Return-processing disallowance of section 80P deduction was impermissible where section 80AC adjustment was outside the applicable scope.

An adjustment denying deduction under section 80P at the return-processing stage under section 143(1)(a) was described as beyond the scope of clause (ii) where the issue depended on section 80AC and late filing under section 139(1). The note also states that the corresponding adjustment under section 143(1)(a)(v), insofar as it was linked to section 80AC, could not be applied for a period before 01.04.2021, when the amendment came into force. On that basis, the disallowance made while processing the return was treated as unsustainable and the assessee's claim succeeded.

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Issues: Whether the denial of deduction under section 80P of the Income-tax Act, 1961 could validly be made while processing the return under section 143(1)(a) on the ground of section 80AC, where the return was filed beyond the time prescribed under section 139(1).

Analysis: The adjustment was held to be beyond the scope of section 143(1)(a)(ii). It was also held that the corresponding adjustment under section 143(1)(a)(v), to the extent it relates to section 80AC, could not be applied for a period prior to 01.04.2021, when the relevant amendment came into force. In the absence of any contrary authority showing the adjustment to be maintainable on the facts of the case, the disallowance made at the processing stage was found unsustainable.

Conclusion: The denial of deduction under section 80P through processing under section 143(1)(a) was held to be impermissible, and the assessee succeeded.

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