2020 (3) TMI 1480 - AT - Income Tax

Disallowance of deduction claimed u/s 80IC while processing the return of income u/s 143(1) - HELD THAT - As noticed that the return of income of the assessee pertaining to AY 2016-17 was processed u/s 143(1) on 25.06.2017, i.e., after the date of insertion of clause (v) to sec.143(1), i.e, after 1.4.2017. The contention of the revenue is that, if processing of return of income of any assessment year is done after 1.4.2017, then the provisions of clauses (iii) to (vi) inserted w.e.f. 1.4.2017 can be applied. In that case, in our view, the proviso mandating giving of intimation to the assessee to the proposed adjustment should have also been followed by the revenue. It is so because, the said proviso was also inserted in sec. 143(1) along with clauses (iii) to (vi) by Finance Act, 2016. Since no such intimation was given to the assessee, the impugned adjustment is liable to be deleted. D.R invited our attention to the provisions of sec. 80AC of the Act. However, the controversy here is related the power of the AO in processing return of income u/s 143(1) - Hence we are of the view that we need not examine the provisions of sec. 80AC of the Act at this stage. Accordingly, we set aside the order passed by CIT (A) on this issue and direct the AO to delete the disallowance of deduction claimed u/s 80IC of the Act - Appeal of the assessee is allowed.

Summary

Issues:
Disallowance of deduction claimed u/s 80IC of the Act due to late filing of return of income u/s 139(1) for AY 2016-17.

Analysis:
The appellant, engaged in the production business, filed an appeal against the disallowance of the deduction claimed u/s 80IC of the Act for AY 2016-17 by the Ld CIT (A). The return of income was filed beyond the due date specified u/s 139(1) of the Act. The Ld CIT (A) upheld the disallowance citing sec. 143(1)(v), which specifies that the deduction u/s 80IC shall be disallowed if the return is furnished late. The appellant contended that the amended provisions of sec. 143(1)(v) inserted by the Finance Act, 2016, were not applicable for AY 2016-17. The Ld A.R argued that since the year under consideration was AY 2016-17, the amended provisions should not apply. The Ld D.R, however, maintained that the disallowance was justified as the return was processed after the effective date of the amendment.

The Tribunal observed that an intimation must be given to the assessee before making any adjustment as per the proviso inserted by the Finance Act, 2016. The appellant confirmed not receiving any such intimation. The revenue argued that the provisions of sec. 80AC mandate timely filing for claiming deductions. The Tribunal noted that the return was processed after the amendment's effective date, which could allow the application of the amended clauses. However, as no intimation was provided to the assessee as required by the proviso, the adjustment was deemed inappropriate. The Tribunal emphasized that the controversy pertained to the AO's power in processing returns under sec. 143(1) and deemed the examination of sec. 80AC unnecessary at this stage.

Consequently, the Tribunal set aside the Ld CIT (A)'s order and directed the AO to delete the disallowance of the deduction claimed u/s 80IC of the Act for AY 2016-17. The appeal of the assessee was allowed, and the order was pronounced on 17.3.2020.