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Facts
The assessee, a primary agriculture credit cooperative society, filed its return of income for AY 2021-22 beyond the due date. The CPC processed the return and disallowed the claim for deduction under Section 80P, determining income at Rs. 14,59,690/-. The assessee appealed to the CIT(A) and then to the Tribunal.
Held
The Tribunal held that the CPC erred in processing the return and making adjustments before the expiry of the statutory response period, violating principles of natural justice. The matter was restored to the AO for fresh adjudication.
Key Issues
Whether the CPC's action of processing the return and disallowing deduction under Section 80P before the expiry of the statutory response period is valid and if the delay in filing the return impacts the eligibility for deduction under Section 80P.
Sections Cited
143(1), 139(1), 139(8A), 80P, 80AC, 143(1)(a)(ii), 139, 142(1), 148, 80A(5), 80P(2)(a)(vi), 10AA, 90, 90A, 91, 89
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Income Tax Appellate Tribunal, Hyderabad “A” Bench, Hyderabad
करदाता का प्रतततितित्व/ Assessee : Shri T. Chaitanya Kumar, Represented by Advocate. राजस्व का प्रतततितित्व/ Department : Shri Ashutosh Pradhan, Sr. D.R. Represented by सुिवाई समाप्त होिे की ततति/ Date of : 23.06.2025 Conclusion of Hearing घोर्णध की तधरीख/Date of Pronouncement : 30.06.2025 O R D E R प्रनत रवीश सूद, जे.एम./PER RAVISH SOOD, J.M.
The present appeal filed by the assessee co-operative society is directed against the order passed by the Addl/JCIT(Appeal)-2, 2 Primary Agriculture Cooperative Society, Wankidi Mumbai, dated 18.02.2025, which in turn arises from the intimation issued by the Assessing Officer (for short “A.O.”)/CPC, Bangalore u/s 143(1) of the Income Tax Act, 1961 (for short “the Act”) dated 13.12.2024 for A.Y. 2021-22. The assessee has assailed the impugned order on the following grounds of appeal before us:
“1. The order of the Learned Commissioner of Income-tax (Appeals) [CIT(A)] is erroneous in law and on facts, and hence unsustainable.
2. The learned CIT(A) erred in upholding the assessment order u/s 143(1) without appreciating that the CPC passed the intimation order on 13.12.2024 before the expiry of the statutory response period, i.e., 14.12.2024, as provided under section 143(1) and its second proviso, thereby violating principles of natural justice.
3. The learned CIT(A) erred in holding that the processing of return before the expiry of the statutory time is an irregularity and not an illegality, contrary to the express provisions of section 143(1) of the Act.
4. The learned CIT(A) grossly erred in confirming the disallowance of the appellant's claim for deduction under section 80P of the Act, without appreciating that the CPC passed the order without granting the Appellant a fair opportunity to present its case, which renders the proceedings void ab initio.
The learned CIT(A) failed to consider that the CPC processed the return and raised demand u/s 143(1) even before the due date for filing the response expired, thus depriving the Appellant of its statutory right to reply, which is violative of natural justice.
The learned CIT(A) erred in confirming the CPC's view that the Appellant is not eligible for deduction under section 80P due to delay in filing the return, without considering that the delay occurred due to reasonable cause and the claim is otherwise legally allowable.
7. The learned CIT(A) failed to appreciate that the addition under section 143(1)(a)(ii) was made on an incorrect interpretation of the provisions of section 80AC read with section 80P and judicial precedents, resulting in undue hardship to the Appellant.
3 Primary Agriculture Cooperative Society, Wankidi
8. The learned CIT(A) erred in dismissing the appeal in a mechanical manner, without granting the Appellant a proper hearing opportunity, thereby violating the principles of natural justice.
9. The Appellant craves leave to add, alter, amend or withdraw any of the above grounds or to submit such additional grounds as may be deemed necessary during the hearing of the appeal.”
Succinctly stated, the assessee, which is a primary agriculture credit cooperative society is engaged in multi-facet activities viz.,
(i) business of purchase/sale of fertilizers and seeds for the benefits of its members; and (ii) granting loans and advances to its members relating to their agricultural related activities.
Ostensibly, the assessee society had e-filed its return of income for the subject year i.e. A.Y.2021-22 under Section 139(8A) of the Act on 02.12.2023. The Central Processing Centre (for short “CPC”), Bangalore, while processing its return of income, vide its communication dated 4.11.2024 proposed to withdraw the claim raised by the assessee society for deduction under Section 80P of the Act, for the reason that it had failed to file its return of income within the “due date” prescribed under Section 139(1) of the Act, and provided it with a window of 30 days for furnishing its reply which was to be reckoned from the date of receipt of the said communication. Thereafter, the CPC, Bangalore vide its intimation 4 Primary Agriculture Cooperative Society, Wankidi issued u/s 143(1) of the Act, dated 13.12.2024 declined the assessee society’s claim for deduction under Section 80P(2)(a)(vi) of the Act, and determined its income at Rs.14,59,690/-.
Aggrieved, the assessee society carried the matter before the CIT(A) but without success. For the sake of clarity, the observations of the CIT(A) are culled out as under:
“7: DECISION 7.1 The first ground is that The learned CPC (Centralized Processing Centre) erred in passing the order u/s143(1) before the expiry of time given under section 143 (1) The CPC (Centralized Processing Centre) has processed the return on 13.12.2024 Date of Intimation seeking clarification was 14:11 2024 hence the 30 days expires on 13.12.2024. It is seen that CPC processed the Return exactly on the 30th day. It is seen that appellant was given sufficient time to respond. The appellant has responded only on the 31st day. Without prejudice to the above, this only makes the process irregular and not illegal. More over the appellant is once again given an opportunity to explain his case in the appeal proceedings This ground of appeal is dismissed. 7.2 Vide this ground the appellant is contesting the addition made u/s 143(1)(a). The CPC made the adjustment on the following grounds To claim deduction u/s 80P, Return of income required to be filed with in the due date 139(1). However Return of Income filed beyond the due date. requiring the claim of deduction u/s 80P to be disallowed. This requires adjustment to the Income within the section meaning of 143 and accordingly this is an opportunity provided to respond within the time allowed. It is seen that the appellant has filed return u/s 139(8A) on 2/12/2023 when the due date of filing return was 31/10/2021 which was subsequently extended to 15/2/2022. Hence the appellant has filed his
5. Primary Agriculture Cooperative Society, Wankidi return much after the due date of filing return. No original return was filed by the appellant. In the instant case, the assessment year under consideration is AY 2021-22 and appellant has filed the return of income on 2/12/2023, which is beyond the normal due date as per Section 139(1). Therefore, as per the amended provisions of sec. 80AC which are applicable for AYs 2018-19 and onwards, the appellant is not eligible to claim exemption u/s 80P of the Act. In a recent judgement of Nileshwar Rangekallu Chethu Vyavasaya Thozhilali Sahakarana Sangham vs. Commissioner of Income-tax [2023] 152 taxmann.com 347 (Kerala)/[2023] 459 ITR 730 (Kerala) [14- 03-2023]it has been held that Where returns filed by assessee-society were beyond dates prescribed under sections 139(1), 139(4), 142(1) or 148 and non-est in view of provision of section 80A(5), precondition to claim deduction under section 80P had not been fulfilled and therefore assessee was not entitled to benefit of exemption under section 80P(2)(a)(vi) Therefore, in application of the above decisions of the High court and also the mandated provisions of the statute the amended provisions of sec. 80AC, the Assessing Officer has rightly disallowed the exemption claimed and made addition of the same to the total income of the appellant as per the provisions of section 143(1)(a)(ii). Accordingly. I am not inclined to interfere with the decision of the Assessing Officer These grounds of appeal are hereby dismissed. In the result, appeal is dismissed.”
5. The assessee society, being aggrieved with the order of CIT(A), has carried the matter in appeal before us.
6. Shri T. Chaitanya Kumar, Advocate, the learned Authorized Representative (for short, “Ld. AR”) for the assessee society, at the threshold of hearing of the appeal, submitted that the CPC, Bangalore had grossly erred in law and on facts of the case in summarily processing the income of the assessee society at 6 Primary Agriculture Cooperative Society, Wankidi Rs.14,59,690/-. Elaborating on his contention, the Ld. AR submitted, that though the CPC, Bangalore, had vide its communication dated 14.11.2024 called for a clarification from the assessee society regarding its entitlement for deduction u/s 80P of the Act, and had provided it with a time window of 30 days for furnishing its objection, but, it had before the lapse of the said period, vide an intimation issued u/s 143(1) of the Act, dated 13.12.2024 summarily processed the return of income and declined its claim for deduction u/s 80P of the Act. The Ld. AR submitted that on a conjoint reading of the “1st Proviso” and “2nd Proviso” to Section 143(1) of the Act, it can safely be gathered that in case the A.O/CPC, Bangalore proposes any adjustment to the returned income of an assessee, then it is statutorily obligated to communicate the same to the assessee and call for his explanation/response, and thereafter proceed in the manner therein contemplated, viz. (i). that in case response is received from the assessee, then the same shall be considered before making any adjustment; and (ii). in case where no response is received within thirty days of the issue of such intimation, such adjustment shall be made. Stressing on the second part, the Ld. AR submitted that 7 Primary Agriculture Cooperative Society, Wankidi it is only when no response is received from the assessee within 30 days after receipt of the communication of the proposed adjustment that the AO/CPC, Bangalore can make the said adjustment. The Ld. AR submitted that as per the mandate of law, the A.O/CPC, Bangalore after intimating to the assessee society the proposed adjustment to its returned income is obligated not to carry out any such adjustment within 30 days of such communication. The Ld. AR submitted that though in the case of the present assessee society, the period of 30 days reckoned from the date of communication of the proposed adjustment i.e. on 14.11.2024 lapsed on 15.12.2024, but the CPC, Bangalore had during the said statutory period available with the assessee society to raise its objection to the said proposed adjustment, processed its return of income vide an intimation issued u/s 143(1) of the Act, dated 13.12.2024. The Ld. AR submitted that the A.O/CPC, Bangalore had though allowed the assessee society a window of 30 days for objecting to the proposed adjustment, but it had before the lapse of the said period declined its claim for deduction u/s 80P vide intimation u/s 143(1) of the Act, dated 13.12.2024, 8 Primary Agriculture Cooperative Society, Wankidi therefore, the said adjustment not being as per the mandate of law cannot be sustained and is liable to be struck down.
On merits, the Ld. AR submitted that the assessee society had filed its application with the PCIT-2, Hyderabad seeking condonation of the delay involved in filing the return of income u/s 139(1) of the Act which had formed the very genesis for declining its claim for deduction u/s 80P of the Act, and the same is pending disposal as on date.
Per contra, Sri Ashuthosh Pradhan, the learned senior Departmental Representative (for short “Ld. DR”), submitted that as the assessee society had failed to file its return of income on or before the “due date” specified u/s 139(1) of the Act, therefore, as per Section 80AC of the Act its claim for deduction u/s 80P had rightly been declined by the A.O/CPC, Bangalore.
We have heard the learned Authorized Representatives of both parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that were pressed into service by the Ld. AR to drive home his contentions.
9 Primary Agriculture Cooperative Society, Wankidi
As the Ld. AR has assailed the validity of the jurisdiction assumed by the A.O/CPC, Bangalore, for processing its return of income u/s 143(1) of the Act, dated 13.12.2024, therefore, we shall first deal with the said issue.
The Ld. AR claims that as the A.O/CPC, Bangalore had divested the assessee society of its statutory right to furnish its objections to the proposed adjustment that was communicated to it on 14.11.2024, therefore, the processing of its return of income vide intimation issued u/s 143(1) of the Act, dated 13.12.2024 is liable to be quashed on the said count itself. Before proceeding any further, it will be apposite to cull out the provisions of Section 143(1) of the Act, to the extent relevant to the issue in hand, as under: Section 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 beyond the due date specified under sub-section (1) of section 139; 10 Primary Agriculture Cooperative Society, Wankidi
(iv) disallowance of expenditure [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 [section 10AA or under any of the provisions of Chapter VI-A under the heading "C.— Deductions in respect of certain incomes", 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; (b) the tax, interest and fee, if any, shall be computed on the basis of the total income computed under clause (a); (c) the sum payable by, or the amount of refund due to, the assessee shall be determined after adjustment of the tax, interest and fee, if any, computed under clause (b) by any tax deducted at source, any tax collected at source, any advance tax paid, any relief allowable under section 89, any relief allowable under an agreement under section 90 or section 90A, or any relief allowable under section 91, any rebate allowable under Part A of Chapter VIII, any tax paid on self-assessment and any amount paid otherwise by way of tax, interest or fee; (d) an intimation shall be prepared or generated and sent to the assessee specifying the sum determined to be payable by, or the amount of refund due to, the assessee under clause (c); and (e) the amount of refund due to the assessee in pursuance of the determination under clause (c) shall be granted to the assessee: Provided that an intimation shall also be sent to the assessee in a case where the loss declared in the return by the assessee is adjusted but no tax, interest or fee is payable by, or no refund is due to, him:
11 Primary Agriculture Cooperative Society, Wankidi Provided further that no intimation under this sub-section shall be sent after the expiry of [nine months] from the end of the financial year in which the return is made. Explanation.—For the purposes of this sub-section,— (a) "an incorrect claim apparent from any information in the return" shall mean a claim, on the basis of an entry, in the return,— (i) of an item, which is inconsistent with another entry of the same or some other item in such return; (ii) in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished; or (iii) in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction; (b) the acknowledgement of the return shall be deemed to be the intimation in a case where no sum is payable by, or refundable to, the assessee under clause (c), and where no adjustment has been made under clause (a).”
On a careful perusal of the mechanism provided for making adjustments u/s 143(1)(a) of the Act, we find that the legislature while enlarging the provisions of said section had set out the aforesaid manner and methodology which is to be strictly followed. As per the “1st proviso” to Section 143(1) of the Act, the A.O. before making any adjustment to the returned income of an assessee shall statutorily communicate the proposed adjustment to him. Thereafter, the A.O. shall proceed in the manner contemplated in the “2nd Proviso” to Section 143(1) of the Act, viz. (i). that in case the response is received from the assessee, then the same shall be considered before making any adjustment; and (ii). in case where 12 Primary Agriculture Cooperative Society, Wankidi no response is received within thirty days of the issue of such intimation, such adjustment shall be made. On a careful perusal of the “2nd proviso” to Section 143(1) of the Act, it can safely be gathered that the A.O. is statutorily obligated not to carry out any adjustment to the returned income of the assessee within a period of 30 days from the date of communication of the proposed adjustment to the assessee.
We have given thoughtful consideration to the issue in hand and are unable to persuade ourselves to subscribe to the whimsical manner in which the A.O/CPC, Bangalore had traversed beyond the aforesaid mandate of law. The A.O/CPC, Bangalore despite having communicated to the assessee about the proposed adjustment, and allowing him a period of 30 days to respond to the same, had thereafter before the lapse of the said period carried out the adjustment vide his intimation issued u/s 143(1)(a) of the Act, dated 13.12.2024. As we cannot remain a mere spectator of the aforesaid whimsical exercise carried out by the A.O/CPC, Bangalore which violates the clear mandate of Section 143(1)(a) of the Act, therefore, in all fairness, and in order to both safeguard the assessee society from being saddled with any 13 Primary Agriculture Cooperative Society, Wankidi such tax liability which is not as per the mandate of law; and at the same time ensuring that there is no leakage of revenue to which the Government exchequer is duly entitled for, restore the issue to the file of A.O. for fresh adjudication. The A.O shall in the course of the set aside proceedings, in strict adherence of the mandate of the “1st Proviso" and “2nd Proviso” to Section 143(1)(a) of the Act, call for the objections of the assessee society to the proposed adjustment and re-adjudicate the matter. The Grounds of Appeal No(s) 2 to 5 are allowed for statistical purposes in terms of our aforesaid observations.
As we have restored the matter to the file of A.O. for fresh adjudication, therefore, we refrain from adverting to and adjudicating the grounds based on which the impugned disallowance of the assessee's claim for deduction u/s 80P of the Act has been assailed before us, which, thus, are left open. The Grounds of Appeal No(s) 6 to 8 are disposed of in terms of our aforesaid observations.
The Grounds of Appeal No(s)1 and 9 being general in nature are dismissed as not pressed.
14 Primary Agriculture Cooperative Society, Wankidi
Resultantly, the appeal of the assessee society is allowed for statistical purposes in terms of our aforesaid observations.
Order pronounced in the Open Court on 30th June, 2025. (मंजूनाथ जी) (श्री रवीश सूद) (MANJUNATHA G.) (RAVISH SOOD) लेखा सदस्य/ACCOUNTANT MEMBER न्यायिक सदस्य/JUDICIAL MEMBER Hyderabad, dated 30.06.2025. TYNM/sps