2023 (9) TMI 1697 - AT - Income Tax

Denial of 80P deduction - Adjustment u/s 143(1)(a)(v) - return filed beyond due date prescribed u/s 139(1) - eligibility of claims made in the belated return - HELD THAT - Apparently out of two riders laid in s/s (5) of section 80A and clause (ii) of section 80AC of the Act the later rider is seems to have rightly attracted. For the reasons the Ld. CPC rejected the claim while processing the ITR summarily u/s 143(1) of the Act and finding no fault therewith the Ld. NFAC has dismissed the appeal on this score. In present appeals we note that the appellant societies have furnished their ITR albeit beyond the prescribed due date (filed belated) and however those were filed with an eligible claim for 80P deduction therein. Therefore jurisdiction of Ld. CPC s/c (v) of clause (a) of sub section (1) of section 143 of the Act is not available as the matter of fact that s/c (v) (supra) was amended by the Finance Act 2021 wherein instead of reference to Sections 10AA 80-IA 80-IAB 80-IB 80-IC 80- ID or Section 80-IE the provision instead makes a mention of Section 10AA or under any of the provisions of Chapter VI-A under the head C- Deductions in respect of certain incomes . Accordingly the enabling provisions to address the amendment in Section 80-AC(ii) by Finance Act 2018 came into play only in 2020-21 assessment year. Thus no doubt Section 80AC as amended by the Finance Act 2018 mandated that even for claiming deduction claimed u/s 80P the return of income was to be filed before the due date as specified u/s 139(1) of the Act. CPC to insist upon the compliance by way of making a disallowance owning to filing the return belated the power vested in the said Authority only vide Finance Act 2021 and came into effect accordingly. Therefore in the absence of the enabling jurisdiction provisions the Ld. CPC lacked the jurisdiction to make any disallowance of claim made u/c VI-A of the act while processing the return summarily u/s 143(1)(a)(v) of the Act. Assessee appeal allowed.

Summary

The core legal questions considered by the Tribunal in these appeals are twofold: (1) the eligibility of the assessee credit co-operative societies to claim deduction under section 80P of Chapter VI-A of the Income-tax Act, 1961 ('the Act'), and (2) the jurisdiction of the tax authorities, particularly the Central Processing Centre (CPC), to disallow the 80P deduction during summary assessment under section 143(1) of the Act.

Regarding the first issue, the Tribunal examined the interplay between the provisions of section 80A(1), section 80A(5), and section 80AC(ii) of the Act as applicable from the assessment year (AY) 2018-19 onwards. Section 80A(1) allows certain deductions under Chapter VI-A from gross total income, subject to conditions. Section 80A(5) mandates that such deductions are allowable only if claimed in the return of income. Section 80AC(ii), introduced by the Finance Act, 2018, further restricts the allowance of deductions under Chapter VI-A by requiring that the return of income claiming such deductions must be filed within the due date prescribed under section 139(1) of the Act. The Tribunal emphasized that these provisions collectively establish a "twin rider" condition: a deduction under Chapter VI-A, including section 80P, is permissible only if the claim is made in a return filed on or before the due date.

The Tribunal provided a detailed tabular illustration clarifying the allowability of deductions under Chapter VI-A depending on whether the original or revised return was filed within or beyond the due date, both for AYs up to 2017-18 and from AY 2018-19 onwards. This table reinforced that from AY 2018-19, no deduction under Chapter VI-A is allowed if the return claiming it is filed after the due date, regardless of whether the claim was made.

In the present cases, both credit co-operative societies filed their returns for AY 2018-19 beyond the due date prescribed under section 139(1), albeit with claims for deduction under section 80P. The CPC, during summary assessment under section 143(1)(a)(v), disallowed the 80P deductions relying on section 80AC(ii) and the relevant provisions of section 143(1), which was subsequently upheld by the National Faceless Appeal Centre (NFAC) on appeal.

The second issue concerned the jurisdictional competence of the CPC to disallow the 80P deduction during summary assessment under section 143(1)(a)(v). The Tribunal noted that the power of the CPC to make adjustments under section 143(1)(a)(v) was amended by the Finance Act, 2021, which came into effect only from AY 2020-21 onwards. Prior to this amendment, the CPC's power to disallow deductions under Chapter VI-A, including section 80P, during summary assessment was not explicitly conferred. The Tribunal observed that the relevant amendment replaced the earlier reference to specific sections with a broader reference to Chapter VI-A deductions, thereby expanding CPC's jurisdiction from AY 2020-21 onwards.

Applying this legal framework to the facts, the Tribunal found that although the Finance Act, 2018 introduced the requirement of timely filing for claiming deductions under section 80P, the CPC did not have the jurisdiction to disallow such deductions during summary assessment for AY 2018-19, as the amendment empowering CPC to do so came only into effect from AY 2020-21. Hence, the CPC's disallowance of the 80P deduction in these cases exceeded its jurisdictional authority at the relevant time.

The Tribunal further relied on judicial precedents from coordinate benches, including decisions in 'Lanjani Co-Operative Agri Service Society Ltd. vs DCIT', 'Lunidhar Seva Sahkari Mandali Ltd. vs Assessing Officer (CPC)', and 'Karohta Co-Operative Agriculture Service Society Ltd. vs ITO', which have held similarly that CPC lacked jurisdiction under section 143(1)(a)(v) to disallow Chapter VI-A deductions for returns filed beyond the due date prior to the Finance Act, 2021 amendment.

Addressing the competing arguments, the Tribunal considered the Revenue's reliance on section 80AC(ii) to deny the deduction and the NFAC's confirmation of the disallowance. However, it rejected this stance on the ground that the CPC's power to enforce this provision through summary assessment was not yet in force for AY 2018-19, thereby rendering the disallowance legally untenable. The Tribunal did not find any fault in the assessee's claim for deduction made in the belated returns per se but emphasized the jurisdictional limitation of the CPC at the time of assessment.

Consequently, the Tribunal set aside the impugned orders of the NFAC and directed the CPC to reverse the disallowance and accept the claim of deduction under section 80P as made in the returns filed by the assessee societies. Both appeals were allowed accordingly.

Significant holdings from the judgment include the following verbatim legal reasoning: "The cumulative reading of both, s/s (5) of section 80A and clause (ii) of section 80AC of the Act unambiguously lays down that, from AY 2018-19 a claim for deduction u/c VI-A of the Act is allowable to assessee utterly when such claim is made in return of income filed within statutory due date prescribed u/s 139(1) of the Act." Further, "the power vested in the said Authority [CPC] only vide Finance Act, 2021 and came into effect accordingly. Therefore, in the absence of the enabling jurisdiction provisions, the Ld. CPC lacked the jurisdiction to make any disallowance of claim made u/c VI-A of the act while processing the return summarily u/s 143(1)(a)(v) of the Act."

The core principles established are: (1) from AY 2018-19, deductions under Chapter VI-A, including section 80P, are allowable only if claimed in a return filed within the due date under section 139(1); (2) the CPC's jurisdiction to disallow such deductions during summary assessment under section 143(1)(a)(v) was effective only from AY 2020-21 following the Finance Act, 2021 amendment; (3) for AY 2018-19, CPC lacked jurisdiction to disallow 80P deductions in belated returns during summary assessment; and (4) appellate authorities must set aside such disallowances made without jurisdiction.

In final determinations, the Tribunal allowed the appeals, set aside the NFAC orders, and directed the CPC to accept the 80P deduction claims as made in the belated returns for AY 2018-19, thereby restoring the assessee societies' entitlement to the deductions under the law applicable at that time.