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2025 (2) TMI 1182 - AT - Income TaxDeduction u/s. 80P - denial of deduction on non-filing of the income-tax return u/s. 139(1) - HELD THAT - An amendment was brought in section 143(1)(a) of the Act by the Finance Act 2021 w.e.f. 01.04.2021 giving powers to the CPC for disallowing the claim of deduction u/s. 80P of the Act if return of income is not filed within the statutory time limit provided u/s. 139(1) - prior to amendment there was no mechanism for CPC to deny the deduction u/s. 80P of the Act. Admittedly the assessment year under consideration is 2018-19 whereas the amendment has been brought in from A.Y. 2021-22 and therefore the CPC erred in making the adjustment by way of disallowing deduction u/s.80P of the Act in the instant case. CPC was not justified in disallowing the deduction claimed by assessee u/s. 80P of the Act for A.Y. 2018-19 as the powers for doing so were brought into the Act from A.Y. 2021-22. Appeal of the assessee is allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal question considered by the Tribunal is whether the Central Processing Centre (CPC) was justified in denying the deduction claimed by the assessee under section 80P of the Income-tax Act, 1961, on the ground that the income tax return was filed belatedly, i.e., after the due date prescribed under section 139(1) of the Act, for the Assessment Year (AY) 2018-19. In particular, the issue involves the interpretation and applicability of the amendment introduced by the Finance Act, 2021, which empowered the CPC, effective from AY 2021-22, to disallow deductions under section 80P if the return was not filed within the statutory time limit. The Tribunal was required to determine whether this provision could be applied retrospectively to AY 2018-19, and consequently, whether the denial of the deduction by the CPC was legally sustainable. 2. ISSUE-WISE DETAILED ANALYSIS Issue: Whether CPC was justified in disallowing deduction under section 80P for AY 2018-19 on account of late filing of return. Relevant legal framework and precedents: Section 80P of the Income-tax Act provides deductions to primary agricultural credit societies and cooperative societies carrying on banking business. The return of income is required to be filed within the due date specified under section 139(1) for claiming such deductions. An amendment by the Finance Act, 2021, effective from 01.04.2021 (AY 2021-22 onwards), introduced clause (v) in section 143(1)(a) of the Act, empowering the CPC to disallow deductions under Chapter VI-A, including section 80P, if the return is not filed within the prescribed due date under section 139(1). Prior to this amendment, no such mechanism existed for the CPC to deny deductions on this ground. The Tribunal relied heavily on a Coordinate Bench decision in the case of Finolex Industries Ltd. Employees Co-operative Credit Society Ltd., wherein it was held that the amended provision under section 143(1)(a)(v) could not be applied retrospectively to AYs prior to 2021-22. The decision clarified that for AY 2018-19, the CPC had no authority to disallow the deduction under section 80P on the ground of late filing. Court's interpretation and reasoning: The Tribunal observed that the amendment empowering the CPC to disallow deductions under section 80P for late filing came into effect only from AY 2021-22. Since the instant case pertains to AY 2018-19, the CPC's action of disallowing the deduction was without legal basis and amounted to an error. The Tribunal noted that the statutory language of section 143(1)(a)(v) specifically includes deductions under Chapter VI-A only from the date of amendment and does not apply retrospectively. Furthermore, the Tribunal examined the definition of "incorrect claim" under section 143(1)(a)(ii) and found that deduction under section 80P is not included within its ambit, thereby excluding the possibility of disallowance under this provision for the AY in question. Key evidence and findings: The assessee filed the return belatedly for AY 2018-19 and claimed deduction under section 80P. The CPC disallowed the deduction citing late filing. The appellate authority upheld the disallowance but advised the assessee to seek condonation of delay from the Chief Commissioner of Income Tax (CCIT) under a Government of India instruction dated 03.08.2023. However, this instruction was not binding on the statutory interpretation of the Act. The Tribunal found that the CPC's disallowance was based on the amended provisions effective from AY 2021-22, which could not be invoked for AY 2018-19. This was corroborated by the Coordinate Bench ruling. Application of law to facts: Applying the law as it stood during AY 2018-19, the Tribunal concluded that the CPC had no authority to deny the deduction under section 80P on the ground of late filing. The amendment empowering such denial was prospective and not retrospective. Therefore, the assessee was entitled to the deduction despite the belated filing of the return. Treatment of competing arguments: The Revenue contended that late filing should attract denial of deduction under section 80P as per the amended provisions and that the assessee could seek condonation of delay from the CCIT. The Tribunal rejected this, holding that the amendment was not applicable to AY 2018-19 and that the CCIT's condonation power did not override the statutory provisions. The Tribunal gave precedence to the clear statutory language and the Coordinate Bench precedent. Conclusions: The Tribunal concluded that the CPC erred in disallowing the deduction under section 80P for AY 2018-19 on the ground of late filing. The amendment empowering such disallowance was not applicable to the AY in question. The impugned order denying the deduction was reversed, and the deduction was to be allowed by the Assessing Officer. 3. SIGNIFICANT HOLDINGS The Tribunal emphasized the following crucial legal reasoning: "Section 143(1)(a)(v) of the Act spells out that if any deduction is claimed under any of the provisions of Chapter VI-A which include deduction u/s 80P such deduction has to be allowed only if the return is filed within due date specified under sub-section 139(1) of the Act. However, clause (v) was inserted by the Finance Act, 2021 w.e.f. 01-04-2021. The case of the assessee, on the other hand, is for F.Y. 2018-19 relevant to A.Y. 2019-20 which is the period prior to amendment brought in by the Finance Act, 2021. Before this amendment, clause (v) did not include and cover deduction u/s 80P. So therefore, in the present Case of the assessee though admittedly return was filed beyond the time limit prescribed u/s 139(1) of the Act but still section 143(1)(a)(v) is not applicable to the assessee since the case of the assessee is for A.Y. 2019-20, which is before the amendment." The core principle established is that statutory amendments introducing procedural safeguards or penalties cannot be applied retrospectively unless expressly stated. The CPC's power to disallow deductions under section 80P for late filing of returns is a procedural safeguard introduced only from AY 2021-22 onwards and cannot be invoked for AY 2018-19. Final determinations on the issue were as follows:
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