CPC has started processing ITR 5 which is filed by LLP, Partnership firm, AOP, BOI and private trust and as every year there is some error in processing Income tax returns, this year also the one error while processing ITR 5 is incorrectly showing that assessee has claimed deduction under Section 80P whereas no such deduction has been actually claimed by assessee.
Various assessee’s have yesterday received an email for proposed adjustments u/s 143(1)(a) of the Act as shown below and people were panicked that they have not claimed any deduction u/s 80P of the Act then why are they getting such notices:
So let’s first understand what is deduction u/s 80P which is being talked about and who can claim it:
Section 80P deals with deduction in respect of income of co-operative societies and clause (e) of sub-section 2 deals with:
“(e) in respect of any income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, the whole of such income;”
Hence, this is a very specific deduction which is available only to co-operative societies and none of the Firms or LLP have actually claimed it but still CPC is raising an adjustment u/s 143(1)(a) as incorrect claim of deduction.
If you open full Income tax return of your Firm or LLP you would see that no deduction has been mentioned u/s 80P of the Act.
Let’s discuss what adjustment can be done u/s 143(1)(a):
“(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 or increase in income indicated in the audit report but not taken into account in computing the total income in the return;
(v) disallowance of deduction claimed under section 10AA or under any of the provisions of Chapter VI-A under the heading “C.—Deductions in respect of certain incomes”, 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:
Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made:
Provided also that no adjustment shall be made under sub-clause (vi) in relation to a return furnished for the assessment year commencing on or after the 1st day of April, 2018;”
The deduction being proposed u/s 143(1)(a) are covered under clause (v) of Section 143(1)(a) of the Act.
What action needs to be taken against such notice u/s 143(1)(a) of the Act:
Now the important question which arises before assessee is to what action needs to be taken against such notice:
CPC has provided 15 day’s time limit to respond to such notice. Since this is a system error of CPC while processing their return of income it is recommended that assessee should wait for a few days to get a clarification from Income tax department and if no clarification is received within next few days then assessee can disagree with the adjustment and mention that there is some technical error while processing the income tax return and assessee has not claimed any such deduction under the Income tax act.
Simultaneously you can apply for grievance before the income tax department.
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