2023 (6) TMI 115 - AT - Income Tax

Rectification of mistake u/s 154 - denial of claim for deduction u/s 80P by CPC u/s 143(1)(a) - CIT(A) dismissed the appeal of the assessee on the ground that denial of deduction u/s 80P(2)(d) does not amount to a mistake apparent from the record - HELD THAT - CIT(Appeals) has dismissed the appeal of the assessee on the ground that the point of difference between computation of book profit made by CPC by denying the claim of deduction under Section 80P as such involved debatable issues and thus was outside the purview of Section 154 of the Act, but on the other hand he has upheld the denial of claim of deduction under Section 80P by way of adjustments u/s 143(1) which, in our view, covers within its scope correction of arithmetical mistakes and adjustment of incorrect claim u/s 143(1) through Centralized Processing of Returns. Also we observe that while the communication of proposed adjustment u/s 143(1) has given one basis for proposed adjustment, however, in the order / intimation issued by u/s 143(1) deduction of claim u/s 80P was denied to the assessee i.e. claim of deduction u/s 80P was denied to the assessee for the first time without any prior communication of proposed adjustment in respect of denial of claim u/s 80P - We observe that the assessee was denied any opportunity to file its objections to the adjustments made in the order / intimation issued by CPC with respect to denial of claim of deduction u/s 80P. Thirdly, we observe that in the instant facts it has not been disputed by the Department that the interest / dividend income was received by the assessee from other Co-operative Societies. On perusal of the return of income filed by the assessee also shows that the said deduction u/s 80P has been claimed by the assessee on the balance income after set off of current year and brought forward losses . Accordingly, there seems to be no justifiable basis for denying assessee s claim for deduction under Section 80P of the Act, in the instant set of facts. Decided in favour of assessee.

Summary

Issues involved:
The appeal against the order passed by the Ld. CIT(Appeals), National Faceless Appeal Centre, Delhi regarding the rejection of the application for rectification of intimation u/s 143(1) and denial of claim for deduction u/s 80P by CPC.

Details of the judgment:

Issue 1: Rejection of application for rectification of intimation u/s 143(1)
The assessee, a Co-operative Society, filed a return of income claiming deduction under Section 80P(2)(d), which was disallowed by CPC under Section 143(1) of the Act. The assessee filed rectification applications, all of which were rejected by the CPC. The Ld. CIT(A) dismissed the appeal, stating that denial of deduction under Section 80P(2)(d) does not amount to a mistake apparent from the record. The Ld. CIT(A) cited precedents to support this decision, emphasizing that rectification under Section 154 does not involve a wholesale review of the earlier order but is limited to rectifying obvious mistakes. The appeal was dismissed on the grounds that the issue was not permissible to convert its character as a mistake apparent from the record.

Issue 2: Denial of claim for deduction u/s 80P by CPC
The appellant contended that the denial of deduction under Section 80P was a violation of the law as the income was received from another Co-operative Society. The appellant argued that there was a discrepancy between the communication for proposed adjustment and the final order by CPC, which denied the deduction without prior communication to the assessee. The Tribunal observed that the denial of the deduction lacked a justifiable basis in the facts of the case, as the income was received from Co-operative Societies and the deduction was claimed on the balance income after set off of losses. The Tribunal held that the Ld. CIT(A) erred in dismissing the appeal without considering the facts of the case, and allowed the appeal of the assessee.

This judgment highlights the importance of ensuring that denials of deductions are based on valid reasons and proper communication between tax authorities and taxpayers to allow for objections and rectifications in a transparent manner.