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2024 (6) TMI 1441 - AT - Income TaxDisallowance of deduction u/s. 80P(2)(d) in intimation u/s. 143(1) - HELD THAT - As scope of adjustment u/s. 143(1)(a) provides that adjustment can be made from Clause (i) to (vi). Sub-clause (v) which existed prior to 01/04/2021 only permitted adjustment u/s. 10AA 80AIA 80IAB 80IB 80IC 80ID or Section 80IE. There was no scope of making any prima facie adjustment u/s. 80P. The amendment was brought in the statute to include Section 10AA or under any provision of Chapter VIA if the return of income has been furnished beyond the due date specified under sub-section (1) of Section 139. Thus prior to A.Y. 2021-22 no such adjustment could have been made. Moreover here in this case as held above the return of income was furnished within the due date prescribed u/s. 139(1). Thus the entire disallowance was beyond the scope of Section 143(1) itself. Disallowance made by the CPC and as confirmed by the ld. CIT(A) is set aside and assessee is entitled for reduction u/s. 80P. Appeal of the assessee is allowed.
ISSUES PRESENTED and CONSIDERED
The core legal issue in this case is whether the adjustment made under Section 143(1) of the Income Tax Act, disallowing the deduction claimed by the assessee under Section 80P(2)(d), was valid. This involves examining whether the adjustment was permissible under the legal framework prior to the amendments effective from A.Y. 2021-22, and whether the return of income was filed within the applicable due date under Section 139(1). ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The legal framework revolves around Section 143(1) of the Income Tax Act, which allows for certain adjustments to be made to the return of income at the time of processing. Prior to the amendments effective from A.Y. 2021-22, Section 143(1)(a) permitted adjustments only for specific deductions under Sections 10AA, 80AIA, 80IAB, 80IB, 80IC, 80ID, or 80IE. The amendment expanded this to include adjustments for returns filed beyond the due date under Section 139(1) for any provision under Chapter VIA, including Section 80P. Court's Interpretation and Reasoning The Tribunal interpreted the provisions of Section 143(1) as they stood prior to the amendment. The Tribunal noted that the scope of adjustments under Section 143(1)(a) did not include Section 80P prior to A.Y. 2021-22. Therefore, any adjustment made under this section for deductions claimed under Section 80P was not permissible. Additionally, the Tribunal observed that the return of income was filed within the extended due date specified under Section 139(1), further invalidating the adjustment. Key Evidence and Findings The Tribunal's findings were based on the timeline of events: the original due date for filing the return was extended by the government to 31/10/2018, and the assessee filed the return on 26/10/2018. The Centralized Processing Center (CPC) made an adjustment treating the income as from other sources, which was not within the permissible scope of adjustments under Section 143(1) as it stood at the time. Application of Law to Facts The Tribunal applied the pre-amendment version of Section 143(1) to the facts, determining that the adjustment made by the CPC was beyond the scope of permissible adjustments. Since the return was filed within the due date, and the adjustment for Section 80P was not allowed under the legal framework applicable at the time, the disallowance was set aside. Treatment of Competing Arguments The Tribunal considered the argument that the appeal was infructuous due to the theory of merger, as the order under Section 143(1) had merged with the subsequent order under Section 154. However, the Tribunal focused on the merits of the original adjustment under Section 143(1), determining that the adjustment was not legally permissible. Conclusions The Tribunal concluded that the adjustment made by the CPC was invalid, and the assessee was entitled to the deduction under Section 80P(2)(d) as claimed. The appeal was allowed, and the disallowance was set aside. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning The Tribunal held: "Thus, prior to A.Y. 2021-22, no such adjustment could have been made. Moreover, here in this case as held above, the return of income was furnished within the due date prescribed u/s. 139(1). Thus, the entire disallowance was beyond the scope of Section 143(1) itself." Core Principles Established The Tribunal established that adjustments under Section 143(1) must strictly adhere to the provisions applicable at the time of filing. Adjustments for deductions not explicitly permitted under the section's scope at the relevant time are invalid. Furthermore, filing within the extended due date under Section 139(1) precludes such adjustments. Final Determinations on Each Issue The Tribunal determined that the adjustment made under Section 143(1) was invalid, and the assessee was entitled to the deduction under Section 80P(2)(d). The appeal was allowed, and the disallowance was set aside.
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