2025 (10) TMI 564 - AT - Income Tax

Intimation under Section 143(1) cannot disallow Section 80P claim; CPC/AO lacked jurisdiction under unamended law

The Manoh Co-Operative Agriculture Service Society Ltd. Versus The ITO Ward, Hamirpur

ITAT, Chandigarh allowed the assessee's appeal, holding that the CPC/AO lacked jurisdiction under unamended law to disallow a claim u/s 80P by issuing an ... Disallowance of deduction claimed u/s 80P - intimation u/s 143(1) - HELD THAT:- Prior to that, as per the un-amended provisions, the AO could disallow a claim u/s 143(1)(a) only on the grounds of arithmetical error or that the Assessee had made an incorrect claim, etc which is again not a case as so defined in the explanation which doesn’t include denial of deduction due to delayed filing of return of income. Reference, in this regard, may be had to ‘Fatehraj Singhvi & Ors. [2016 (9) TMI 964 - KARNATAKA HIGH COURT]. It goes without saying that in the absence of enabling powers, no disallowance can be made. As such, enabling provisions being absent, the CPC did not have the jurisdiction to make the disallowance in question, in the order u/s 143(1) of the Act for impugned assessment year 2018-19. This is a consistent stand taken by the Chandigarh Benches and therefore, to maintain the rule of consistency and in absence of the said orders being reversed or any contrary view taken by the higher authorities, we find merit in the grievance raised by the assessee and the same is accepted. The order under appeal is accordingly reversed. Disallowance is hereby deleted and the AO is directed to allow relief to the assessee in terms of claim of deduction so made u/s 80P of the Act. Assessee appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether deduction under section 80P can be denied where the return of income was filed after the due date prescribed by section 139(1). 2. Whether the Centralised Processing Centre (CPC) could, in the intimation under section 143(1), disallow a claim under section 80P on the ground of belated filing for the assessment year prior to the amendment to section 143(1)(a)(v) effected by Finance Act, 2021. 3. Whether denial of deduction by CPC without issuing a reasonable opportunity as required by the first proviso to section 143(1)(a) is permissible. 4. Whether hardship arising from delay in statutory audit and late filing of return can be remedied by condonation or discretionary directions (including reliance on CBDT Circular and power under section 119(2)(b)). ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of denying deduction under section 80P for belatedly filed return Legal framework: Section 80P provides deduction for certain cooperative societies; Section 80AC (as amended by Finance Act, 2018) conditioned claiming of specified deductions on filing return within the time prescribed under section 139(1). Precedent treatment: Tribunal benches have applied the amended section 80AC to deny deductions where returns were filed after the due date. Interpretation and reasoning: The Court accepts that, substantively, the Finance Act, 2018 amendment to section 80AC makes timely filing a condition precedent to claiming deduction under section 80P. In the present facts, the return for the impugned year was belatedly filed; thus, on the statutory condition introduced by section 80AC, the assessee would not be entitled to the deduction if procedural jurisdiction exists to give effect to that disqualification. Ratio vs. Obiter: Ratio - Timely filing as per amended section 80AC is a statutory precondition for claiming deduction under section 80P; whether that precondition can be applied at the CPC processing stage depends on Issue 2. Conclusion: Merits acceptance of the statutory condition but subject to the limitation on the CPC's power to effect disallowance for the relevant assessment year. Issue 2: Jurisdiction of CPC under section 143(1) to disallow claim on ground of belated return for A.Y. prior to amendment to section 143(1)(a)(v) Legal framework: Section 143(1)(a) permits assessment processing adjustments for certain errors or incorrect claims as defined; Finance Act, 2021 amended sub-clause (v) to enable CPC to disallow claims where returns are not filed within time for specified deductions. Precedent treatment: Coordinate Tribunal benches (Chandigarh and others) have consistently held that, in the absence of the 2021 amendment, CPC lacked jurisdiction under section 143(1) to disallow claims on grounds of belated filing; authorities are followed to maintain consistency. Interpretation and reasoning: The Court analyses the statutory text and legislative chronology: the 2018 amendment to section 80AC introduced a substantive disqualification for late filing, but the CPC's statutory power to make adjustments in 143(1) was not correspondingly extended until Finance Act, 2021. Prior to the 2021 amendment, the scope of adjustments under section 143(1)(a) was limited to arithmetical errors or claims constituting an 'incorrect claim' as defined, which did not encompass denial of deduction solely for delayed filing. Absent enabling provisions in the law applicable to the assessment year in issue, the CPC/JAO could not exercise such disallowance in the intimation under section 143(1). Ratio vs. Obiter: Ratio - For assessment years prior to the 2021 amendment, CPC has no jurisdiction under section 143(1) to deny deductions on the ground of belated filing; such disallowance exceeds the statutory mandate and is void for lack of jurisdiction. Conclusion: The disallowance made by CPC in the intimation under section 143(1) for the impugned assessment year is without jurisdiction and must be set aside; the order under appeal is reversed on this ground and relief granted to the assessee. Issue 3: Requirement of reasonable opportunity under the first proviso to section 143(1)(a) Legal framework: The first proviso to section 143(1)(a) mandates that where an adjustment is proposed by CPC/processing, a reasonable opportunity be given to the taxpayer before making such adjustment. Precedent treatment: Jurisprudence and Tribunal practice emphasize adherence to procedural safeguards; failure to give an opportunity where required invalidates the processing adjustment. Interpretation and reasoning: It was contended that CPC did not provide the reasonable opportunity contemplated by the first proviso and proceeded directly to deny the deduction. While the primary disposal rests on lack of jurisdiction (Issue 2), the procedural argument reinforces that the CPC failed to comply with statutory safeguards where an adjustment was proposed. Given that the CPC had no jurisdiction to deny the deduction for the relevant year, the procedural lapse is cumulative but not essential to the decision. Ratio vs. Obiter: Obiter (supporting): Failure to provide reasonable opportunity in accordance with the first proviso to section 143(1)(a) is a material procedural infirmity that further vitiates any disallowance made by CPC. Conclusion: Even if jurisdictional issues were not decisive, non-compliance with the first proviso would have independently rendered the disallowance unsustainable. Issue 4: Relief by condonation and discretionary powers (CBDT Circular and section 119(2)(b)) Legal framework: CBDT Circulars and section 119(2)(b) permit administrative directions and exercise of discretion in genuine hardship cases; condonation of delay may be considered by competent authorities to mitigate hardship caused by delayed statutory audits and consequent late filing. Precedent treatment: Administrative guidance (CBDT Circular No.13/2023) recognizes hardships faced by cooperative societies in obtaining audits and allows competent authorities to consider condonation under section 119(2)(b). Interpretation and reasoning: The assessee relied on the Circular and on the fact that statutory audit completion caused delay beyond its control. The Tribunal notes the Circular and the availability of remedial administrative relief, but limits its decision to statutory and jurisdictional analysis for the assessment year in question. The Court accepts the hardship argument as factual background and notes that competent authorities have discretion to condone delays under the Circular and section 119(2)(b), but the operative decision reverses the disallowance on grounds of lack of CPC jurisdiction. Ratio vs. Obiter: Obiter - Administrative condonation under section 119(2)(b) and CBDT Circulars is a permissible remedy for genuine hardship, but not necessary for the disposition of this appeal given the jurisdictional conclusion. Conclusion: The assessee's contention of hardship is recognized and avenues for condonation under administrative powers exist; however, the appeal is allowed on jurisdictional grounds without requiring exercise of those discretionary powers. Overall Disposition Because CPC/processing lacked statutory jurisdiction under section 143(1) to disallow a claim under section 80P on the ground of belated filing for the impugned assessment year (pre-2021 amendment), and because procedural safeguards under the first proviso to section 143(1)(a) were not observed, the disallowance is reversed and the deduction under section 80P is restored. The Tribunal follows consistent coordinate bench decisions and maintains the rule of consistency absent contrary higher authority pronouncement.