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Facts
The assessee, a start-up, claimed a deduction of Rs. 2,05,72,739/- under Section 80-IAC for AY 2023-24. However, the audit report in Form 10CCB was filed on 26.10.2023, which was after the due date of 30.09.2023. The CPC disallowed the claim due to the delayed submission of Form 10CCB.
Held
The tribunal held that the provisions of Section 80IA(7) and the amended provisions by the Finance Act, 2020, require mandatory submission of the audit report before the specified date. Following the Supreme Court's decision in Pr.CIT vs. Wipro Ltd., which emphasizes strict compliance with exemption provisions, the disallowance was upheld.
Key Issues
Whether the deduction under Section 80-IAC can be allowed when the mandatory audit report (Form 10CCB) was filed after the specified due date.
Sections Cited
80-IAC, 80-IA, 44AB, 139, 143(1), 115JB, 33B, 288, 32
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Income Tax Appellate Tribunal, JAIPUR BENCHES “A” :: JAIPUR
Before: SHRI SANDEEP GOSAIN & DR. DIPAK P. RIPOTE
ORDER
PER DR. DIPAK P. RIPOTE, AM:
This appeal filed by the assessee is against the order of ld.Addl.Commissioner of Income Tax/JCIT(Appeals)-2, Pune u/sec.250 of the Income Tax Act, 1961; for A.Y.2023-24 dated
OAN Industries Private Limited [A] 29.02.2024. The assessee has raised the following sole ground of appeal : “
1. That the ld.CIT(A) has erred in confirming the action of the ld.AO viz. CPC in disallowing the claim of the appellant for Rs.2,05,72,739/- u/s 80-IAC on account of delayed submission of form 10CCB ignoring the fact that the same was available at the time of processing of the ITR. It is sincerely prayed that the claim of the appellant be allowed considering the settled legal position that where audit report/ form are available with the AO at the time of assessment, deductions may not be disallowed.” Submission of ld.AR :
2. The ld.AR filed written submission. The relevant part of the same is reproduced here as under : “Facts of the case: The appellant is a company and is a start up and as per provisions of section 80-IAC of the Income Tax Act, 1961 it is eligible for claim of 100% profit derived from such business for three consecutive years. The instant year was the first year of its claiming deduction u/s 80- IAC of the Income Tax Act, 1961. It had filed its ITR on 31.10.2023 by declaring NIL taxable income as per its accounts but as per provisions of section 115JB its income was declared at Rs.2,10,66,199/- and tax was paid u/s 115JB of the Income tax Act, 1961. It had claimed deduction u/s 80-IAC for Rs.2,05,72,739/-. As per provisions of sub section 7 of section 80-IA audit report in form 10CCB was required to be filed on or before 7th October, 2023 (extended due date) as against which the form had been filed on 26.10.2023 and e verified by the assessee on 20.12.2023. However since requisite form 10CCB had not been filed before the due date of 7th October, 2023 the CPC disallowed the claim of the assessee due to non furnishing of form 10CCB within due date, vide processing note issued dated 08.01.2024 u/s 143(1) of the Income Tax Act, 1961.
OAN Industries Private Limited [A]
The audit report in form 10CCB as filed was available to CPC at the time of processing the return. But the CPC disallowed the claim of the assessee on account of delayed filing of the audit report and such action has been confirmed by the Id. CIT (A). Order of the Ld. CIT (A): The Id. Addl.CIT (A) to whom the appeal was migrated did not decide the appeals on the submissions of the appellant but left the same to be decided as per order of the Id. PCIT-2, Jaipur to whom the appellant had filed an application u/s 119(2)(b) of the Income Tax Act, 1961 for condoning the delay occurred in filing the report of accountant as required under section 80-IAC. Submissions of the appellant The appellant has withdrawn its application filed to Id. PCIT-2, Jaipur for condoning delay occurred in filing the report of accountant. Copy of letter filed by the assessee before the Id. PCIT-2, Jaipur is at APB 21. Reasons for delay occurred in filing the report of accountant The CA who had audited the accounts of the appellant u/s 44AB and who was responsible for filing the ITR of the appellant was having a confusion about filing of any audit report/ report of accountant for claiming deduction u/s 80-IAC as provisions of section 80-IAC do not contain any direct provision requiring the assessee to file a report of accountant. However sub section 4 of this section refers to applicability of sub section 5 and sub section 7 to 11 of section 80-IA which are also applicable on section 80-IAC. Due to his first assignment of such claim he was under confusion about filing of the same. However out of this confusion he prepared the report on portal on 30.09.2023, which fact is apparent from the date mentioned on APB 20. Thereafter he tried to get guidance from other CAs and consultants but he could not get a perfect opinion about whether it is mandatory to submit the report. Finally he got an opinion that this is required to be uploaded and hence he uploaded the document on 26th October, 2023 which was digitally approved by the appellant on OAN Industries Private Limited [A]
20.12.2023. This is because of this reason the date of e filing of the document is appearing as 20.12.2023 at APB 16. The ITR was processed by CPC on 08.01.2024 and the above etinery shows that the requisite report of accountant was available before the CPC at the time when the ITR was processed. It is also to bring to your kind attention that the audit report in form 3CD was filed by the auditor before due date of filing as per section 44AB and in the said audit report (APB 4-14) the auditor had verified the claim of the appellant u/s 80-IAC and quantified the same in column no. 33 of the audit report (Back page of APB 11) and therefore there could not be any presumption of mala fide in filing the report in form 10CCB belatedly. There have been various instances wherein the requisite forms/ audit reports/ report of accountant for claiming deductions under various sections of the Income tax Act, 1961 were filed late but the opinion of the judicial authorities had been that due date of filing of such audit reports/ report of accountant etc. form claiming deductions are directory in nature and not mandatory and if the requisite report is available before the AO at the time of making assessment then deduction deserves to be allowed. Reliance is placed on the following judicial pronouncements :-
1. 1. CIT vs G.M.Knitting Industries(P.) Ltd. [2016] 71 taxmann.com 35 (SC).
2. Rajesh Kumar Agarwal Vs. DCIT, Circle-1, Jaipur (Jaipur ITAT) (ITA No.85/JP/2023 vide order dated 17.04.2023).
3. Pratap Technocrats Pvt. Ltd. vs. PCIT-1, Jaipur (Jaipur ITAT) (ITA No.225/JP/2023 vide order dated 18.07.2023).
4. ITO vs. Marathon India Ltd., (ITAT Jaipur) (ITA No.287/JP/2018 vide order dated 27.06.2018).
5. ITO vs. Novelty Garments (Rajasthan High Court) (256 ITR 0688) 6. CIT vs. AKS Alloys (P.) Ltd. [2012] (Mad.) 7. CIT vs. Contimeters Electricals Pvt. Ltd., [2009] 317 ITR 249 8. CIT vs. Fortuna Foundation Engineers & Consultants (P.) Ltd., [2017] 81 taxmann.com 189 (Allahabad).
OAN Industries Private Limited [A] Submission of ld.DR : 3. The ld.DR for the Revenue relied on the order of Assessing Officer and ld.Addl.CIT(A).
Basic Facts : We have heard both the parties and perused the records. The assessee filed Return of Income u/sec.139(1) of the Act on 31.10.2023. The assessee had claimed deductions u/s 80IAC of Rs.2,05,72,739/-. However, the Assessee had not filed Audit Report in form number 10CCB, as required u/sec.80IA(7) of the Act. Therefore, the Dy.Director of Income Tax (Central Processing Center) passed an order u/s 143(1) of the Act disallowing the assessee’s claim of deduction u/s 80IAC of the Act. In the order u/s 143(1) it is specifically mentioned that Assessee has not filed Audit Report in Form 10CCB within the due date hence no deduction will be allowed. Aggrieved by the order u/s 143(1) the Assessee filed an appeal before the Commissioner of Income Tax (appeal). Vide E-Appeals Scheme, 2023 dated
OAN Industries Private Limited [A] 29.05.2023 Notification S.O. 2352(E) [No.33/2023/ F.No.370142/10/2023-TPL] certain appeals were allotted to Joint Commissioner/ Additional Commissioner of Income Tax(Appeal). Accordingly, appeal order u/sec.250 of the Act was passed in this case by Additional/Joint Commissioner Income Tax (appeal). The assessee’s appeal was dismissed. Hence, assessee filed appeal before this Tribunal.
Findings & Analysis : In this case it is an admitted fact that the Assessee filed the Audit Report in Form No.10CCB on 20/12/2023 electronically. We are reproducing the relevant Sections :- Special provision in respect of specified business. 80-IAC. (1) Where the gross total income of an assessee, being an eligible start- up, includes any profits and gains derived from eligible business, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to one hundred per cent of the profits and gains derived from such business for three consecutive assessment years. (2) The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him for any three consecutive assessment years out of ten years beginning from the year in which the eligible start-up is incorporated.
OAN Industries Private Limited [A]
(3) This section applies to a start-up which fulfils the following conditions, namely:— (i) it is not formed by splitting up, or the reconstruction, of a business already in existence: Provided that this condition shall not apply in respect of a start-up which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as referred to in section 33B, in the circumstances and within the period specified in that section; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose. Explanation 1.—For the purposes of this clause, any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if all the following conditions are fulfilled, namely:— (a) such machinery or plant was not, at any time previous to the date of the installation by the assessee, used in India; (b) such machinery or plant is imported into India; (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee. Explanation 2.—Where in the case of a start-up, any machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the total value of the machinery or plant or part so transferred does not exceed twenty per cent of the total value of the machinery or plant used in the business, then, for the purposes of clause (ii) of this sub-section, the condition specified therein shall be deemed to have been complied with.
OAN Industries Private Limited [A] (4) The provisions of sub-section (5) and sub-sections (7) to (11) of section 80-IA shall apply to the start-ups for the purpose of allowing deductions under sub-section (1). Section 80IA : (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, 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 85 duly signed and verified by such accountant. Section 44AB has defined Specified date as under: “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.
The Due Date for filling Return of Income u/s 139(1) of the Act for A.Y.2023-24 was 31/10/2023, which is mentioned in the Order u/sec.143(1) also. The combined reading of Section 80IAC, 80IA and 44AB explains that, the Specified date for filling Audit Report in Form No.10CCB for A.Y.2023-24 was 30/09/2023. Therefore, the due date for filling Form 10CCB in the case of the Assessee was 30/09/2023.
OAN Industries Private Limited [A]
The CBDT has explained the procedure for uploading the Form 10CCB electronically. First, the Assessee’s Chartered Accountant (CA) has to complete the Audit and upload the Form 10CCB on the Income Tax Portal. Then, the same Form 10CCB would be visible to the Assessee on the Income Tax Portal in “work list”. The assessee has to approve the same, then it gets uploaded. The Assessee has filed copy of entire Form 10CCB in the paper book at page 16-20. On perusal of the impugned Form 10CCB it is observed that the impugned Form 10CCB was digitally signed by the CA on 26/10/2023. Then, the said Form 10CCB was approved by the Director of the Assessee on 20/12/2023. Thus, fundamentally the Audit Report in Form 10CCB was digitally signed by the CA on 26/10/2023 which was after the specified date for filling the Form 10CCB. For A.Y.2023- 24, the specified date for filling the Audit Report in Form 10CCB was 30th September, 2023 but the CA of the Assessee has Signed the impugned Audit Report in Form 10CCB on 26/10/2023 i.e. after the specified date. Then, the impugned Audit Report was OAN Industries Private Limited [A] uploaded on 20.12.2023. Thus, the Audit Report was filed beyond the statutory limitation date mentioned in the Act.
The Section 80IA(7) was amended by Finance Act, 2020. The amended provisions are applicable for A.Y.2023-24. By the Finance Act, 2020 it has been made mandatory for the assessee to furnish Audit Report in the prescribed form duly signed and verified by the Accountant, before the specified date. Prior to the amendment, it was not mandatory. We have already reproduced the section 80IA(7) of the Act, above, which is applicable to the present case. Therefore, in this case, the assessee has filed the Audit Report in the prescribed form i.e.Form 10CCB duly signed verified by the Accountant after the specified date. Thus, Form No.10CCB was filed beyond the time limit specified in the Act.
The Hon’ble Supreme Court in the case of Pr.CIT vs. Wipro Ltd [2022] 288 Taxman 491 (SC)has held has observed as under :
OAN Industries Private Limited [A]
Quote, “As per the settled position of law, an assessee claiming exemption has to strictly and literally comply with the exemption provisions. ” Unquote.
The assessee has relied on the decision of the Hon’ble Supreme Court in CIT Vs. G.M.Knitting Industries Pvt. Ltd., (supra) which is pertaining to the additional depreciation claimed, u/sec.32 of the Act. The Hon’ble Supreme Court in the case of Pr.CIT Vs. Wipro Ltd.(supra) has distinguished the decision in the case of CIT Vs. G.M.Knitting Industries Pvt. Ltd., Thus, the decision in the case of G.M.Kniting Industries Pvt. Ltd., is not applicable in the case as it is distinguishable on facts.
10.1 Therefore, respectfully following the Hon’ble Supreme Court decision in the case of Pr.CIT vs. Wipro Ltd., (supra) and the principle of stricter interpretation, we uphold the disallowance of Rs.2,05,72,739/- made in the order u/sec.143(1) of the Act.
The ld.AR has relied on the ITAT Jaipur in the case of Rajesh Kumar Agarwal vs. DCIT in dated
OAN Industries Private Limited [A] 17.04.2023. In this case, there is a finding recorded by ITAT that it was the Covid-19 Pandemic period and therefore, there was a delay. Hence, the said case is distinguishable on facts. Also in the said case, the Hon’ble ITAT has not discussed the Hon’ble Supreme Court’s decision in the case of CIT vs. Wipro Ltd.,(supra).
The ld.AR also relied on ITO vs. M/S.Marathon India Ltd., in dated 27.06.2018. In this case, the assessment year is A.Y.2014-15, we have already discussed that there was an Amendment by the Finance Act, 2020. The said Amendment was not applicable for A.Y.2014-15, hence the said case is distinguishable on facts.
The ld.AR relied on decision of the Hon’ble Madras High Court in CIT-I vs. M/s.AKS Alloys(P) Ltd, in Tax Appeal No.495 of 2011 dated 14.12.2011. The said decision pertains to A.Y.2005-
OAN Industries Private Limited [A] 06 which is prior to Amendments made by Finance Act, 2020. Therefore, it is distinguishable on facts.
In these facts and circumstances of the case, the Ground No.1 raised by the assessee is dismissed for the elaborate reasons discussed above.
In the result, appeal of the assessee is dismissed.
Order pronounced in the open Court on 10th July, 2024.