2022 (9) TMI 345 - AT - Income Tax

Tribunal rules CPC Bangalore lacked jurisdiction to disallow deduction under section 80P, allowing appeals.

The Tribunal concluded that the CPC Bangalore lacked jurisdiction to disallow the deduction under section 80P for late filing of the return for the AYs ... Disallowance of deduction u/s 80P - CPC Bangalore jurisdiction to make this disallowance in the order u/s 143(1) - assessee, a primary agricultural cooperative society declaring ‘nil’ income by claiming deduction u/s 80P - disallowance has been made merely because the return was filed beyond the due date - HELD THAT:- Sub-clause (v) of Section 143(1)(a) was amended by the Finance Act, 2021 wherein instead of reference to Sections 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or Section 80-IE, the provision instead makes a mention of Section 10AA or under any of the provisions of Chapter VI-A under the head ‘C-Deductions in respect of certain incomes”. Accordingly, the enabling provisions to address the amendment in Section 80-AC by Finance Act, 2018 came into play only in 2020-21 assessment year. Thus, no doubt Section 80AC as amended by the Finance Act, 2018 mandated that even for claiming deduction claimed u/s 80P, the return of income was to be filed before the due date as specified under subsection (1) of Section 139. For the AO to insist upon the compliance by way of making a disallowance, the power was vested in the said Authority only vide Finance Act, 2021. Hence, in the absence of the enabling provisions, the CPC Bangalore lacked the jurisdiction to make this disallowance in the order u/s 143(1). In the facts of the present case, admittedly the provision enabling the AO to pass an order relying upon sub-clause (5) of Section 143(1)(a) was not on the Statute for 2018-19 assessment year. Accordingly, for the detailed reasons hereinabove, setting aside the impugned order, the appeal of the assessee is allowed. Issues Involved:1. Disallowance of deduction claimed under section 80P of the Income Tax Act, 1961.2. Validity of the order passed by the Assessing Officer under section 143(1) of the Income Tax Act, 1961.3. Applicability of amendments introduced by the Finance Act, 2018 and 2021 to the assessment years in question.Detailed Analysis:Disallowance of Deduction Claimed Under Section 80P:The primary issue revolves around the disallowance of the deduction claimed under section 80P of the Income Tax Act, 1961 by the assessee, a primary agricultural cooperative society. The assessee filed its Income Tax Return (ITR) for the Assessment Year (AY) 2018-19 on 13.10.2018, declaring 'nil' income by claiming a deduction under section 80P amounting to Rs. 1,11,421/-. However, the return was filed after the due date of 31.08.2018.The Centralized Processing Center (CPC), Bangalore, processed the return under section 143(1) and disallowed the deduction on the grounds that the return was filed beyond the due date. This disallowance was upheld by the First Appellate Authority, leading the assessee to appeal further.Validity of the Order Passed by the Assessing Officer Under Section 143(1):The assessee argued that at the relevant point of time, the CPC Bangalore did not have the jurisdiction to disallow the deduction under section 80P merely because the return was filed late. The enabling provision to do so under section 143(1) was introduced by the Finance Act, 2021, effective from 01.04.2021. Prior to this amendment, section 143(1)(a) allowed disallowances only on grounds of arithmetical error or incorrect claims apparent from the return, but not for late filing of the return.The assessee relied on various judicial decisions, including the Hon'ble Karnataka High Court's decision in Fatehraj Singhvi & Ors. Vs UOI & Ors., which supported the view that in the absence of enabling provisions, such disallowances were not permissible.Applicability of Amendments Introduced by the Finance Act, 2018 and 2021:The Finance Act, 2018, amended section 80AC to mandate that deductions under Chapter VIA, including section 80P, would be allowed only if the return was filed within the due date specified under section 139(1). However, the corresponding amendment to section 143(1)(a) to enable disallowance for late filing was introduced only by the Finance Act, 2021. Thus, for the AYs 2018-19 and 2019-20, the CPC Bangalore lacked the jurisdiction to disallow the deduction under section 80P for late filing of the return.Judicial Precedents and Distinguishing Factors:The Revenue relied on the Hon'ble Madras High Court's decision in Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd. Vs DCIT, which upheld the disallowance under similar circumstances. However, the assessee distinguished this case on the grounds that it was fact-specific, involved non-cooperation by the assessee, and the amendment by the Finance Act, 2021, was not considered.The Tribunal also referred to the Supreme Court's decision in CIT Vs B.C. Srinivasa Shetty, which emphasized that the charging section and the computation provisions together constitute an integrated code. In the absence of enabling provisions, the computation provisions could not apply, thus supporting the assessee's case.Conclusion:The Tribunal concluded that the CPC Bangalore lacked the jurisdiction to disallow the deduction under section 80P for late filing of the return for the AYs 2018-19 and 2019-20. The enabling provisions were introduced only by the Finance Act, 2021, effective from AY 2020-21. Therefore, the disallowance was not in accordance with the law, and the appeals of the assessees were allowed.The Tribunal's decision applies mutatis mutandis to all the remaining appeals, which involved identical facts, circumstances, and legal positions. Consequently, all the appeals of the assessees were allowed, and the disallowances were set aside.Order Pronounced in the Open Court on 30th August, 2022.