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Facts
The assessee, a company engaged in software development in an SEZ, claimed deduction under Section 10AA. Form 56F, required for the deduction, was physically prepared and signed before the due date but e-filed 5 days late due to technical issues. The CPC processed the return under Section 143(1) by disallowing the deduction due to the delayed e-filing of Form 56F.
Held
The Tribunal held that the delay in e-filing Form 56F was a procedural lapse and not a substantive defect, especially since the form was available before the due date and the claim was disclosed in the return and tax audit report. The deduction under Section 10AA should not be denied for such minor procedural delays.
Key Issues
Whether a deduction under Section 10AA can be disallowed at the processing stage under Section 143(1) solely due to a procedural delay in e-filing Form 56F when the form was otherwise valid and submitted timely in physical form.
Sections Cited
10AA, 143(1), 143(1)(a), 115JB, 234B, 234C, 119(2)(b), 16D, 139(1), 10B(8)
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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Asstt.Year : 2019-2020 Singularity Labs Private Limited ITO, Ward-4(1)(1) A Wing, Unit No.105 Vs. Ahmedabad- 380 Building No.1-A, Aqualine Properties 015. Pvt.Ltd. IT/ITES SEZ, Koba Gandhinagar – 382 421 PAN : AAYCS 8711 R (Applicant) (Responent) : Shri Hardik Vora, AR Assessee by : Shri Atul Pandey, Sr.DR Revenue by सुनवाई क� तारीख/Date of Hearing : 13/08/2025 घोषणा क� तारीख /Date of Pronouncement: 14/08/2025 आदेश/O R D E R PER MAKARAND V.MAHADEOKAR, AM:
This appeal by the assessee is directed against the order dated 26.12.2024 passed by the learned Additional/Joint Commissioner of Income Tax, Office of Commissioner of Income Tax (Appeals), Faridabad [hereinafter referred to as "the CIT(A)"], arising out of the intimation dated 17.06.2020 issued by the Centralized Processing Centre, Bengaluru, under section 143(1) of the Income-tax Act, 1961 [hereinafter referred to as "the Act"] for the Assessment Year (AY) 2019–20.
2 Facts of the Case:
The brief facts of the case, as emanating from the record, are that the assessee is a company engaged in the business of software development services and is located in a Special Economic Zone (SEZ). The assessee e-filed its return of income for the relevant year on 29.11.2019, declaring total income of Rs.6,26,620/- after claiming deduction under section 10AA of the Act amounting to Rs.3,69,46,950/-. Further, the assessee declared deemed total income under section 115JB at Rs.3,61,68,169/- and paid tax thereon. The claim of deduction under section 10AA was duly reflected in the return of income and in the tax audit report in Form 3CD under the relevant clause.
In the course of processing the return under section 143(1) of the Act, the CPC issued a communication dated 31.12.2019 proposing adjustment under section 143(1)(a) of the Act, on the ground that, though the assessee had claimed deduction under section 10AA, the corresponding audit report in Form 56F was not e-filed within the due date prescribed. It was noted that the due date for filing the return for the assessment year 2019–20 was 30.11.2019, whereas the assessee had e- filed Form 56F on 05.12.2019, i.e., with a delay of 5 days. The CPC proposed to treat the claim under section 10AA as inadmissible and to make a prima facie adjustment reducing the deduction to nil. The assessee, in response to the said proposal, submitted that the signed physical copy of Form 56F, duly verified by a Chartered Accountant along with UDIN, had been received from the auditor on 29.11.2019, i.e., within the due date. It was explained that the delay in e-filing was occasioned purely due to technical difficulties in the e-filing portal, and that there was no dispute regarding the substantive eligibility for deduction under section 10AA. Reliance was placed on various judicial precedents holding that the 3 requirement of filing Form 56F along with the return is directory in nature and that such procedural delay should not defeat a substantive claim.
3.1. However, the CPC, without accepting the assessee’s explanation, proceeded to process the return under section 143(1) on 17.06.2020 by denying the deduction under section 10AA in entirety and computing the total income at Rs.3,75,73,570/-, resulting in a demand of Rs.31,25,540/- inclusive of interest under sections 234B and 234C of the Act.
Aggrieved, the assessee carried the matter in appeal before the learned CIT(A). Before the first appellate authority, the assessee reiterated the factual background and emphasized that the physical Form 56F had been prepared, signed, and available within the prescribed due date; the delay of 5 days in uploading the same was due to genuine technical reasons. It was further submitted that for the immediately preceding year, i.e., the first year of operation, the assessee had duly filed Form 56F in time and the claim under section 10AA had been allowed. It was urged that the delay being venial and procedural in nature should be condoned and the deduction allowed. Several judicial decisions were cited, wherein it was held that filing of the prescribed report along with the return is directory and not mandatory, and that the claim should not be denied merely for procedural lapses if substantive compliance exists before completion of assessment or during appellate proceedings.
5. The learned CIT(A) recorded that under Rule 16D and section 10AA, the report in Form 56F is required to be furnished along with the return of income, and in the present case, the assessee had e-filed the said form on 05.12.2019, i.e., after filing the return on 29.11.2019 and beyond the due date of 30.11.2019. The learned CIT(A) held that there was no error in the CPC’s action in denying the deduction in processing under section 143(1) of the Act. The CIT(A) further observed that under section 119(2)(b) of the 4 Act, the power to condone the delay in filing such reports rests only with the jurisdictional Commissioner of Income Tax, Chief Commissioner of Income Tax, or Principal Chief Commissioner of Income Tax, and not with the Assessing Officer or the CIT(A). The assessee was advised to approach the competent authority for condonation. The grounds relating to levy of interest under sections 234B and 234C of the Act were treated as consequential and requiring no separate adjudication. Consequently, the appeal was dismissed in toto.
Being further aggrieved, the assessee has come up in appeal before us, raising the following grounds of appeal:
1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming disallowance of Rs. 3,69,46,856/- as a prima facie adjustment under section 143(1)(a) of the Act.
2. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming disallowance of Rs. 3,69,46,856/- claimed under section 10AA of the Act only due to a minor delay of 5 days in filing Form 56F.
3. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in not condoning the minor delay of 5 days in filing Form 56F.
4. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in not considering that Form 56F was received from the Chartered Accountant before the due date but could not be e- filed due to technical issues.
On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming disallowance of Rs. 3,69,46,856/- claimed under section 10AA of the Act without considering that Form 56F was already filed before processing of return under section 143(1) of the Act.
6. It is therefore prayed that the above addition/disallowance made by the Assessing Officer may please be deleted.
The appellant craves leave to add, alter, or delete any ground either before or in the course of the hearing of the appeal.
5 7. During the course of hearing before us, the learned Authorized Representative (“AR”) of the assessee reiterated the factual background already brought on record before the lower authorities. He submitted that the assessee had, in its return of income filed on 29.11.2019, specifically claimed deduction under section 10AA of the Act amounting to Rs.3,69,46,950/-, and such claim was also duly disclosed in the tax audit report in Form 3CD. Our attention was invited to Clause 33 of the said Form 3CD, wherein the claim of deduction under section 10AA was categorically reported at the said figure.
7.1. The AR emphasized that the substantive requirement of section 10AA of the Act, namely, the furnishing of a report of an accountant in the prescribed form, stood complied with inasmuch as the duly signed and verified Form 56F was in the possession of the assessee prior to the due date and had been physically filed; the procedural lapse in delayed e-filing was occasioned by technical issues on the portal. In support of the proposition that such a procedural lapse should not defeat a substantive claim, reliance was placed on decisions of the co-ordinate benches, including: i. DCIT v. Croygas Equipments Pvt. Ltd. (ITA No. 415/Ahd/2020, order dated 16.06.2023) ii. Nachiket Dipak Shah v. ITO (ITA No. 1330/Ahd/2024, order dated 13.12.2024)
In reply, the learned Departmental Representative (“DR”) supported the findings recorded by the learned CIT(A) and submitted that the assessee, having admittedly e-filed Form 56F on 05.12.2019 i.e., after the due date of 30.11.2019, had failed to satisfy a mandatory statutory requirement for claiming deduction under section 10AA. The DR further placed reliance on the judgment of the Hon’ble Supreme Court in Pr. CIT
6 v. Wipro Ltd. [(2022) 446 ITR 1 (SC)], wherein it was held, in the context of section 10B(8), that the twin requirements of (i) furnishing the prescribed declaration/report, and (ii) furnishing it before the due date under section 139(1), are mandatory and have to be cumulatively satisfied, failing which the benefit cannot be allowed.
8.1. The learned DR further submitted that, without prejudice, if the Bench is inclined to allow the claim, the matter should be restored to the file of the Assessing Officer for verification of the actual filing and contents of Form 56F.
We have given our thoughtful consideration to the rival submissions and perused the material placed on record, including the orders of the lower authorities, the statutory provisions, and the judicial precedents cited by both sides. The undisputed facts are that the assessee had claimed deduction under section 10AA of the Act in the return of income filed on 29.11.2019 amounting to Rs.3,69,46,950/-, which was also duly disclosed in Clause 33 of the tax audit report in Form 3CD. The assessee had obtained the accountant’s report in Form 56F, signed and verified before the due date of filing the return, but e-filed the same on 05.12.2019, i.e., with a delay of five days.
9.1. The short controversy, therefore, is whether in the facts of the present case the deduction under section 10AA of the Act can be denied at the stage of processing under section 143(1)(a) of the Act merely on account of a short procedural delay in e-filing Form 56F, notwithstanding the fact that (i) the claim was made in the return of income, (ii) it was also disclosed in the audit report in Form 3CD, and (iii) the duly signed Form 56F was available before the due date and was filed electronically before the processing of the return.
7 We find that in DCIT v. Croygas Equipments Pvt. Ltd. (ITA No. 415/Ahd/2020, order dated 16.06.2023), the co-ordinate bench has held, in the context of section 10AA of the Act, that the benefit of such deduction, being a beneficial provision aimed at promoting exports from SEZs, should not be denied merely for failure to e-file Form 56F along with the return, when the said form was filed before completion of assessment. The Tribunal has observed that the requirement to file the report along with the return is directory in nature, and procedural lapses by themselves should not frustrate substantive claims where eligibility on merits is not in dispute. Similarly, in Nachiket Dipak Shah v. ITO (ITA No. 1330/Ahd/2024, order dated 13.12.2024), it was held that where Form 56F was filed prior to issuance of intimation under section 143(1) of the Act, the delay in filing the form was a procedural lapse that could not override substantive compliance, and the deduction under section 10AA was directed to be allowed.
9.2. On the other hand, the Revenue has placed reliance on the judgment of the Hon’ble Supreme Court in Pr. CIT v. Wipro Ltd. (446 ITR 1), where it was held, in the context of section 10B(8) of the Act, that the requirements of furnishing the prescribed declaration and doing so before the due date of filing the return under section 139(1) are mandatory. However, as rightly pointed out in Croygas Equipments (supra), the said decision was rendered on materially different facts, in that case, the assessee had claimed the deduction in the original return and later sought to withdraw it in a revised return by filing the requisite declaration beyond the due date. Moreover, section 10B(8) is an exemption provision carrying a specific requirement to file a declaration for foregoing the benefit, whereas section 10AA, as held in CIT v. Yokogawa India Ltd. (391 ITR 274, SC), is a deduction provision intended to incentivise exports, and thus attracts a liberal construction.
8 9.3. In the present case, there is no dispute about the assessee’s substantive eligibility for deduction under section 10AA of the Act; the only reason for denial is the 5-day delay in e-filing the audit report. The report itself was obtained and available before the due date, and the claim was transparently disclosed in both the return and the audit report in Form 3CD. In our considered view, such a short delay in e-filing, particularly when the form was on record before the return was processed, is at best a procedural lapse which does not go to the root of the claim and cannot be made a ground for denial at the stage of section 143(1) of the Act processing.
9.4. We also find that the decision in Wipro Ltd. (supra) is distinguishable on facts and statutory context, as explained in Croygas Equipments (supra). In the present case, the assessee’s claim was made in the original return itself, the report was available before the due date, and the short delay in e-filing did not prejudice the Revenue. Section 10AA being a deduction provision with a beneficial object, it should receive a liberal construction to advance its purpose and not be frustrated by hyper-technical compliance requirements when substantive eligibility is established.
9.5. Having considered the plea for remand, we note that the assessee has placed on record a copy of the electronically filed Form 56F along with the e-filing acknowledgment bearing the date 05.12.2019. It is also an admitted position that this form was on record before the date of processing of the return under section 143(1). There is no allegation from the Revenue that the form is deficient in contents or not in the prescribed format; the only objection is to the timing of its e-filing. In these circumstances, no further verification by the Assessing Officer is warranted, and remanding the matter would only prolong the proceedings without serving any substantive purpose.
9.6. In view of the above discussion, we hold that the disallowance of Rs.3,69,46,950/- made under section 143(1)(a) of the Act, and confirmed by the learned CIT(A) is not sustainable. We direct the Assessing Officer to delete the disallowance and allow the claim of deduction under section 10AA as made in the return of income. The plea of the DR for remand is rejected for the reasons discussed in para 17 above.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 14th August, 2025 at Ahmedabad.
Sd/- Sd/- (SUCHITRA R. KAMBLE) (MAKARAND V. MAHADEOKAR) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad, dated 14 /08/2025 Tc nair आदेश क� �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)-concerned 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण / DR, ITAT, 6. गाड� फाईल /Guard file. आदेशानुसार/BY ORDER,