By TIOL News Service

MUMBAI, MAR 27, 2017: THE ISSUE IS - Whether a malfunctioning in the software of Revenue which prevented certain claim of deduction from reflecting, while filing of online return, could result in disallowance of such claims by holding that no claims were made by assessee. NO is the verdict.

Facts of the case:

The assessee is a Cooperative Credit Society formed by the Secondary Teachers' in Zilla Parishad schools and is engaged in providing the credit facility to its members. The assessee had filed its return and the same was assessed u/s 143(3) accepting the return of income as Nil after allowing exemption u/s 80P. Subsequently, the CIT exercised its powers u/s 263 and revised the order of assessment. This was on account of the fact that even when the assessee had not claimed deduction u/s 80P, yet it was granted in the face of the decision of the Apex Court in Goetze (India) Ltd. Vs. Commissioner of Income Tax. Further, the AO while allowing the deduction did not make enquiries with regard to entitlement on merits to deduction u/s 80P. On appeal, the ITAT found that the assessee had filed its return in Form ITRV online and also in hard copy with the AO and duly obtained the acknowledgement thereto. This acknowledgement given by the AO clearly reflected that the deduction under Chapter VIA of the Act had been claimed. In respect of the online return, the ITAT held that due to an error attributable to the software of the Revenue, the deduction claimed by assessee was not reflected as deduction from the total income. This error was particularly evident from the fact that the total liability worked out by the software was Nil, indicating no taxable income. Besides, the impugned order also held that the reasons recorded to select the return of income of assessee for scrutiny assessment was deduction claimed under Chapter VIA of the Act being in excess of Rs.25 lakhs.

On appeal, the HC held that,

++ the impugned order of the Tribunal has clearly recorded a finding of fact that the hard copy of the return was filed with the AO and an acknowledgement of the same was also given by the AO. This acknowledgement did indicate the assessee's claim for deduction u/s 80P was claimed in the return of income. The impugned order also records the fact that there was a malfunctioning of the software as the tax liability could not have been 'Nil' in the absence of the deduction u/s 80P being taken into account as the income declared by the assessee is Rs.1.26 crores before deduction u/s 80P. In the aforesaid facts, the decision of the Apex Court in Goetze (India) Ltd. would have no application as the return of income as evidenced by its hard copy, had claimed deduction u/s 80P. Further, the malfunctioning of the software under which the return of income was electronically uploaded is also not disputed before us, nor is it shown that the finding of the Tribunal on the above account is in any manner perverse. The Revenue has not demonstrated as to how and in what manner the consideration of the claim u/s 80P as reflected in order is erroneous so as to enable him to exercise his powers u/s 263.

(See 2017-TIOL-563-HC-MUM-IT)