CPC was not authorised to disallow deduction u/s 80P vide adjustment u/s 143(1)(a)

CPC was not authorised to disallow deduction u/s 80P u/s 143(1)(a) for violation of Section 80AC of the Act – ITAT

In A recent judgment, ITAT Jodhpur held that CPC while processing the return u/s 143(1)(a) of the Act was not authorised to disallow the deduction u/s 80P of the Act for violation of Section 80AC of the Act. 

ABCAUS Case Law Citation:
4712 (2025) (08) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the rejection by CPC Bengaluru of the claim made by the assessee u/s 80P of the Income Tax Act, 1961 (the Act)

The appellant assessee was a co-operative society engaged in business of trading in fertilizers and pesticides to its members.  The assessee, while filing return of income for AY 2018-19 claimed exemption under section 80P(2)(iv).  During the processing of return by CPC Bengaluru under section 143(1), the said claim was duly rejected for violation of Section 80AC of the Act.

The Assessee had filed the return of income with delay of 43 days. The return u/s 139 was due on 30^th September but was filed in the month of November.

The Tribunal observed that after the amendment made by the Finance Act, 2018 w.e.f 01/04/2018 related A.Y. 2018–19 onwards, section 80AC provided that no deduction under any provision of Chapter VIA under the heading C.—Deductions in respect of certain incomes” shall be allowed, unless: The return of income is furnished on or before the due date specified under section 139(1).

The Tribunal further observed that the CPC during processing of return u/s 143(1) of Act rejected the claim made by the assessee U/s 80P of the Act and added back the surplus income.

The Tribunal further noted that for the relevant Assessment Year the section 143(1)(a) provided for certain adjustments can be made, such as arithmetical errors, incorrect claims, disallowance of loss set-off against late return, etc. But the CPC adjusted the said amount U/s 143(1)(a) of the Act by disallowing the claim of deduction U/s 80P of the Act by violation of Section 80AC of the Act. 

The Tribunal noted that the Lucknow Bench of the ITAT had allowed the claim under section 80AC of the Act observing that disallowance for deductions claimed under Chapter VIA was incorporated in the adjustments by the amendment made to section 143(1)(a) by the Finance Act 2021 w.e.f. 01.04.2021. However such adjustments under Chapter VI-A was not permissible under Section 143(1) of the Act in response of assessment years prior to A.Y. 2021-22.

The Tribunal held that the claim of deduction U/s 80P was duly rejected for contravening provision u/s 80AC of Act. But for the relevant Assessment Year, the CPC was not empowerd to adjust the said claim u/s 143(1)(a) of the Act.  Following the order of the ITAT Lucknow Bench the Tribunal held that the adjustment made by the CPC was unjustified.

Accordingly, the impugned appellate order was set aside and the addition was quashed. 

Download Full Judgment Click Here >>

• Expenses of ESOP are allowable as revenue expenditure u/s 37(1) of Income Tax Act.
• Compliance history of supplier can’t be used to invalidate genuine business transactions of buyer
• Reassessment quashed as AO issued notice u/s 148 instead of 153C as reopening was based on search
• Empanelment of CA/CMA /Legal firm for FEMA & other allied services at EPIL
• Individual contract for booking persons for participation in event not event management liable to service tax