Section 80P deduction and penalty relief: late return could not justify prima facie disallowance or penalty on these facts.

A prima facie disallowance of deduction under section 80P could not be made under section 143(1)(a)(v) for an assessment year before the amendment effective from 01.04.2021, because the CPC had no authority to reject the claim merely on the ground of late filing; the disallowance was therefore unsustainable and was set aside. Penalty under section 272A(1)(d) was also deleted because the record did not show service of the demand notice, the assessment had been completed under section 143(3), and reasonable cause for the default was disclosed.

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Issues: (i) Whether deduction under section 80P could be disallowed in intimation under section 143(1) on the ground that the return was filed beyond the due date, for an assessment year prior to the amendment effective from 01.04.2021. (ii) Whether penalty under section 272A(1)(d) was sustainable for alleged non-compliance with notices, when the assessment had been completed under section 143(3) and the demand notice was not shown to have been served.

Issue (i): Whether deduction under section 80P could be disallowed in intimation under section 143(1) on the ground that the return was filed beyond the due date, for an assessment year prior to the amendment effective from 01.04.2021.

Analysis: The disallowance was made as a prima facie adjustment under section 143(1)(a)(v). The provision enabling such adjustment for deductions under Chapter VI-A, including section 80P, was held to have come into force only from 01.04.2021. For the relevant assessment year, the CPC had no authority to reject the claim merely because the return was filed late. Although section 80AC bars the claim in scrutiny assessment where the return is not filed within the prescribed time, that position did not authorise the impugned adjustment under section 143(1).

Conclusion: The disallowance of deduction under section 80P was unsustainable and was set aside in favour of the assessee.

Issue (ii): Whether penalty under section 272A(1)(d) was sustainable for alleged non-compliance with notices, when the assessment had been completed under section 143(3) and the demand notice was not shown to have been served.

Analysis: The record did not show service of the demand notice accompanying the penalty order. The assessment had been completed under section 143(3), and the facts disclosed a reasonable cause for the default relied upon by the revenue. In those circumstances, the penalty was not justified.

Conclusion: The penalty under section 272A(1)(d) was deleted in favour of the assessee.

Final Conclusion: Both appeals succeeded and the assessee obtained relief on the deduction issue as well as on the penalty issue.

Ratio Decidendi: A prima facie disallowance of deduction under section 80P could not be made under section 143(1)(a)(v) for a period preceding the operative amendment, and a penalty for non-compliance is unsustainable where reasonable cause is shown and the supporting demand notice is not established.

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