Case Law Details
Medi Seva Sahakari Mandali Ltd Vs ADIT (ITAT Rajkot)
Held by the Rajkot Bench of the Income Tax Appellate Tribunal in the case of [2023] 146 taxmann.com 3 (Rajkot – Trib.) Medi Seva Sahakari Mandali Ltd. V ADIT (CPC) that deduction u/s 80P could not be denied only on the basis that assessee did not filed the Return of Income within due date prescribed u/s 139(1) of the Income Tax Act, 1961.
The Assesse is a Co-operative society & filed its Return of Income after the due date mentioned in Section 139(1) & also claimed deduction u/s 80P of the IT Act, 1961. However, the deduction u/s 80P was denied while processing of the Return of Income u/s 143(1)(a) of the Act on the ground that the Return was not filed within the due date.
Against the intimation u/s 143(1)(a) the Assessee preferred an appeal before the Commissioner of Income tax (Appeals). The CIT(A) while passing the order u/s 250 referred to the provisions of Section 80AC & held that No Deductions under the Part – C of Chapter VI-A ‘’Deduction in respect of certain incomes’’ which includes Section 80P also if the assessee fails to submit the Return of Income within the due date. The CIT(A) further states that the Jurisdiction of Section 143(1) also includes disallowance of deduction u/s 80P as it falls under the ‘’Incorrect claim in the return of income & such claim is apparent from any information in the return’’.
The ITAT observed that Section 80AC amended vide Finance Act, 2018 i.e., w.e.f. Assessment Year 2018-19. As per the amended provisions the deduction under Part C of the Chapter VI ‘’Deduction in respect of Certain Incomes’’ shall not be allowed to an assessee unless he furnished the return of the Income within the due date prescribed u/s 139(1) of the Act. However, Section 143(1)(a)(v) of the Act that disallowed the deduction claimed under any of the provision of Chapter VI – Part C which includes Section 80P is effective from Assessment Year 2021-22. Hence, the amendment would not apply to the impugned Assessment Year.
The Relevant extracts of the ITAT Judgment in Para 7.1 are worth-noting ‘’………………………………………………………we also note that amendment has been introduced in section 143(1)(a)(v) of the Act to provide that the claim of deduction under section 80P of the Act can be denied to the assessee, in case the assessee does not file its return of income within the time prescribed under section 139(1) of the Act with effect from 1-4-2021 and does not apply to the impugned assessment year i.e. assessment year 2019-20 relevant to financial year 2018-19. Accordingly, in our considered view, denial of claim under section 80P of the Act would not come within the purview of prima facie adjustment under section 143(1)(a)(v) of the Act, for the simple reason that the section was not in force during the period under consideration i.e. assessment year 2019-20.
Hence, the appeal is allowed to the Assessee.
FULL TEXT OF THE ORDER OF ITAT RAJKOT
This assessee’s appeal for A.Y. 2019-20, arises from order of National Faceless Appeal Centre (NFAC), Delhi vide DIN and Order No. ITBA/NFAC/S/250/2021-22/1037911824(1) dated 17-12-2021, in proceedings under section 143(1) of the Income Tax Act, 1961; in short “the Act”.
2. The assessee has taken the following grounds of appeal:-
“1. The learned Commissioner (Appeals), National Faceless Appeal Centre, Delhi failed to appreciate that order passed u/s 143(1) is bad in law because provisions of Sec. 143(l)(a)(v) do not provide for denial of deduction u/s 80P of the Act when the return of income is not filed within time limit as provided u/s 139(1) of the Act but u/s 139(4).
2. The learned Commissioner (Appeals), National Faceless Appeal Centre, Delhi erred in upholding action of the CPC Bengaluru in making adjustment to the returned income of the Appellant by way of an intimation u/s 143(1) and in denying the benefit of Sec. 80P of the Act of Rs. 5,52,154/- to the Appellant by failing to appreciate that this was not permissible u/s 143(l)(a) of the Act.
3. The learned Commissioner (Appeals), National Faceless Appeal Centre, Delhi, on merits, erred in disallowing deduction of Rs. 5,52,154/- claimed by the Appellant under various sub-sections of Sec. 80P of the Act as per return of income filed for the year.
4. The appellant craves leave to add, amend, alter and withdraw any ground of appeal anytime up to the hearing of this appeal.
Total Tax Effect Rs. 1,70,615/-”
3. The brief facts of the case are that the assessee is a co-operative society, who filed return of income on 28-11-2020 declaring total income of Rs. Nil and claimed deduction of Rs. 5,52,154/-under section 80P of the Act. Thereafter, the assessee received intimation under section 143(1)(a) of the Act making adjustment in the returned income and not granting deduction of Rs. 5,52,154/- claimed in the return of income under section 80P of the Act, since the return of income was not filed within the due date prescribed under section 139(1) of the Act.
4. The assessee filed appeal against the order of Ld. CIT(A), who dismissed assessee’s appeal with the following observations:
“6.2 Decisions: The order u/s. 143(1), the statement of facts, and the submissions furnished by the appellant have been considered.
6.3 On perusal of the provisions of section 80AC it is noted that prior to Financial Act, 2018, in computing the total income of an assessee of the previous year relevant to the assessment year commencing on the 1st day of April, 2006 or any subsequent assessment year, for any deduction admissible under section 80-IA or section 80-IAB or section 80-IB or section 80-IC, 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.
6.4 Vide Amendment in the Act vide Financial Act , 2018, to have one principle in respect of certain incomes, it was proposed that the scope of section 80AC shall be extended to all similar deductions which are covered in heading “
C.— Deductions in respect of certain incomes” in Chapter VIA. Deduction under section 80 (P) is covered under the head of Chapter-C.
6.5 After this amendment, from AY 2018-19 onwards, deduction u/s 80(P) will be available only if return is filed on or before the due date . In view of the existing provision for the relevant assessment year, the adjustment u/s 143(1 (a) can be made under the clause (ii) of the said section which says” an incorrect claim, if such incorrect claim is apparent from any information in the return.” The information of filing the return after the due date is very much apparent from the return and therefore, the disallowance of claim of deduction u/s 80(P) by making adjustment u/s 143(1)(a)(ii) is justified and appropriate. Addition of Rs. 5,52,154 is therefore, confirmed. Grounds of appeal No. 2 & 3 are DISMISSED.”
5. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(A) denying assessee’s claim of exemption under section 80P of the Act,
6. Before us, the counsel for the assessee submitted that CPC made adjustment to income of the assessee by denying assessee’s claim of deduction of Rs. 5,52,154/- under section 80P of the Act on the ground that the claim of assessee was incorrect under section 143(1)(a)(ii) of the Act since the return of income was not filed within the due date prescribed under section 139(1) of the Act. The counsel for the assessee submitted that the adjustment made by the CPC was beyond the scope of section 143(1)(a)(v) of the Act. The counsel for the assessee submitted that 143(1)(a)(v) of the Act was amended w.e.f. 01-04-2021 and hence any prima facie adjustment relating to denial of deduction when the return of income was not filed within due date, was not possible for the year under consideration. Further, “incorrect claim” u/s 143(1)(a)(ii) of the Act is defined by way of an Explanation to section 143(1) of the Act which does not state that the claim would be “incorrect” if return of income is not filed within the due date. Hence, the action of CPC is bad in law and therefore Ld. CIT(A) erred in facts and in law in holding that the assessee is not eligible for claiming deduction under section 80P of the Act for not filing return within the due date prescribed under section 139(1) of the Act. In response, Ld. Departmental Representative relied upon the observations made by Ld. CIT(A) in the appellate order.
7. We have heard the rival contentions and perused the material on record. In the instant facts, admittedly the assessee did not file return of income within the time permissible under section 139(1) of the Act. However, the assessee filed its return of income belatedly on 28-11-2020 and claimed deduction of Rs. 5,52,154/- under section 80P of the Act. The issue for consideration before us is that whether once the return of income is filed beyond the prescribed date under section 139(1) of the Act, can the deduction under section 80P of the Act be denied to the assessee, by way of adjustment under section 143(1) of the Act. On going through the statutory provisions, we observe that 80AC of the Act provides that no such deduction under section 80P of the Act shall be allowed to an assessee unless he furnishes a return of his income on or before the due date specified under section 139(1) w.e.f. assessment year 2018-19 onwards. However, section 143(1)(a)(v) of the Act provides 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 sub-section (1) of section 139. This amendment has been introduced w.e.f. 1-4-2021. Accordingly, the above amendment would not apply to the impugned assessment year. Further, section 143(1)(ii) of the Act permits adjustment in case of an incorrect claim, if such incorrect claim is apparent from any information in the return. However, Explanation to the aforesaid section specifies the following cases where the claim made in the return of income can be said to be “incorrect” for the purposes of this subsection:
(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
7.1 A joint reading of the above provisions makes it evident that the claim of deduction under section 80P of the Act cannot be allowed the assessee, if the assessee does not file its return of income within the due date stipulated under section 139(1) of the Act w.e.f. assessment year 2018-19 onwards. However, we also note that amendment has been introduced in section 143(1)(a)(v) of the Act to provide that the claim of deduction under section 80P of the Act can be denied to the assessee, in case the assessee does not file its return of income within the time prescribed under section 139(1) of the Act with effect from 01-04-2021 and does not apply to the impugned assessment year i.e. assessment year 2019-20 relevant to financial year 2018-19. Accordingly, in our considered view, denial of claim under section 80P of the Act would not come within the purview of prima facie adjustment under section 143(1)(a)(v) of the Act, for the simple reason that the section was not in force during the period under consideration i.e. assessment year 2019-20.
7.2 The second issue for consideration is that whether the case of the assessee would fall within the purview of prima facie adjustment under section 143(1)(a)(ii) (an incorrect claim, if such incorrect claim is apparent from any information in the return). In our view, the scope of the adjustments that can be made under the said provision has been elaborated in the Explanation to the aforesaid section, which 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) (an incorrect claim, if such incorrect claim is apparent from any information in the return). We also observe that the counsel for the assessee has filed copies of orders passed by Commissioner (Appeals), NFAC in many other cases of cooperative societies having similar issues, in which it has been held that section 143(1)(a)(ii) of the Act does not deal with disallowance of deduction for deed filing of return of income and also the said adjustment is not permissible under section 143(1)(a)(v) of the Act.
7.3 We note that in the case of Chirakkal Service Co-Operative Bank Ltd. Kannur v. CIT [2016] 68 taxmann.com 298 (Kerala), the Kerala High Court held 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 the case of ASR Engg. & Projects Ltd. [2019] 111 taxmann.com 49 (Hyderabad – Trib.), the ITAT held that to be eligible to make claim under section 80-IA or any other section of Chapter VI A, assessee should have filed return of income under section 139(1) and even if it did not make claim for deduction in original return and subsequently file revised return making such claim, its claim for deduction under section 80-IA is maintainable. Therefore, where assessee had filed return under section 139(1), it was entitled to claim deduction under section 80-IA even if such claim was not made in original return but subsequently in revised return filed in response to notice issued under section 153A.
7.4 We note that the instant case, there was a few-month delay in filing the return of income by the assessee for the assessment year 2019-20 and return of income was filed within due date permissible u/s 139(4) of the Act, in which the claim for deduction u/s 80P of the Act was made. Therefore, looking into the totality of facts, we are of the view that claim of deduction u/s 80P of the Act cannot be denied to the assessee only 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 , in light of the discussion and judicial precedents highlighted above. Therefore, in the interests of justice, we are restoring the case to the file of the Ld. CIT(Appeals) for fresh adjudication on merits of the case after giving due opportunity of hearing to the assessee.
8. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 31-10-2022
Author Bio
Will it be applicable for AY 2020-21 also?