Section 80P deduction denial for late filing invalid under section 143(1)(a)(v) before April 2021 amendment

ITAT Rajkot held that denial of deduction under section 80P for late filing of return cannot be made under prima facie adjustment provisions of section 143(1)(a)(v) for assessment year 2019-20, as the relevant amendment was effective from April 1, 2021. The tribunal found that section 143(1)(a)(ii) also does not permit such disallowance merely for delayed filing when return was filed within extended due date under section 139(4). The case was remanded to CIT(Appeals) for fresh adjudication on merits. Appeal allowed.

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Issues Involved:
1. Disallowance of deduction under Section 80P of the Income Tax Act due to late filing of return.
2. Validity of adjustments made under Section 143(1)(a) of the Act.
3. Denial of adjournment application by the Commissioner (Appeals).

Detailed Analysis:

1. Disallowance of Deduction under Section 80P:
The primary issue was the disallowance of a deduction claimed by the assessee under Section 80P of the Income Tax Act, amounting to Rs. 4,11,630/-, due to the late filing of the return. The assessee, a co-operative society, filed its return on 30-11-2020, beyond the due date prescribed under Section 139(1). The CPC Bengaluru made an adjustment under Section 143(1)(a) denying the deduction, which was upheld by the Commissioner (Appeals), citing the amendment to Section 80AC by the Finance Act 2018. This amendment mandated that deductions under Chapter VIA, including Section 80P, are not allowable if the return is filed after the due date specified under Section 139(1).

2. Validity of Adjustments under Section 143(1)(a):
The assessee contended that the adjustment made by CPC was beyond the scope of Section 143(1)(a)(v) of the Act, which was amended effective 01-04-2021. They argued that the amendment did not apply to the assessment year 2019-20. The Tribunal noted that the amendment to Section 143(1)(a)(v) allowing disallowance of deductions for late returns was not applicable for the assessment year in question. Furthermore, the Tribunal observed that the definition of "incorrect claim" under Section 143(1)(a)(ii) did not include the scenario where a deduction is denied due to late filing of the return. Therefore, the Tribunal concluded that the denial of the deduction under Section 80P did not fall within the permissible adjustments under Section 143(1)(a) for the relevant assessment year.

3. Denial of Adjournment Application:
The assessee also raised an issue regarding the denial of their adjournment application dated 26-11-2021 by the Commissioner (Appeals), which was neither rejected nor considered, leading to an ex-parte order. The Tribunal noted this procedural lapse and emphasized the importance of providing a fair opportunity of hearing to the assessee.

Conclusion:
The Tribunal concluded that the denial of the deduction under Section 80P was not justified for the assessment year 2019-20, as the relevant amendments to Section 143(1)(a)(v) were not applicable. Additionally, the Tribunal highlighted the procedural unfairness in not considering the adjournment application. Consequently, the Tribunal restored the case to the file of the Commissioner (Appeals) for fresh adjudication on merits, ensuring the assessee is given a fair opportunity of being heard.

Result:
The appeal of the assessee was allowed, and the case was remanded for fresh adjudication by the Commissioner (Appeals).

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