Case Law Details
Pairagacha Cooperative Credit Society Ltd. Vs ITO (ITAT Kolkata)
The ITAT held that the authority to make prima facie adjustments regarding deduction under section 80P of the Act was vested in the CPC only from April 1, 2021. Therefore, the purported disallowance by the CPC falls outside its jurisdiction. Additionally, since no demand notice was issued or served on the assessee for the imposition of the penalty, the penalty is deleted.
Introduction: The case of Pariagacha Cooperative Credit Society Ltd. vs ITO, adjudicated by ITAT Kolkata, revolves around the disallowance of a deduction under section 80P of the Income-tax Act. Here’s an analysis of the proceedings and the final decision.
Analysis: The appeals filed by the assessee against the orders of the Ld. CIT(A), NFAC, Delhi, and the penalty order by the ITO, NFAC, Delhi were heard by ITAT Kolkata. The contention of the assessee primarily revolved around the disallowance of the deduction under section 80P of the Act. The Central Processing Centre (CPC) had denied the deduction solely on the grounds of delayed filing of the return. However, it was noted that before April 2021, CPC did not possess the authority to prima facie disallow claims under section 80P. With the amendment effective from April 2021, CPC gained this power. Therefore, the disallowance made by CPC was deemed beyond its jurisdiction.
Additionally, in the penalty proceedings for AY 2018-19, the imposition of a penalty of Rs. 20,000 under section 271A(d) was challenged by the assessee. It was argued that no demand notice had been issued and served on the assessee for the imposition of the penalty. Upon review, it was found that indeed no demand notice was available. Considering that the assessment had been completed under section 143(3) and there was no demand notice issued, the penalty was deemed unjustified and was consequently deleted.
Conclusion: The ITAT Kolkata, after careful consideration of the arguments presented by both parties, ruled in favor of the assessee in both appeals. The disallowance of deduction under section 80P was overturned due to jurisdictional issues with the CPC. Furthermore, the penalty imposed under section 271A(d) was deleted due to the absence of a demand notice. This case highlights the importance of adhering to procedural requirements and the necessity for authorities to exercise their powers within the bounds of jurisdiction.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
Both these captioned appeals filed by the assessee are against the separate orders of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi vide order nos. ITBA/NFAC/S/250/2023- 24/1052230906(1) & ITBA/NFAC/S/250/2023-24/ 105223 1472(1) both dated 20.04.2023 passed against the penalty order for AY 2018- 19 by ITO, NFAC, Delhi dated 10.08.2021 u/s. 272A(1)(d) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) and against the assessment order by ITO, Ward-23(1), Hooghly dated 22.11.2016 u/s.143(3) of the Act for AY 2019-20 respectively.
2. Both the appeals are time barred by 14 days. In respect of AY 2018-19 the assessee has filed an affidavit explaining the reasons for condonation of delay due to non-existence of board from 01.04.2022 to 01.07.2023, Members of the board were made through election process. Board was reconstituted on 01.07.2023. Considering the stated facts on record, the brief delay of 14 days is condoned.
3. First we take up ITA No. 669/Kol/2023 for AY 2019-20. Grounds of appeal in respect of AY 2019-20 read as under:
1. That the disallowance of claim under section 80P in pursuance to deduction under chapter VIA in intimation u/s. 143(1) is unlawful and unjustified.
2. That the action of the AO in disallowance in intimation u/s. 143(1) of claim u/s. 80P which is a debatable issue and requires scrutinisation and verification is unlawful and unjustified.
3. That the disallowance of claim u/s. 80P in pursuance to deduction under Chapter VIA in intimation under section 143(1) even after allowing in scrutiny assessment proceeding u/s. 143(3) for AY 14-15 and AY 17-18 is unlawful and unjustified.
4. That the Appellant craves leave of adducing such further ground or grounds at any stage of appeal procedure.
5. That the imposition of the interest Rs. 1,50,935/- is unlawful and unjustified.”
4. The sole grievance of the assessee is against the action of the Ld. CIT(A) in confirming the action of the AO disallowing deduction u/s 80P of the Act for delay in filing the return of income.
5. Ld. Counsel for the assessee argued stating the reasons for delay in filing the return, also claimed that no opportunity was granted before making such.
4. On the other hand, the Ld. DR supported the order of the lower authorities.
5. We have heard rival submissions and have gone through the record placed before us. We notice that the assessee is a Co-operative Society engaged in the business of providing credit to its members. The assessee is required under law to get its account audited under the rules and regulations of West Bengal Cooperative Societies Act, 2006 by the auditor appointed by Directorate of Cooperative Societies. For the AY 20 18-19 due date for filing the return was 31.08.2019. However, the return was submitted on 26.06.2020.
6. We note that the Central Processing Centre denied the deduction u/s. 80P of the Act solely for the reason that return was not filed within the due date. Provisions of section 143(1)(a)(v) provides that –
“(v) disallowance of deduction claimed under section 10AA or under any of the provisions of Chapter VIA 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;”
6.1. In the above provision, an amendment brought is in by Finance Act from 01.04.2021 w.e.f. 1.4.21 and before such amendment in place of the phrase section 10A or in any of the provisions of Chapter VIA under the head e – the words “deductions in respect of certain income, previously which was provided as section 10AA, 80IA, 80IB, 80IC, 80ID or section 80IE of the Act were appearing.”
7. From perusal of the said amendment, we note that before 04.2021 there was no mechanism for the CPC to prima facie disallow the claim u/s. 80P of the Act. It was only from 01.04.2021 that such powers have been conferred with the CPC to make prima facie disallowance in case of the claim made u/ .s 1 0AA or deduction claimed under any of the provisions in Chapter VIA which, inter alia, includes 80P of the Act.
8. We note that section 80AC of the Act puts a bar against claiming of deduction in respect of certain income provided under the head (C) of Chapter VIA which includes section 80P of the Act also if the return of income are not filed before the due date prescribed u/s. 139(1) of the Act. Had it been a case of scrutiny proceeding u/s. 143(3) of the Act, the situation certainly would have been against the assessee subject to the approval by the authorities for condonation of delay in filing the return. However, before us, the issue is regarding prima facie adjustment made u/s. 143(1)(a)(v) of the Act and as discussed above, such power of making the prima facie adjustment towards deduction u/s. 80P of the Act came to CPC only from 1.4.2021 and thus, the alleged disallowance by CPC is beyond its jurisdiction. Therefore, the assessee deserves relief. We are thus inclined to hold that the Ld. CIT(A) erred in denying the deduction u/s 80P of the Act for Rs.23,98,593/-. We, therefore, set aside the order of the Ld. CIT(A) and allow the grounds of appeal raised by the assessee for the claim of deduction u/s. 80P of the Act at Rs.23,98,593/-.
9. In the result, appeal of the assessee is allowed.
10. Now, we take up ITA No. 668/Kol/2023 for AY 20 18-19 which is in respect of imposing a penalty of Rs.20,000/- u/s. 271A(d). In this respect, ld. AO has noted that notices u/s. 142(1) were issued and served on the assessee. However, no compliance was made within the stipulated time. For this non-compliance on the part of the assessee penalty of Rs. 10,000/- per default was imposed totalling to 20,000/- for failure of compliance with the notice issued u/s. 142(1). In the impugned penalty order, it is noted that demand notice is issued along with this order. However, assessee claimed that no demand notice has been issued and served on the assessee imposing the said penalty. Aggrieved, assessee went in appeal before the Ld. CIT(A).
11. Before the Ld. CIT(A) assessee contended that notices have not been served on it. It also contended that assessment of the assessee for the impugned assessment year has been completed u/s. 143(3) and, therefore, there is no occasion for the Ld. AO to impose a penalty u/s. 272A(1)(d). Further, it was strongly submitted that a demand notice for imposing the penalty was not accompanied with the penalty order and, therefore, the penalty so imposed is ought to be deleted which is not in accordance with the provisions of law. Ld. CIT(A), however, confirmed the penalty so imposed. Aggrieved, assessee is in appeal before the Tribunal.
12. Before us, ld. Counsel submitted that since the assessment has been completed u/s. 143(3) wherein submissions made by the assessee has been considered by taking them on record there is no occasion for the Ld. AO to impose the penalty. Ld. Counsel also reiterated the submissions made before the Ld. CIT(A) whereby no demand notice has been issued and served on the assessee for the imposition of penalty. According to him, there exists a reasonable cause both on account of assessment being completed u/s. 143(3) and no demand notice being issued so as to delete the penalty in the instant case.
13. Per contra, Ld. Sr. DR relied on the orders of the authorities
14. We have heard the rival contentions and perused the material available on record. From the documents on record, we observe that the demand notice for imposition of penalty is not available. However, we find it proper to consider the submissions made by the Ld. Counsel for deleting the penalty since the assessment has been completed u/s. 143(3) of the Act and it not being an ex parte order u/s. 144. Considering these facts, we find that there is a reasonable cause to delete the penalty so imposed. Thus, the penalty imposed of 20,000/- is deleted. Grounds taken by the assessee are allowed.
15. In the result, both the appeals of the assessee are allowed.
Order is pronounced in the open court on 31st January, 2024
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