2023 (6) TMI 1311 - AT - Income Tax

Disallowance of deduction claimed u/s 80P - return was processed by the CPC Bangalore u/s 143(1) of the I.T. Act denying the deduction claimed u/s 80P for the reason that the return of income was not filed with the due date - HELD THAT - It is not in question that section 80AC of the I.T. Act as amended by Finance Act 2018 stipulated that for claiming deduction u/s 80P of the Act the return of income was required to be filed before the due date as prescribed by section 139(1) and in the present case the return was filed belatedly. It was only by the amendment to section 143(1) (a)(v) brought in by Finance Act 2021 that the CPC can be said have been vested exercising powers u/s 143(1)(a) to make disallowance on the ground of belated return. 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. 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 this we find support from the decision of The Lanjani Cooperative Agri Service Society Ltd. VPO Lanjani Kangra (HP) 2022 (9) TMI 345 - ITAT CHANDIGARH as held admittedly the provision enabling the AO to pass an order relying upon sub-clause (5) of Section 143(1)(a) was not on the Statute for 2018-19 assessment year. Accordingly for the detailed reasons hereinabove setting aside the impugned order the appeal of the assessee is allowed.

Summary

Issues Involved:
1. Disallowance of deduction claimed under section 80P of the Income Tax Act, 1961.
2. Validity of the order of the Assessing Officer under section 143(1) of the Income Tax Act, 1961.
3. Jurisdiction of CPC Bangalore to disallow the deduction under section 143(1) for the assessment year 2018-19.

Summary:

Issue 1: Disallowance of Deduction Claimed under Section 80P
The assessee contended that the disallowance of deduction under section 80P was not justified as the amendment to section 80AC by the Finance Act, 2018, which required filing the return within the due date specified under section 139(1), could not be applied while processing the return under section 143(1) for the assessment year 2018-19. The Tribunal noted that the amendment to section 143(1)(a)(v) by the Finance Act, 2021, which enabled such disallowance, was effective from assessment year 2021-22 onwards and did not apply to the impugned assessment year.

Issue 2: Validity of the Order of the Assessing Officer under Section 143(1)
The Tribunal observed that prior to the amendment by the Finance Act, 2021, the Assessing Officer could disallow a claim under section 143(1)(a) only on specific grounds such as arithmetical error or incorrect claim. The Tribunal referred to the case of 'Fatehraj Singhvi & Ors. v. UOI and Ors' to support the view that in the absence of enabling powers, no disallowance could be made. Consequently, the CPC Bangalore did not have the jurisdiction to make the disallowance in question in the order under section 143(1) for the assessment year 2018-19.

Issue 3: Jurisdiction of CPC Bangalore
The Tribunal relied on the decision of the Coordinate Chandigarh Benches in 'The Lanjani Cooperative Agri Service Society Ltd. vs. The DCIT (CPC) Bangalore' and concluded that the CPC Bangalore lacked the jurisdiction to disallow the deduction under section 80P in the order under section 143(1) for the assessment year 2018-19. The Tribunal emphasized that the enabling provisions to address the amendment in section 80AC by the Finance Act, 2018, came into play only in the assessment year 2021-22. Therefore, the disallowance made by the CPC Bangalore was not justified.

Conclusion:
The Tribunal found merit in the grievance raised by the assessee and accepted the appeal. The order under appeal was reversed, and the disallowance of Rs. 7,35,190/- was cancelled. The appeal of the assessee was allowed.