The Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, has recently, in an appeal filed before it, quashed the disallowance of claim under Section 143(1)(a) for belated filing of ITR, on the ground of lack of enabling provision in the Income Tax Act.
The aforesaid observation was made by the Chandigarh ITAT, when an appeal was filed before it by the assessee, as against the order of the CIT(A), National Faceless Appeal Centre (NFAC), Delhi, dated 22.03.3022, for the Assessment Year 2018-19.
The ground of the assessee’s appeal being that the order/intimation under section 143 (1)(a) & 154, passed by the Assessing Authority and that of the Appellate Authority confirming the same are illegal, unjust, arbitrary and opposed to the facts of the case, the brief facts of the case were that the Assessee had filed its return of income declaring the total income at Rs. 7,820/- after claiming deduction under Section 80P of the Income Tax Act, 1961 amounting to Rs. 4,11,664.
The return was processed by the CPC, Banglore under Section 143(1) of the Income Tax Act, denying the deduction claimed under 80P. The Assessee filed rectification application before the AO, stating that the deduction claimed had wrongly been denied by the CPC.
The AO, rejecting the application, observed that the return of income had been filed late; that the due date under Section 139(1) of the Income Tax Act was 31.08.2018, whereas the return had been filed on 13.10.2018; and that according to section 80AC, after 01.04.2018, no deduction under Chapter VIA heading ‘C’ would be allowed, unless the return was filed before the due date under Section 139(1) of the Income Tax Act.
In its appeal before the CIT(A), the Assessee contended that the Audit Report under the Act had taken time to complete, which was the reason for the delay in filing the return, the same being beyond the control of the Assessee; that the Audit Report was dated 30.09.2018, and it was only after filing thereof, that the return was filed on 13.10.2018; that the amendment under section 80C is advisory and not mandatory; that no opportunity of hearing had been given to the Assessee; and that such an adjustment could not be made under Section 143(1) of the Income Tax Act.
Reliance was placed on, inter alia, on the case of M/s Chirakkal Service Cooperative Bank Ltd, holding that even if the return was filed late, the deduction u/s 80P of the Act should be allowed, as long as the return is filed within the time allowed under Section 139(4) of the Income Tax Act.
By virtue of the impugned order, the CIT(A) dismissed the appeal. It was observed that the provisions of section 80AC 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 u/s 80P as well; that since the provision uses the expression ‘shall’, there is no scope to consider reasonable cause, etc.; that in this case, the Audit Report had been obtained after the date prescribed under section 139(1) and, as such, it is not a case where the Audit Report was uploaded within time but the return was filed late.
Adding to the observation, held that the return having been filed late, in accordance with the provisions of section 143(1)(a)(ii), the provisions of section 80AC would limit and disallow the deduction u/s 80P; and that the decisions relied upon pertain to the pre-amended provisions of section 80AC and, therefore, they are not applicable. And it is being aggrieved by the same, that the assessee has preferred the instant appeal before the tribunal.
Hearing the opposing contentions of both sides as presented by Sh. Ajay Kumar, ITP, on behalf of the assessee and by Sh. Akashdeep, the JCIT, Sr.DR , on behalf on the Revenue, and thereby perusing the materials available on record, the ITAT observed:
“We have heard the rival contentions and have perused the material on record. 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. However, 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’.’
“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) of the Act. For this, we find support from ‘The Lanjani Co-operative Agri Service Society Ltd., VPO Lanjani, Kangra (HP) v. The DCIT (CPC) Bangaluru”, the Coram of Vikram Singh Yadav, the Accountant Member, and AD Jain, the Vice -President added.
Thus, the ITAT finally held:
“For the above discussion, finding merit in the grievance raised by the Assessee, the same is accepted. The order under appeal is accordingly reversed. Consequently, the disallowance of Rs. 4,11,664/- is cancelled. In the result, the appeal is allowed.”
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