2024 (7) TMI 281 - AT - Income Tax

Rectification application u/s. 154 - Denial of deduction u/s 80P - assessee has not filed any appeal against the intimation u/s. 143(1) issued by CPC - Procedural lapses in filing the return of income - HELD THAT - The e-filing of return of income is an evolving concept and is a complex process wherein large number of details are captured by department which also is increasing with the time, and there are regular changes made by the Department in the procedural aspects of filing the return of income including changes made in the ITR s. There is every possibility that some error could be committed by the tax payers keeping in view complexity in filing return of income. There is an error committed by the assessee which is admitted by the assessee. It is also true that the assessee has not filed revised return of income, but at the same time the department authorities are obligtated to assess the correct Income and to collect correct taxes under the mandate of the 1961 Act. Reference is drawn to Article 265 of the Constitution of India. Reference is also drawn to CBDT circular No. 14 of 1955 , dated 11.04.1955. The mandate is to assessee correct income and to allow correct deductions , so that correct taxes can be collected. The departmental officers are duty bound to follow the above mandate. If there is a procedural lapse, the department should not take advantage of the same and collect more taxes than what is legitimately due . The assessee return of income was processed by CPC u/s. 143(1) and the claim of deduction was disallowed. It is true that the assessee has not filed any appeal against the intimation u/s. 143(1) issued by CPC but the assessee has filed rectification application u/s. 154. The doors of justice cannot be shut merely on technicalities. It is equally true that the assessee has declared taxable income to be Nil in the return of income filed with the Department after claiming deduction of Rs. 7,88,092/-. The claims and contentions of the assessee both on legal as well factual aspects requires verification by the authorities below. This in the interest of justice, remanding the matter back to the file of ld. CIT(A) to reconsider the contentions, claims as well evidences filed by the assessee, and to pass appellate order on merit, both factual and legal, in accordance with law. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Denial of deduction under Section 80P of the Income Tax Act.
2. Rejection of rectification application under Section 154 of the Income Tax Act.
3. Non-consideration of the claim of deduction under Section 80P based on mutuality.
4. Procedural errors in the filing of the return and rectification applications.
5. Condonation of delay in filing the appeal with the Tribunal.

Detailed Analysis:

1. Denial of Deduction Under Section 80P:
The assessee filed a return of income for the assessment year 2018-19 declaring a gross total income of Rs. 7,82,092 and claimed a deduction under Chapter VIA, resulting in a net income of Nil. The Centralized Processing Center (CPC) processed the return under Section 143(1) and denied the deduction under Section 80P, computing the income chargeable to tax at Rs. 7,82,092. The CPC's denial was based on the improper filling of Schedule VIA and the assessee's status not being a 'co-operative society.'

2. Rejection of Rectification Application Under Section 154:
The assessee filed two rectification applications under Section 154, both of which were rejected by CPC. The CPC noted that the Schedule VIA was not correctly filled for claiming the deduction under Section 80P and that the deduction is not allowable for statuses other than 'co-operative society.' Additionally, the CPC mentioned that the deduction under Section 80P is allowed only on non-speculative and non-specified business income and suggested using the Department utility for filing corrected XML.

3. Non-Consideration of Claim of Deduction Under Section 80P Based on Mutuality:
The assessee, a co-operative society, claimed that its income is exempt based on the principle of mutuality. The CIT(A) dismissed the appeal on the grounds that the assessee did not properly fill the schedule in the return of income for claiming the deduction under Section 80P. The CIT(A) observed that the assessee had not filed any appeal against the intimation order issued under Section 143(1) and that the rectification application under Section 154 was not maintainable for debatable issues.

4. Procedural Errors in Filing of Return and Rectification Applications:
The Tribunal noted that the assessee admitted to procedural lapses in filing the return of income and the rectification applications. The Tribunal emphasized that the Department is obligated to assess the correct income and allow correct deductions, even if there are procedural errors, and referenced Article 265 of the Constitution of India and CBDT Circular No. 14 of 1955.

5. Condonation of Delay in Filing the Appeal with the Tribunal:
The assessee filed the appeal with the Tribunal 104 days beyond the time prescribed under Section 253(3). The Tribunal condoned the delay, noting that there was no malafide intention on the part of the assessee and that the delay was due to the assessee not being informed about the CIT(A)'s order by their Authorized Representative. The Tribunal referenced the Supreme Court decision in Collector of Land Acquisition, Anantnag v. Mst. Katiji, emphasizing the preference for substantial justice over technicalities.

Conclusion:
The Tribunal allowed the appeal for statistical purposes and remanded the matter back to the CIT(A) to reconsider the contentions, claims, and evidence filed by the assessee. The CIT(A) was directed to pass an appellate order on merit, both factual and legal, in accordance with the law, after giving an opportunity to both parties. The Tribunal clarified that it had not commented on the merits of the issue and that the CIT(A) should adjudicate all the issues on merit. The order was pronounced in the open court on 03-07-2024.