CPC cannot disallow section 80P(2)(d) deduction for co-operative society's interest income during section 143(1) processing

ITAT Mumbai held that CPC's disallowance of deduction u/s 80P(2)(d) for interest received from co-operative banks was beyond the scope of adjustment u/s 143(1). The co-operative housing society had filed returns within the due date under section 139(1), making no prima facie adjustment permissible. Additionally, section 80AC does not restrict deduction u/s 80P(2)(d) for delayed filing, as it only applies to specific deductions under sections 80IA, 80IAB, 80IB, 80IC, 80ID, and 80IE before 01.04.2018. Appeal decided in favour of assessee.

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Issues Involved:
1. Failure to appreciate the rectification application filed by the appellant.
2. Failure to provide an opportunity to be heard.
3. Error in not dealing with the grounds of appeal.
4. Jurisdiction of CPC to make adjustments in respect of deductions claimed under Section 80P(2)(d).
5. Delay in filing appeals and condonation of delay.

Issue-wise Detailed Analysis:

1. Failure to Appreciate the Rectification Application:
The appellant contended that the Learned Additional/Joint Commissioner of Income Tax (Addl. CIT) failed to appreciate that a rectification application was filed with the Income Department. The rectification application, filed on 14.06.2013, was still pending as of 25.07.2024. The appellant believed that the request for rectification would be allowed since for AY 2013-14, an identical relief was granted under Section 154. However, no order under Section 154 was passed, leading the appellant to file an appeal after a significant delay. The tribunal found that the appellant had a reasonable cause for the delay due to the pending rectification application.

2. Failure to Provide an Opportunity to be Heard:
The appellant argued that the Addl. CIT failed to provide an opportunity to be heard. The tribunal noted that the appellant had raised this issue in their grounds of appeal, emphasizing the importance of natural justice. The tribunal did not specifically address this issue separately but implicitly considered it while discussing the overall delay and the appellant's reasonable cause for the delay.

3. Error in Not Dealing with the Grounds of Appeal:
The appellant claimed that the CIT(A) erred in not dealing with the grounds of appeal raised. The tribunal acknowledged that the CIT(A) dismissed the appeal on the ground of inordinate delay without addressing the merits of the case. The tribunal found that the CIT(A) should have considered the appellant's grounds, especially given the reasonable cause for the delay.

4. Jurisdiction of CPC to Make Adjustments:
The appellant contended that the CPC had no jurisdiction to make adjustments regarding the deduction claimed under Section 80P(2)(d), as this authority was given only with effect from AY 2021-22. The tribunal agreed, citing a co-ordinate bench decision in the case of Vishva Villa Co-op. Housing Society Ltd. v/s ITO, Ward 19(3)(1), which held that disallowance of claims under Section 80P(2)(d) was beyond the scope of adjustments under Section 143(1) for years prior to AY 2021-22. The tribunal concluded that the CPC's adjustments were beyond its jurisdiction and directed the AO to allow the claim of deduction under Section 80P(2)(d).

5. Delay in Filing Appeals and Condonation of Delay:
The tribunal considered the appellant's affidavit explaining the delay in filing appeals. The appellant, a small co-operative housing society, relied on a part-time accountant and faced challenges due to the voluntary nature of its managing committee. The tribunal noted that a significant portion of the delay was covered by the Supreme Court's decision regarding the exclusion of certain periods due to the COVID-19 pandemic. The tribunal found that the appellant had a reasonable cause for the delay and condoned it, allowing the appeals.

Separate Judgments for Each Assessment Year:

Assessment Year 2012-13:
The tribunal allowed the appeal, directing the AO to allow the claim of deduction under Section 80P(2)(d), following the co-ordinate bench's decision.

Assessment Year 2014-15:
The tribunal found the facts similar to AY 2012-13 and allowed the appeal, directing the AO to allow the claim of deduction under Section 80P(2)(d).

Assessment Year 2015-16:
The tribunal noted that the return was filed late but found that Section 80AC did not apply to disallow deductions under Section 80P(2)(d) for belated returns before 01.04.2018. The tribunal allowed the appeal, directing the AO to allow the claim of deduction under Section 80P(2)(d).

Assessment Year 2016-17:
The tribunal considered the delay and the appellant's affidavit, finding a reasonable cause for the delay. The tribunal allowed the appeal, directing the AO to allow the claim of deduction under Section 80P(2)(d).

Assessment Year 2018-19:
The tribunal found the facts similar to AY 2016-17 and allowed the appeal, directing the AO to allow the claim of deduction under Section 80P(2)(d).

Conclusion:
The tribunal allowed all the appeals, directing the AO to allow the claims of deduction under Section 80P(2)(d) for the respective assessment years, and condoned the delays in filing the appeals.

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