Tribunal rules in favor of assessee on deduction claim under Income Tax Act

The Tribunal ruled in favor of the assessee, finding that the disallowance of deduction claimed under section 80P of the Income Tax Act for the assessment year 2018-19 was not justified. It held that the amendment enabling such disallowance was effective only from the assessment year 2021-22 onwards and did not apply to the impugned year. The Tribunal also determined that the Assessing Officer lacked the jurisdiction to disallow the claim under section 143(1) without specific grounds, as per the pre-amendment provisions. Consequently, the order disallowing Rs. 7,35,190/- was reversed, and the appeal of the assessee was allowed.

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Issues Involved:
1. Disallowance of deduction claimed under section 80P of the Income Tax Act, 1961.
2. Validity of the order of the Assessing Officer under section 143(1) of the Income Tax Act, 1961.
3. Jurisdiction of CPC Bangalore to disallow the deduction under section 143(1) for the assessment year 2018-19.

Summary:

Issue 1: Disallowance of Deduction Claimed under Section 80P
The assessee contended that the disallowance of deduction under section 80P was not justified as the amendment to section 80AC by the Finance Act, 2018, which required filing the return within the due date specified under section 139(1), could not be applied while processing the return under section 143(1) for the assessment year 2018-19. The Tribunal noted that the amendment to section 143(1)(a)(v) by the Finance Act, 2021, which enabled such disallowance, was effective from assessment year 2021-22 onwards and did not apply to the impugned assessment year.

Issue 2: Validity of the Order of the Assessing Officer under Section 143(1)
The Tribunal observed that prior to the amendment by the Finance Act, 2021, the Assessing Officer could disallow a claim under section 143(1)(a) only on specific grounds such as arithmetical error or incorrect claim. The Tribunal referred to the case of 'Fatehraj Singhvi & Ors. v. UOI and Ors' to support the view that in the absence of enabling powers, no disallowance could be made. Consequently, the CPC Bangalore did not have the jurisdiction to make the disallowance in question in the order under section 143(1) for the assessment year 2018-19.

Issue 3: Jurisdiction of CPC Bangalore
The Tribunal relied on the decision of the Coordinate Chandigarh Benches in 'The Lanjani Cooperative Agri Service Society Ltd. vs. The DCIT (CPC) Bangalore' and concluded that the CPC Bangalore lacked the jurisdiction to disallow the deduction under section 80P in the order under section 143(1) for the assessment year 2018-19. The Tribunal emphasized that the enabling provisions to address the amendment in section 80AC by the Finance Act, 2018, came into play only in the assessment year 2021-22. Therefore, the disallowance made by the CPC Bangalore was not justified.

Conclusion:
The Tribunal found merit in the grievance raised by the assessee and accepted the appeal. The order under appeal was reversed, and the disallowance of Rs. 7,35,190/- was cancelled. The appeal of the assessee was allowed.

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