ITAT deletes disallowance made u/s 80P of Income Tax Act on Failure to File ROI in Due Date Prior to Amendment of S.143(1) (a)(v) of Act [Read Order]

The Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) has deleted the disallowance made under Section 80P of the Income Tax Act, 1961 on failure to file return of income in due date prior to amendment of section 143(1)(a)(v) of the Income Tax Act.

The assessee, Sard Dogri Co-operative Agri Services Society Limited, filed its return of income declaring total income at Rs. ‘Nil’ after claiming deduction under Section 80P of the Income-tax Act. The return was processed by the CPC, Bangalore under Section 143(1) of the Income Tax Act, denying the deduction claimed under Section 80P Income Tax Act for the reason that the return of income was not filed with the due date.

Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals)[CIT(A)].

During the proceedings CIT(A) observed that “provisions of section 80AC of  Income Tax Act are applicable from assessment year 2018-19 onwards; that as per these amended provisions, no deduction under Chapter VIA, Part C can be allowed, unless the return is filed within the time allowed under Section 139(1) of the Income Tax Act; that the amendment covers deduction under Section 80P Income Tax Act  as well and the provisions of section 80AC would limit and disallow the deduction under Section 80P Income Tax Act”.

Then CIT(A) dismissed the appeal of the assessee. Therefore, the assessee filed a second appeal before the tribunal.

In the appeal hearing, Vishal Mohan, the counsel representing the taxpayer, argued that despite the amendment introduced by the Finance Act 2018 in Section 80AC, any society seeking a deduction under Section 80P must file their income tax return by the specified due date mentioned in Section 139(1) of the Income Tax Act.

Such deduction could not be disallowed while processing the return of income under Section 143(1) of the Income Tax Act As existing at the relevant point in time as clause (v) to 143(1)(a) enabling such disallowance has been introduced only by the  Finance Act, 2021 which is effective from assessment  year 2021-22 onwards and didn’t apply to the impugned assessment year.

The departmental representative Dharamvir, supported the decision of the lower authorities.

The tribunal observed that amendment to section 143(1) (a)(v) brought in by Finance Act, 2021, also the CPC has power to exercise disallowance on the ground of belated return under  Section 143(1)(a) Income Tax Act .

Prior to the amenedment, the AO could disallow a claim under Section  143(1) (a) Income Tax Act  only on the grounds of arithmetical error or that the Assessee had made an incorrect claim, etc.

In the instant case CPC did not have the jurisdiction to make the disallowance in the order under Section 143(1) of the Income Tax Act.

Consequently, after carefully reviewing the arguments presented by both parties, the two-member bench comprising A.D. Jain (Vice President) and Vikram Singh Yadav (Accountant Member) decided to revoke the disallowance and upheld the appeal filed by the concerned parties.

To Read the full text of the Order CLICK HERE

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