Niteshkumar J. Shah Vs DCIT (ITAT Ahmedabad)

Income Tax Appellate Tribunal (ITAT) Ahmedabad, in the case of Niteshkumar J. Shah Vs. Deputy Commissioner of Income Tax (DCIT), ruled on the disallowance of a deduction under Section 80-IA due to the delayed filing of Form 10CCB. The case stemmed from the Centralized Processing Centre’s (CPC) rejection of the assessee’s deduction claim of ₹19,39,565 for the Assessment Year 2017-18, as Form 10CCB was submitted after the prescribed due date. The National Faceless Appeal Centre (NFAC) upheld the CPC’s decision, citing Rule 12(2) of the Income Tax Rules and Section 80IA(7) of the Income Tax Act, which require the audit report to be filed along with the return of income.

In appeal, the assessee contended that the requirement to file Form 10CCB along with the return was procedural and not mandatory. The assessee relied on various judicial precedents, including CIT vs. Contimeters Electricals (P) Ltd. [(2009) 317 ITR 249 (Delhi)], where the Delhi High Court held that the filing of an audit report with the return was directory rather than mandatory. However, CIT(A) dismissed the appeal, distinguishing the case law cited and asserting that Section 80-IA(7) explicitly mandates the filing of the audit report along with the return for claiming deductions. The CIT(A) also referred to rulings such as DCIT vs. Tide Water Oil Co. (I) Ltd. (ITAT Kolkata) and CIT vs. ACE Multitaxes Systems (P) Ltd. [(2009) 317 ITR 207 (Karnataka)], which upheld strict compliance with filing requirements.

Before ITAT Ahmedabad, the assessee argued that Form 10CCB had been filed before CPC processed the return under Section 143(1) and that a procedural lapse should not result in the denial of a substantial benefit. The Tribunal examined past decisions, including those by the Jurisdictional Ahmedabad ITAT and Gujarat High Court, which have taken a lenient approach in similar cases. The Tribunal emphasized that procedural lapses should not override substantive tax benefits unless the law explicitly mandates strict compliance.

ITAT Ahmedabad ultimately ruled in favor of the assessee, holding that the late filing of Form 10CCB does not automatically disqualify a taxpayer from claiming deductions under Section 80-IA. The Tribunal found that since the audit report was submitted before the return was processed, the assessee was eligible for the deduction. This decision reinforces the principle that procedural compliance should not overshadow the genuine eligibility of deductions, provided that substantive conditions of the tax law are met. The appeal was accordingly allowed.

FULL TEXT OF THE ORDER OF ITAT AHMEDABAD

This is an appeal filed by the assessee against the order of National Faceless Appeal Centre, (NFAC), Delhi, in proceeding u/s. 250 vide order dated 26/09/2022 passed for the assessment year 2017-18.

2. The assessee has taken the following grounds of appeal:-

3. The brief facts of the case are that the assessee has filed his return of income for assessment year 2017-18 and the same was processed by the CPC on 04-02-2019. The assessee filed a rectification application to CPC against the order u/s. 143(1) of the Act and CPC passed order u/s. 154 on 21- 10-2019 and determined demand of Rs. 7,15,480/-. The assessee’s case is that the assessee claimed deduction u/s. 80-IA of the Act of Rs. 19,39,565/- in the ITR for Y. 2017-18, which was not granted by CPC while passing order u/s. 154 of the Act dated 21-10-2019. The reason for rejection of assessee’s claim u/s. 80-IA was that the assessee filed Form 10CCB for claiming u/s. 80-IA of the Act on 11-10-2018, however, the due date for filing ITR and audit report was 07-11-2017. Therefore, the assessee’s claim for deduction was disallowed by CPC on the ground that the assessee filed Form 10CCB beyond the prescribed date.

4. In appeal, CIT(A) dismissed the appeal of the assessee on the ground that as per plain language of Rule 12(2), it is clear that the assessee was required to furnish report of audit and return of income within due date for getting the benefits of deduction u/s. 80-IA of the Act. The ld. CIT(A) held that filing of report of audit in form 10CCB within due prescribed time is a mandatory requirement, and since the assessee failed to file Form 10CCB within the due prescribed date along with return of income, the Assessing Officer rightly disallowed the deduction claimed u/s. 80-IA of the Act . While dismissing the appeal of the assessee, the ld. CIT(A) observed as under:-

“4.4. The issue was considered. Respective rectification orders, statement of fact and written submission of the appellant and related provisions on the subject matter and case laws relied upon have been carefully perused. It is apparent from the rectification order dated 09.02.2022 that the appellant filed his return on 17.10.2017 u/s 139(1) of the Act well within the extended due date 07.11.2017. But, Form 10CCB for claiming deduction u/s 80-IA was filed on 11.10.2018 i.e. after the due date. Hence, the filing of Form 10CCB/audit report after due date is the main reason for disallowance of the deductions claimed u/s 80IA of the Act. From perusal of the written submission of the appellant, it was found that the appellant has taken the plea of Rule 12(2) of Income Tax Rules, 1962 and some case laws, already referred in the written submission of the appellant, and claimed that filing of audit report along with return of income is not mandatory but directory in nature. The plea of the appellant was verified and found not to be substantiated as Rule 12(2) has no such bar as claimed by the appellant. The Rule 12(2) reads as under:

“The return of income required to be furnished in Form SAHAJ (ITR-1) or Form No. ITR-2 or Form No. ITR-3 or SUGAM (ITR-4S) or Form No. ITR-4 or Form No. ITR-5 or Form No. ITR-6 [or Form No. ITR-7] shall not be accompanied by a statement showing the computation of the tax payable on the basis of the return, or proof of the tax, if any, claimed to have been deducted or collected at source or the advance tax or tax on self-assessment, if any, claimed to have been paid or any document or copy of any account or form or report of audit required to be attached with the return of income under any of the provisions of the Act.

[Provided that where an assessee is required to furnish a report of audit specified under sub-clause (iv), (v), (vi) or (via) of clause (23C) of section 10, section 10A, [section 10AA], clause (b) of sub-section (1) of section 12A, section 44AB [section 44DA, section 508], section 80-IA, section 80-IB, section 80-IC, section 80-ID, section 80JJAA, section SOLA, section 92E, [section 115JB or section 115VW] [or to give a notice under clause (a) of subsection (2) of section 11] of the Act, he shall furnish the same electronically.]”

From above rule, it is clear that appellant was required to furnish a report of audit with return of income within due date for getting the benefit of deductions u/s 80IA of the Act. Section 80IA (7) of the Act clearly establishes the provisions of rule 12(2). The section 80IA(7) reads as under:

“(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. “

From the provisions of the above section, it is clear that for getting the benefit of deductions u/s 80IA of the Act, filing of report of audit (Form 10CCB) along with the return of income is mandatory, which was not fulfilled by the appellant as the required Form 10CCB was filed after the due date.

Moreover, the other case laws of the ITAT, Kolkata in the case of DCIT vs Tide Water Oil Co. (I) Ltd, ITA No. 20151/Kol/10 dated 20.01.2012, the ITAT, Ahmedabad in the case of Eagle Synthetics (P.) Ltd vs ITO [2011] and zest Aromas (P) Ltd. Vs CIT-II and Karnataka High Court in the case of CIT vs ACE Multitaxes Systems (P) LTD (2009) 317 ITR 207 (Karnataka) relied are related to the issues of 80IB of the Act, hence, were found not tenable. In addition to the same the appellant relied upon the decision of Delhi High Court in the case of CIT vs Contimeteres Electricals (P) LTD (2009) 317 ITR 249 (Delhi) wherein the Delhi High Court by following the judgments of the Madras High Court in CIT vs Arunachalam (A.N.) (1994) 208 ITR 481 and in CIT vs Jayant Patel (2001) 248 ITR 199 (Mad) held that the filing of audit report along with the return was not mandatory but directory. The relied these case laws were studied and found that the Delhi High Court drew this inference in view of section 80IA(7) of the Act in concurrence to the section 80J(6A) of the Act. But, on verification, it was found that the section 80J was already omitted by the Finance (No.2) Act, 1996 w.e.f. 01.04.1989, which is not effective for this case. Apart from the above, the existing section 80IA(7) of the Act clearly makes the fling of audit report in Form 10CCB along with return of income mandatory. Hence, the above case laws relied upon too are not found tenable.

4.5. In view of the discussion made above, it is evident that the appellant filed the required Form 10CCB after due date in violation of Rule 12(2) of Income Tax Rules, 1962 and section 80IA(7) of the Income Tax Act, 1961, hence, the Assessing Officer rightly disallowed the deductions of 19,39,5657- claimed u/s 80IA and made the addition of the same to the total income of the appellant. Accordingly, I am not inclined to interfere with the decision of the Assessing Officer. The grounds of appeal are hereby dismissed.”

 5. The assessee is in appeal before us against the addition confirmed by ld. CIT(A) denying the benefit of deduction u/s. 80-IA of the Act. The counsel for the assessee placed reliance on several judicial precedents in support of the contention that filing Form 10CCB is a procedural requirement and not a mandatory requirement. In the instant facts, it has not been disputed that the assessee had filed form 10CCB on 11-10-2018, while the return of income as processed by CPC on 04-02-2019 i.e. after Form 10CCB was filed by the assessee. The counsel for the assessee placed reliance on several judicial precedents of the Jurisdictional Ahmedabad ITAT and also by the Gujarat High Court in support of the contention that even if audit report in Form 10CCB is filed beyond the due prescribed date, this cannot be a ground to deny claim of benefit u/s. 10-IA of the Act

6. In response, the ld. Departmental Representative placed reliance on the case of Wipro Ltd. 140 taxman.com 227, wherein the Supreme Court held that for claiming deduction u/s. 10B of the Act, furnishing of Form 56F along with return of income was a mandatory requirement. Accordingly, it was submitted that since the assessee failed to furnish Form 10CCB along with the return of income, the benefit of 80-IA of the Act cannot be given to the assessee.

7. We have heard the rival contentions and perused the material on record. We observe that recently, Ahmedabad Tribunal in the case of DCIT vs. Croygas Equipments Pvt. Ltd. in ITA No. 415/Ahd/2020 dated 16-06- 2023 have dealt aspect of whether benefit u/s. 10AA of the Act could be denied to the assessee if the assessee failed to fill Form 56F along with return of income, which however was subsequently filed by the assessee before the Assessing Officer, before the conclusion of assessment. Further, in this case, the ITAT Ahmedabad also distinguished the decision of Wipro Ltd. supra, which was rendered by the Hon’ble Supreme Court on a different set of facts. The relevant extracts of the ruling are reproduced below for reference:-

“6.1 In our view, it is a well accepted principle of law that beneficial provisions should be given a liberal construction and once the assessee has satisfied the conditions laid down for claiming deduction/exemption under the relevant beneficial provision, the same should not be denied. We are of the view that exemption benefits u/s 10AA cannot be denied to the assessee on account of a procedural lapse committed by the Chartered Accountant of the assessee. We must always keep the object of the Act in view while interpreting the section. The legislative intention must be the foundation of the court’s interpretation. In a recent judgment of Mother Superior Adoration Convent [2021] 126 taxmann.com 68 (SC), the Supreme Court held that beneficial exemptions having their purpose as encouragement or promotion of certain activities should be liberally interpreted. In reference to Dilip Kumar’s case (Supreme Court), it held that the Constitution bench has not made any distinction between exemption granted generally and exemption provisions that have a beneficial purpose, therefore, it cannot be said that for beneficial exemption liberal rule of construction has been done away with. In other words, for construction of beneficial exemption strict rule of interpretation may not be required to be applied. The Supreme Court in this case observed as under:

“This being the case, it is obvious that the beneficial purpose of the exemption contained in Section 3(1)(b) must be given full effect to, the line of authority being applicable to the facts of these cases being the line of authority which deals with beneficial exemptions as opposed to exemptions generally in tax statutes. This being the case, a literal formalistic interpretation of the statute at hand is to be eschewed. We must first ask ourselves what is the object sought to be achieved by the provision, and construe the statute in accord with such object. And on the assumption that any ambiguity arises in such construction, such ambiguity must be in favour of that which is exempted. Consequently, for the reasons given by us, we agree with the conclusions reached by the impugned judgments of the Division Bench and the Full Bench.”

6.2 In IPCA Laboratory Ltd. v. Dy. CIT [2004] 12 SCC 7421 the Supreme Court in the said judgment observed that section 80HHC has been incorporated with a view to provide incentive to export houses and this section must receive liberal interpretation. In Bajaj Tempo Ltd. v. CIT [1992] 3 SCC 78, the Supreme Court while interpreting section 15C of the Income-tax Act, 1922 observed that the section, read as a whole, was a provision, directed towards encouraging industrialization by permitting an assessee setting up a new undertaking to claim benefit of not paying tax to certain extent on the capital employed. The Gujarat High Court in the case of Kishorbhai Harjibhai Patel v. ITO [2019] 107 taxmann.com 295 (Gujarat) held that section 54F is a beneficial provision and is applicable to an assessee when the old capital asset is replaced by a new capital asset in the form of a residential house. Once an assessee falls within the ambit of a beneficial provision, then the said provision should be liberally In the case of State of Gujarat v. S.A. Himnani Distributors (P.) Ltd. [2014] 43 taxmann.com 358 (Gujarat), the Gujarat High Court held that when State is inclined to give some tax benefit to tax payers, terms or provisions of policy should be interpreted in a liberal manner and with an intention to see that purpose for which policy is framed is fulfilled and beneficiaries is helped and the interpretation must not be such which would frustrate objective of policy. Section 10AA of the Act is a beneficial provision aimed at encouraging exports of goods and services by setting up of industrial units in special economic zones. In our view, benefit of section 10AA should not be denied on account of a procedural/technical default by the assessee or his chartered accountant, if otherwise the assessee is eligible to claim deduction under the said exemption provision.

6.3 Another notable issue for consideration is that recently the Hon’ble Supreme Court was confronted with the claim of benefit u/s 10B in Pr. CIT v. Wipro Ltd. [2022] 140 taxmann.com 223/288 Taxman 491/446 ITR 1. The assessee furnished original return taking the benefit of section 10B and did not carry forward the loss. Thereafter, a revised return was filed foregoing the claim of deduction u/s 10B. The AO rejected the withdrawal of exemption under section 10B by holding that assessee did not furnish the necessary declaration in writing before due date of filing return of income, which was an essential requirement for not claiming the benefit of section 10B. The Hon’ble High Court decided the issue in favour of the assessee by holding that the requirement of filing the declaration was mandatory but filing it along with the return of income u/s 139(1) was a directory requirement. The matter was brought by the Revenue before the Hon’ble Supreme Court. The assessee, inter alia, relied on the judgment of the Apex Court in G.M. Knitting Industries (P.) Ltd. (supra). Their Lordships held that the requirement of filing the report in support of deduction u/s 10B was not a directory but a mandatory requirement. It further held that both the conditions of – filing the declaration and filing it before the time limit u/s 139(1) – were mandatory and had to be cumulatively satisfied. Rejecting the reliance on G.M Knitting Industries (P.) Ltd. (supra), the Hon’ble Supreme Court held that that decision was relevant in the context of deduction provisions and not the exemption provisions as given under Chapter III of the Act.

In our view, the aforesaid decision would not apply to assessee’s set of facts and would not preclude / prohibit the assessee from claiming deduction u/s 10AA of the Act, for the following reasons:

(i) Firstly, in the case of Wipro Limited supra, the issue for consideration before the Hon’ble Supreme Court was that in the original return of income, the assessee had claimed deduction under section 10B of the Act, whereas in the revised return filed under section 139(5) of the Act, assessee did not claim deduction under section 10B of the Act, and instead claimed benefit of carry forward of It was in light of these facts that the Hon’ble Supreme Court held that on a plain reading of section 10B(8) of the Act, it is clear that where assessee claimed benefit under section 10B(8) by furnishing declaration in revised return much after due date prescribed under section 139(1), same was to be denied as requirement of furnishing declaration before AO before due date of filing original return under section 139(1) was a mandatory condition not directory. However, notably, there is no such equivalent/similar provision in section 10AA of the Act, which gives an option to the assessee to file a declaration before the due date of return of income under section 139(1) of the Act, to the effect that the provisions of this section may not be made applicable to him, for the impugned assessment year. Therefore, going by the strict language of section, the relevant statutory provisions on which the decision of Wipro was based, were on a different footing. Further, the issue for consideration in the Wipro case is also distinguishable, since in the assessee’s case, it had claimed benefit of deduction u/s. 10AA in the original return of income (and only Form 56F was omitted to be e-filed along-with return of income), whereas the issue for consideration in Wipro case supra was that once the assessee had claimed benefit of section 10B in the original return of income, whether such benefit could be foregone/withdrawn by filing declaration u/s. 10B(8) of the Act in the revised return of income filed u/s 139 (5) of the Act (and the assessee could, in turn, avail the benefit of carry forward losses in the revised return of income).

(ii) Secondly, the Hon’ble Supreme Court in the case of Wipro Limited held that section 10B of the Act is an “exemption provision” and hence, assessee claiming such exemption has to be “strictly” comply with the exemption provisions. However, notably, the Hon’ble Supreme Court in the case of CIT v. Yokogawa India Ltd 391 ITR 274 (Supreme Court), held that section 10A of the Act is a “deduction provision” and not an “exemption provision”. Therefore, apparently there seems to be a difference of opinion to whether section 10A/B provisions qualify as “Exemption” or Deduction” provisions. Therefore, since it is well-settled principle of law that deduction provisions, which have been introduced in the Statute to provide incentive to the assessee, should be construed “liberally”, in our considered view, once it is not disputed that the instant set of facts, the assessee claimed the benefit of provisions under section 10AA in the return of income (which in our view is a mandatory/directory requirement), the benefit of section 10AA cannot be denied only on the ground that the assessee could not file Form 56F along with the return of income (being a procedural requirement), especially when Form 56F has been filed by the assessee at the assessment stage when such claim was being considered by the Assessing Officer.

(iii) Besides the above, in the case of G. M. Knitting Industries (P.) Ltd. case supra, the Hon’ble Supreme Court further held that even though necessary certificate in Form 10CCB along with return of income had not been filed but same was filed before final order of assessment was made, assessee was entitled to claim deduction under section 80-IB of the Act as well. Therefore, in light of the decision of Yokogawa supra (which is held that section 10A of the Act is a “deduction provision” not an “exemption provision”) and the decision of G. M. Knitting Industries case supra, which have been rendered on a similar facts as that of the assessee i.e. claim of deduction was made in the original return of income itself, in our view, the ratio laid down in the Wipro Ltd case would not disentitle assessee to claim benefit of section 10AA of the Act, since it has been rendered on a different set of facts. Therefore in our considered view, once such claim has been made in the original return of income and assessee has also furnished Form 56F during the course of assessment proceedings itself, before the assessment was finalized. The assessee should not be denied the benefit of s. 10AA of the Act. It is a well settled principle of law that if there is any ambiguity regarding interpretation of a Statutory provision, an interpretation favourable to the assessee may be taken, especially when we are dealing with Statutory provisions aimed at giving some incentive to the assessee.”

7.1 Accordingly, in the light of the above discussion, in our considered view, ld. CIT(A) has erred in facts and in law in not allowing the claim of the assessee on the ground that benefit of section 80-IA of the Act is not available to the assessee if the assessee does not e-file Form 10CCB along with return of income when the assessee admittedly furnished From 10CCB, prior the return of income filed by the assessee being processed by the Department u/s. 143(1) of the Act.

8. In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 12-07-2023