Disallowance of deduction u/s. 80P by CPC is beyond the scope of adjustment u/s. 143(1): ITAT Mumbai

Vishva Villa Co-op Housing Society Ltd Vs ITO (ITAT Mumbai)

ITAT Mumbai held that disallowance made by the CPC u/s. 143(1)(a) of the Income Tax Act on the claim of deduction u/s. 80P of the Income Tax Act is beyond the scope of adjustment u/s. 143(1) accordingly the adjustment is deleted.

Facts- The present appeals are filed by the assessee against impugned order passed by additional/ JCIT(A)–1 Ahemdabad for the assessment year 2012-13, 2013-14 & 2014-15 with regard to adjustment made u/s. 143(1)(a) by disallowing claim of deduction u/s. 80P(2)(d).

Conclusion- Held that admittedly assessee is a Co-operative Housing Society registered under Maharashtra Society act 1960 and as per the said act of the Co-operative Housing Societies have to get their accounts audited ones there is requirement to furnish and audit before from Charted Accountant, and therefore the due date was 31/10/2012 and 31/10/2014 for the A.Y 2012-23 and 2014 -15 respectively and thus assesse had filed the return of income within the due date of under section 139(1). Thus even under amended provision no prima facie adjustment have been made no prima facie adjustment on account of deduction u/s.80P could have been made. In the early provision of adjustment u/s. 143(1)(a) no such disallowance could have been made. Accordingly, we hold that disallowance made by the CPC u/s. 143(1)(a) on the claim of deduction u/s. 80P is beyond the scope of adjustment u/s. 143(1) accordingly the adjustment is deleted.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

The aforesaid appeals has been filed by the assessee against separate impugned order of even date 29/12/2023 passed by additional/JCIT(A)–1 Ahemdabad for the assessment year 2012-13, 2013-14 & 2014-15 with regard to adjustment made u/s. 143(1)(a) by disallowing claim of deduction u/s. 80P(2)(d). At the outset Ld. Council submitted that in so far as appeal for the assessment year 2013-14, i.e., 682/Mum/2024, assessee is withdrawing the appeal, because in pursuance of application filed u/s. 154 before the CPC, the disallowance u/s. 80P(2)(d) has been removed. Thus, assessee has no grievance. Accordingly, the appeal of the assessee in ITA 682/Mum/2024 for A.Y. 2013-14 is dismissed as withdrawn.

2. In so far as appeals for the assessment years 2012-13 & 2014-15, he submitted that the Ld. CIT(A) has dismissed the assessee’s appeal on the ground that has been delay of nearly 10 years in the appeal for A.Y. 2012-13 and delay for nearly 8 years for A.Y. 2014-15. Thus appeals has been dismissed on the ground of delay in filling of appeal by the assessee before CIT(A) against intimation u/s. 143(1).

3. He submitted that the reason for the delay was that assessee has filed a petition for rectification u/s. 154 before AO/CPC rectifying the mistake which was not disposed off. The Counsel for the assessee Co-operative Housing Society advised that, since application u/s. 154 is pending before the AO, therefore appeal need not to be filed. Even affidavit of the secretary of the society has also been filed giving averments of facts and circumstances for the delay. Thus, he subnitted that there was bonafide belief in that not filing the appeal before the CIT(A).

4. The Ld. Counsel further submitted that for the assessment year 2013-14, already order u/s. 154 has been passed giving relief to the assessee and therefore assessee was very hopeful that even for the A.Y.s 2012-13 & 2014-15 similar relief would be granted at the level of CPC only.

5. On merits, Ld. Counsel submitted that the prima facie adjustment has been made u/s. 143(1) by disallowing the claim of 80P on the interest received from Co-operative Bank. This issue is not only covered in favour of the assessee by series of the decisions of this Tribunal, but also by the Hon’ble High court. Further, such an adjustment u/s. 80P was beyond the scope as of section 143(1).

6. On the other hand, Ld. DR submitted that there is enormous delay in filing the appeal before the CIT(A) and if order u/s.154 was not passed within a reasonable time, then assessee should have filed an appeal before the CIT(A) and therefore, CIT(A) has rightly rejected the appeal on the ground of this delay in filing the appeal.

7. We heard both the parties and also peruse the relevant material based on record. First of all the assessee has explained the reason for delat in filing of the first appeal before CIT(A) that ealier CA of the assessee had filed rectification application u/ 154 before the AO/CPC, then assessee was under bonafide belief that the adjustment would get rectified and even CA also did not advice the society to file an appeal when appliocation was disposed of for certain period. It is later on when demand notice was issued then assessee was advised to file an appeal. Thus, looking to the fact that assessee is cooperative housing society and it was under a bonafide belief that it has filed a rectification which was not disposed of till date, therefore delay in filing of first appeal cannot be held to latches on part of the assessee. Thus, delay in filing appeal before the first appellate authority is condoned.

8. On merits in both the years, adjustment has been made by the CPC u/s. 143(1) treating the interest received from the Co­operative Bank as income from other sources by disallowing the claim of section 80P(2)(d).

9. First of all prior to assessment year 2021-22 there was no such provision for disallowing the claim of deduction within the scope of section 143(1)(a). Prima adjustment was permissible only with regard to claim of deduction u/s. 10AA, 80 IA, 80IAB, 80IB, 80IC, 80ID or section 80-IE. It was from the Finance act 2021 with effect from A.Y. 2021-22, disallowance of claim of deduction under chapter VIA can be made, if the return has been furnished beyond the due date of return of income filed u/s. 139(1). Here in this case the CPC has treated the due date of return of income as on 31/08/2012 for A.Y. 2012-13 and 05/08/2013 for A.Y. 2014-15, whereas the return has been filed by the assessee on 02/09/2012 and 20/09/2013 respectively.

10. Admittedly assessee is a Co-operative Housing Society registered under Maharashtra Society act 1960 and as per the said act of the Co-operative Housing Societies have to get their accounts audited ones there is requirement to furnish and audit before from Charted Accountant, and therefore the due date was 31/10/2012 and 31/10/2014 for the A.Y 2012-23 and 2014 -15 respectively and thus assesse had filed the return of income within the due date of under section 139(1). Thus even under amended provision no prima facie adjustment have been made no prima facie adjustment on account of deduction u/s.80P could have been made. In the early provision of adjustment u/s. 143(1)(a) no such disallowance could have been made. Accordingly, we hold that disallowance made by the CPC u/s. 143(1)(a) on the claim of deduction u/s. 80P is beyond the scope of adjustment u/s. 143(1) accordingly the adjustment is deleted.

11. In the result appeal for the A.Y 2012-13 & 2014-15 is allowed and appeal for A.Y.2013-14 is dismissed as withdrawn.

Order pronounced on 27^th Jun, 2024.