Section 80P deduction cannot be denied for late filing in assessment year 2019-20 before amendment became effective

ITAT Rajkot allowed the appeal regarding denial of deduction under section 80P. The court held that amendment to section 143(1)(a)(v) permitting denial of section 80P claims for late filing became effective from April 1, 2021, and did not apply to assessment year 2019-20. The denial could not be made under section 143(1)(a)(ii) as prima facie adjustment for incorrect claims. The assessee filed return within extended due date under section 139(4) with only few months delay. The deduction under section 80P could not be denied solely for not filing within original due date under section 139(1).

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Issues:
- Denial of deduction under section 80P of the Income Tax Act for not filing the return within the due date specified under section 139(1).
- Scope of prima facie adjustment under section 143(1)(a)(v) and (a)(ii) of the Act.
- Interpretation of statutory provisions regarding deduction under section 80P.

Analysis:
1. The case involved an appeal by the assessee against the order denying the claim of exemption under section 80P of the Income Tax Act. The assessee, a cooperative society, filed its return of income after the due date and claimed a deduction of Rs. 5,13,568 under section 80P. The issue was whether the deduction could be denied due to the late filing of the return.

2. The appellate order dismissed the assessee's appeal, citing section 80AC which requires filing the return on time for claiming deductions. It referenced a previous decision by ITAT Mumbai and held that the deduction claimed under section 80P was rightly denied due to the late filing of the return. The order relied on the explanation to section 143(1) to support the disallowance of the deduction.

3. The Tribunal analyzed the statutory provisions, noting that section 80AC mandates timely filing for deductions from the assessment year 2018-19 onwards. However, the amendment to section 143(1)(a)(v) disallowing deductions for late filing was effective from 01-04-2021 and did not apply to the assessment year in question (2019-20). The Tribunal also discussed the scope of adjustment under section 143(1)(a)(ii) for incorrect claims, emphasizing the specific instances mentioned in the explanation.

4. Referring to judicial precedents, the Tribunal highlighted cases where deductions were allowed even if the return was filed late but within the permissible period. It cited instances where claims made in revised returns were accepted, emphasizing the importance of filing the return under section 139(1) for claiming deductions. The Tribunal concluded that the deduction under section 80P could not be denied solely based on the late filing of the return within the due date under section 139(1).

5. In the interests of justice, the Tribunal allowed the appeal, overturning the previous order and remanding the case back to the CIT(A) for fresh adjudication on the merits after providing the assessee with a fair hearing. The decision was pronounced in open court on 31-10-2022.

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