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Facts
The assessee, a co-operative society, filed a NIL income return for AY 2018-19, claiming a deduction under Section 80P of Rs. 84,01,394/-. The case was selected for limited scrutiny to verify this deduction. The Assessing Officer's order under Section 143(3) stated no addition would be made, but the accompanying computation sheet disallowed the Section 80P deduction, leading to a tax demand of Rs. 20,19,107/-. The CIT(A) upheld the AO's action, treating the computation sheet as an integral part of the assessment order.
Held
The Tribunal found a clear contradiction between the AO's assessment order, which explicitly stated no addition on the limited scrutiny issue, and the computation sheet, which disallowed the Section 80P deduction. The Tribunal held that once the AO categorically observed no addition in the body of the assessment order, he could not subsequently disallow the deduction via the computation sheet without justification. Therefore, the disallowance and the CIT(A)'s order sustaining it were deemed unsustainable.
Key Issues
Whether a deduction claimed under Section 80P can be disallowed through a computation sheet when the assessment order explicitly states that no addition is being made on the issue selected for limited scrutiny, and if such disallowance without explicit reasoning in the order is legally sustainable.
Sections Cited
143(3), 143(3A), 143(3B), 80P, 147, 148, Chapter VI-A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Visakhapatnam Bench, Visakhapatnam
Before: Shri Manjunatha G. & Shri Ravish Sood
(निर्धारण वर्ा/Assessment Year:2018-19) GMEDAPADU PACS, Vs. Income Tax Officer, East Godavari District, Ward-1, Andhra Pradesh. Kakinada. PAN: AAAAG8455A (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: Sri KSS Sarma, CA रधजस् व द्वधरध/Revenue by: Dr. Aparna Villuri, Sr. AR सुिवधई की तधरीख/Date of Hearing: 16/10/2025 घोर्णध की तधरीख/Date of 19/11/2025 Pronouncement: आदेश / ORDER PER. RAVISH SOOD, J.M: The present appeal filed by the assessee society is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, dated 18/08/2025, which in turn arises from the order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (for short, “the Act”), dated 10/02/2021 for AY 2018-19. The assessee society has assailed the impugned order passed by the AO on the following grounds of appeal:
“1. The order of the Hon CIT(A) is arbitrary and unjustice.
2. The CIT(A) at para no 6.3.7 concluded that the AO completed the assessment in accordance with law and within the permitted scope of scrutiny. He did not verify the assessment order at all as in the assessment order the AO at S.no 2 concluded as follows In view of material on record, no addition on the issue is made. The only issue in this case is deduction from total income under chapter by VIA which was accepted by the AO and the Hon CIT(A) did not give any specific order.
3. The appellant craves leave to add to, amend, alter, delete all or any of the above grounds of appeal.”
Succinctly stated, the assessee society, which is formed for providing credit facilities to its farmer members, had filed its return of income for AY 2018-19 on 29/10/2018 declaring NIL income (after claiming deduction under section 80P of the Act of Rs. 84,01,394/-).
Thereafter, the case of the assessee society was selected for “limited scrutiny” for verifying its claim for deduction from total income under Chapter VI-A.
The AO, vide his order passed under section 143(3) r.w.s 143(3A) & 143(3B) of the Act, dated 10/02/2021 though specifically observed that, in view of material available on record, no addition on the subject issue for which the case of the assessee society was selected for “limited scrutiny” was being made, but the at the same time observed that the assessment of income was being done as per the “computation sheet” and the sum payable was being determined as per the demand notice.
The AO, based on the “computation sheet” which was stated to be an order under section 143(3) of the Act, dated 10/02/2021 for the subject year, i.e., AY 2018-19, determined the income of the assessee (after deduction under Chapter VI-A) at Rs. 84,01,394/-. On a perusal of the “computation sheet”, we find that the assessee’s claim for deduction under section 80P of the Act, i.e., under Chapter VI-A of the Act, was not allowed by the AO while computing its income. Accordingly, the AO, as per the “computation sheet”, dated 10/02/2021, determined the outstanding tax liability of the assessee society at Rs. 20,19,107/-.
Aggrieved, the assessee society carried the matter in appeal before the CIT(A), but without success. For the sake of clarity, the observations of the CIT(A) are being culled out as under: “6.0 Findings & Decision: The appellant, a co-operative society providing credit facilities to its farmer-members, filed its return of income for AY 2018- 19 declaring NIL income after claiming deduction of Rs. 8401394 under section 80P of the Income-tax Act, 1961. The return was filed within the due date along with audited financial statements and supporting documents. The case was selected for limited scrutiny under the e-assessment scheme to examine the allowability of deductions under Chapter VI-A. The AO completed the assessment under section 143(3) on 10.02.2021 and mentioned in the body of the order that no addition was made based on the material available on record. However, in the computation sheet attached to the order, the AO disallowed the entire deduction claimed under section 80P, resulting in a tax demand of Rs. 2019107. The appellant challenged this, alleging inconsistency between the assessment order and the computation sheet.
The appellant contended that the assessment order did not discuss or record any disallowance of the deduction under section 80P and that the AO, if proposing any deviation, should have issued a show cause notice before finalizing the assessment. It was submitted that disallowing the claim without communication or explanation amounts to a denial of natural justice. The appellant maintained that the deduction was correctly claimed under the provisions of the Act and was duly supported by the return and documents filed. Therefore, the computation sheet was claimed to be erroneous and the tax demand arising from it unjustified. The appellant requested that necessary directions be issued to correct the computation and cancel the demand. I have carefully considered the grounds of appeal
, the facts of the case, the assessment order, the computation sheet, and the written submissions filed by the appellant on 25.10.2023, 19.03.2024 and 19.06.2025. However, the appellant has not provided any specific rebuttal or supporting evidence during the appellate proceedings to justify the deduction or to challenge the basis of disallowance by the AO. The submissions remained general in nature and did not address the issue under scrutiny in detail. The matter is therefore adjudicated on the basis of the records available. 6.1 Ground No. 1: Decision: 6.1.1 The appellant has contended that the AO has accepted the returned income and passed the assessment order without making any addition or disallowance. According to the appellant, the body of the order indicates acceptance of returned income, and hence the computation sheet should have reflected the same. It is submitted that the assessment order states that no additions are made based on the material on record, and yet a demand of Rs. 2019107/- has been raised solely due to the figures in the computation sheet, which, as per the appellant, are erroneous and not aligned with the order. 6.1.2 However, this contention is not tenable. The case was selected for limited scrutiny under the e-assessment scheme, specifically to verify the correctness and allowability of deduction claimed under Chapter VI-A. The claim for deduction under section 80P of the Act, amounting to Rs. 8401394/-, was the subject matter of scrutiny. Therefore, the AO was duty- bound to examine the claim in detail. Although the order mentions that no addition has been made based on material on record, it is clear that the AO evaluated the claim of deduction and took a decision which is reflected in the computation sheet. 6.1.3 It is important to note that in current assessment practice, the computation sheet is an integral and operative part of the assessment. The assessment order and computation sheet read together form the final assessment. The AO’s remarks in the body of the order may not always elaborate every adjustment or disallowance, particularly when such actions are reflected in the computation. Therefore, the inference that the AO accepted the returned income simply because no separate narrative disallowance was made in the order is incorrect. 6.1.4 Moreover, the appellant, during appellate proceedings, has not submitted any supporting documents or legal arguments to establish that the computation sheet is factually or legally incorrect. The appellant’s repeated submissions are limited to stating the same facts and requesting correction in the computation sheet without addressing the basis of disallowance or justifying the claim under section 80P. 6.1.5 In the absence of such evidence or reasoning, and given that the issue was under scrutiny, the AO’s decision to disallow the deduction and determine tax payable in the computation sheet is found to be in order. Accordingly, this ground of appeal is dismissed. 6.2 Ground No. 2: Decision: 6.2.1 The appellant has raised a grievance that the AO ought to have issued a show cause notice before making any variation from the returned income, particularly with respect to the disallowance of deduction under section 80P. It is submitted that the absence of such a notice is in violation of the principles of natural justice and that any proposed deviation should have been brought to the notice of the assessee with an opportunity to respond. This argument, though appealing at a general level, does not hold good under the facts and circumstances of the present case. Firstly, the case was selected for limited scrutiny under the e-assessment scheme specifically on the issue of deduction under Chapter VI-A. The appellant was very much aware of the issue under examination. During the assessment proceedings, the AO called for relevant details, and the assessee submitted documents including audit reports, financial statements, and the return of income. The appellant had full knowledge of the issue and had an opportunity to present all relevant materials in support of the claim. 6.2.2 Secondly, in the e-assessment framework, procedural requirements such as issuance of show cause notice are to be interpreted in the context of the automated and document- driven nature of the scheme. Where the issue under scrutiny is known, and opportunity is provided to present the claim, a separate notice to reject a claim is not mandatory, especially when the decision is based on evaluation of documents already filed. The disallowance of a deduction does not amount to a fresh addition beyond the scope of scrutiny but is part of verifying the correctness of claims made. 6.2.3 The AO has not made any addition outside the scope of scrutiny or introduced any new issue. The deduction under section 80P, though claimed, has not been accepted in the final computation. The AO, upon examining the materials submitted, decided to disallow the deduction claimed. There is no procedural lapse or violation of natural justice, as the appellant had every opportunity to substantiate the deduction claim but failed to do so either during assessment or in the course of appellate proceedings. 6.2.4 In view of the above, and considering that the AO operated within the limits of the issue selected for scrutiny, this ground also does not merit acceptance and is therefore dismissed. 6.3 Ground No.3: Decision: 6.3.1 The third ground raised by the appellant is that the assessment order explicitly mentions that no additions were made, yet the computation sheet disallows the deduction under section 80P and raises a tax demand. According to the appellant, this contradiction between the narrative in the order and the figures in the computation sheet is erroneous and creates an unjust tax burden on the assessee. It is submitted that such an action is without basis and not supported by any explanation or reasoning in the assessment order. This ground is not found to be valid in light of the facts of the case. In the current system of assessment under the e- assessment scheme, the order and the computation sheet must be read together. The computation sheet is not a mere annexure but a statutory component of the final order of assessment. Where there is a disallowance or an adjustment made in the computation, it is considered to be part of the assessment outcome, even if it is not separately discussed in the body of the order. 6.3.2 The appellant has misunderstood the structure of the assessment order. The fact that no “additions” were made does not automatically mean that the deduction claimed was accepted. In this case, the AO’s note that no addition was warranted based on the material on record does not preclude the AO from rejecting a deduction claim if the documentation or justification for the same is found to be insufficient. The AO has disallowed the section 80P deduction in the computation, which has resulted in the tax liability. This is not a computational error but a conscious and valid determination of taxable income. 6.3.3 Further, during the appellate proceedings, the appellant has merely reiterated the same grievance without submitting any evidence or legal basis to demonstrate the eligibility of the deduction claimed. No specific arguments or factual rebuttals were made on why the deduction should not have been disallowed. It is also important to note that the disallowance was made within the scope of scrutiny and based on the documents submitted by the appellant. There is no procedural irregularity or legal infirmity in the manner in which the disallowance was carried out. 6.3.4 Hence, the plea that the computation sheet is erroneous and contradictory to the order is unfounded. The disallowance has been properly made in the computation and is deemed to be part of the assessment order. This ground, therefore, stands dismissed. 6.3.5 Furthermore, the appellant has taken a ground that the AO failed to follow the directives of the Hon’ble Supreme Court as laid down in the case of GKN Driveshafts (India) Ltd. v. ITO (2003) 259 ITR
19. (SC). It is contended that the AO disallowed the deduction under section 80P in the computation sheet without communicating any reasons for such disallowance and without affording an opportunity to the assessee to file objections. The appellant argued that such action violates the principles of natural justice and the binding precedent of the Apex Court. I have carefully considered this ground and the applicability of the cited Supreme Court decision. The ruling in GKN Driveshafts (India) Ltd. pertains specifically to reassessment proceedings initiated under section 147 of the Act, where the AO issues a notice under section 148 and is mandated to provide reasons for reopening and dispose of the objections filed by the assessee through a speaking order before proceeding with reassessment. In the present case, however, the assessment was not carried out under section 147. It was a regular assessment under section 143(3), pursuant to a limited scrutiny selection under the e-assessment scheme. The issue under scrutiny was the allowability of deductions under Chapter VI-A, including section 80P. The AO examined the materials and documents filed during the course of assessment and proceeded to disallow the deduction in the computation sheet. There was no reopening of assessment, nor was there any requirement to follow the procedure prescribed in the GKN Driveshafts judgment, which is applicable only in cases of reassessment. Furthermore, the appellant was aware of the scrutiny issue and was provided an opportunity to file responses and documents during assessment proceedings. The appellant’s claim that no reasons were communicated does not hold, as the issue under examination itself involved verifying the allowability of the deduction under section 80P, and the appellant had the opportunity to justify the claim. No separate statutory requirement exists under section 143(3) for the AO to issue a speaking order for each disallowance, particularly when the disallowance falls squarely within the scope of scrutiny. 6.3.6 Accordingly, the decision of the Hon’ble Supreme Court in GKN Driveshafts (India) Ltd. v. ITO is not applicable to the facts of the present case. The ground raised in this regard is therefore dismissed. Conclusion: 6.3.7 In view of the above discussions and findings on each ground, and considering the facts, documents and contentions on record, it is evident that the AO has completed the assessment in accordance with law and within the permitted scope of scrutiny. The appellant has not provided any convincing legal or factual basis to establish error in the assessment or justify the deduction claimed under section 80P. The mere assertion that the returned income was accepted is not sufficient to nullify the computation outcome, especially when the deduction itself was the very subject of scrutiny. 6.3.8 Accordingly, all grounds of appeal are treated as dismissed. 7.0 In the result, the appeal is hereby dismissed.”
We have heard the Learned Authorized Representatives of both parties, perused the orders of the lower authorities, and the material available on record.
Sri KSS Sarma, Chartered Accountant, the Learned Authorized Representative (for short, “Ld. AR”) for the assessee, at the threshold of hearing of the appeal, submitted that the AO had grossly erred in law and facts of the case, wherein he had though vide his order passed under section 143(3) r.w.s 143(3A) &143(3B) of the Act, dated 10/02/2021 after considering the material available on record not made any addition on the issue on which the case of the assessee society was picked up for “limited scrutiny”, i.e., verification of its claim for deduction under Chapter VI-A, but had grossly erred in computing its tax liability at Rs. 20,19,107/- by declining its claim for deduction under section 80P of the Act of Rs. 84,01,387/- as per the “computation sheet”, dated 10/02/2021. The Ld. AR had drawn our attention to the assessment order and the computation sheet enclosed along with the same, Page No. 35-39 of APB. Elaborating further on his contention, the Ld. AR submitted that now when the AO vide his order passed under section 143(3) r.w.s 143(3A & 143(3B) of the Act, dated 10/02/2021, had specifically observed that no addition was being made on the issue for which the case of the assessee society was selected for “limited scrutiny” assessment, therefore, there was no justification on his part in declining its claim for deduction under section 80P of Rs.84,01,387/- and raising the consequential demand in the hands of the assessee society. The Ld. AR vehemently submitted that the computation of the tax liability of the assessee as per the computation sheet is not only self-contradictory, but militates against the observations of the AO recorded in the assessment order, wherein the returned income of the assessee was accepted by him, as such.
Per contra, Dr. Aparna Villuri, the Learned Senior Departmental Representative (for short, “Ld. Sr. DR”), relied upon the orders of the lower authorities.
We have given thoughtful consideration to the contentions of the Learned Authorized Representatives of both parties in the backdrop of the orders of the authorities below and the material available on record.
Ostensibly, the case of the assessee society for the subject year was selected for “limited scrutiny” under E-assessment Scheme, 2019, for verifying its claim for deduction under Chapter VI-A of the Act. As is discernible from the assessment order, we find that the AO had therein specifically observed that in view of the material available on record, no addition on the issue for which the case of the assessee was selected for “limited scrutiny” was being made.
Admittedly, it is a matter of fact borne from the record that there is no whisper in the assessment order about the disallowance of the assessee’s claim for deduction under section 80P of the Act of Rs. 84,01,387/-, i.e., the solitary deduction that was claimed by the assessee society in its return of income under Chapter VI-A. On the contrary, we find that the AO, while framing the assessment, had specifically observed that in view of the material available on record, no addition on the issue for which the case of the assessee society was selected for “limited scrutiny” was being made. Having said so, we are unable to comprehend that, as to how the AO could have thereafter, vide the “computation sheet” which is stated to be an order under section 143(3) r.w.s 143(3A) & 143(3B) of the Act, dated 10/02/2021, declined the assessee’s claim for deduction under section 80P of Rs.84,01,387/- and raised a consequential demand of Rs. 25,17,417/- in its hands.
We find that the Hon’ble Supreme Court in the case of Kalyan Kumar Ray vs. CIT (1991) 191 ITR 634 (SC), had observed, that as assessment is one integrated process involving not only assessment of the total income but also the determination of tax, therefore, the computation sheet enclosed by the AO along with the assessment order undeniably forms a part of the said integrated process of assessment. However, the Hon’ble Apex Court had observed that once the assessee of the total income is complete with indications of the deductions, rebates, reliefs, and adjustments available to the assessee, the calculation of the net tax payable is a process which is mostly arithmetical. Accordingly, it was observed that the computation sheet is also a form for determination of the tax payable and when is signed or initialed by the AO, it is certainly an order in writing of the ITO determining the tax payable within the meaning of section 143(3) of the Act, and, thus, there is no reason as to why such document, which is also in writing and has received the imprimatur of the I.T.O., should not be treated as part of the assessment order in the wider sense in which the expression has to be understood in the context of section 143(3) of the Act.
Although there is no denying of the fact that the computation sheet (as specifically mentioned by the AO in the assessment order) is to be treated as a part of the assessment order, but the controversy involved in the present case is, that now when the AO, vide his order passed under section 143(3) r.w.s 143(3A) & 143(3B) of the Act, dated 10/02/2021, had specifically observed that in view of the material available on record, no addition on the issue is made, i.e., no addition was being made with respect to the issue for which the case of the assessee was selected for limited scrutiny, then was it permissible on his part to have thereafter in the same breath taken a view to the contrary and in the “computation sheet” (forming part of the assessment order) disallowed the assessee’s claim for deduction under section 80P of the Act of Rs.84,01,387/- and computed the consequential tax liability in its hands.
We have given thoughtful consideration and are of the firm conviction that once the AO in the body of the assessment order, had categorically observed that no addition was being made on the issue for which the case of the assessee was selected for “limited scrutiny”, then having said so, he could not have thereafter taken a view to the contrary and based on the “computation sheet”, date 10/02/2021 disallowed the claim of the assessee society for deduction under section 80P of the Act. In fact, we are unable to comprehend that now when the AO vide his assessment order under section 143(3) r.w.s 143(3A) & 143(3B) of the Act, dated 10/02/2021, had after referring to the material available on record, refrained from making any addition on the subject issue, i.e., deduction claimed by the assessee under Chapter VI-A, then, how he could have thereafter based on the “computation sheet” enclosed along with the said order disallowed the claim for deduction under section 80P of the Act that was raised by the assessee society in its return of income.
In our view, the demand raised by the assessee society based on the “computation sheet” (supra) in itself militates against his observation recorded in the body of the assessment order passed under section 143(3) r.w.s 143(3A) & 143(3B) of the Act, dated 10/02/2021.
Even otherwise, we are of the view that a conjoint perusal of the assessment order passed by the AO under section 143(3) r.w.s 143(3A) & 143(3B) of the Act read along with computation sheet, dated 10/02/2021, nowhere reveals to why the claim of deduction raised in the return of income by the assessee society under section 80P of the Act of Rs.84,01,387/- had been disallowed by him while framing the assessment, which, thus, on the said count renders the order passed by him as unsustainable in the eyes of law.
We, thus, in terms of our aforesaid observations, are unable to persuade ourselves to approve the order passed by the CIT(A), who had sustained the disallowance of the assessee’s claim for deduction under section 80P of the Act of Rs. 84,01,387/- and, thus, set aside his order.
Resultantly, the appeal filed by the assessee society is allowed in terms of our aforesaid observations.
Order pronounced in the open court on 19th November, 2025.
Sd/- Sd/- (MANJUNATHA G.) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated 19th November, 2025 *OKK / SPS Copy to: S.No Addresses 1 GMEDAPADU PACS, 13-160 canal road, G Medapadu BO East Godavari, Medapadu B.O-533434, East Godavari District, Andhra Pradesh. 2 Income Tax Officer, WEard-1, Kakinada. 3 The Pr.CIT, Visakhapatnam. 4 The DR, ITAT, Visakhapatnam Bench 5 Guard File By Order
Sr. Private Secretary, ITAT, Visakhapatnam.