2025 (7) TMI 1289 - AT - Income Tax

Disallowing deduction u/s 80P - delay in filing the return - return of the assessee has been processed by CPC u/s 143(1) - HELD THAT - CPC has to process the return strictly as per section 143(1)(a) and in the said section upto 31.03.2021 there had been no specific provisions for making Prime Facie adjustments for disallowing deduction claimed u/s 80P. Therefore prior to 01.04.2021 CPC could not make Prime-Facie adjustments by disallowing deduction u/s 80P of the Act for delay in filing the return. This issue has been dealt by this Tribunal on number of occasions. In the written submissions assessee has referred and relied on the decision of this tribunal in the case of NRB Bearings Sevakachi Patsanstha 2024 (6) TMI 1482 - ITAT PUNE and Finolex Industries Ltd. Employees Co-op Credit Society Ltd. 2023 (4) TMI 1423 - ITAT PUNE wherein it has been held that the legislature has introduced such disallowance provisions in section 143(1)(a)(v) dealing with deduction claim(s) provided in Chapter VIA of the Act by way of Finance Act 2021 w.e.f 01.04.2021 with prospective effect and therefore prior to 01.04.2021 the disallowance u/s 80P of the Act cannot be made in the returns processed u/s 143(1)(a) of the Act. Respectfully following the same thus hold that Ld. CIT(A) erred in affirming the action of the CPC. Finding of the Ld. CIT(A) is set aside and disallowance of deduction u/s 80P of the Act is hereby deleted. Assessee appeal allowed.

Summary

ISSUES:

Whether delay in filing the appeal can be condoned on the ground of reasonable cause supported by medical evidence.Whether deduction under section 80P of the Income-Tax Act, 1961 can be disallowed by the CPC on account of delay in filing the income tax return for the relevant assessment year.Whether the disallowance of deduction under section 80P can be treated as an "incorrect claim" under section 143(1)(a)(ii) read with section 80AC(ii) of the Act in returns processed prior to 01.04.2021.Whether the amendment introduced by the Finance Act, 2021 with effect from 01.04.2021 empowers CPC to make prime facie adjustments disallowing deductions under Chapter VIA, including section 80P, for delayed filing of returns.

RULINGS / HOLDINGS:

The delay of 182 days in filing the appeal was condoned as there was a "reasonable cause" supported by medical treatment evidence, applying the principle that a "more liberal approach may be adopted for the examination of the case on its merits" where delay is unintentional and well explained.The disallowance of deduction under section 80P by the CPC on the ground of delayed filing of the return for AY 2018-19 is not sustainable, as prior to 01.04.2021, CPC did not have the power to make prime facie adjustments disallowing such deductions under section 143(1)(a) of the Act.The CIT(A) erred in confirming the disallowance by treating the claim as "incorrect claim" under section 143(1)(a)(ii) read with section 80AC(ii), since the legislative amendment empowering such disallowance came into effect only from 01.04.2021.The amendment introduced by the Finance Act, 2021 w.e.f. 01.04.2021, which added section 143(1)(a)(v), empowers CPC to disallow deduction claims under Chapter VIA in returns filed after the due date, but this provision cannot be applied retrospectively to returns processed before that date.

RATIONALE:

The court applied the principle of condonation of delay based on "reasonable cause" supported by affidavit and medical evidence, referencing the Apex Court's ruling that delay which is "unintentional and less due to deliberate laches" may be condoned to examine the merits.The legal framework under section 80P requires the return to be filed within the due date prescribed under section 139(1) to claim deduction; however, the power of CPC to make prime facie disallowance of such deduction claims under section 143(1)(a) was introduced only by the Finance Act, 2021 effective 01.04.2021.Prior to this amendment, returns processed under section 143(1)(a) could not be adjusted for delayed filing-related disallowance of deductions under section 80P, as held consistently by this Tribunal in earlier decisions.The Tribunal followed precedent decisions which held that the amendment has prospective effect and cannot be applied retrospectively, thereby setting aside the disallowance confirmed by the CIT(A).