Modifications for disallowing a deduction under Section 80P that CPC is not authorised to make

Fact and issue of the case

This appeal by the assessee is directed against order dated 19.10.2022 passed by the Ld. Faceless Appeal Centre, Delhi, [in short ‘the Ld. CIT(A)’] for assessment year 2017-18, arising from the order u/s 143(1) of the Income-tax Act, 1961 (in short ‘the Act’) passed by the Ld. Centralized Processing Centre (CPC) on 09.03.2019. The ground raised by the assessee are reproduced as under:

On the facts and circumstances case in law, the Ld. NaCIT(A) erred in not providing deduction u/s 80P of the Act.

On the facts and circumstances of the case in law, the Ld. NaCIT(A) erred in not considering facts that assessee is facing issue of double taxation if addition is sustained.

The assessee also raised additional ground which is reproduced as under:

On the facts and circumstances of the case in law, CPC erred in disallowing 80P deduction while processing return u/s 143(3) which is bad in law.

Briefly stated, facts of the case are that in the case, the u/s 80P of the assessee filed return of income claiming deduction Act on 19.09.2017. While processing the return, the Ld. CPC denied the deduction claimed of s.1,82,74,406/- u/s 80P of the Act. On further appeal, the Ld. CIT(A) held that the order u/s 143(1) of the Act has merged with the assessment order u/s 143(3) of the Act dated 17.12.2019 wherein the Assessing Officer has disallowed deduction u/s 80P of the Act and therefore, no intervention was required as the subject matter and the issue involved has merged with the subsequent assessment order challenged by the assessee.

Before us, the of the the Ld. Ld. Counsel assessee filed copy of the order of CIT(A) passed in relation to the order u/s 143(3) dated 17.12.2019 and submitted the Assessing Officer has not reduced the demand which was raised consequent to u/s 143(1) of the Act, though Ld. CIT(A) has allowed the claim of the assessee in order passed with reference to 143(3) order of the Assessing Officer.

Before us, the Ld. Departmental Representative (DR) submitted that the Revenue has preferred appeal against the said order of the Ld. CIT(A) before the ITAT, hence matter being subjudice addition should not be deleted.

Observation by the tribunal

The tribunal has heard rival submission of the parties and perused the relevant material on record. In our opinion, the issue of deduction has already been allowed by the Ld. CIT(A) in 143(3) proceedings and therefore, the Revenue should have reduced the demand raised u/s 143 (1) of the also. The AO is accordingly direct to give effect of the finding of the Ld. CIT(A) in the impugned order that order u/s 143(1) already merged with the section 143(3) of the act and the said addition u/s 143(3) has been deleted by the Ld. CIT (A) vide order dated 01.12.2022.

Before us, the Ld. Counsel of the assessee has raised an additional ground that the Ld. CPC was not authorized to make adjustment u/s 143(1) of the Act as the issue of deduction u/s 80P of the Act was of debatable nature. The Ld. Counsel also submitted that power to make disallowance of deduction under the heading C – “Deductions in respect of certain incomes u/s VI-A, while processing return u/s 143(1) only by the Finance Act, 2021 w.e.f. 01.04.2022 prior to that there was no power available to the “C- Assessing Officer to allow the claim made under the heading deduction in respect of certain incomes” under Chapter VI-A. She submitted that assessment year in the year under consideration being assessment year 2007o empowering the CPC for carrying out such adjustments and therefore, making such adjustment was beyond the power of the CPC. She relied on the decision of the Tribunal in ITA No. 612 to 614/M/2022 for assessment year 2013-2014 to 2014-2015 in the case of Meghana Apartment Co-operative Housing Society Ltd. v. ITO order dated 20.07.2022.

In the result, the appeal filed by the assessee is allowed.