Cooperative society wins appeal for Section 80P(2)(d) deduction on interest from cooperative banks after processing error

The ITAT Mumbai allowed the assessee's appeal against disallowance of deduction under section 80P(2)(d) for interest received from cooperative banks. The tribunal found no delay in filing the return as the due date was 30.09.2014 due to mandatory audit requirements under Maharashtra Co-operative Societies Act, 1960. The CPC's presumption of delay was incorrect. The tribunal held that debatable issues like section 80P(2)(d) deductions cannot be adjusted during processing under section 143(1). The delay in filing appeal was justified due to bonafide belief that intimation would be rectified under section 154. The AO was directed to delete the disallowance.

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Issues:
- Delay in filing appeal
- Disallowance of deduction under section 80P(2)(d) of the Income-tax Act, 1961
- Adjustment made by the Central Processing Centre (CPC) under section 143(1) of the Act

Analysis:
1. Delay in Filing Appeal:
- The appeals were filed by the assessee against the order of the Additional/Joint Commissioner of Income-tax (Appeals) for AY 2012-13 and 2013-14. The delay in filing the appeal was significant, with 3685 days for AY 2012-13. The assessee contended that the delay was due to a bonafide belief that the intimation under section 143(1) would be rectified by the Assessing Officer (AO) under section 154. The delay was explained through an affidavit filed before the Additional CIT(A).

2. Disallowance of Deduction under Section 80P(2)(d):
- The primary issue in both AYs was the disallowance of deduction under section 80P(2)(d) of the Act by the CPC. The CPC disallowed the claim of deduction on the grounds that the return was not filed on time. However, the assessee argued that there was no delay in filing the return, as the due date was later due to audit requirements under the Maharashtra Co-operative Societies' Act, 1960. The Tribunal held that the disallowance made by the CPC was beyond the scope of adjustment under section 143(1) and directed the AO to delete the disallowance.

3. Adjustment by CPC under Section 143(1) of the Act:
- The Tribunal referred to similar cases and held that adjustments made by the CPC under section 143(1) were not permissible on debatable issues like deduction under section 80P(2)(d). The Tribunal emphasized that prior to AY 2021-22, disallowance of deductions within the scope of section 143(1) was limited to specific provisions, and adjustments related to section 80P were not permissible. The Tribunal ordered the deletion of the disallowance made by the CPC under section 143(1)(a).

4. Conclusion:
- The Tribunal allowed the appeals of the assessee for both AYs, directing the AO to delete the disallowance of the claim of deduction under section 80P(2)(d) of the Act. The Tribunal relied on precedents and held that the delay in filing the appeal was justified, and the disallowance made by the CPC was incorrect. The orders were pronounced in favor of the assessee on 30.08.2024.

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