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Income Tax Appellate Tribunal, BENCH : COCHIN
Before: SHRI GEORGE GEORGE K. & Ms. PADMAVATHY S.
Date of hearing : 02.03.2023 Date of Pronouncement : 08.03.2023 O R D E R
Per Padmavathy S, Accountant Member:
The stay petition and the appeal by the assessee is against the order of the CIT(Appeals), National Faceless Appeal Centre, Delhi [NFAC] dated 26.10.2022 for the assessment year 2019-20.
The assessee raised the following grounds of appeal –
1. The order of Commissioner (Appeals) National Faceless Centre, Delhi dated 26/10/2022 is opposed to the facts of the case and not legally maintainable.
SP No.76/Coch/2022 & Page 2 of 9 2. The first appellate authority is not justified in sustaining the disallowance made by Centralized Processing Centre by disallowing chapter VI A deduction of Rs 43,17,817/-since the appellant has filed the return under section 139(4) of the act and made the above claim.
The return for the above was filed on 25/09/2020 by claiming deduction under section SOP of the act to an extent of Rs 43,17,817/- and both the Centralized Processing Centre and first appellate authority are not justified in denying the above deduction 4. The provision containing section 80 AC of the act as to the filing of the return within the due date specified under section 139(1) of the act, in order to claim deduction under section SOP of the act, is only directory and not Mandatory.
5. The appellant is relying on the decision of the Income Tax Appellate Tribunal Chennai ( Chen-Trib) 2022 ITL 1605 TPD 101 Uthangarai Milk-Producers Co-Operative Society Ltd .v. ITO . in the view of the above decision the appellant is eligible for the claim made under chapter VI A to an extent of Rs 43,17,817/- 6. The appellant being a Co-Operative Society registered under the Kerala Co-Operative Societies Act, 1969, is subject to audit under section of the act, by the Co-Operative Audit department. It is also a fact that the audit of the appellant's books of accounts has been carried out by the department audit and such audit was completed after the due date of filing income tax Return. The delay in filing of the return is on account of delay in completion of audit by the Co-Operative Department and such delay cannot attributed to the assessee, because, completion of audit by the Department, is not in the hands of assessee. The only reason, not filed the return within due date, the deduction under chapter VI A , section 80 P(2) of the IT Act, not be denied. We pray for the kind consideration.
SP No.76/Coch/2022 & Page 3 of 9 Relief Claimed in the Appeal 1. To Hold that the Appellant is entitled to deduction Under section 80 P (2)(a) of the Income Tax Act,1961 and deduction of Rs 43,17,817 /- of total income- 2. To Waive the tax and interest of Rs 18,51,990/- 3. To admit any other grounds which may arise at the time of hearing the appeals.”
3. The assessee is a co-operative society with the main object of providing credit facilities to its members. The assessee filed the return of income for AY 2019-20 on 25.9.2020 admitting a total income of Rs.43,17,817 and claimed deduction u/s. 80P(2) of the Income-tax Act, 1961 [the Act] amounting to Rs.43,17,817. The return was processed u/s. 143(1)(a) denying the benefit of section 80P to the assessee. The assessee filed a petition for rectification u/s.154 requesting allowance of deduction u/s.80P which was rejected by the AO. Aggrieved, the assessee preferred appeal before the CIT(A).
The CIT(A) confirmed the disallowance by stating that the assessee has filed the return belatedly and therefore in accordance with section 80AC of the Act, deduction u/s. 80P cannot be allowed as per the amended provisions w.e.f. 1.4.2018. Aggrieved the assessee is in appeal before the Tribunal.
Before us, the ld. AR submitted that the amount disallowed u/s. 80P(2) is allowable on merits as per the decision of the Hon’ble Supreme Court in the case of Mavilayil Service Coop. Bank Ltd. v. CIT [2021] 123 taxmann.com 161. The ld AR further submitted that the SP No.76/Coch/2022 & Page 4 of 9 provisions contained in section 80AC of the Act as to the filing of return within the due date specified u/s. 139(1) of the Act in order to claim deduction u/s. 80P is only directory and not mandatory. In this regard, the ld. AR relied on the decision of the Chennai Tribunal in the case of Uthangarai Milk Producers Co-op. Society Ltd. v. ITO [2022] ITL 1605 TPD 101 (Chennai Trib). The ld. AR further submitted that the assessee is a co-op society registered under Kerala Co-operative Societies Act and is subject to audit under the said Act. The delay in filing the return of income is on account of delay in completion of audit by the co-operative department and such delay cannot be attributed to the assessee. Accordingly, the ld. AR submitted that the deduction u/s. 80P cannot be denied only for the reason that the assessee has not filed the return within the due date.
We heard the parties and perused the material on record. The issue for consideration before us is that whether when the return of income is filed beyond the prescribed date u/s. 139(1) of the Act, can the deduction u/s. 80P of the Act be denied to the assessee, by way of adjustment u/s. 143(1)(a) of the Act. Section 80AC has been amended w.e.f. 01.04.2018 to provide that – 80AC. Where in computing the total income of an assessee of any previous year relevant to the assessment year commencing on or after— (i) *** (ii) the 1st day of April, 2018, any deduction is admissible under any provision of this Chapter under the heading "C.—Deductions in respect of certain incomes", SP No.76/Coch/2022 & Page 5 of 9 no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139.
From the above amended provisions it is clear that an assessee cannot claim deduction u/s.80P after 01.04.2018 if the return of income is not filed within the due date prescribed u/s.139(1). In assessee’s case it is an admitted fact that the return of income is filed belatedly on 25.09.2020 claiming the deduction u/s.80P for an amount of Rs.43,17,817 which has been denied in the intimation u/s.143(1)(a). Though as per the provisions of section 80AC, the assessee is denied the deduction u/s.80P it is also important to examine whether the same can be done u/s.143(1)(a). In this regard we will look at the provisions of section 143(1)(a) which 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; (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 68[or increase in income] indicated in the audit report but not taken into account in computing the total income in the return; SP No.76/Coch/2022 & Page 6 of 9 (v) disallowance of deduction claimed under 69[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: *********** 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) ****** 8. In the given case the applicable clauses for making the disallowance u/s.80P is either 143(1)(a)(ii) or 143(1)(a)(v). An amendment is brought into section 143(1)(1)(v) to provide that disallowance of deduction claimed under any of the provisions of Chapter VI-A under the heading "C.—Deductions in respect of certain incomes" (which includes deduction under section 80P of the Act), can be made if the return is furnished beyond the due date specified under SP No.76/Coch/2022 & Page 7 of 9 sub-section (1) of section 139. Prior to the amendment the deduction could be denied only for sections 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or section 80-IE. The year under consideration is AY 2019-20 and therefore the section prior to the amendment is what is applicable to assessee, that does not cover the deduction u/s.80P. The amended clause is not applicable to assessee’s case since the same is effective only from 01.04.2021. Accordingly it is clear that the denial of deduction u/s.80P could not be done u/s.143(1)(a)(v).
Now coming to whether the deduction can be denied u/s.143(1)(ii) which permits an adjustment in case of an incorrect claim, if such incorrect claim is apparent from any information in the return. The explanation to section 143(1) specifies what is to be construed as an “incorrect claim apparent from any information in the return” as extracted above, from the perusal of which it is clear that, the scope of the adjustments that can be made under the said provision does not include denial of deduction claimed by the assessee in case the assessee does not furnish its return of income within the date stipulated under section 139(1) of the Act. The Explanation to the said section specifically provides for cases/instances when the claim made by the assessee could be said to be "incorrect". Therefore, in our considered view, the case of the assessee would also not fall within the purview of prima facie adjustment under section 143(1)(a)(ii).
We further notice that as per the ratio laid down by the jurisdictional High Court in the case of Chirakkal Service Co- Operative Bank Ltd. v. CIT (2016) 384 ITR 490 (Ker) where it is held SP No.76/Coch/2022 & Page 8 of 9 that a return filed by assessee beyond period stipulated under section 139(1) or 139(4) or under section 142(1) or section 148 can also be accepted and acted upon for entertaining claim raised under section 80P provided further proceedings in relation to such assessments are pending in statutory hierarchy of adjudication in terms of provisions of Act. In view of these discussion and considering the facts of the case we are of the view that claim of deduction u/s 80P of the Act cannot be denied to the assessee on the basis that the assessee did not file return of income its return of income within due date u/s 139(1) of the Act through an intimation u/s.143(1)(a). Accordingly, in the interests of justice, we restore the case to CIT(A) for fresh adjudication on merits of the case keeping in mind the decision of the Hon’ble Supreme Court in the case Mavilayil Service Coop. Bank Ltd (supra), after giving due opportunity of hearing to the assessee. It is ordered accordingly.
In view of the disposal of the appeal, the stay petition has become infructuous and dismissed as such.
In the result, the appeal by the assessee is allowed for statistical purposes and the stay petition is dismissed.
Pronounced in the open court on this 8th day of March, 2023.