K N M MILLS PRIVATE LIMITED,COIMBATORE vs. ITO, CORP WARD, COIMBATORE, COIMBATORE

The main grievance of the assessee is against the action of the First Appellate Authority having confirmed the denial of deduction claimed u/s.80JJAA of the Income Tax Act 1961(hereinafter ‘the Act’).

Brief facts are that the assessee is a private limited company engaged in the business of manufacture of cotton yarn for AY 2022-23, and it filed return of income returning taxable income of Rs.1,34,56,120/- under normal provisions and claimed deduction u/s.80JJAA of the Act,[for employing new employees for encouraging generation of employment since 01.04.1991]. However, while processing return of income u/s.143(1) of the Act, the CPC disallowed the claim of deduction stating that “deduction u/s.80JJAA of the Act, is not allowable, if Form No.10DA is not filed within due date specified in the Act”.

Aggrieved by the aforesaid action of the CPC, the assessee filed an appeal before the JCIT(A) and asserted that it had complied with the condition prescribed in this regard by obtaining the necessary report of accountant as prescribed by Act/Rules. The Ld.AR explained that as required by law, the accountant of assessee, Shri G Shankar [Chartered Accountant, Membership No. 024042] duly uploaded the report through his login in the Income Tax Portal, duly generating ‘UDIN’ as prescribed by Institute of Chartered Accountants of India. In terms of Sec 80JJAA(2)(c) read with Explanation (ii) to Section 44AB, report need to be furnished one month prior to due date of filing the return of income. And since, the assessee's due date for filing of return of income was 07.11.2022. [the due date prescribed u/s.139 was extended to (AY 2022-23) M/s.K N M Mills Pvt. Ltd., :: 3 ::

07.11.2022 vide notification No.20/202 dated 26.10.2022] accordingly, the audit report was furnished to Income Tax Department online on 01.10.2022 vide ack. No.607810550011022. The income tax returns were uploaded using digital signature of the assessee on 01.10.2022 vide ack. no 607811251011022. However, the assessee by oversight omitted to approve the audit report u/s.80JJAA while duly approving tax audit report u/s.44AB. The CPC vide intimation dated 14.12.2022 proposed adjustment u/s.143(1) of the Act and that adjustment pertained to disallowing the claim of wages paid to new workmen u/s.80JJAA amounting to Rs.3,13,921/-, with the stated reason of non-filing of audit report u/s.80JJAA. The observation made by CPC was as under:

Thus, assessee coming to know about the omission, realized the mistake and promptly responded and cured the defect by approving the audit report. And the assessee furnished a detailed reply dated 19.12.2022 and submitted that Form 10DA has been filed within stipulated due date on 01.10.2022 with Ack.No.851626930191222 and the same was approved by assessee on 19.12.2022. Hence, CPC was (AY 2022-23) M/s.K N M Mills Pvt. Ltd., :: 4 ::

On appeal, the First Appellate Authority/Ld.JCIT(A) dismissed the appeal of the assessee. Before us, Ld.AR contended that the assessee had filed return of income on 01.10.2022 along with Form No.10DA i.e. well before the due date. According to the Ld.AR, in order to successfully upload Form No.10DA, there were ‘7’ steps stipulated to be carried out online for successfully uploading the same before the tax authorities (portal of the Income Tax Department). According to the assessee, it successfully reached step ‘6’, which fact is proved since the assessee’s Accountant has digitally affixed his signature on 01.10.2022 [i.e. within the prescribed time limit] and in order to complete step ‘6’ was the audit- report, which was electronically transmitted had to be approved by the assessee, which assessee due to oversight did not comply, for which CPC gave notice and assessee had duly cured the defect albeit on 19.12.2012.

In Owners & Parties interested in MV Vali Perov. Fernandeo Lopez AIR 1989 SC 2206, it was observed - Rules of procedure are not by themselves an end but means to achieve the ends of justice. Rules of procedure are tools forged to achieve justice and are not hurdles to obstruct the pathway to justice. Construction of a rule of procedure which promotes justice and prevents its miscarriage by enabling the Court to do justice in myriad situations, all of which cannot be envisaged, acting within the limits of permissible construction, must be preferred to that which is rigid and negatives the cause of justice. Procedure is meant to subserve and not rule the cause of justice

In the light of the discussion (supra) and judicial precedents we restore the matter back to the file of the jurisdictional AO for a limited purpose, with a direction to verify the facts as claimed by the assessee and if it is found that the assessee had uploaded Form No.10DA well before the due date as prescribed by the statute and only for omitting step ‘6’ out of steps ‘7’ as discussed supra, assessee’s legitimate claim if found to be correct should not be denied. Needless to say, assese be heard, before passing order.