CPC cannot Deny S. 80P Deduction to Cooperatives for AY 2018–19: ITAT clarifies Prima Facie Adjustment Begins from AY 2021–22 [Read Order]

The Kolkata Benchof Income Tax Appellate Tribunal (ITAT) held that the prima facie disallowance of deduction under Section 80P of the Income Tax Act, 1961, while processing returns under Sections 143(1) was not permissible for Assessment Year (AY) 2018–19 since the amendment to Section 143(1)(a)(v) was brought about by the Finance Act, 2021 and is applicable prospectively from AY 2021–22 only.

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The appellant, Tajpur S.K.U.S Ltd., filed its return of income for the AY 2018–19, after a delay of 106 days from the due date. The return was processed by the CPC under Section 143(1) of the Income Tax Act, 1961, and a disallowance was made in respect of the deduction claimed under Section 80P.

The disallowance was made on the ground that the return was not filed within the due date prescribed under Section 139(1), and accordingly, the claim was held to be inadmissible.

Upon appeal before the Commissioner of Income Taxes ( CIT(A) ), the disallowance was upheld, with reliance placed on the decision of the Kerala High Court in Nileshwar Range Kallu Chethu Vyavasaya Thozhilali Sahakarana Sangham (2023) where it was held that a claim for deduction under Section 80P would not be allowed if the return was filed under Sections 139(4), 142(1), or 148, unless it was also filed within the due date prescribed under Section 139(1).

The appellant contended before the tribunal that, prior to 01.04.2021, there was no mechanism that permitted the Central Processing Centre under Section 143(1)(a)(v) for making prima facie adjustments towards disallowance of deductions claimed under Section 80P.

The appellant relied on the ruling of the Coordinate Bench in Jhaupathara Samabay Krishi Unnyan Samiti Limited vs. ADIT (ITA No. 146/KOL/2023) where such disallowance was deleted on similar facts.

The bench consisting of Sonjoy Sarma (Judicial Member) and Rakesh Mishra (Accountant Member) found merit in the contentions raised by the appellant and held that the disallowance of deduction by CPC while processing the return under Section 143(1) was not valid for AY 2018–19.

The tribunal, relying on the ruling of the Coordinate Bench in Jhaupathara Samabay Krishi Unnyan Samiti Ltd, further noted that the power to make adjustments was introduced only through Finance Act, 2021, with effect from 01.04.2021.

Since there was no specific mention of Section 80P in the pre-amended provision, the disallowance under section 143(1) could be made only from AY 2021-22 onwards.

The tribunal further noted that, since an error of law is also a mistake apparent from the record, the assessing officer should have rectified the intimation when the issue was identified, and the CIT(A) should have allowed the appeal.

Accordingly, the appeal of the appellant was allowed.

The assessee was represented by Giridhar Dhelia, AR, and Praniti Poddar, Advocate, while the Department was represented by S.B. Chakraborthy, Addl. CIT, Sr. DR, and Somnath Das Biswas, Sr. DR.

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