2023 (9) TMI 1220 - AT - Income Tax

Denial of deduction u/s 80P - Claim inadmissible in view of section 80AC on the processing of returns u/s 143(1)(a) of the Act - invocation of s. 143(1)(a)(ii) of the Act for effecting a disallowance u/s. 80P r/ws. 80AC for processing a return prior to 01.4.2021 - scope of amendment to section 143(1)(a)(v) including within its scope disallowance of deduction claimed under any provision of Chapter VI-A, sub-heading (C), if the return is filed beyond the date specified u/s. 139(1), being the clear mandate of s. 80AC, is only by Finance Act, 2021 w.e.f. 01.4.2021 - HELD THAT - The processing of the returns of income in the instant cases has been in July/August, 2020. Section 143(1)(a)(v), which could not have been made applicable prior to 28/3/2021, i.e., the date the Finance Act, 2021 became law, is made applicable w.e.f. 01/4/2021. The provision in the amended form was thus not on the statute at the time of processing of the relevant returns. There is thus no question of the same having been invoked for effecting the disallowance, as being claimed before us. Why, the processing of the return being machine-made, which could not possibly have been updated for the revised procedure prior to 28/3/2021, there is no question of disallowance u/s 80AC of the Act being carried out by the AO u/s. 143(1)(a)(v) of the Act prior to 01/4/2021. The only manner, therefore, whereby the impugned disallowance could be made on processing of a return u/s. 143(1)(a) of the Act is under sub-clause (ii) thereof, which is to be read along with Explanation below section 143(1) of the Act. The date of filing the return, it was submitted by Shri Suresh, is not an information required to be furnished under this Act to substantiate any entry. It cannot therefore be regarded as an invalid claim on the basis of inconsistency u/s. 143(1)(a)(ii) of the Act r/w Explanation thereto. The date of filing the return, he would add, appears only in the acknowledgement to the return, which cannot be regarded as part of the return. We agree. The return form has been scrutinized. The date of filing the return is not required to be entered to substantiate any entry in respect of any claim of deduction and, in fact, cannot possibly be. A return would stand to be regarded as complete in all respects, ready for being filed, on it being verified, and which would therefore only be prior to it s filing. For the purpose of giving effect to s. 143(1)(a)(v), however, it is permissible to travel outside the return. This further clarifies of sub-clauses (ii) and (v) of section 143(1)(a) as operating in different fields, i.e., without any overlap. The orders by the Tribunal relied upon by the Revenue are w.r.t. the strict interpretation of s. 80AC, which aspect is not disputed, and do not concern the applicability of s. 143(1)(a). The same would therefore not assist it in the matter. The invocation of s. 143(1)(a)(ii) of the Act for effecting a disallowance u/s. 80P r/ws. 80AC for processing a return prior to 01.4.2021 is, thus, not valid in law. We decide accordingly, and the appeals succeed.

Summary

Issues Involved:
1. Validity of the denial of deduction under section 80P of the Income Tax Act, 1961, during the processing of returns under section 143(1)(a).
2. Applicability of section 143(1)(a)(v) and section 143(1)(a)(ii) for disallowance of deduction under Chapter VI-A(C) for Assessment Year 2019-20.

Summary:

The sole issue in these appeals is the validity in law of the adjustment by way of denial of deduction under section 80P of the Income Tax Act, 1961 ('the Act'), inadmissible in view of section 80AC of the Act, during the processing of returns under section 143(1)(a) of the Act. The year involved is Assessment Year (AY) 2019-20. Section 80AC mandates that deduction under the specified provisions of Chapter VI-A would be allowed only if the return claiming the said deductions is filed within the time specified under section 139(1). The scope of section 80AC was extended by Finance Act, 2018, to include all other deductions under Chapter VI-A (Part C), which includes section 80P.

The controversy arises because the amendment to section 143(1)(a)(v) of the Act, which includes the disallowance of deduction claimed under any provision of Chapter VI-A(C) if the return is filed beyond the date specified under section 139(1), came into effect from 01.04.2021 by Finance Act, 2021. Before this amendment, section 143(1)(a)(v), brought by Finance Act, 2008, was in agreement with section 80AC, extending the disallowance of deductions for returns not filed within the time specified under section 139(1) to the provisions specified in section 80AC.

Section 143(1)(a)(v) did not include within its ambit the disallowance of deduction under Chapter VI-A(C) and, thus, under section 80P of the Act, before its amendment by Finance Act, 2021. The processing of the returns of income in the instant cases was in July/August, 2020, before the amended section 143(1)(a)(v) came into effect. Therefore, the disallowance of deduction under section 80P could not have been made under section 143(1)(a)(v) before 01.04.2021.

The Tribunal examined section 143(1)(a)(ii), which deals with incorrect claims apparent from any information in the return. The definition of "incorrect claim" is exhaustive and does not include the date of filing the return as information required to substantiate any entry in the return. Therefore, the invocation of section 143(1)(a)(ii) for disallowing deduction under section 80P for returns processed before 01.04.2021 is not valid in law.

In conclusion, the Tribunal held that the amended section 143(1)(a)(v) would apply only from 01.04.2021 and not earlier. The appeals were allowed, and the disallowance of deduction under section 80P for the relevant assessment year was held to be invalid.

Order pronounced on September 25, 2023, under Rule 34 of The Income Tax (Appellate Tribunal) Rules, 1963.