2022 (9) TMI 1375 - AT - Income Tax

Deduction u/s 80P(2) - Claim denied as assessee made a claim in the income tax return but for not filling up certain Schedules in the return correctly - Denial of natural justice as opportunity to substantiate its claim with necessary documentary evidences not given - HELD THAT - As before denying such claim no opportunity has been given to the assessee as provided in the provisions of Section 143(1)(a) of the Act where the proviso states that No such adjustments shall be made unless any intimation is given to the assessee of such adjustments either in writing or in electronic mode and further provided that the response received by the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made. I find that the assessee was never given an opportunity to substantiate its claim with necessary documentary evidences. Even ld. CIT(A) did not entertain the claim of the assessee by giving a general finding. If the assessee has made a rightful claim it should not be denied without giving any opportunity of hearing to it to file necessary documents in support of its claim and if rightful claim has been made then denying of such claim merely on the basis of not filling up of certain Schedules in the income tax return will not be in the interest of justice. Restore all the issues raised in the instant appeal including that of claim of deduction u/s 80P(2) to the file of AO having jurisdiction over the assessee and direct him to examine/verify the claim of the assessee made for deduction u/s 80P(2) of the Act - Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
Appeal against order u/s 250 of the Income Tax Act - Denial of claim u/s 80P(2) - Eligibility of Poultry farming for deduction u/s 80P(2) - Opportunity for substantiating claim u/s 143(1)(a) - Restoration of issues to AO for examination - Merit-based allowance of claim u/s 80P(2).

Analysis:
The appeal filed by the assessee challenges the order passed u/s 250 of the Income Tax Act, contesting the denial of the claim made u/s 80P(2) for the Assessment Year 2018-19. The primary contention raised in the appeal revolves around the correctness of the denial without proper verification and examination of the records and provisions of law. The assessee, a Cooperative Society registered under the West Bengal Co-operative Societies Act, claimed deduction u/s 80P(2) for income from business or profession. However, the claim was denied during processing, citing improper filling of certain columns in the income tax return.

The Tribunal noted that the denial of the claim without providing an opportunity to the assessee to substantiate the claim goes against the provisions of Section 143(1)(a) of the Act. This section mandates that adjustments should not be made without informing the assessee and considering their response. The Tribunal found that the assessee was not given a chance to provide necessary documentary evidence to support the claim, and the CIT(A) did not adequately address the issue.

Considering the lack of opportunity provided to the assessee and the importance of substantiating a rightful claim, the Tribunal decided to restore all issues raised in the appeal, including the claim of deduction u/s 80P(2), to the Assessing Officer for re-examination. The AO was directed to verify the claim, consider any additional documents or details provided by the assessee, and allow the claim if found to be meritorious and in accordance with the law.

In conclusion, the Tribunal allowed the appeal of the assessee for statistical purposes, emphasizing the need for a fair opportunity for the assessee to substantiate their claim and for a merit-based decision on the allowance of the deduction u/s 80P(2) of the Income Tax Act.