Case Law Details
Navavaghniya Seva Sahkari Mandali Ltd Vs DCIT/ACIT (ITAT Rajkot)
In a significant ruling for co-operative societies, the Income Tax Appellate Tribunal (ITAT) Rajkot bench recently overturned an order denying exemption under Section 80P of the Income Tax Act, 1961, to Navavaghniya Seva Sahkari Mandali Ltd. The tribunal held that the deduction could not be disallowed merely because the return of income was filed beyond the due date specified under Section 139(1) of the Act.
The case, Navavaghniya Seva Sahkari Mandali Ltd. vs. DCIT/ACIT (ITAT Rajkot), pertained to the Assessment Year 2019-20. The appellant, a co-operative society providing credit facilities to its members, had filed its original return of income on November 30, 2020, declaring a nil income and claiming a deduction of Rs. 3,52,877/- under Section 80P.
However, the Centralized Processing Centre (CPC), Bengaluru, processed the return under Section 143(1) of the Act and denied the Section 80P benefit. The CPC’s reasoning was that the return was not filed within the due date stipulated by Section 139(1). This denial led to a tax demand of Rs. 1,37,180/-.
Aggrieved by this action, the society appealed to the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi. The society argued that a prima facie adjustment under Section 143(1)(a) could not be used to deny the Section 80P deduction. It presented several judicial precedents to support its claim.
Judicial Precedents Cited by Assessee:
- Mumbai ITAT in New Ideal Cooperative Housing Society Ltd. VS ITO (ITA No. 2681/Mum/2019, dated February 3, 2021): This case likely supported the argument against denying Section 80P for delayed filing.
- Chirakkal Service Cooperative Bank Vs CIT (2016) 384 ITR 490 (Kerala): The Kerala High Court held that a return filed beyond the period stipulated under Section 139(1) or 139(4) or under Section 142(1) or Section 148 can be accepted and acted upon for entertaining a claim under Section 80P, provided further proceedings are pending.
- ITAT ‘C’ Ahmedabad in Uttar Gujarat Cooperative Credit Society Ltd VS ITO (ITA No. 1670 & 1671/Ahd/2018)
- ITAT, Surat in Bardoli Vibhag Cooperative Credit Society Ltd Vs PCIT (2021) 189 ITD 0604 (Surat Trib)
- ITAT, Rajkot Bench in Surendra Nagar Dist Cooperative Milk Producers Union Ltd. Vs DCIT (ITA No. 262-263/Rjt/2018, dated September 20, 2019)
CIT(A) Dismisses Appeal
Despite the precedents cited, the CIT(A) dismissed the society’s appeal, stating that the relied-upon case laws were not applicable to the present situation.
Appeal to ITAT Rajkot
The society then approached the ITAT Rajkot, arguing that the CPC’s order under Section 143(1) was bad in law. The key contention was that Section 143(1)(a)(v) does not permit the denial of Section 80P deduction merely because the return was filed under Section 139(4) (belated return) instead of Section 139(1) (due date).
The assessee’s counsel highlighted that the amendment to Section 143(1)(a)(v), which specifically allows for disallowance of Section 80P claims if the return is filed beyond the due date under Section 139(1), was introduced by the Finance Act, 2021, and became effective from April 1, 2021. Therefore, this amendment was not applicable for the Assessment Year 2019-20.
The counsel further referred to recent co-ordinate bench judgments, specifically Lunidhar Seva Sahakari Mandali Ltd. vs. Assessing Officer (CPC) in ITA No. 202/Rjt/2022 (dated February 22, 2023) and ITA No. 186/Rjt/2022 (dated February 10, 2023), which covered similar issues.
ITAT Rajkot’s Decision
The ITAT, after careful consideration, noted that the NFAC had failed to consider the non-applicability of the Finance Act, 2021 amendment for the Assessment Year 2019-20. The tribunal relied on its co-ordinate bench decision in the Lunidhar Seva Sahakari Mandali Ltd. case, which thoroughly examined the relevant statutory provisions.
The ITAT’s reasoning was based on the following points:
1. Section 80AC: This section provides that deduction under Section 80P shall not be allowed unless the return is furnished on or before the due date specified under Section 139(1) from Assessment Year 2018-19 onwards.
2. Section 143(1)(a)(v) Amendment: The amendment allowing disallowance of Chapter VI-A deductions (including Section 80P) for returns filed beyond Section 139(1) due date became effective from April 1, 2021. Crucially, this amendment does not apply to Assessment Year 2019-20.
3. Section 143(1)(a)(ii) and Explanation: This section permits adjustments for “incorrect claims apparent from any information in the return.” However, the Explanation to this section defines “incorrect claim” and does not include the denial of deduction merely for late filing.
The ITAT emphasized that since the amendment to Section 143(1)(a)(v) was not in force during the period under consideration (A.Y. 2019-20), the denial of the Section 80P claim could not be considered a prima facie adjustment under this provision. Furthermore, the denial did not fall under the purview of “incorrect claim” as defined by the Explanation to Section 143(1)(a)(ii).
The tribunal also cited the Chirakkal Service Co-Operative Bank Ltd. Kannur v. CIT (2016) 68 taxmann.com 298 (Kerala) judgment, which held that returns filed belatedly can still be considered for Section 80P claims if further proceedings are pending. Additionally, it referenced Lanjani Co-Operative Agri Service Society Ltd. (CPC) v. DCIT [2023] 146 taxmann.com 468 (Chandigarh – Trib.), which explicitly stated that the disallowance of Section 80P for late filing was unjustified for Assessment Years 2018-19 and 2019-20 due to the effective date of the enabling provisions in Section 143(1)(v).
Conclusion
Based on these judicial precedents and the non-applicability of the amendment for the relevant assessment year, the ITAT concluded that the Section 80P deduction could not be denied to Navavaghniya Seva Sahkari Mandali Ltd. solely because the return of income was not filed within the due date specified under Section 139(1) of the Act. The tribunal quashed the intimation issued under Section 143(1) dated January 11, 2021, thereby allowing the assessee’s appeal.
This ruling clarifies that for assessment years preceding April 1, 2021, the automated processing under Section 143(1) cannot deny Section 80P benefits solely on the grounds of belated return filing, highlighting the importance of the effective date of statutory amendments.
FULL TEXT OF THE ORDER OF ITAT RAJKOT
This appeal is filed by the Assessee against the Appellate order dated 02.12.2021 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “NFAC”), arising out of the Intimation passed under section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2019-20.
2. The solitary issue involved in this appeal is denial of exemption u/s. 80P of the Act on the ground that the Return was filed belatedly u/s. 139(4) of the Act.
2.1. The brief fact of the case is that the assessee is Co-operative Society with objects and activities of providing credit facilities to its members. For the Assessment Year 2019-20, the original Return of Income was filed on 30.11.2020 declaring total income Nil and claiming deduction under section 80P of Rs. 3,52,877/-. The Return of Income filed by the assessee was processed by the Centralized Processing Centre, Bengaluru vide Intimation u/s. 143(1) dated 11.01.2021, thereby denying the benefit of claim of deduction u/s. 80P for the reason that the Return of Income was not filed within the due date prescribed u/s. 139(1) of the Act. Thus, the CPC, Centre demanded a sum of Rs. 1,37,180/- as tax payable by the assessee.
3. Aggrieved against the same, the assessee filed an appeal before the Ld. CIT(A) claiming that the benefit of deduction u/s. 80P cannot be denied by making the prima facie adjustment u/s. 143(1)(a) of the Act. The assessee relied upon the following case laws in support of its claim.
(i) Mumbai ITAT in the case of New Ideal Cooperative Housing Society Ltd. VS ITO in ITA No. 2681/Mum/2019 dated 03.02.2021
(ii) Chirakkal Service Cooperative Bank Vs CIT (2016) 384 ITR 490 (Ker),
(iii) Citizen Cooperative Society Vs ACIT, Hyderabad (SC) [2018] 252 Taxman 274 (SC)
(iv) SBI vs CIT (2016) 389 ITR 0578 (GUJ)
(v) ITAT ‘C’ Ahmedabad in the case of Uttar Gujarat Cooperative Credit Society Ltd VS ITO (ITA No. 1670 & 1671/Ahd/2018- A.Y. 2014-15 & 2015-16)
(vi) ITAT, Surat in the case of Bardoli Vibhag Cooperative Credit Society Ltd Vs PCIT (2021) 189 ITD 0604 (Surat Trib)
(vii) ITAT, Rajkot Bench in the case of Surendra Nagar Dist Cooperative Milk Producers Union Ltd. Vs DCIT in ITA No. 262-263/Rjt/2018 dated 20.09.2019.
3.1. However the Ld. CIT(A) dismissed the appeal filed by the assessee stating that the case laws are not applicable to the present case.
4. Aggrieved against the same, the assessee is in appeal before us raising 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) by the Assistant Director of Income-tax (CPC), Bangalore is bad in law as provisions of Sec.l43(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) of the Act.
2. The learned Commissioner (Appeals), National Faceless Appeal Centre, Delhi erred in holding that in the order u/s 143(1), an incorrect claim has been arrived at based on an incorrect claim, if such claim is apparent from any information in the return of income.
3. 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.3,52,877/- (restricted to GTI Rs. 3,19,470/-) to the Appellant by failing to appreciate that this was not permissible u/s 143(l)(a) of the Act.
4. The learned Commissioner (Appeals), National Faceless Appeal Centre, Delhi, on merits, erred in disallowing deduction of Rs. 3,52,877/-(restricted to GTI Rs. 3,19,470/-) claimed by the Appellant u/s 80P (2)(d) of the Act.
4.1. At the time of hearing of the above appeal, Ld. Counsel Ms. Devina Patel for the assessee submitted before us that this issue is squarely covered by the Co-ordinate Benches judgments in the case of Lunidhar Seva Sahakari Mandali Ltd. vs. Assessing Officer (CPC) in ITA No. 202/Rjt/2022 dated 22.02.2023 and ITA No. 186/Rjt/2022 dated 10.02.2023 in other group of cases. Thus pleaded that the assessment year involved herein being A.Y. 2019-2020, the disallowance u/s. 143(1)(a)(v) cannot be done. Therefore pleaded to quash the Intimation passed by the CPC, Centre.
5. Per contra, the Ld. D.R. appearing for the Revenue relied upon the order passed by the Lower Authorities and requested to dismiss the assessee appeal.
6. We have given our thoughtful consideration and perused the materials available on record. It is apparent from the Ld. NFAC order when the assessee has clearly pointed out the amendment in Section 143(1) made by Finance Act, 2021 which is not applicable for the present assessment year 2019-2020. However the same was not been considered by the Ld. NFAC and erroneously dismissed the assessee’s appeal.
6.1. The Co-ordinate Bench of this Tribunal in Lunidhar Seva Sahakari Mandali Ltd. (cited supra) considered the above amendment and held as follows:
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 30-11-2020 and claimed deduction of Rs. 2,22,704/- 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 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
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).
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. In the case of Lanjani Co-Operative Agri Service Society Ltd. (CPC) v. DCIT [2023] 146 taxmann.com 468 (Chandigarh – Trib.), the ITAT held that the enabling provisions of sub-clause (v) of section 143(1) providing for disallowance of deduction under section 80P due to late filing of return having been introduced by Finance Act, 2021 effective from 1-4-2021, disallowance of deduction claimed under section 80P during relevant years 2018-19 and 2019-20 on grounds of late filing of return was unjustified
7.4 We note that the instant case, there was a 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.
8. In the result, appeal of the assessee is allowed.
6.2. Respectfully following the above Co-ordinate Bench decisions, we have no hesitation in holding that the assessee cannot be denied the deduction u/s. 80P of the Act on the ground that the assessee did not file the Return of Income within the due date prescribed u/s. 139(1) of the Act under proceedings made u/s. 143(1)(a)(v) of the Act for the Assessment Year 2019-20. Thus the intimation made u/s. 143(1) dated 11/01/2021 is invalid in law and thereby quashed.
7. In the result, the appeal filed by the Assessee is hereby allowed Order pronounced in the open court on 03-03-2023
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