Sard Dogri Co-operative Vs DCIT (ITAT Chandigarh)
This case involves an appeal filed by Sard Dogri Co-operative against the order of the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi. The appeal challenges the disallowance of the deduction claimed under section 80P of the Income Tax Act for the Assessment Year 2018-19. The disallowance was made by the CPC Bangalore while processing the return of income under section 143(1) on the ground that the return was not filed within the due date.
The ITAT Chandigarh, after considering the amended provisions of section 80AC and section 143(1)(a)(v) of the Income Tax Act, held that the CPC Bangalore lacked jurisdiction to make the disallowance in question. The tribunal noted that the amendment to section 143(1)(a)(v) by the Finance Act, 2021, empowered the CPC to make disallowances on the ground of belated return. However, this amendment was effective from the assessment year 2021-22 onwards and did not apply to the assessment year 2018-19. Therefore, the tribunal concluded that the disallowance made by the CPC was invalid.
Conclusion: The ITAT Chandigarh allowed the appeal of Sard Dogri Co-operative, deleting the disallowance of the deduction claimed under section 80P of the Income Tax Act. The tribunal held that the CPC Bangalore lacked jurisdiction to make such a disallowance prior to the amendment of section 143(1)(a)(v) by the Finance Act, 2021. Therefore, the disallowance made by the CPC was cancelled.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
This is assessee’s appeal against the order of the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, dated 22.12.2021, for the Assessment Year 20 18-19, taking the following grounds of appeal:-
(i) That in the facts and circumstances of the case the Ld. Commissioner of Income Tax (Appeals) is not justified in upholding the disallowance of deduction claimed under section 80P of the Income Tax Act, 1961 and that too under section 143(1) of the Income Tax Act, 1961.
(ii) That the order of the Ld. Assessing Officer is bad in law and facts.
2. At the outset, it is noted that there has been a delay in filing the present appeal as pointed out by the Registry. After hearing both the parties and pursuing the material on record, the delay is hereby condoned and the appeal is admitted for adjudication.
3. Briefly, the facts of the case are that the assessee filed its return of income declaring total income at Rs. ‘Nil’ after claiming deduction u/s 80P of the Income-tax Act, 1961 amounting to Rs. 7,35,190/-. The return was processed by the CPC, Bangalore u/s 143(1) of the I.T. Act, denying the deduction claimed u/s 80P for the reason that the return of income was not filed with the due date.
4. In its appeal before the Ld. CIT(A), the Assessee contended that though amendment by the Finance Act 2018 in section 80AC, any society claiming deduction under section 80P has to furnish the return of income with due date as specified u/s 139(1) of the Act, at the same time, such deduction cannot be disallowed while processing the return of income under section 143(1) of the Act as existing at the relevant point in time as clause (v) to 143(1)(a) enabling such disallowance has been introduced only by the Finance Act, 2021 which is effective from 01/04/2021 i.e, from assessment year 2021-22 onwards and doesn’t apply to the impugned assessment year.
5. 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 and the provisions of section 80AC would limit and disallow the deduction u/s 80P.
6. 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 decision of the ITAT, Chandigarh Benches, rendered on 30.08.2022 in ‘The Lanjani Co-operative Agri Service Society Ltd., VPO Lanjani, Kangra (HP) vs. The DCIT (CPC) Bangaluru’ (ITA No. 332-338/Chd/202 1), for assessment year 20 18-19 and other cases.
7. On the other hand, the ld. DR has placed strong reliance on the impugned order and the decision of the Hon’ble Madras High Court in the case of Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd. Vs DCIT.
8. In his rejoinder, the ld AR submitted that the Coordinate Bench in case of The Lanjani Co-operative Agri Service Society Ltd (supra) has duly considered the decision of the Hon’ble Madras High Court as referred to by the ld Sr DR.
9. 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 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 decision of the Coordinate Chandigarh Benches in case of ‘The Lanjani Co-operative Agri Service Society Ltd., VPO Lanjani, Kangra (HP) vs. The DCIT (CPC) Bangaluru’ (supra) wherein the relevant findings read as under:
“14. I have heard the submissions and perused the material on record. Since heavy reliance has been placed by the ld. Sr.DR on the impugned order, specific para 8.1. For ready reference of the same is extracted hereunder :
“8.1 Finding on Ground of appeal Nos. 1 to 3
a) The CPC Bangalore has made the addition/adjustment of 1,11,421/- u/s 143(1) of the Act as deduction u/s 80P claimed of Rs.1,11,421/- was disallowed on the ground that return was not filed within the due date. The undersigned has gone through the 143(1) intimation and written submissions filed by the Appellant. These Grounds of Appeal are discussed and decided in subsequent paras of this order.
b) It is not in dispute that from AY. 2018-19, the Appellant for claiming deduction u/s 80P has to file return of income within the due date of filing of ITR as provided in Section 80AC of the IT Act, 1961. Section 80AC was amended by Finance Act, 2018. From AY. 2018-19, all the deductions falling under the heading ‘C of Chapter VIA of IT Act, 1961 were brought into the ambit of this section. Section 80P also falls under the heading ‘C of Chapter VIA of the Act is included in Section 80AC of the Act.
c) The amended Section 80AC provides as under:-
“[Deduction not to be allowed unless return furnished.
80AC. Where in computing the total income of an assessee of any previous year relevant to the assessment year commencing on or after—
(i) the 1st day of April, 2006 but before the 1st day of April, 2018, any deduction is admissible under section 80-IA or section 80-IAB or section 80-IB or section 80- IC or or;
(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”, 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 ]”
d) Thus, from 01.04.2018, the clause(i) of the above section has become inoperative and clause (ii) was introduced which provides that all the deductions falling under the heading ‘C of Chapter VIA of the Act will be allowed only when ITR is furnished before the due date specified u/s 139(1) of the Act. This amendment became effective from AY. 2018-19.
e) In the present case the due date of filing ITR for AY. 2018-19 was 31.08.2018. However, the Appellant filed its return on 13.10.2018 i.e. after the due date for filing of ITR. Appellant had claimed deduction u/s 80P of Rs. 1,11,421/-. As discussed above Section 80P falls under the heading ‘C of Chapter VIA of the Act. Therefore, from AY. 2018-19 and onwards, any assessee claiming deduction u/s 80P has to file its return within due date specified u/s 139(1) of the Act to avail such deduction as required u/s 80AC of the Act. In the present case, the Appellant did not file its return within the due date prescribed u/s 139(1) of the Act for AY. 2018-19, therefore, the AO rightly disallowed deduction u/s 80P of Rs. 1,11,421/- in intimation u/s 143(1). Thus, the action of AO in disallowing deduction u/s 80P is upheld. Grounds of Appeal Nos. 1 to 3 are dismissed.”
14.1 On consideration of the above when read alongwith the arguments advanced before the CIT(A) on behalf of the assessee which have been re-iterated before the ITAT, I find that on facts the case of the assessee is allowable. The AO/CPC Bangalore at the relevant time though considering the amended Section 80AC was exercising the powers as vested by the Section 143(1) of the Act as it then stood. At the relevant point of time, the provisions of Section 143(1) of the Act were as under :
