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Income Tax Appellate Tribunal, “I” BENCH, MUMBAI
This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-28, Mumbai, [in short CIT(A)] in appeal No. CIT(A)-28/IT-765/ITO-17(2)(3)/2015-16 dated 02.03.2017. The Income filed by assessee was processed by ACIT (CPC) Bangalore under section 143(1) of the Income Tax, 1961 (hereinafter ‘the Act’) for AY 2015-16 vide dated 14.12.2015.
At the outset, the learned Counsel for the assessee stated that he has raised the four grounds of appeal but as regards to ground No. 2 and ground No.4, the AO has already allowed for rectification and hence, he is not pressing the same. On query from the Bench, the learned DR has not objected to the issue. Accordingly, these two grounds are dismissed as not pressed.
3. The only issue raised by these two grounds i.e. no. 1 and 3 is as regards to the validity of adjustment made by AO to the returned income of the assessee being deduction claimed under section 80P2(d) of the Act while computing its total income while processing returns under section 143(1) of the Act. On account of validity of adjustment, the assessee has raised the following ground No.1:
“1 :0 Re.: Validity of the adjustment of Rs. 76,53,771/- to the returned income:
1:1 The Commissioner of Income-tax (Appeals) has erred in confirming the action of the Assessing Officer in making an adjustment to the returned income of the Appellant while processing its return of income in terms of section 143(1) of the Income- tax Act, 1961.
1.2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject no adjustment was warranted in the case of the Appellant and the Assessing Officer is illegal, incorrect and unwarranted.
1.3 The Appellant submits at the Assessing Officer be directed to delete the adjustment made by him to the total income as returned and re-compute/ re- process the Appellant's total income accordingly.”
The assessee has also raised this issue on merits reading non granting of deduction under section 80P2(d) of the Act by way of following grounds No. 3:
“3.0 Re.: Non-granting of deduction of Rs. 76,03,771/- under section 80P(2)(d) of the Income- tax Act, 1961:
3:1 The Commissioner of Income-tax (Appeals) has erred in confirming the action of the Assessing Officer in not granting the Appellant a deduction u/s. 8OP(2)(d) of the Income-tax Act, 1961 while computing its total income for the year under consideration.
3.2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, the Appellant is entitled to 3 deduction u/s. 80P(2)(d) of the Income-tax Act, L961 while computing its total income for the year under consideration.
3 3 The Appellant submits that the Assessing Officer be directed to grant deduction u/s. 8OP(2)(d) of the Income -tax Act, 1961 and to re-compute its total income accordingly.”
The only remaining issue is regarding validity of adjustments made by disallowing the claim of deduction under section 80P2(D) of the Act while processing the return of income under section 143(1) of the Act by Centralized Processing Centre (CPC) of Income Tax Department, Bangalore.
Briefly stated facts are that the assessee filed its return of income through E-filing on 30-09-2015. The assessee file the breakup of income which reads as under: - Heads of Income Amount in ₹ Income from House Property 5,86,523 Income from other sources 76,49,603 Gross total Income 82,36,126 Less: Deductions under section 80P 76,53,771 Total Income 5,82,355 Total Income (Rounded off) 5,82,360 7. The assessee has enclosed copy of statement showing computation of total income along with the income tax return in ITR 5, which is enclosed in assessee’s paper book at pages 8 to 46. The assessee claimed deduction under section 80P2(d) of the Act amounting to Rs. 76,53,771/-. The CPC of the Income Tax Bangalore issue processing order of return of income under section 143(1) by disallowing the claim of deduction of Rs. 76,53,771/- vide its intimation dated 14.12.2015. The assessee filed original return of income by declaring total income chargeable to tax at Rs. 5,82,361/-, the CPC of the department issue intimation under section 143(1) of the Act assessing the total income at Rs. 82,36,130/- thereby disallowing the claim of deduction under section 80P2(d) at Rs. 1,76,53,770/- claimed by the assessee. The assessee side by side filed rectification application under section 154 of the Act requesting electronically on the relevant website of the department on 19-01-2016, pointing out that the errors apparent on Rs. 76,53,771/- claimed under section 80P2(d) of the Act. The rectification application was also rejected by the CPC by observing as under:
“Your application vide rectification request no 621614470190116 dated 19-01- 2016 for the above mentioned assessment year cannot be rectified at CPC and hence rejected for the reasons as provided below. Your case has been transferred to the jurisdictional Assessing Officer Mum/W/122/3, who may be contacted for all subsequent actions against the order passed by CPC.
THE ASSESSEE HAS SUBMITTED AN-E-FILED RECTIFICATION REQUEST, CLAIMING DEDUCTION UNDER SECTION 80P. AS SEEN FROM THE E-FILED RETURN OF INCOME AND THE RECTIFICATION REQUEST, FILED BY THE ASSESSEE, THE DEDUCTION, UNDER SECTION 80P, HAS NOT BEEN ALLOWED FOR ONE OF THE REASONS MENTIONED BELOW- ASSESSEE HAS NOT CLAIMED THE DEDUCTIONS UNDER SECTION 80P, IN SCH. VIA. THE SYSTEM HAS CORRECTLY NOT ALLOWED THE DEDUCTION FURTHER, THE DEDUCTIONS UNDER CHAPTER VIA, IS ALLOWABLE ONLY ON THE NON-SPECULATION BUSINESS INCOME AVAILABLE, AFTER SET OFF OF THE CURRENT YEAR FORWARD LOSSES IN VIEW OF THE ABOVE. THIS RECTIFICATION APPLICATION IS TREATED AS DISPOSED. THE RECTIFICATION RIGHTS, IN YOUR CASE ARE BEING TRANSFERRED TO YOUR ASSESSING OFFICER KINDLY CONTACT YOUR ASSESSING OFFICER FOR THE SAME. THE DETAILS OF THE JURISDICTIONAL ASSESSING OFFICER ARE AVAILABLE ON THE WEBSITE http://www.incometaxindiaefiling.gov.in UNDER “SERVICES” KNOW YOUR JURISDICTIONAL A.O.”
Aggrieved, against the intimation passed under section 143(1) of the Act, the assessee challenged the matter before CIT(A). The CIT(A) simply rejected the appeal of assessee by stating that the assessee has already filed application under section 154 of the Act and hence, original intimation us/ 143(1) of the Act stands merged in the order of rectification passed by CPC of the department, Bangalore. He observed that as on date, there exists no order under section 143(1) of the Act. He has not deliberated on any of the aspects raised by assessee. The CIT(A) finally observed in Para 3 as under:-
3. I find that the appeal of the appellant must fall on a technicality itself. The reason is that the original intimation under section 143 (1) stands merged in the order under section 154. Hence, as on the date of hearing there is no order under section 143(1). What remains is an order under section 143(1)1154. The doctrine of merger clearly applies on this and hence the present appeal is technically infructuous. Accordingly, the same is liable for rejection.
Aggrieved, now assessee is in second appeal before Tribunal.
Before us, the learned Counsel for the assessee reiterated all the arguments made before CIT(A) and also filed all the details in its paper books consisting the pages 1 to 80. The learned Counsel for the assessee first of all raised the issue of validity of making adjustment under section 143(1) of the Act, he argued that the disallowance of deduction under section 80P2(d) claimed by the assessee on interest earned on deposits given to co-operative banks amounting to Rs. 76,11,781/- is clearly allowable deduction. As per the provisions there is no scope for any disallowance. Moreover, in any case, it is to be held to be debatable issue under debatable issue cannot be disallowed while
143(1) of the Act. The learned Counsel for the assessee took us through the provisions of section 143(1) and the relevant provisions reads 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; 92[***]
(ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; 93 [(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 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, 80-IB, 80- IC, 80-ID or 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:”
From the above provision of section 143(1), as operative from 01.04.2008, which was introduced with an object to reduce Revenue loss, the provisions of section 143(1) of the Act has been amended to provide that the total income of the assessee shall be computed as this provision is for making adjustment to the total income in the return income of the assessee i.e. (a) any arithmetic error in the return or (b) in incorrect claim, if such incorrect claim is apparent from any information in the return of income. Here in the very section, the meaning of term “incorrect claim apparent from any information in the return” has been defined by inserting an explanation in the said section. The term shall mean such claim on the basis of an entry, in the return for filing (a) an item, which is inconsistent with another entry of the same or some other item in such return; (b) in respect of which, information required to be furnished under this act to substantiate such entry has not been so furnished; or (c) 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.
We have gone through the facts in the present case and noticed that the complete details of the deduction claim under section 80P2(d) on the interest income derived from co-operative banks were filed in the return of income with the CPC. We find no specific reason for not granting of deduction under section 80P2(d) of the Act and how it is incorrect in any manner. Accordingly, the return processed by CPC Bangalore under section 143(1) of the Act disallowing the claim of deduction under section 80P2(d) of the Act, is without any basis and being a highly debatable issue, it cannot be considered while acting 143(1) of the Act. Accordingly, we delete the disallowance of deduction and allow this issue of assessee’s appeal on validity of processing by CPC under section 143(1) of the Act.
Since, we have adjudicated the issue on validity of processing of return under section 143(1) of the Act and allowed the claim of the assessee on the very jurisdiction. Hence, we need not to adjudicate the issue on merits. The appeal of assessee is allowed.
In the result, the appeal assessee is allowed. Order pronounced in the open court on 04-07-2018.