings Sevakachi Patsanstha (Supra) and Finolex Industries Ltd. Employees Coop Credit Society Ltd. (Supra), wherein it has been held that the legislature has introduced such disallowance provisions in section 143(1)(a)(v) dealing with deduction claim(s) provided in Chapter VIA of the Act by way of Finance Act, 2021 w.e.f 01.04.2021 with prospective effect and therefore prior to 01.04.2021 the disallowance u/s 80P of the Act cannot be made in the returns processed u/s 143(1)(a) of the Act. Respectfully following the same and taking a consistent view, I hereby hold that Ld. CIT(A) erred in affirming the action of the CPC. Finding of the Ld. CIT(A) is set aside and disallowance of deduction u/s 80P of the Act is hereby deleted. Grounds of appeal raised by the assessee allowed as per terms indicated above.”
13. On perusal of the above, we find that the Tribunal has held that prior to 1.4.2021 the disallowance under section 80P of the Act cannot be made in the return processed under section 143(1)(a) of the Act. Therefore, on the basis of our aforesaid observation and on the basis of the findings given by the Coordinate Bench of the Tribunal in the case of Narhari Maharaj
Page 10 of 11 Manjoor Sahakari Sanstha Ltd. (supra), we hold that the disallowance of deduction under Section 80P of the Act by CPC is beyond the scope of adjustment permissible under Section 143(1) of the Act for the year under consideration. Accordingly, we set aside the order of the Ld. First Appellate Authority and direct the Learned Assessing Officer to delete the disallowance of deduction under Section 80P of the Act amounting to Rs.36,70,431/- made while processing the return under Section 143(1).
In the result, appeal filed by the assessee is allowed.