Belated return by co-operative society and CPC denial of s. 80P deduction in s. 143(1)(a)(ii) intimation upheld

The dominant issue was whether CPC could, in an intimation under s. 143(1)(a)(ii), deny a co-operative society's deduction under s. 80P solely because the return was filed beyond the due date under s. 139(1) for the relevant AY, notwithstanding that the specific adjustment in s. 143(1)(a)(v) was inserted w.e.f. 01.04.2021. Although co-ordinate ITAT benches had held that belated filing was not an "incorrect claim" within the Explanation to s. 143(1)(a)(ii), the Tribunal treated the binding Madras HC precedent as upholding such denial under s. 143(1)(a)(ii) in the absence of any contrary HC ruling, and sustained the adjustment; the appeal was dismissed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether deduction under Section 80P can be denied where the return of income is filed beyond the due date prescribed under Section 139(1), in view of Section 80AC(ii).

(ii) Whether, for the relevant assessment year, the Central Processing Centre could lawfully make an adjustment in processing under Section 143(1)(a)(ii) treating such belated claim of Section 80P deduction as an "incorrect claim", and consequently reject rectification under Section 154.

(iii) Whether the Tribunal was bound to follow the view taken by a High Court on the same issue in the absence of any contrary High Court decision, notwithstanding contrary views of coordinate benches.

(iv) What consequential relief/direction, if any, should be given regarding the statutory mechanism for condonation of delay for claiming Section 80P deduction.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Effect of belated return on eligibility for Section 80P deduction

Legal framework: The Court considered Section 80P (deduction for eligible co-operative societies), Section 139(1) (due date for filing return), and Section 80AC(ii) (timely filing condition for Chapter VI-A deductions under Part C).

Interpretation and reasoning: The Court found it undisputed on facts that the returns were filed after the due date under Section 139(1). It accepted that Section 80AC(ii), effective from 01.04.2018, mandates that deductions under Part C of Chapter VI-A (including Section 80P) are admissible only if the return is furnished within the prescribed due date.

Conclusion: A belated return renders the claim of deduction under Section 80P inadmissible, unless the delay is condoned through the permissible statutory route.

Issue (ii): Validity of CPC adjustment under Section 143(1)(a)(ii) and rejection of rectification under Section 154

Legal framework: The Court examined the scope of adjustments under Section 143(1)(a), particularly clause (ii) ("incorrect claim ... apparent from any information in the return"), and noted the existence of clause (v) introduced/expanded with effect from 01.04.2021 to specifically cover certain belated-return deduction disallowances during processing. The Court also considered whether rectification under Section 154 could be allowed when the original adjustment was legally sustainable.

Interpretation and reasoning: Although the Court articulated an interpretive view that, prior to 01.04.2021, denial of a Chapter VI-A deduction solely because of belated filing may not automatically fit within the narrow "incorrect claim" categories, it held that a High Court decision had already upheld denial of Section 80P in belated returns through processing under Section 143(1)(a)(ii), treating the belated filing date as apparent from the return and the adjustment as a mechanical exercise within the processing scope. Applying that binding view, the Court held there was no infirmity in denying Section 80P through Section 143(1)(a)(ii) at the processing stage for the year under consideration, and consequently no rectifiable "mistake" warranting relief under Section 154.

Conclusion: The disallowance of Section 80P by CPC through adjustment under Section 143(1)(a)(ii) for a belated return was upheld as valid on the facts; the rejection of rectification under Section 154 was therefore sustained.

Issue (iii): Binding effect of a High Court decision vis-à-vis contrary coordinate bench decisions

Legal framework: The Court applied principles of judicial discipline regarding precedential hierarchy.

Interpretation and reasoning: The Court held that where a High Court has decided the identical issue, the Tribunal must follow that view in the absence of any contrary decision of another High Court. It further held that declining to follow such a binding precedent would violate judicial discipline, even if coordinate benches had taken a different approach.

Conclusion: The Court followed the High Court view and declined to apply contrary coordinate bench decisions; the appeals were dismissed accordingly.

Issue (iv): Consequential direction regarding condonation mechanism for delayed returns claiming Section 80P

Legal framework: The Court considered Section 119(2)(b) as the statutory mechanism enabling condonation of delay, and noted that if condonation is granted, the belated return is treated as filed within the due date for the purpose of eligibility to claim Section 80P.

Interpretation and reasoning: While upholding the processing-stage disallowance, the Court recognized that eligible taxpayers may seek condonation of delay before the prescribed authority, particularly in view of practical difficulties such as audit delays. The Court therefore advised use of the condonation route and issued a time-bound facilitative direction to allow filing of such applications.

Conclusion: Though no deduction was granted in these appeals, the Court directed that time of 30 days be afforded for making condonation applications under Section 119(2)(b), and indicated that such applications should be considered in the spirit of the enabling mechanism.

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