The Lanjani Co-Operative Agri Service Society Limited, Kangra v. DCIT,CPC/ITO-Ward-, Dharamshala

28.09.2021, 09.09.2021, 25.09.2021, 25.09.2021,

15.09.2021, 14.09 .2021 and 15.09.2021 passed by CIT(A) (NFAC i .e . Nat ional Face less Appea l Centre ) De lhi as F irs t Appe l late Author ity is cha l lenged on ident ical grounds and facts. According ly, i t was a common reques t o f the part ies be fore the Bench that the arguments advanced in I TA 332/CHD/2021 would app ly to the remaining s ix appea ls as the facts , c i rcumstances and posi t ion of law remain the same.

2 . The grounds ra ised in I TA 332/CHD/2021 are reproduced hereunder for the sake o f completeness:

1. That in the facts and circumstances of the case the Ld Commissioner of Income Tax (Appeals) is not justified in upholding the disallowance of deduction claimed under section 80P of the Income Tax Act, 1961 and that too under section 143(1) of the Income Tax Act, 1961.

2. That the order of the Ld Assessing Officer is bad in law and Facts.

3. The re levant facts o f the case are that the assessee who i s a pr imary agr icultura l cooperat i ve soc ie ty f i l ed i ts I TR for AY . 2018-19 on 13 .10.2018 dec laring 'n i l ' income by c la iming deduct ion u/s 80P o f Rs .1 ,11,421/- .

3 .1 The said re turn was processed u/s 143 (1) by CPC, Bangalore . In t imat ion u/s 143 (1) dated 31.05 .2019 was served on assessee on 17.06.2019 assess ing to ta l income o f the assessee a t Rs .1 ,11,420/-.

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3.2 In the present case the due date o f f i l ing of the re turn was 31.08.2018. The assessee has f i led i ts re turn af ter the due date on 13 .10 .2018. S imi lar is the pos it ion in the remain ing appeals as a l l the assessees f i l ed the ir respect ive re turns af te r the due date .

4 . The assessee aggrieved wi th the d isa l lowance o f i ts deduct ion c la imed u/s 80P by the int imat ion u/s 143(1) o f the Act by CPC, Banga lore carr ied the issue be fore the F irs t Appe l late Author i ty assa i l ing the d isal lowance. The assessee 's appea l d id not succeed. The addi t ion made by way of a d isa l lowance was sustained.

5 . Aggr ieved the assessee i s in appea l .

6 . The ld . AR invi t ing at tent ion to the impugned order submit ted that the disa l lowance has been made mere ly because the re turn was f i led beyond the due date . I t was submit ted that pr ior to th is year , there was no such requirement. Only on account o f Amendment carried out in Sect ion 80AC by F inance Ac t 2018, the requirement accord ing to the Revenue was there . He agreed that as a resul t o f this amendment from 2018-19 assessment year , the deduct ions fa l l ing in the heading "C" o f chapter VIA o f the Income Tax Act ,1961 can be sa id to be brought in the ambit o f th is sect ion. However , at the re levant point o f t ime, no

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such powers were vested wi th the CPC Bangalore . The enabl ing prov is ion to do so u/s 143(1) was avai lable on the Statute on ly by the F inance Act , 2021. Re ferr ing to the prov is ions as they stood in 2018-19 and 2019-20 assessment year , i t was argued that as per law, the c la im u/s 143(1) (a ) could be d isal lowed by the AO here in CPC Banga lore only on the grounds o f ari thmetical error or that the assessee had made an incorrect c la im etc . but not on the grounds that the re turn was f i led beyond the due date . I t was submitted that the assessee Socie ty is e l ig ib le for deduct ion u/s 80P and al l informations re lated to th is deduct ion was correct ly prov ided . Invi t ing a ttent ion to Sect ion 143(1) (a ) sub c lause ( v ) as i t then stood at the re levant point o f t ime, i t was argued there was no mention o f Sect ion 80P there in. 6 .1 I t was re- i terated that only by the Finance Ac t , 2021 where in sub-c lause ( v ) o f Sec t ion 143 (1 ) (a ) was amended that the CPC, Banga lore could be sa id to be vested wi th the jur isdic t ion to make a disa l lowance on the grounds of re turn f i led beyond the due date exercis ing the powers u/s 143(1) (a ) .

6.2. Reliance for the proposition of law as available in near similar facts and legal position though in the context of dif ferent provisions was placed upon the decision of the Hon'ble

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Karnataka High Court in the case of Fatehraj Singhvi & Ors. Vs UOI & ors (2016) 289 CTR 0602 (Kar) . Apart from that orders of the different Benches of the ITAT were also rel ied upon pleading that the enabling provisions having been introduced by the Finance Act, 2021 effective from 01.04.2021 by way of amendment of sub-clause (v) of Section 143(1). Accordingly, prior to the assessment year 2020-2021 disallowance of deduction claimed u/s 80P on the grounds of late fi l ing of return by an order u/s 143(1) was not in accordance with law.

6.3 Reliance was also placed upon various decisions to argue that absence of enabling provisions the order is sans powers. Decision of the ITAT, Chandigarh in M/s Sonalac Paints & Coating Ltd. Vs DCIT in ITA 1158/CHD/2017 dated 01.05.2018; HIMUDA Nigam Vihar, Shimla V ACIT in ITA Nos.480,481 & 972/CHD/2012 dated 10.05.2019; decision dated 05.10.2015 of Hon'ble Delhi High Court in the case of CIT-VI Vs M/s Unitech Ltd. and decision dated 08.11.2019 of ITAT, Lucknow Bench in Dy. CIT, Central Circle-1, Kanpur Vs M/s Rama Medicare Ltd. in ITA No.183/LKW/2019 were specif ically referred to.

7. Sr.DR Ms.Ranjeet Kaur rel ied on the order.

8. The ld. AR was required to address the Bench on whether there was any decision against the assessee on the issue. In response thereto, ld. AR in all fairness invited attention to the

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decision of the Hon'ble Madras High Court in WP No. 7038 of 2020 dated 07.04.2021 in the case of Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd. Vs DCIT.

9. Copy of the said decision was directed to be fi led and made available to the Sr.DR.

10. Time was given to the parties to be prepared to address the said decision on the next date.

11. On the next date, ld. AR referring to the said decision submitted that it was distinguishable as the decision is very fact specif ic. The position of law as argued by the assessees before the First Appellate Authority extracted in the order and before the ITAT has not been argued, hence the non-availability of the enabling provision in the Statute at the re levant point of time has not been considered by the Court.

11.1 Distinguishing the said decision, it was further submitted that f irstly, it was an ex-parte order where the assessee was not present nor heard. I t was further argued that the decision rendered was in the context of the prayer in the Writ Petition on facts as available. Attention was also invited to the fact that the petitioners therein were repeatedly found to be non- cooperative with the Revenue right from the assessment proceedings stage. For the said purposes, para 9 of the said order was referred to. It was his submission that therein the

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Court went on to categorically observe that the assessee petitioners did not cooperate and it was noticed that the writ petitions were f i led belatedly i .e. after more than 6 to 8 months and only when the Revenue had initiated proceedings for recovering by attaching the bank accounts etc. that the petitioners were found to have approached the Court invoking the writ jurisdiction.

11.2 In the facts of the present case, it was his submission that the none of the assessees have been found to be non- cooperative. They have cooperated in the proceedings all along. I t is only a case wherein the return was filed late. The assessee has all along been l ive and alert in approaching the First Appellate Authority well within time and again the appeal before the ITAT also has been f i led well within time. There is no delay.

11.3 Apart from referring to para 9 it was argued that following specific facts as available before the Hon'ble Court for consideration were referred to so as to argue that they are not applicable to the present assessees. These read as under:

(iii) disallowance of loss claimed if the returns were filed beyond the due date, (iv) disallowance of expenditure indicated in the audit report but not taken into account in computing total income (v) disallowance o f d e d u c t i o n claimed u n d e r specified provisions of the Act i f the return was filed beyond due date or

(vi) additional income appearing in Form 26AS or 16A or l6, which has not been taken into account in computing total income. According to them, there is no error

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as aforesaid that emanates from the returns of income tiled by the petitioners and as such, the invocation of Section 143 (1)(a) of the Act is itself flawed.

11.4 Emphasis was also laid on the fol lowing argument for consideration before the Court which is not the argument advanced in the present case :

"5 Learned counsel for the petitioners would than argue that the Explanation under Section 143(1)(a) of the Act explains an incorrect claim' for the purpose of Clause (ii) of Section 143 (l) (a) of the Act, as meaning a claim based on an entry in a return of income. According to them, the date of return does not constitute an 'entry' and hence no adjustment is called for on this score.

11.5 It was submitted that in the l ight of this factual background and argument, the Hon'ble Court in an ex-parte order considered the issue in the fol lowing manner :

7. The scope of an 'intimation' under Section 143 (1) (a) of the Act, extends to the making of adjustments based upon errors apparent from the return of Income and patent from the record. Thus to say that the scope of 'Incorrect claim' should be circumscribed and restricted by the Explanation which employs the term 'entry' would, in my view, not be correct and the provision must be given full and unfettered play. "

(emphasis supplied)

11.6 Inviting attention to para 9 of the aforesaid decision again, it was submitted, that commenting upon the conduct of the petitioners wherein they had not bothered to respond to the defect notices from the CPC and non cooperation on the part of the petitioners wherein the writ jurisdict ion of the Court was also invoked on account of the fact that the Revenue had initiated proceedings for recovery by attachment of bank account and there was a lapse of 6 to 8 months in f il ing of the writ petitions were all the factors taken into consideration to

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address the prayer in the Writ proceedings. I t is in that factual background that the Court was pleased to hold as under :

"9. The conduct of the petitioners is also relevant. Not only have the returns been filed belatedly but the petitioners have also chosen not to co-operate in the conduct of assessment. They are admittedly in receipt of the defect notices from the CPC, but have not bothered to respond to the same. The writ petitions have themselves been filed belatedly and after the elapse of more than six to eight months from the dates of impugned orders, in all cases, it is only when the Revenue has initiated proceedings for recovery by attachment of bank accounts have the petitioners approached this Court."

11.7 Accordingly, it was his submission that the said decision proceeds on facts peculiar to its own. Reliance was placed upon decision of the Hon'ble Supreme Court in the case of^CIT Vs B.C. Srinivasa Shetty 128 ITR 294 (S.C) for allowing re lie f to the assessee.

12. The ld. Sr.DR rel ied upon the orders. Specif ic attention was invited to para 8.1 of the said decision.

12.1 Apart from relying upon para 8.1 she further placed rel iance upon the decision of the Apex Court in Civi l Appeal No.332.7 of 2017 dated 30.07.2018 in the case of Commissioner of Customs (Import) , Mumbai vs M/s Dil ip Kumar and Company & Sons for the fol lowing proposition :

"(2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue."

13. The ld. AR submitted that the decision is not applicable.

14. I have heard the submissions and perused the material on record. Since heavy re liance has been placed by the ld.

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Sr.DR on the impugned order, specific para 8.1. For ready reference of the same is extracted hereunder :

"8.1 Finding on Ground of appeal Nos. 1 to 3

a) The CPC Bangalore has made the addition/adjustment of Rs.1,11,421/- u/s 143(1) of the Act as deduction u/s 80P claimed of Rs.1,11,421/- was disallowed on the ground that return was not filed within the due date. The undersigned has gone through the 143(1) intimation and written submissions filed by the Appellant. These Grounds of Appeal are discussed and decided in subsequent paras of this order.

b) It is not in dispute that from AY. 2018-19, the Appellant for claiming deduction u/s 80P has to file return of income within the due date of filing of ITR as provided in Section 80AC of the IT Act, 1961. Section 80AC was amended by Finance Act, 2018. From AY. 2018-19, all the deductions falling under the heading 'C of Chapter VIA of IT Act, 1961 were brought into the ambit of this section. Section 80P also falls under the heading 'C of Chapter VIA of the Act is included in Section 80AC of the Act.

c) The amended Section 80AC provides as under:-

"[Deduction not to be allowed unless return furnished. 80AC. Where in computing the total income of an assessee of any previous year relevant to the assessment year commencing on or after—

(i) the 1st day of April, 2006 but before the 1st day of April, 2018, any deduction is admissible under section 80-IA or section 80-IAB or section 80-IB or section 80- IC or or;

(ii) the 1st day of April, 2018, any deduction is admissible under any provision of this Chapter under the heading "C.—Deductions in respect of certain incomes", no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139.]"

d) Thus, from 01.04.2018, the clause(i) of the above section has become inoperative and clause (ii) was introduced which provides that all the deductions falling under the heading 'C of Chapter VIA of the Act will be allowed only when ITR is furnished before the due date specified u/s 139(1) of the Act. This amendment became effective from AY. 2018-19.

e) In the present case the due date of filing ITR for AY. 2018-19 was 31.08.2018. However, the Appellant filed its return on 13.10.2018 i.e. after the due date for filing of ITR. Appellant had claimed deduction u/s 80P of Rs. 1,11,421/-. As discussed above Section 80P falls under the heading 'C of Chapter VIA of the Act. Therefore, from AY. 2018-19 and onwards, any assessee claiming deduction u/s 80P has to file its return within due date specified u/s 139(1) of the Act to avail such deduction as required u/s 80AC of the Act. In the present case, the Appellant did not file its return within the due date prescribed u/s 139(1) of the Act for AY. 2018-19, therefore, the AO

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rightly disallowed deduction u/s 80P of Rs. 1,11,421/- in intimation u/s 143(1). Thus, the action of AO in disallowing deduction u/s 80P is upheld. Grounds of Appeal Nos. 1 to 3 are dismissed."

14.1 On consideration of the above when read alongwith the arguments advanced before the CIT(A) on behalf of the assessee which have been re-iterated before the ITAT, I f ind that on facts the case of the assessee is al lowable. The AO/CPC Bangalore at the relevant time though considering the amended Section 80AC was exercising the powers as vested by the Section 143(1) of the Act as it then stood. At the relevant point of time, the provisions of Section 143(1) of the Act were as under :

143. (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:—

(a) the total income or loss shall be computed after making the following adjustments, namely: —

(i)any arithmetical error in the return; [***]

(ii) an incorrect claim, if such incorrect claim is apparent from any information in the return;

(iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub- section (1) of section 139;

(iv)disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return;

(v)disallowance of deduction claimed under Sections 10AA, 80-1 A, 80-1 AB, 80- IB, 80- IC, 80-1D or section 80-1E if the return is furnished beyond the due date specified under sub-section (1) of section 139; or

(vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return:

Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode:

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(emphasis supplied)

14.2 It is a matter of fact that sub-clause (v) of Section 143(1)(a) was amended by the Finance Act, 2021 wherein instead of re ference to Sections 10AA, 80- IA, 80- IAB, 80- IB, 80-IC, 80- ID or Section 80- IE , the provision instead makes a mention of Section 10AA or under any of the provisions of Chapter VI-A under the head 'C-Deductions in respect of certain incomes". Accordingly, the enabling provisions to address the amendment in Section 80-AC by Finance Act, 2018 came into play only in 2020-21 assessment year. Thus, no doubt Section 80AC as amended by the Finance Act, 2018 mandated that even for claiming deduction claimed u/s 80P, the return of income was to be f i led before the due date as specified under sub- section (1) of Section 139. However, for the AO to insist upon the compliance by way of making a disallowance, the power was vested in the said Authority only vide Finance Act, 2021. Hence, in the absence of the enabling provisions, the CPC Bangalore lacked the jurisdiction to make this disallowance in the order u/s 143(1). Accordingly, on facts, I f ind that the appeal of the assessee has to be allowed.

14.3 Before parting, it may also be re levant to refer to the decision of the Apex Court dated 30.07.2018 in the case of Commissioner of Customs (Import) Vs M/s Dil ip Kumar & Co. &

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Ors. Civi l Appeal No.3327 of 2007 rel ied upon by the ld. Sr.DR. On a reading therefrom, it is seen that the issue for consideration before the Hon'ble Court was whether the denial of benefit of Customs Notif ication No. 20/1999 was justi fied to the party who pleaded that the benefit of concessional rates for import of animal feed should also be available to import which admittedly contained chemical ingredients for animal feed. The concessional rate of duty under the extent Notification was being considered. The order of denial by the Customs Officer was reversed by Commissioner of Customs. This order was confirmed by Customs Excise & Service Tax Tribunal (CESTAT) which led to the f il ing of the appeal before the Hon'ble High Court and then the Apex Court. It is in that background that the Hon'ble Court held that exemption notification should be interpreted strict ly and the burden of proving that the case comes within the parameters of the exemption clause or exemption notif ication would be on the assessee. In such circumstances, in case there is ambiguity, the Notif ication must be interpreted in favour of the Revenue. In the facts of the present case, there is no ambiguity. I t is a case of absence of enabling provision. Hence, the ratio laid down therein has no applicabil ity to the facts of the present case.

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14.4 It is also necessary to refer to the decision of the Hon'ble Madras High Court in the case of Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd. Vs DCIT (cited supra). A perusal of the same shows that the issue for consideration before the Hon'ble High Court in the Writ Jurisdiction invoked by the assessee was very fact specif ic. The assessee therein was canvassing that u/s 143(1)(a) for considering denial on the grounds of "incorrect claims" the scope was l imited to "entry" in the return of income. The Court therein did not permit such a restrict ive interpretation commenting variously on the conduct of the assessee. Hence, the decision is dist inguishable. Further, before the Hon'ble High Court, the amendment carried out in Section 143(1)(a) by the Finance Act 2021 was neither argued nor referred to for consideration of the Hon'ble Court.

14.5 It is further seen that the decision of the Apex Court in the case of CIT Vs B.C. Srinivasa Shetty 128 ITR 294 fully supports the view taken. The Court therein at page 299 has held as under :

" …………..The character of the computation provisions in each case bears a relationship to the nature of the charge. Thus, the chagrining section and the computation provisions together constitute an integrated code . When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section. Otherwise one would be driven to conclude that while a certain income seems to fall within the charging section there is no scheme of computation for quantify it……………..

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(emphasis supplied)

14.6 In the facts of the present case, admittedly the provision enabling the AO to pass an order re lying upon sub-clause (5) of Section 143(1)(a) was not on the Statute for 2018-19 assessment year. Accordingly, for the detailed reasons hereinabove, setting aside the impugned order, the appeal of the assessee is allowed.

15. Since in the remaining appeals, the facts, circumstances and position of law continues to remain the same, accordingly, mutatis-mutandis the decision arrived at in ITA 332/CHD/2021 would apply. Accordingly, al l appeals of the assessees are allowed.

16. In the result, the appeals of the assessees are allowed. Order pronounced in the Open Court on 30 ^th

August,2022. Sd/-

(दवा सहं )

(DIVA SINGH)

या#यक सदय/Judicial Member

"पनूम"

आदेश क! त,ल-प अ.े-षत/ Copy of the order forwarded to :

1. अपीलाथ / The Appellant - 2. यथ / The Respondent 3.आयकर आयु/त/ CIT 4.आयकर आयु/त (अपील)/ The CIT(A) 5.-वभागीय तन2ध, आयकर अपील&य आ2धकरण, च4डीगढ़/ DR, ITAT, CHANDIGARH 6.गाड  फाईल/ Guard File

2.

आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar

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