Section 80P deduction cannot be denied at return-processing stage; section 80AC must be examined in scrutiny assessment.

Disallowance of deduction under section 80P at the processing stage under section 143(1)(a)(v) was not permissible for the relevant assessment year because the prima facie adjustment power for Chapter VI-A deductions came into force only from 1 April 2021 by the Finance Act, 2021. The bar under section 80AC could be examined in scrutiny assessment under section 143(3), but not through a return-processing adjustment. The intimation disallowing the deduction therefore exceeded the scope of section 143(1), and the deduction was directed to be allowed.

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Issues: Whether the disallowance of deduction under section 80P made while processing the return under section 143(1)(a)(v), by invoking section 80AC for filing the return beyond the due date, was legally permissible for the assessment year in question.

Analysis: The adjustment under section 143(1)(a)(v) for disallowance of deductions under Chapter VI-A was held to have been brought into force only by the Finance Act, 2021 with effect from 01.04.2021. For the relevant assessment year, the power to make a prima facie disallowance of deduction under section 80P was not available at the processing stage under section 143(1). The bar under section 80AC could be examined in scrutiny assessment under section 143(3), but not through a prima facie adjustment in processing of the return. The disallowance made in the intimation was therefore beyond the permissible scope of section 143(1).

Conclusion: The disallowance of deduction under section 80P in processing under section 143(1)(a)(v) was not sustainable, and the deduction was directed to be allowed.

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