2023 (3) TMI 1156 - AT - Income Tax

Deduction u/s 80-P - Claim denied by the CPC - Delay filling ROI - AO rejecting the application, observed that the return of income had been filed late, i.e. beyond due date u/s 139 (1) - as per AO no deduction under Chapter VIA heading C would be allowed unless the return was filed before the due date u/s 139(1) - HELD THAT - It is not in question that section 80AC of the I.T. Act, as amended by Finance Act, 2018, stipulated that for claiming deduction u/s 80P of the Act, the return of income was required to be filed before the due date, as prescribed by section 139(1) and in the present case, the return was filed belatedly. It was only by the amendment to section 143(1) (a)(v) brought in by Finance Act, 2021, that the CPC can be said have been vested, exercising powers u/s 143(1)(a), to make disallowance on the ground of belated return. Prior to that, as per the un-amended provisions, the AO could disallow a claim u/s 143(1) (a) only on the grounds of arithmetical error or that the Assessee had made an incorrect claim, etc. Reference, in this regard, may be had to Fatehraj Singhvi Ors. v. UOI and Ors 2016 (9) TMI 964 - KARNATAKA HIGH COURT . It goes without saying that in the absence of enabling powers, no disallowance can be made. As such, enabling provisions being absent, the CPC did not have the jurisdiction to make the disallowance in question, in the order u/s 143 (1) - For this, we find support from The Lanjani Co-operative Agri Service Society Ltd., VPO Lanjani, Kangra (HP) v. The DCIT (CPC) Bangaluru 2022 (9) TMI 345 - ITAT CHANDIGARH - Decided in favour of assessee.

Summary

Issues Involved:
The issues involved in this case are:
1. Disallowance of deduction under section 80P due to late filing of return.
2. Applicability of section 80AC and its constitutionality.
3. Consideration of slight delay in completing the audit.

Disallowance of Deduction under Section 80P:
The Assessee filed its return of income claiming deduction under section 80P of the Income-tax Act, 1961. However, the CPC denied the deduction stating that the return was filed late, after the due date specified under section 139(1) of the Act. The AO rejected the rectification application, citing section 80AC which disallows deductions under Chapter VIA if the return is filed after the due date. The Assessee argued before the Ld. CIT(A) that the delay was due to the completion of the Audit Report, and relied on case law to support the allowance of deduction even for late-filed returns.

Applicability of Section 80AC and Constitutionality:
The ld. CIT(A) dismissed the appeal, stating that section 80AC, effective from assessment year 2018-19, disallows deductions under Chapter VIA if the return is not filed within the time allowed under section 139(1) of the Act. The ld. CIT(A) held that there was no scope for considering reasonable cause under this provision, and since the return was filed late, the deduction under section 80P was disallowed. The Assessee argued that the amendment under section 80AC is advisory and not mandatory, and that the provision is violative of the constitution for denying benefits disproportionately.

Consideration of Slight Delay in Audit Completion:
The Assessee contended that the delay in filing the return was due to the time taken to complete the Audit Report, which was beyond their control. The ld. CIT(A) observed that the return was filed late after obtaining the Audit Report, and upheld the disallowance of deduction under section 80P. However, the ITAT reversed the order, stating that the CPC did not have the jurisdiction to make the disallowance based on a late return, as per the un-amended provisions, and hence cancelled the disallowance.

Conclusion:
The ITAT allowed the appeal, reversing the order of the ld. CIT(A) and cancelling the disallowance of the deduction claimed under section 80P. The ITAT held that the CPC did not have the authority to disallow the deduction based on a late-filed return, as per the un-amended provisions.