2023 (2) TMI 1115 - AT - Income Tax

Denial of exemption u/s. 80P - Return was filed belatedly u/s. 139(4) of the Act - adjustments prescribed in Section 143(1) - HELD THAT - It is apparent from the Ld. NFAC order when the assessee has clearly pointed out the amendment in Section 143(1) made by Finance Act, 2021 which is not applicable for the present assessment year 2019-2020. However the same was not been considered by the Ld. NFAC and erroneously dismissed the assessee s appeal. As relying on Lunidhar Seva Sahakari Mandali Ltd 2023 (2) TMI 1012 - ITAT RAJKOT assessee cannot be denied the deduction u/s. 80P of the Act on the ground that the assessee did not file the Return of Income within the due date prescribed u/s. 139(1) of the Act under proceedings made u/s. 143(1) of the Act for the Assessment Year 2019-20. Appeal filed by the Assessee is hereby allowed.

Summary

Issues Involved:
1. Denial of exemption under Section 80P due to belated filing of return under Section 139(4).
2. Legality of adjustments made under Section 143(1)(a) regarding the disallowance of deductions.

Issue-wise Detailed Analysis:

1. Denial of Exemption under Section 80P Due to Belated Filing of Return under Section 139(4):

The primary issue in these appeals is the denial of exemption under Section 80P of the Income Tax Act, 1961, on the grounds that the returns were filed belatedly under Section 139(4). The assessee, a Co-operative Society registered under the Gujarat Co-operative Societies Act, filed its return of income on 30.11.2020, claiming a deduction under Section 80P amounting to Rs. 7,83,615/-. However, the Centralized Processing Centre (CPC) in Bengaluru denied this deduction through an intimation under Section 143(1) dated 28.12.2020, citing that the return was not filed within the due date prescribed under Section 139(1). Consequently, the CPC demanded a tax payable amounting to Rs. 3,50,420/- from the assessee.

2. Legality of Adjustments Made under Section 143(1)(a) Regarding the Disallowance of Deductions:

The assessee appealed against the CPC's decision, arguing that Section 143(1)(a) did not provide for adjustments disallowing deductions under Section 80P if the return was filed under Section 139(4). The assessee relied on the Mumbai Tribunal's decision in the case of New Ideal Cooperative Housing Society Ltd., which held that such adjustments did not fall within the scope of Section 143(1)(a). Despite this, the National Faceless Appeal Centre (NFAC) dismissed the appeal, stating that the adjustments were valid as per the law, and upheld the CPC's action.

The NFAC's order examined the appellant's submission and concluded that the adjustment made under Section 143(1)(a) was legal. The NFAC noted that Section 80AC, introduced by the Finance Act 2018, explicitly states that no deduction shall be allowed if the return is not filed within the due date specified under Section 139(1). The NFAC interpreted this provision to include deductions under Section 80P as well, thereby justifying the CPC's denial of the exemption.

Appeal to the Tribunal:

The assessee further appealed to the Tribunal, challenging the NFAC's decision on several grounds, including the misinterpretation of Section 143(1)(a)(v) and the failure to adjudicate the merits of the deduction under Section 80P. The Tribunal considered the arguments and precedents, including the Co-ordinate Bench's judgments in similar cases, which clarified that the amendment to Section 143(1)(a)(v) effective from 01.04.2021 did not apply to the assessment year 2019-20.

The Tribunal observed that the denial of deduction under Section 80P could not be made as a prima facie adjustment under Section 143(1)(a) for the assessment year 2019-20. It referenced the Explanation to Section 143(1)(ii), which specifies the instances when a claim can be deemed incorrect, none of which applied to the assessee's case. The Tribunal also cited judicial precedents, including the Kerala High Court's decision in Chirakkal Service Co-Operative Bank Ltd. and the ITAT's decision in Lanjani Co-Operative Agri Service Society Ltd., which supported the assessee's position.

Tribunal's Conclusion:

The Tribunal concluded that the assessee could not be denied the deduction under Section 80P merely because the return was filed under Section 139(4) and not within the due date under Section 139(1). It held that such denial did not fall within the scope of adjustments permissible under Section 143(1)(a) for the assessment year 2019-20. Consequently, the Tribunal allowed the appeals filed by the assessees, quashing the CPC's intimation and the NFAC's order.

Final Judgment:

The Tribunal allowed all the appeals filed by the respective assessees, concluding that the denial of deduction under Section 80P was not justified under the provisions applicable for the assessment year 2019-20. The order was pronounced in the open court on 24-02-2023.