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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: MS. SUCHITRA KAMBLE & SHRI MAKARAND V. MAHADEOKAR
आयकर अपीलीय अिधकरण, अहमदाबाद "ायपीठ SMC, अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD सु"ी सुिच"ा का"ले, "ाियक सद" एवं "ी मकरंद वसंत महादेवकर, लेखा सद" के सम"। ] ] BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर अपील सं /ITA No.1330/Ahd/2024 िनधा"रण वष" /Assessment Year : 2017-18 Nachiket Dipak Shah The Income Tax Officer बनाम/ C4-C5, Incubation Centre, Ward-5(3)(2) v/s. IT–ITES SEZ Ahmedabad Million Mind SEZ B/h. Nirma University Off. S.G. Road Ahmedabad – 382 481 (Gujarat) "थायी लेखा सं./PAN: AMJPS 7085 G अपीलाथ%/ (Appellant) &' यथ%/ (Respondent) Assessee by : Shri Chetan Agarwal, AR Revenue by : Shri Nitin Vishnu Kulkarni, Sr.DR सुनवाई की तारीख/Date of Hearing : 11/12/2024 घोषणा की तारीख /Date of Pronouncement: 13/12/2024 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, AM:
This appeal has been filed by the assessee against the order dated 21.06.2024 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”], upholding the disallowance of the deduction of Rs.26,81,185/- claimed under Section 10AA of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] for the Assessment Year (AY) 2017-18. Nachiket Dipak Shah vs. ITO Asst. Year : 2017-18
2 Facts of the Case:
The assessee is an individual and filed his return of income for the AY 2017-18 on 07.11.2017 declaring total income of Rs.16,30,680/- after claiming a deduction of Rs.26,81,185/- under Section 10AA of the Act. The assessee is engaged in IT-enabled services under the name "Brain Teclabs" and operates within an IT/ITES Special Economic Zone (SEZ) approved by the Kandla SEZ authority. The Centralized Processing Center (CPC), Bengaluru, disallowed the claim under Section 143(1) of the Act, citing the assessee’s failure to file the mandatory audit report in Form 56F along with the return of income as required under Section 10AA(8), read with Section 10A(5) of the Act. Subsequent rectification petitions filed by the assessee under Section 154 of the Act, were also dismissed on similar grounds, leading to a demand of Rs.5,32,110/-.
Aggrieved by the rectification order passed u/s.154 of the Act, the assessee approached the CIT(A), who upheld the disallowance, holding that the filing of Form 56F along with the return of income is a mandatory condition for claiming the deduction under Section 10AA of the Act.
Aggrieved by the order of the CIT(A), the assessee is in appeal before us with following grounds of appeal: “1. Ld. CIT(A) erred in law as well as on fact in upholding disallowance of exemption of Rs.26,81,185 claimed u/s. 10AA solely because form no. 56F was filed on 22.11.2017 not along with return of income filed u/s. 139(1) on 07.11.2017 as denied by CPC, Bengaluru in order u/s 143(1) and subsequent rectification application u/s154.” Nachiket Dipak Shah vs. ITO Asst. Year : 2017-18
3 4.1. During the course of hearing before us, the Authorized Representative (AR) of the assessee contended that the filing of Form 56F is procedural and directory in nature. The AR further highlighted that Form 56F was filed on 22.11.2017, well before the issuance of the order under Section 143(1) of the Act on 24.09.2018. The AR also contended that as the form satisfies the statutory requirements, the procedural delay in its filing should not override substantive compliance. The AR placed reliance on following judicial precedents:
CIT vs. Gujarat Oil and Allied Industries - [1993] 201 ITR 325) (GUJ). 2. M/s. Vishnu Exports vs. ACIT - (ITA No. 1840/Ahd/2018). 3. Aprameya Engineering Limited vs. ITO, Ward-1(1)(1) Ahmedabad – (ITA No. 456/Ahd/2024). 4. Arvind Kumar Agarwal vs. ITO - (ITA No. 917/Del/2022).
The Departmental Representative (DR) argued that compliance with Section 10A(5) of the Act, made applicable to Section 10AA of the Act through Section 10AA(8) of the Act, mandates filing the audit report in Form 56F along with the return of income. Failure to comply with this condition renders the claim inadmissible. The DR also stated that the date of filing return of income was extended till 07-11-2017 and the assessee was having sufficient time to comply with the requirements. The DR also contended that the form submitted by the assessee need to be verified by the AO and, therefore, the matter be restored back to AO. Nachiket Dipak Shah vs. ITO Asst. Year : 2017-18
4 6. We have carefully considered the submissions and judicial precedents cited. It is undisputed that the deduction under Section 10AA of the Act was allowed in the initial year, i.e., assessment year 2016-17. The Hon'ble Gujarat High Court in the case of CIT v. Gujarat Oil and Allied Industries (supra) held that procedural non-compliance should not override substantive compliance if the required documents are submitted before the completion of assessment. The Co-ordinate Benches in the case of M/s. Vishnu Exports (supra) and Arvind Kumar Agarwal (supra) also emphasized that the provisions of Section 10AA of the Act should be construed liberally to advance the legislative intent of promoting SEZs.
6.1. Form 56F, filed on 22.11.2017, serves as a crucial certification by an independent Chartered Accountant, attesting to the correctness of the claim made under Section 10AA of the Act. The form was submitted well before the issuance of the intimation under Section 143(1) of the Act on 24.09.2018. This establishes that the necessary certification was available on record at the time of processing. In light of this, the DR's contention for remand lacks merit as no further verification is required.
6.2. The legislative intent behind Section 10AA of the Act is to promote exports and economic activity in SEZs, and procedural delays should not defeat substantive claims, particularly when the required documentation is on record before the completion of assessment.
6.3. In view of the above, we hold that the disallowance of the deduction under Section 10AA of the Act is not justified, as the delay in filing Form 56F is a procedural lapse that does not go to the root of the claim. The deduction Nachiket Dipak Shah vs. ITO Asst. Year : 2017-18
is restored without any necessity for remand. Accordingly, the ground of appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed. Order pronounced in the Open Court on 13th December, 2024 at Ahmedabad. (SUCHITRA KAMBLE) ACCOUNTANT MEMBER
अहमदाबाद/Ahmedabad, िदनांक/Dated 13/12/2024 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS आदेश की #ितिलिप अ$ेिषत/Copy of the Order forwarded to : अपीलाथ% / The Appellant 1. #&थ% / The Respondent. 2. संबंिधत आयकर आयु' / Concerned CIT 3. आयकर आयु' अपील 4. ( ) / The CIT(A)-(NFAC), Delhi िवभागीय #ितिनिध आयकर अपीलीय अिधकरण राजोकट/DR,ITAT, Ahmedabad, 5. , , गाड" फाईल / 6. Guard file.
आदेशानुसार/ BY ORDER, स&ािपत #ित //// सहायक पंजीकार (Asstt.