2025 (5) TMI 432 - AT - Income Tax

CPC jurisdiction to disallow or deny the claim for deduction made u/s 80P at the relevant time of passing the order of intimation u/s 143(1) - HELD THAT - Appellant society furnished its ITR beyond the prescribed due date (filed belated) but making therein claim for 80P(2) deduction. The claim for deduction was no doubt subjected to disallowance by application of provisions of clause (ii) of section 80AC of the Act however there was complete absence of authority vested with the Ld. CPC to carry out the disallowance u/s 143(1)(a)(v). Therefore the impugned action of denial of 80P deduction to the appellant by the Ld. CPC was barred by jurisdiction hence unlawful. And in the absence of any explicit power contained in and vested with any authority under the Act to ratify the impugned action of the Ld. CPC we are duty bond to reverse prejudice caused to the appellant by vacating the impugned disallowance. We concur with the claim of the appellant society that the Ld. CPC clearly traversed and in fact exceeded its jurisdiction in disallowing the appellant s claim for deduction u/s 80P of the Act. Therefore same is liable to be vacated. In consequence we set-aside impugned order of Ld. CIT(A) and direct the Ld. CPC to reverse the disallowance and accept the claim of deduction u/c VI-A of the Act as claimed in the return of income filed by the appellant assessee.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal are:

(a) Whether the Central Processing Centre (CPC) had jurisdiction to deny the deduction claimed under section 80P of Chapter VI-A of the Income-tax Act, 1961 (the Act) while processing the return of income summarily under section 143(1) of the Act for the assessment year 2018-19;

(b) Whether the denial of deduction by the CPC on the ground of belated filing of the return under section 139(4) (filed after the due date prescribed under section 139(1)) was valid and within the authority conferred by law;

(c) The applicability and effect of section 80AC(ii) of the Act, which disqualifies deduction under Chapter VI-A if the return is not filed within the prescribed time limit under section 139(1); and

(d) The interpretation and effect of clause (v) of section 143(1)(a) of the Act, which defines the scope of the CPC's power to disallow certain deductions during summary assessment, particularly with regard to deductions under Chapter VI-A as it stood during the relevant period.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) & (b): Jurisdiction of CPC to deny deduction under section 80P during summary assessment u/s 143(1)

The Tribunal examined the jurisdictional scope of the CPC under section 143(1) of the Act at the time of processing the return for AY 2018-19. The assessee, a co-operative society, filed its return belatedly on 30/03/2019 under section 139(4), claiming deduction of Rs.10,21,541 under section 80P. The CPC, however, denied this deduction summarily under section 143(1), invoking section 80AC(ii) which mandates that the return must be filed within the time prescribed under section 139(1) to claim deduction under Chapter VI-A.

The assessee challenged the denial on the ground that the CPC lacked jurisdiction to disallow the deduction at the stage of summary assessment under section 143(1). The Tribunal noted that the parties did not dispute the applicability of section 80AC(ii) in principle, but the question was whether the CPC had authority to enforce it at the summary assessment stage.

The Tribunal analyzed clause (v) of section 143(1)(a), which enumerated the CPC's powers to disallow certain deductions if the return was filed beyond the due date under section 139(1). The relevant provision at the time (prior to amendment by Finance Act, 2021) allowed CPC to disallow deductions claimed under sections 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID, or 80-IE, but did not explicitly include section 80P or other provisions of Chapter VI-A.

The Tribunal observed that the Finance Act, 2021 substituted clause (v) to explicitly include deductions under Chapter VI-A, effective from 01/04/2021, which post-dated the AY 2018-19 assessment. Therefore, at the time of CPC's order of intimation dated 25/06/2019, the CPC did not have statutory authority to disallow deductions under section 80P during summary assessment under section 143(1).

Issue (c): Effect of section 80AC(ii) on deduction claims in belated returns

Section 80AC(ii) of the Act, as amended by the Finance Act, 2018, mandates that for claiming deductions under Chapter VI-A, the return must be filed within the due date prescribed under section 139(1). Failure to do so disentitles the assessee from claiming such deductions. This provision was not disputed by either party and was acknowledged as applicable.

However, the question was procedural-how and by whom the disallowance of such deductions should be effected. The Tribunal noted that while the substantive disqualification existed, the procedural mechanism for denying the deduction at the summary assessment stage was not available to the CPC for AY 2018-19 due to the absence of enabling jurisdiction under section 143(1)(a)(v) at that time.

Issue (d): Interpretation of clause (v) of section 143(1)(a) and its amendment

The Tribunal scrutinized the language of clause (v) of section 143(1)(a) as it stood before and after the Finance Act, 2021 amendment. Prior to amendment, clause (v) allowed CPC to disallow deductions under certain specified sections but did not cover section 80P or Chapter VI-A deductions generally. The amendment broadened the scope to include deductions under Chapter VI-A, effective from 01/04/2021.

The Tribunal held that since the CPC's order was passed on 25/06/2019, before the amendment's effective date, the CPC lacked jurisdiction to disallow the deduction under section 80P at the summary assessment stage. This conclusion was supported by the principle that jurisdictional provisions must be strictly construed, and the absence of explicit authority meant the CPC's action was ultra vires.

Application of law to facts and treatment of competing arguments

The Revenue argued that the CPC's denial was justified as the deduction was statutorily barred under section 80AC(ii) due to belated filing, and the CPC's power to disallow such deductions was implicit in the summary assessment process. It contended that since not all returns undergo regular assessment under section 143(3), the CPC's power to deny deductions under section 143(1) was necessary for effective tax administration.

The Tribunal rejected this argument on the ground that the enabling jurisdiction for such denial under section 143(1)(a)(v) of the Act was not available at the relevant time for deductions under section 80P. The Tribunal emphasized that the CPC's jurisdiction is defined by statute and cannot be extended by implication or administrative convenience.

The Tribunal relied on coordinate bench decisions which held similarly that the CPC lacked jurisdiction to disallow Chapter VI-A deductions during summary assessment for AY 2018-19. These precedents included decisions in cases involving co-operative societies where the belated filing of returns with claims under section 80P was not a ground for summary disallowance by the CPC prior to the 2021 amendment.

3. SIGNIFICANT HOLDINGS

The Tribunal's significant holdings include the following:

"The bare reading of substituted provisions clearly suggest that, the jurisdiction of Ld. CPC s/c (v) of clause (a) of s/s (1) of section 143 of the Act to deny or disallow the deduction claimed under the head 'C-Deduction in respect of certain income' u/c VI-A of the Act was not available as on the date when the order of intimation was passed."

"As on the date of processing the return summarily u/s 143(1)(a)(v) of the Act there was no enabling power vested with the Ld. CPC to apply provisions of section 80AC(ii) of the Act. Therefore, the impugned action of disallowance in our considered view was beyond Ld. CPC's jurisdiction or authority."

"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."

"Therefore, the impugned action of denial of 80P deduction to the appellant by the Ld. CPC was barred by jurisdiction, hence unlawful."

"We concur with the claim of the appellant society that the Ld. CPC clearly traversed and in fact exceeded its jurisdiction in disallowing the appellant's claim for deduction u/s 80P of the Act. Therefore, same is liable to be vacated."

"In consequence, we set-aside impugned order of Ld. CIT(A) and direct the Ld. CPC to reverse the disallowance and accept the claim of deduction u/c VI-A of the Act as claimed in the return of income filed by the appellant assessee."