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Facts
The assessee filed an appeal with a delay of 11 days due to inadvertently filing it before the wrong bench. The appeal concerned a deduction claimed under Section 80-IA of the Income Tax Act for profits from a solar power unit. The audit report was uploaded a few days after the due date but before the return of income was filed and processed.
Held
The Tribunal held that the delay in filing the appeal was condoned as it was due to a procedural error without malafide intention. Regarding the deduction, the Tribunal found that while filing the audit report is mandatory, it is procedural. Since the audit report was available before the assessment was completed and the assessee was otherwise eligible, the deduction could not be denied on a technical ground.
Key Issues
1. Whether the delay in filing the appeal can be condoned due to a procedural error. 2. Whether the deduction under Section 80-IA can be denied solely on the ground that the audit report was filed a few days after the due date, despite being filed before the completion of assessment.
Sections Cited
80IA, 80AC, 139, 143(1), 288, 44AB
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Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MADHUSUDAN SAWDIA
आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M. : This appeal is filed by Shri Mulakala Mohan Krishna (“the assessee”), feeling aggrieved by the order passed by the Learned ADDL/JCIT (A)-3, Chennai, (“Ld. First Appellate Authority”), dated 20.12.2024 for the A.Y. 2021-22. 2. At the outset, it is noted that there is a delay of 11 days in filing of this appeal. The assessee has filed a condonation petition along with an affidavit explaining the reasons for the delay. In this regard, the Learned Authorised Representative (“Ld. AR”) submitted that the impugned order was passed on 20.12.2024. Accordingly, the appeal was required to be filed on or before 28.02.2025. The assessee filed the appeal on 11.02.2025, well within the stipulated time; however, the same was inadvertently filed before the Chennai Bench of the Tribunal instead of the Hyderabad Bench which had jurisdiction. When the assessee opened the e-filing website on 10.03.2025, it came to notice that the Chennai ITAT had returned the appeal with a remark that the jurisdiction of the appeal lies with Hyderabad ITAT. Immediately thereafter, the assessee refiled the appeal with the Hyderabad ITAT on 11.03.2025. Thus, the delay of 11 days was caused only on account of an inadvertent mistake in selecting the wrong jurisdictional bench at the time of original filing. It was further submitted that there was no malafide intention on the part of the assessee, and the delay was purely due to a procedural error. The Ld. AR prayed before the bench for condonation of delay in filing of the appeal and admission of the appeal for adjudication.
Per contra, the Learned Departmental Representative (“Ld. DR”) fairly submitted that he had no serious objection to the condonation of delay, considering that the assessee had initially filed the appeal within the stipulated period and the delay was due to a bona fide mistake.
We have considered the rival submissions and perused the material available on record. The facts clearly show that the assessee had initially filed the appeal well within the prescribed time, but inadvertently filed it before the wrong Bench. On detection of this mistake, the appeal was promptly filed before the correct Bench after rectifying the error. The delay of 11 days is thus due to a procedural lapse without any malafide intention. Hence, we are of the view that the assessee has shown sufficient cause for the delay. Accordingly, the delay of 11 days in filing of the appeal is condoned, and the appeal is admitted for adjudication on merits.
The assessee has raised the following grounds of appeal :
1. 6. The brief facts of the case are that, the assessee is the proprietor of M/s. Sarvotham Care, having income from two units, one being a solar power generation unit eligible for deduction under section 80IA(4)(iv) of the Income Tax Act, 1961 (“the Act”) and another manufacturing unit. During the financial year 2020–21, the assessee earned profits from the solar unit, incurred loss from the manufacturing unit, and had positive income from house property and other sources. The assessee claimed deduction of Rs.49,28,566/- under section 80IA(4)(iv) in respect of profits derived from the solar power unit. The return of income was filed by the assessee within the extended due date of 15th March, 2022. The audit report in Form No.10CCB was required to be filed before one month from the last date of filing the return of income. Accordingly, the extended due date for filing the audit report was 15.02.2022. However, the audit report though signed before the due date, was uploaded on 23.02.2022, i.e., after the statutory due date but before the extended due date of filing of return. The CPC, Bangalore while processing the return under section 143(1) of the Act, disallowed the deduction claimed under section 80IA of the Act on the ground that the audit report was not filed within the prescribed time.
7. Aggrieved with the order of CPC, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) upheld the action of the CPC. The observation of the Ld. CIT(A) are captured at para nos.4 to 4.6 of his order, which is to the following effect :
8. Aggrieved with the order of Ld. CIT(A), the assessee is in appeal before the Tribunal. The Ld. AR submitted that, the return of income was filed after facing technical issues in the income-tax e-filing portal within the extended due date of 15th March, 2022. The audit report in Form No.10CCB was required to be filed before one month from the last date of filing the return of income. Accordingly, the extended due date for filing the audit report was 15.02.2022. However, the audit report though signed before the due date, was uploaded on 23.02.2022, i.e., after the extended due date of furnishing the audit report, but before the extended due date of filing of return of income. The Ld. AR submitted that the assessee had duly obtained the audit report in Form 10CCB before the extended due date and uploaded the same well before the due date of filing of return of income. It was contended that due to technical glitches in the new income-tax portal launched in June 2021, and repeated extensions of due dates by CBDT, there was a reasonable cause for the delay. The Ld. AR also submitted that filing of audit report is procedural and if the same is made before framing of assessment, deduction should not be denied. In support of its argument, the assessee relied on the following judicial pronouncements : a) Hon'ble High Court of Punjab & Haryana in the case of Mahalakshmi Rice Factory reported in 294 ITR 631 b) Hon'ble Supreme Court in the case of G.M Knitting Industries Pvt. Ltd (2016) 71 Taxmann.com 35 (SC) c) Hon'ble Karnataka High Court in the case of Sutures India (P) Ltd (2021) 125 Taxmann.com 226 d) ITAT Kolkata Benches in the case of DCIT vs. Tide Water Oil Company (I) Ltd in dated 20.01.2012. e) Hon'ble Karnataka High Court in the case of CIT vs. ACE Multitaxes Systems (P) Ltd (2009) 317 ITR 207 (Kar.) f) Hon'ble Delhi High Court in the case of CIT vs.Contimeters Electricals () Ltd (2009)317 ITR 249 (Del.) g) Hon'ble Madras High Court in the case of CIT vs.AN Arunachalam (1994) 208 ITR 481. h) Hon'ble Madras High Court in the case of CIT vs. Jayant Patel (2001) 248 ITR 199 (Mad) i) Hon'ble Bombay High Court in the case of CIT vs. Shivanand Electronics (1994) 209 ITR 63 (Bom.) j) CIT-1 vs. M/s. AKS Alloys (P) Ltd 18 Taxmann.com 25 (Mad) k) ITAT Ahmedabad Bench of the Tribunal in the case of Aprameya Engg. Ltd vs. ITO 164 Taxmann.com 740 l) ITAT Ahmedabad Bench of the Tribunal in the case of Dy. CIT vs. Croygas Equipments (P) Ltd in dated 16.06.2023 m) ITAT Nagpur Bench of the Tribunal in the case of Krushi Vibhag Karmchari Vrund Sahakari Pat Sanstha Maryadit vs. ITO (2023) 147 Taxmann.com 449
9. Relying on the above decisions, the Ld. AR submitted that the Hon'ble Courts have held that audit report can be filed any time before assessment and that technical delay should not prejudice substantive claim. The Ld. AR further argued that the amendment made by the Finance Act, 2020 to section 80IA(7) is procedural and should not operate to deny genuine deduction, particularly in view of CBDT’s extensions and technical glitches.
10. Per contra, the Ld. DR invited our attention to section 80IA(7) of the Act as amended by the Finance Act, 2020 w.e.f. 01.04.2020. He submitted that the amended provision mandates that for claiming deduction, the assessee must furnish the audit report in prescribed form on or before the specified due date. He further submitted that the extended due date for filing the audit report was 15.02.2022 and the audit report have been uploaded by the assessee on 23.02.2022 i.e. after the specified due date. He also submitted that unlike earlier judicial interpretations, the amendment has made the requirement mandatory. The Ld. DR emphasized that all the case law relied upon by the Ld. AR pertains to periods prior to the amendment, and therefore they are not applicable to assessment year 2021–22. Since the assessee failed to comply with the amended requirement, the deduction cannot be allowed.
We have heard the rival submissions and perused the material available on record. The only issue raised for our consideration is whether the assessee is eligible to claim deduction under section 80- IA of the Act. It is an admitted position of fact that the extended due date for filing of return of income for the assessment year under consideration was 15.03.2022 and, accordingly, the due date for furnishing the audit report was 15.02.2022. The assessee had duly obtained the audit report before the due date of 15.02.2022; however, the same was actually furnished on the income tax portal on 23.02.2022. The assessee thereafter filed its return of income on 15.03.2022. The CPC processed the return under section 143(1) of the Act on 08.07.2022. Thus, there is no dispute regarding the fact that the audit report was available on record before filing of the return of income within the prescribed due date, and was also available before the CPC at the time of processing the return.
The assessee has relied upon various judicial precedents to contend that where the audit report has been furnished before completion of assessment, deduction should not be denied. It has also been argued that filing of the audit report, though mandatory, is in the nature of a procedural requirement, and cannot be a ground to deny deduction, particularly when the return of income has been filed within the prescribed due date. However, the Ld. DR submitted that the Finance Act, 2020 has amended the provisions of section 80- IA(7) of the Act with effect from 01.04.2020. According to the Ld. DR, all the judicial precedents relied upon by the assessee pertain to the period prior to the amendment, and therefore, they are not applicable to the assessment year under consideration.
We have gone through the judicial precedents relied upon by the assessee and on perusal of the same, it is evident that although filing of the audit report is mandatory, such requirement is procedural in nature. The consistent view of various Courts has been that if the audit report is available or filed before completion of assessment, then the deduction claimed by the assessee should not be denied merely on the ground that the audit report was furnished belatedly, so long as the assessee is otherwise eligible. In the present case before us, there is no dispute by the Revenue regarding the eligibility of the assessee’s claim under section 80-IA; the only dispute that remains is whether the principles laid down by the various Courts continue to apply even after the amendment made by the Finance Act, 2020 with effect from 01.04.2020. In this regard, We have gone through the provisions of section 80IA(7) of the Act as amended by the Finance Act, 2020 w.e.f. 01.04.2020, which is to the following effect : “Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. 80-IA. (1) to (6) ……….
(7) The deduction under sub-section (1) from profits and gains derived from an undertaking shall not be admissible unless the accounts of the undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, 30[before the specified date referred to in section 44AB and the assessee furnishes by that date] the report of such audit in the prescribed form duly signed and verified by such accountant.”
On perusal of section 80IA(7) of the Act as amended by the Finance Act, 2020 w.e.f. 01.04.2020, it is evident that to claim deduction under section 80IA of the Act, the assessee is required to get the accounts of the undertaking audited before the specified date referred to in section 44AB of the Act and also required to furnish such audit report by that date. Further, section 44AB of the Act, by virtue of Explanation (ii), defines the “specified date” , which is to the following effect : “ Section 44AB in The Income Tax Act, 1961 44AB. Audit of accounts of certain persons carrying on business or profession. Every person,—(a)carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year [***]: (b) …. Explanation (i) …….. (ii)"specified date", in relation to the accounts of the assessee of the previous year relevant to an assessment year, means [date one month prior to] the due date for furnishing the return of income under sub- section (1) of section 139.”
On perusal of above , it is evident that the specified due date for the purpose of section 80IA(7) of the Act means the date one month prior to the due date of furnishing the return of income under section 139(1) of the Act. Therefore, on a combined reading of section 80IA(7) and Explanation (ii) to section 44AB of the Act, it is evident that for claiming the deduction under section 80IA of the Act, there is a requirement to furnish the audit report one month prior to the due date specified for filing of income tax return under section 139(1) of the Act. We have also gone through the provisions of section 80IA(7) of the Act as it stood prior to 01.04.2020, which is to the following effect : “Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. 80-IA. (1) to (6) ………. (7) The deduction under sub-section (1) from profits and gains derived from an undertaking shall not be admissible unless the accounts of the undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant.”
On perusal of the provisions of section 80IA(7) of the Act as it stood prior to 01.04.2020, we find that the requirement was that the assessee should furnish audit report along with the return of income. Similarly, under section 80AC of the Act, for claiming deduction under section 80IA, filing of return of income before due date prescribed under section 139(1) was mandatory. The provisions of section 80AC are reproduced as under for ready reference : “Deduction not to be allowed unless return furnished. 80AC. Where in computing the total income of an assessee of any previous year relevant to the assessment year commencing on or after— (i) the 1st day of April, 2006 but before the 1st day of April, 2018, any deduction is admissible under section 80-IA or section 80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80-IE; (ii) the 1st day of April, 2018, any deduction is admissible under any provision of this Chapter under the heading "C.—Deductions in respect of certain incomes", no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139.”
On a combined reading of the provisions of section 80AC and 80IA(7) , it is evident that even earlier i.e. prior to 01.04.2020, there existed a requirement of time-bound filing of the audit report and return of income. On perusal of the earlier provisions as well as the provisions applicable after 01.04.2020, we find that even under the earlier law, there was a requirement to file the audit report before the due date specified for filing of the return of income. The only difference between the two provisions are that, earlier there was a requirements of furnishing of audit report before the due date prescribed for filing of income tax return under section 139(1) of the Act. However, w.e.f. 01.04.2020 there is a requirements of furnishing of audit report one month prior to the due date prescribed for filing of income tax return under section 139(1) of the Act. Therefore, it is not the case of the Revenue that such a requirement has been introduced for the first time with effect from 01.04.2020. Therefore, in our view, the judicial precedents rendered by various Courts in the context of the statutory provision prior to 01.04.2020 continue to apply even after the amendment. Accordingly, relying on the ratio laid down by the various judicial authorities, we are of the considered view that if the assessee is otherwise eligible for deduction under section 80-IA, such deduction cannot be denied merely on the ground that the audit report was furnished after the specified due date, so long as it has been filed before the completion of assessment. In the present case, there is no dispute regarding the eligibility of deduction under section 80-IA; the only reason for denial was that the audit report was furnished on 23.02.2022 instead of 15.02.2022. However, since the audit report was available on record prior to the filing of return of income as well as prior to processing by the CPC under section 143(1), the assessee cannot be deprived of the benefit of deduction on this technical ground. Therefore, following the judicial precedents and considering that the requirement of furnishing the audit report is procedural in nature, we hold that the assessee is eligible to claim deduction under section 80-IA of the Act. We accordingly direct the Assessing Officer to delete the disallowance made on account of denial of deduction under section 80-IA.
In the result, the appeal of the assessee is allowed.