THE TAL CO-OPERATIVE AGRICULTURE SERVICE SOCIETY LTD.,HAMIRPUR vs. ITO, WARD, HAMIRPUR

The Assessee filed its return of income declaring total income at NIL after claiming deduction u/s 80P of the Income-tax Act, 1961 (in short, ‘the I.T. Act’ ) amounting to Rs. 3,50,177/-. The return was processed by the CPC, Bangalore u/s 143(1) of the I.T. Act, denying the deduction claimed u/s 80P. The Assessee filed rectification application before the AO, stating that the deduction claimed had wrongly been denied by the CPC. The AO, rejecting the application, observed that the return of income had been filed late; that the due date u/s 139 (1) of the Act was 31.08.2018, whereas the return had been filed on 13.03.2019; and that according to section 80AC, after 01.04.2018, and no deduction under Chapter VIA heading ‘C’ would be allowed unless the return was filed before the due date u/s 139(1) of the I.T. Act.

In its appeal before the Ld. CIT(A), the Assessee contended that the Audit Report under the Act had taken time to complete, which was the reason for the delay in filing the return, which delay was beyond the Assessee; that the Audit Report was dated 11.02.2019, and it was only after filing thereof, that the return was filed on 13.03.2019; that the amendment under section 80C is advisory and not mandatory; that no opportunity of hearing had been given to the Assessee; and that such an adjustment could not be made u/s 143(1) of the Act. Reliance was placed on, inter alia, ‘M/s Chirakkal Service Cooperative Bank Ltd.’, 384 ITR 190 (Kerala), holding that even if the return was filed late, the deduction u/s 80P of the Act should be allowed, as long as the return is filed within the time allowed u/s 139(4) of the Act.

By virtue of the impugned order, the ld. CIT(A) dismissed the appeal. It was observed that the provisions of section 80AC are applicable from assessment year 2018- 19 onwards; that as per these amended provisions, no deduction under Chapter VIA, Part C can be allowed, unless the return is filed within the time allowed u/s 139(1) of the Act; that the amendment covers deduction u/s 80P as well; that since the provision uses the expression ‘shall’, there is no scope to consider reasonable cause, etc.; that in this case, the Audit Report had been obtained after the date prescribed under section 139(1) and, as such, it is not a case where the Audit Report was uploaded within time but the return was filed late; that the return having been filed late, in accordance with the provisions of section 143(1) (a) (ii), the provisions of section 80AC would limit and disallow the deduction u/s 80P; and that the decisions relied upon pertain to the pre- amended provisions of section 80AC and, therefore, they are not applicable.

Before us, besides reiterating the stand taken by the Assessee before the ld. CIT(A), the ld. counsel for the assessee has placed reliance on the various decisions of the ITAT, Chandigarh Benches, rendered on 30.08.2022 in case of ‘The Lanjani Co- operative Agri Service Society Ltd., VPO Lanjani, Kangra (HP) vs. The DCIT (CPC) Bangaluru’, for assessment year 2018-19, the Balol Co-op Agriculture Service Society Ltd. Vs. The CIT(CPC) Bangaluru in ITA No. 79/Chd/2022, dt. 15/12/2022, The Karohta Co-op Agriculture Service Society Ltd. Vs. ITO, Ward Hamirpur in ITA No. 447/Chd/2022 dt. 24/03/2023, The Mundkhar Co-op. Agriculture Service Society Ltd. Vs. The ITO, Ward Hamirpur in ITA No. 513/Chd/2022 dt. 05/04/2023, The Ambaradi Seva Shakari Mandi Ltd.. and Notification of Govt. Of India, Ministry of Finance, Department of Revenue, Central Board of Direct Taxes regarding Condonation of delay under clause(b) sub section (2) of section 119 of Income Tax Act, 1961.

On the other hand, the ld. DR has placed strong reliance on the impugned order.

We have heard the rival contentions and have perused the material on record. It is not in question that section 80AC of the I.T. Act, as amended by Finance Act, 2018, stipulated that for claiming deduction u/s 80P of the Act, the return of income was required to be filed before the due date, as prescribed by section 139(1) and in the present case, the return was filed belatedly. However, it was only by the amendment to section 143(1) (a)(v) brought in by Finance Act, 2021, that the CPC can be said have been vested, exercising powers u/s 143(1)(a), to make disallowance on the ground of belated return. Prior to that, as per the un-amended provisions, the AO could disallow a claim u/s 143(1) (a) only on the grounds of arithmetical error or that the Assessee had made an incorrect claim, etc. Reference, in this regard, may be had to ‘Fatehraj Singhvi & Ors. v. UOI and Ors’; 289 ITR 602 (Kar.). It goes without saying that in the absence of enabling powers, no disallowance can be made. As such, enabling provisions being absent, the CPC did not have the jurisdiction to make the disallowance in question, in the order u/s 143 (1) of the Act. For this, we find support from ‘The Lanjani Co-operative Agri Service Society Ltd., VPO Lanjani, Kangra (HP) v. The DCIT (CPC) Bangaluru’ (supra) and various other decisions of the Coordinate Benches cited supra.

For the above discussion, finding merit in the grievance raised by the Assessee, the same is accepted. The order under appeal is accordingly reversed. Consequently, the disallowance of Rs. 3,50,177/- is cancelled.

In the result, the appeal is allowed.