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The Mundkhar Co-Operative Society Limited vs. Income Tax Officer - (Income Tax Appellate Tribunal) (05 Apr 2023)

In the absence of enabling powers, no disallowance can be made


Direct Taxation

The Assessee filed its return of income declaring total income at Rs. 'Nil' after claiming deduction under Section 80P of the Income-tax Act, amounting to Rs. 2,27,994. The return was processed by the CPC, under Section 143(1) of the I.T. Act, denying the deduction claimed under Section 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 Act was 27th December, 2018, whereas the return had been filed on 13th October, 2018; and that according to section 80AC, after 1st April, 2018, and 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 I.T. Act.

By virtue of the impugned order, the learned 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 Act.

It is not in question that, Section 80AC of the I.T. Act, as amended by Finance Act, 2018, stipulated that for claiming deduction under Section 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 under Section 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 under Section 143(1) (a) only on the grounds of arithmetical error or that the Assessee had made an incorrect claim, etc. In the absence of enabling powers, no disallowance can be made. Enabling provisions being absent, the CPC did not have the jurisdiction to make the disallowance in question, in the order under Section 143 (1) of the Act. The order under appeal is accordingly reversed. Consequently, the disallowance of Rs. 2,27,994 is cancelled. Appeal allowed.


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