In ITA No. 187/Rjt/2022 -ITAT- Denial of deduction under Section 80P of the Income Tax Act cannot come within the purview of a prima-facie adjustment under Section 143(1) of the Act, especially in the absence of an enabling provision during the relevant assessment year: ITAT (Rajkot)
Members Annapurna Gupta (Accountant) & Siddhartha Nautiyal (Judicial)

Read Order: Chakargadh Seva Sahakari Mandali Ltd. Chakargadh v. The DCIT(CPC), Bengaluru

Chahat Varma

New Delhi, July 27, 2023: The Rajkot bench of the Income Tax Appellate Tribunal ruled in favour of Chakargadh Seva Sahakari Mandali Ltd. (assessee), stating that the claim for deduction under Section 80P of the Income Tax Act cannot be denied solely based on the delay in filing the return of income within the due date under Section 139(1) of the Act through a prima facie adjustment under Section 143(1) of the Act.

Factual background of the case was that the assessee, a co-operative society, filed its return of income for assessment year 2019-20, declaring a total income of 5,58,494 and claimed a deduction of the same amount under Section 80P of the Income Tax Act. However, the return was filed after the extended due date of 31-08-2019. Subsequently, the assessee received an intimation under Section 143(1)(a) of the Act, which adjusted the returned income and denied the claimed deduction of 5,58,494 under Section 80P due to the late filing of the return beyond the prescribed due date under Section 139(1) of the Act.

The issue for consideration was that whether once the return of income is filed beyond the prescribed date under Section 139(1) of the Act, can the deduction under section 80P of the Act be denied to the assessee, by way of adjustment under Section 143(1) of the Act.

The coram of Annapurna Gupta (Accountant) and Siddhartha Nautiyal (Judicial) observed that starting from the assessment year 2018-19 onwards, the claim of deduction under Section 80P of the Income Tax Act cannot be allowed to the assessee if the assessee does not file its return of income within the due date stipulated under Section 139(1) of the Act. However, the bench also noted that an amendment had been introduced in Section 143(1)(a)(v) of the Income Tax Act. This amendment provided that the claim of deduction under Section 80P of the Act can be denied to the assessee if the assessee does not file its return of income within the time prescribed under Section 139(1) of the Act, but this amendment came into effect from 01-04-2021 and did not apply to the impugned assessment year, which was assessment year 2019-20 relevant to financial year 2018-19.

The bench clarified that denial of the claim under Section 80P of the Income Tax Act would not fall within the purview of prima facie adjustment under Section 143(1)(a)(v) of the Act. This was because the specific section, which allows denial of deduction under section 80P for late filing of the return, was not in force during the relevant period of assessment year 2019-20.

The bench further emphasized that the scope of adjustments that can be made under Section 143(1)(a)(v) has been clearly defined in the Explanation to the said section. According to this Explanation, adjustments can only be made in cases where the claim made by the assessee is found to be ‘incorrect’ based on the information provided in the return. However, denial of deduction claimed by the assessee due to late filing of the return, as per section 80AC of the Act, did not fall within the ambit of such adjustments.

With the above observations, the bench concluded that the denial of deduction under Section 80-P cannot be justified as a prima facie adjustment under section 143(1) of the Act, especially in the absence of an enabling provision during the relevant assessment year.