2017 (3) TMI 1391 - HC - Income Tax

Revision u/s 263 - Claim of deduction under Chapter VIA of the I.T. Act 1961 - whether claim not made in the original return of income can be allowed as deduction otherwise than by revised return of income -assessee is a Cooperative Credit Society - Held that - Tribunal has clearly recorded a finding of fact that the hard copy of the return of income was filed with the Assessing Officer and an acknowledgement of the same was also given by the Assessing Officer. This acknowledgement did indicate the respondent assessee s claim for deduction under Section 80P of the Act was claimed in the return of income. The impugned order also records the fact that there was a malfunctioning of the software as the tax liability could not have been Nil in the absence of the deduction under Section 80P of the Act being taken into account as the income declared by the respondent assessee is ₹ 1.26 crores before deduction under Section 80 of the Act. The malfunctioning of the software under which the return of income was electronically uploaded is also not disputed before us, nor is it shown that the finding of the Tribunal on the above account is in any manner perverse. So far as the nonconsideration by the Assessing Officer of the merits of the claim for deduction under Section 80P of the Act is concerned, we find that the Assessing Officer had considered the claim for deduction under Section 80P of the Act. The Revenue has neither before the Tribunal nor before us demonstrated how and in what manner the consideration of the claim under Section 80P of the Act as reflected in order is erroneous so as to enable him to exercise his powers under Section 263 of the Act. - Decided in favour of assessee

Issues:
- Claim of deduction under Chapter VIA of the Income Tax Act not made in the original return of income
- Validity of revision of assessment order under Section 263 of the Act
- Consideration of merits of claim for deduction under Section 80P of the Act by Assessing Officer
- Functionality of software for electronically uploaded return of income

Analysis:
1. Claim of deduction under Chapter VIA not made in original return:
The respondent assessee, a Cooperative Credit Society, filed its return of income for Assessment Year 2007-08 both in hard copy and online. The Assessing Officer initially accepted the return as Nil after allowing exemption under Section 80P of the Act. However, the Commissioner of Income Tax revised the assessment order under Section 263, setting it aside for fresh consideration due to the deduction granted even though not claimed by the respondent. The Tribunal found that the deduction under Chapter VIA was indeed claimed by the respondent, and a software error caused it not to reflect in the electronically uploaded return. The Tribunal held that the benefit of deduction under Section 80P was claimed in the return, and the Assessing Officer did consider the merits of the claim.

2. Validity of revision of assessment order under Section 263:
The Commissioner revised the assessment order due to the deduction granted without being claimed and lack of proper enquiries by the Assessing Officer. The Tribunal found that the hard copy of the return filed with the Assessing Officer did show the claim for deduction under Section 80P. The malfunctioning of the software for the electronically uploaded return was acknowledged, and it was evident that the income declared before deduction was substantial. The Tribunal concluded that the revisionary powers were rightly exercised as the claim was indeed made by the respondent.

3. Consideration of merits of claim for deduction under Section 80P:
The Revenue contended that the Assessing Officer did not consider the claim for deduction under Section 80P, but the Tribunal found otherwise. It noted that the Assessing Officer had indeed considered the claim, and there was no demonstration of any error in the consideration. The Tribunal held that the question raised did not give rise to any substantial question of law, as the claim was properly considered by the Assessing Officer.

4. Functionality of software for electronically uploaded return:
The malfunctioning of the software caused the deduction under Section 80P not to reflect in the electronically uploaded return, leading to the Revenue's grievance. However, the Tribunal found that the hard copy of the return clearly indicated the claim for deduction. The malfunctioning of the software was not disputed, and the Tribunal's finding on this matter was considered valid. The Apex Court decision cited by the Revenue was deemed inapplicable due to the clear claim made by the respondent in the hard copy of the return.

In conclusion, the High Court dismissed the appeal, upholding the Tribunal's decision that the claim for deduction under Section 80P was validly made by the respondent assessee, and the revision of the assessment order under Section 263 was justified.

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