2025 (8) TMI 1671 - AT - Income Tax

Section 80P deductions must be considered on merits despite belated 139(4) returns; AO to verify compliance and allow if satisfied

Shree Dhamel Seva Sahkari Mandali Ltd., Damnagar Seva Sahkari Mandli And Shree Bhingrad Seva Sahakari Mandali Ltd. Versus The Asstt. Director of Income Tax (CPC), Bangalore

ITAT upheld that deductions under section 80P cannot be mechanically denied solely because returns were filed belatedly under section 139(4); cooperative ... Denial of exemption claimed u/s 80P - Assessment u/s 143(1)(a) - assessee filed its return of income beyond the prescribed time-limit and as such its claim is not admissible as per provisions of section 80AC(ii) - CIT(A) held that return filed u/s 139(4) can always be treated as belated return and cannot be said to be at par to return filed u/s 139(1) HELD THAT:- Section 139(4) of the Act, allows taxpayers to file a belated return, if they miss the original deadline under Section 139(1) - As per the Income Tax Act, certain deductions, including those under Chapter VI-A (which includes Section 80P), must be claimed only if the return is filed within the timelines prescribed u/s 139(1) of the Act. I Government is promoting Cooperative societies, and if these Co-operative societies, are eligible for deductions under Section 80P of the Act, even if the return is filed late, as long as the claim is valid and substantiated, their genuine claim, should not be denied. Therefore, remit these three lis to the file of the assessing officer to examine the claim of the assessees, under section 80P of the Act, with the direction to the assessing officer that if these assessees, satisfy the conditions of section 80P of the Act, then the assessing officer should allow the deduction in accordance with law. For statistical purposes, these three appeals are allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether an intimation under section 143(1) can disallow a deduction claimed under section 80P where the return was filed as a belated return under section 139(4) and not within the time allowed under section 139(1). 2. Whether section 80AC(ii) operates to render a deduction under section 80P inadmissible where the return is filed belatedly under section 139(4), and if so, whether such a matter is susceptible to prima facie adjustment under section 143(1). 3. Whether an issue which is debatable in law should be adjusted by the CPC under section 143(1)(a) or ought to be examined by the Assessing Officer with opportunity to the assessee (e.g., under section 143(2)). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Permissibility of disallowance under section 143(1) where return filed under section 139(4) Legal framework: Section 143(1) permits the Central Processing Centre (CPC) to adjust return figure(s) only for arithmetical errors or incorrect claims apparent from any information in the return, producing an intimation. Section 139(1) prescribes the due date for filing the original return; section 139(4) permits filing of a belated return within the time limits specified. Section 80P grants deductions to cooperative societies subject to conditions; section 80AC(ii) prescribes temporal limitation for claiming certain deductions linked to filing within the time under section 139(1). Precedent Treatment: The Tribunal noted several judicial decisions submitted by the assessee (including various High Court and Tribunal decisions) supporting the proposition that where the issue is debatable, adjustment under section 143(1) is not appropriate and the matter requires adjudication with notice (e.g., reliance placed on decisions such as Manubhai M. Patel and others listed by the assessee). Interpretation and reasoning: The Court observed that section 139(1) and section 139(4) create distinct filing regimes (original vs belated return) and that CPC's use of section 143(1) to deny a substantive deduction (80P) on the ground of belated filing engages questions of substantive entitlement rather than a mere arithmetical or manifest incorrectness. The Tribunal accepted the assessee's contention that where a legal issue is debatable, the concept of making a prima facie adjustment under section 143(1) is not appropriate. Ratio vs. Obiter: The conclusion that a debatable entitlement should not be denied by mechanical adjustment under section 143(1) is treated as the operative reasoning (ratio) for remitting the matter for adjudication; the Tribunal did not lay down an exhaustive legal rule overriding prior authority but followed the approach taken in earlier supportive decisions. Conclusions: The Tribunal found merit in the contention that section 143(1) ought not to be invoked to disallow the 80P deduction where the question of entitlement in view of belated filing is debatable. It remitted the matter to the Assessing Officer for examination on merits rather than sustaining CPC's prima facie disallowance. Issue 2 - Application of section 80AC(ii) to bar section 80P deduction where return filed under section 139(4) Legal framework: Section 80AC(ii) restricts certain deductions if the return is not filed within the time prescribed under section 139(1); section 80P conditions deductions for cooperative societies on satisfaction of statutory conditions. The legal question is whether a belated return under section 139(4) renders a claim under section 80P automatically inadmissible under section 80AC(ii). Precedent Treatment: The assessee relied on several decisions (High Court and Tribunal) which have taken the view that claims made in belated returns may still be entertained where the claim is substantiated and where the point is debatable; the Tribunal recorded these decisions but did not overrule or expressly distinguish them. Interpretation and reasoning: The Tribunal acknowledged the statutory linkage but emphasized that the applicability of section 80AC(ii) to deny an 80P claim is a matter requiring detailed examination (conditions under section 80P, factual satisfaction, and legal interpretation of section 80AC(ii)). Given the contentious nature, a summary disallowance at the processing stage was inappropriate. Ratio vs. Obiter: The Tribunal's direction to the Assessing Officer to examine whether the conditions of section 80P are satisfied and to allow the deduction if they are is the operative order (ratio) as applied to the facts; broader statements about policy (e.g., Government promoting cooperative societies) are ancillary observations (obiter). Conclusions: The Tribunal did not adjudicate finally on whether section 80AC(ii) conclusively bars the 80P deduction in all cases of belated filing. Instead, it remitted the matter to the Assessing Officer to examine and decide on the merits whether the statutory conditions for 80P are fulfilled, and to allow the deduction if so. Issue 3 - Appropriate procedure where legal question is debatable: processing adjustment vs adjudication with enquiry Legal framework: Section 143(1) is procedural and limited to computational/manifest issues; section 143(2) contemplates issuing notice and conducting assessment where substantive or disputable matters require examination. Precedent Treatment: The Tribunal accepted the assessee's reliance on multiple authorities holding that debatable legal issues should not be resolved by CPC in a summary manner under section 143(1) but require adjudication after notice. Interpretation and reasoning: The Tribunal concluded that when an entitlement to deduction turns on debatable points of law or fact (e.g., interplay between sections 139(4), 80AC and 80P), the CPC's summary disallowance via section 143(1) is inappropriate. The Tribunal therefore remitted the matters to the Assessing Officer for appropriate examination, affording the assessee opportunity to establish eligibility. Ratio vs. Obiter: The instruction to remit for adjudication and not to treat CPC's summary repudiation as final is part of the Tribunal's binding disposal in these appeals (ratio). Observations regarding the desirability of promoting cooperative societies and not denying genuine claims are explanatory and non-binding (obiter). Conclusions: The Tribunal held that debatable legal issues should be examined in the assessment process (with opportunity to the taxpayer), not conclusively determined by CPC through adjustments under section 143(1); remittal for fresh examination was ordered. Disposition, Scope and Precedential Value Legal framework and reasoning led to remand: The Tribunal remitted the matters to the Assessing Officer to examine the claim under section 80P on merits and directed that if the statutory conditions of section 80P are satisfied, the deduction be allowed in accordance with law. Precedent treatment: The Tribunal relied on the existence of contrary decisions and the debatable nature of the issue to justify remand; it did not overrule any precedent nor resolve the abstract legal question conclusively. Ratio vs. Obiter: The operative ratio is that summary disallowance of a debatable substantive claim under section 143(1) is inappropriate and the matter must be adjudicated by the Assessing Officer with opportunity to the assessee; statements of policy and non-precedential remarks are obiter. Conclusions: Appeals were allowed for statistical purposes by remitting the cases to the Assessing Officer for fresh examination of eligibility under section 80P. The Tribunal expressly confined its decision to the peculiar facts of these cases and directed that the order should not be treated as a precedent.