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Facts
The assessee filed its return of income claiming a deduction under Section 80P. The CPC disallowed this claim under Section 143(1) without providing specific reasons. The assessee contended that the CPC lacked jurisdiction for such disallowance as it was not an 'apparent incorrect claim'.
Held
The Tribunal held that the disallowance made by the CPC under Section 143(1) was not sustainable in law. Following various High Court decisions, the Tribunal directed the Assessing Officer to allow the deduction claimed by the assessee under Section 80P.
Key Issues
Whether the CPC has the jurisdiction to disallow a deduction under Section 143(1) without specific reasons and whether the disallowance was justified in light of judicial precedents on Section 80P deductions for cooperative societies.
Sections Cited
250, 143(1), 143(1), 139, 142, 10AA, 89, 90, 90A, 91, 80P(2)(a), 80P(4), 80P(2)(a), 80P
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Income Tax Appellate Tribunal, PUNE BENCHES “A” :: PUNE
Before: DR.DIPAK P. RIPOTE & SHRI VINAY BHAMORE
This is an appeal filed by the assessee against the order of ld.Commissioner of Income Tax(Appeal)[NFAC], Delhi passed under section 250 of the Income Tax Act, 1961 dated 28.08.2024 for the A.Y.2021-22 emanating from the order under section 143(1) of the Act dated 28/12/2022. The Assessee has raised the following grounds of appeal :
1. On the facts and the circumstances of the case and in law, lower authorities erred in passing ex-parte order and erred in deciding the [A] issue only on the basis of material available with them, this action is being violative of principal of natural justice. Your appellant prays for granting opportunity of hearing before lower authorities. Without prejudice to the above grounds of appeal
, following grounds are also taken on merit,
2. On the facts and in the circumstances of the case and in law, the learned Assessing CPC erred in disallowing the claim of deduction of Rs. 4,81,84,840/- u/s 80P of the IT Act, by passing intimation order u/s 143(1) dated 28/12/2022. The action of CPC is legally not tenable as such disallowance cannot be termed as prima facie adjustments as envisaged u/s 143(1). Your appellant prays for allowing the deduction u/s 80P as claimed. Your appellant prays for deletion of entire addition. Your appellant craves for to add, alter amend, modify, delete any or all grounds of appeal before or during the course of hearing in the interest of natural justice.”
Submission of ld.AR :
The ld.AR for the Assessee filed a paper book. Ld.AR submitted that CPC has disallowed assessee’s claim for deduction u/s 80P of the Act. He submitted that the CPC do not have jurisdiction u/s. 143(1) of the Act. Ld.AR invited our attention to the reply filed by the assessee on 26/12/2022, wherein Assessee had already elaborately explained the claim of the assessee. However, the CPC has failed to consider the submission dated 26/12/2022 and passed the order u/s 143(1) on 28/12/2022. Ld.AR invited our attention to various decisions of the ITAT Pune wherein claim of 80P has been allowed. Submission of ld.DR :
Ld.DR for the Revenue relied on the order of the CIT(A) and order u/s. 143(1). 2
We have heard both the parties and perused the records. In this case, the assessee had filed Return of Income on 09/01/2022 under section 139(1) of the Act. The due date of filling Return of Income was 15/03/2022. Thus the Return was filed withing the due date mentioned in the act as extended by CBDT. The Assessee had claimed deduction u/s 80P of the Act.
4.1 However, it is observed that CPC under section 143(1) of the Income Tax Act has disallowed the assessee’s claim of deduction u/s 80P of the Act. We have studied the order u/s 143(1) carefully and observed that no where in the order the CPC has given reasons for disallowance of deduction u/s 80P of the Act. Ld.DR could not explain the Reason for disallowance by CPC.
The section 143(1) of the Act is reproduced here as under :
“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; (iv) disallowance of expenditure 82[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 83[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 3 (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, 84[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: Provided further that no intimation under this sub-section shall be sent after the expiry of 85[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 4 intimation in a case where no sum is payable by, or refundable to, the (c), and where no adjustment has been made under clause (a). In this case the Return was filled within due date hence subclause (v) of Section 143(1) will not be applicable.
5.1 Also the other sub clauses are not applicable in this case. Thus, apparently there is no specific provision under which the CPC has disallowed the claim of deduction/s 80P of the Act.
The Ld.CIT(A) in his order has confirmed the disallowance relying on decision of Hon’ble Supreme Court in the case of Totagars Coopertaive Sale Society Ltd vs ITO .
In this case the Ld.CIT(A) has erred in not taking into consideration that the Order appealed is the Order u/s.143(1) of the Act which mentions specific instances where disallowance can be made. Hence the decision relied by the Ld.CIT(A) is not applicable to the case under consideration.
Be it as it may be, the Hon’ble High Court of Andhra Pradesh and Telangana in the case of Vavveru Co-operative Rural Bank Ltd. [2017] 396 ITR 371 analysed the provisions of Section 80P, succinctly distinguished the decision of Hon’ble Supreme Court in the case of Totagar Cooperative Sale Society, and held as under :
Quote,“ 8. Therefore, the real controversy arising in these writ petitions is as to whether the income derived by the petitioners by way of interest on the fixed deposits made by them with the banks, is to be treated as profits and gains of business attributable to any one of the activities indicated in sub-clauses (i) to (vii) of clause (a) of sub-section (2) of section 80P or not.
While the petitioners place strong reliance upon a decision of the Division Bench of this court in CIT v. Andhra Pradesh State Co- 5 operative Bank Ltd. [2011] 12 taxmann.com 66/200 Taxman 200/336 ITR 516, the Revenue places strong reliance upon the decision of the Supreme Court in Totgar's Co-operative Sale Society Ltd. v. ITO [2010] 188 Taxman 282/322 ITR 283. ……………………
The case before the Supreme Court in Totgar's Co-operative Sale Society Ltd.'s case (supra) was in respect of a co-operative credit society, which was also marketing the agricultural produce of its members. As seen from the facts disclosed in the decision of the Karnataka High Court in Totgars, from out of which the decision of the Supreme Court arose, the assessee was carrying on the business of marketing agricultural produce of the members of the society. It is also found from paragraph-3 of the decision of the Karnataka High Court in Totgar's Co-operative Sale Society Ltd.'s case (supra) that the business activity other than marketing of the agricultural produce actually resulted in net loss to the society. Therefore, it appears that the assessee in Totgars was carrying on some of the activities listed in clause (a) along with other activities. This is perhaps the reason that the assessee did not pay to its members the proceeds of the sale of their produce, but invested the same in banks. As a consequence, the investments were shown as liabilities, as they represented the money belonging to the members. The income derived from the investments made by retaining the monies belonging to the members cannot certainly be termed as profits and gains of business. This is why Totgar's struck a different note.
But, as rightly contended by the learned senior counsel for the petitioners, the investment made by the petitioners in fixed deposits in nationalised banks, were of their own monies. If the petitioners had invested those amounts in fixed deposits in other co-operative societies or in the construction of godowns and warehouses, the respondents would have granted the benefit of deduction under clause (d) or (e), as the case may be.
The original source of the investments made by the petitioners in nationalised banks is admittedly the income that the petitioners derived from the activities listed in sub-clauses (i) to (vii) of clause (a). The character of such income may not be lost, especially when the statute uses the expression "attributable to" and not any one of the two expressions, namely, "derived from" or "directly attributable to". 37. Therefore, we are of the considered view that the petitioners are entitled to succeed. Hence, the writ petitions are allowed, and the order of the Assessing Officer, in so far as it relates to treating the interest income as something not allowable as a deduction under section 6 80P(2)(a), is set aside.” Unquote.
8.1 Thus, Hon’ble High Court of AP &TS held that Interest Income earned by investing Income derived from Business and Profession by a Co-Operative Society was eligible for deduction u/ s80P(2)(a) of the Act.
9. Similarly, Hon’ble Bombay High Court in the case of Pr.CIT vs M/s. Annasaheb Patil Mathadi Kamgar Sahakari Pathpedhi Ltd. INCOME TAX APPEAL NO. 933 OF 2017 vide Order dated 14/10/2019 has held as under :
Quote, “ 2. The Revenue urges the following two questions of law for our consideration :- (a) Whether on the facts and circumstances of the case and in law, the Tribunal is correct in holding that assessee is entitled to deduction u/s 80P(2)(a) and (d) of the IT Act, 1961? (b) Whether on the facts and circumstances of the case and in law, the Tribunal is right to allow the relief to the assessee by holding that the assessee being Co-operative Credit Society is not a Co-operative Bank hence entitled for deduction u/s 80P(4) of the I.T. Act despite the fact that the assessee is carrying on the banking business and has been categorized as Co-operative Bank / other Bank ? 3. Regarding question (a) (a) It has not been shown to us that the respondent has in any manner breached Section 80P(2)(a) and (d) of the Act. (b) Thus, no substantial question of law arises for ourconsideration. Thus, not entertained. ………. ” Unquote. 9.1 Thus the appeal was decided in favour of Annasaheb Patil Mathadi Kamgar Sahakari Pathpedhi by the Hon’ble Jurisdictional High Court.
In these facts and circumstances of the case, respectfully following Hon’ble High Court (supra) we hold that the disallowance 7
In the result Appeal of the assessee is allowed. Order pronounced in the open Court on 29th Aug, 2025.
Sd/- Sd/- VINAY BHAMORE Dr.DIPAK P. RIPOTE JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; �दनांक / Dated : 29th Aug, 2025/ Satish आदेशक��ितिलिपअ�ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, “ए” ब�च, पुणे / 5. DR, ITAT, “A” Bench, Pune. गाड�फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकरअपीलीयअिधकरण, पुणे/ITAT, Pune.
S. Details Date Initi Designati No als on 1 Draft dictated on 28.08.2025 Sr. PS/PS 28.08.2025 2 Final Draft placed before author Sr. PS/PS .08.2025 3 JM/AM Draft proposed & placed before the Second Member 4 Draft discussed/approved by Second Member AM/AM 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order