AI Insights
The case involves M/s Swani Rubber Industries, which appealed against the order of the CIT(A), NFAC, Delhi, which had denied them a deduction under section 80IA of the Income Tax Act for the Assessment Year 2017-18. The deduction was initially denied because the audit report in Form 10CCB was not filed with the return of income by the due date. The assessee argued that the filing of Form 10CCB is procedural and should not affect their eligibility for the deduction. The Tribunal examined precedents and legal provisions, ultimately deciding in favor of the assessee, allowing the deduction and directing the Assessing Officer to consider the late-filed Form 10CCB.
Appeal Details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 135456 (ITAT-CHANDIGARH)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
10 month(s) 9 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
04-09-2023
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Next Hearing Date
02-08-2023
Assessment Year
2017-2018
Appeal Filed On
26-10-2022
Judgement Text
आयकर अपीलीय अिधकरण,चǷीगढ़ Ɋायपीठ “बी” , चǷीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH ᮰ी आकाश दीप जैन, उपा᭟यᭃ एवं ᮰ी िवᮓम ᳲसह यादव, लेखा सद᭭य BEFORE: SHRI. AAKASH DEEP JAIN, VP & SHRI. VIKRAM SINGH YADAV, AM आयकर अपील सं./ ITA NO. 669/Chd/2022 िनधाᭅरण वषᭅ / Assessment Year : 2017-18 M/s Swani Rubber Industries, C/o Shri Tejmohan Singh, Advocate # 527, Sector 10D, Chandigarh बनाम The Dy. CIT, Circle-1(1), Chandigarh ᭭थायी लेखा सं./PAN NO: AAPFS5991M अपीलाथᱮ/Appellant ᮧ᭜यथᱮ/Respondent िनधाᭅᳯरती कᳱ ओर से/Assessee by : Sh. Tejmohan Singh, Advocate राज᭭व कᳱ ओर से/ Revenue by : Shri Dharam Vir, JCIT, Sr. DR सुनवाई कᳱ तारीख/Date of Hearing : 03/08/2023 उदघोषणा कᳱ तारीख/Date of Pronouncement : 05/09/2023 आदेश/Order PER VIKRAM SINGH YADAV, A.M: This is an appeal filed by the Assessee against the order of the Ld. CIT(A),NFAC Delhi dt. 12/10/2022 pertaining to Assessment Year 2017-18. 2. In the present appeal, the assessee has raised the following grounds of appeal: “1. That the Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in disallowing the deduction of Rs. 9,16,840/- claimed u/s 80IA while processing the return u/s 143(1)(a) only on the basis that audit report in Form 10CCB was not uploaded alongwith the return which is arbitrary and unjustified. 2. That the Ld. Commissioner of Income Tax (Appeals) has erred not appreciating the judicial precedents placed before him in the correct perspective and as such the order passed in arbitrary and unjustified. 3. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off. 4. That the order of the Ld. CIT(A) is erroneous, arbitrary, opposed to the facts of the case and thus untenable.” 2 3. During the course of hearing, the Ld. AR submitted that the assessee firm is having a Wind Mill in Village Pimpalwadi, Ahmednagar, Maharahstra and during the financial year relevant to the impugned assessment year, the assessee firm had generated and supplied electricity to Electricity Department amounting to Rs. 9,23,911/- and has earned profit of Rs. 9,16,840/- after claiming depreciation of Rs. 7,701/-. It was submitted that profit from electricity so generated and supplied qualifies for exemption under section 80IA(4)(iv) of the Act. 3.1 It was submitted that the assessee is claiming the exemption from electricity generation and supply since A.Y. 2015-16 and this was the third year of claim of deduction under section 80IA of the Act. It was submitted that the assessee had claimed the deduction under section 80IA amounting to Rs. 9,16,840/- in its return of income which was duly filed on 09/10/2017. Thereafter, intimation was received from CPC, Bangalore under section 143(1) dt. 20/02/2019 wherein the deduction claimed under section 80IA was denied holding it to be incorrect claim under section 143(1)(a)(ii) of the Act for non filing of Form 10CCB within due date. 3.2 It was submitted that subsequently, the assessee filed Form 10CCB on 16/03/2019 and necessary evidence thereof is placed at page 30 to 34 of the paper book. Thereafter the assessee filed its revised return of income on 22/03/2019 and again a notice dt. 15/05/2019 under section 143(1)(a) was received in respect of proposed adjustment by way of denying the claim u/s 80IA by the CPC, Bangalore. 3.3 It was submitted that the assessee disagreed with proposed adjustment and filed its necessary response on very same day i.e; 15/05/2019 wherein it was submitted that Form 10CCB was signed and issued on 28/09/2017 and has been e-filed on 16/03/2019. It was submitted that thereafter, an intimation dt. 09/08/2019 was issued by CPC under section 143(1) making the adjustment. 3 Thereafter the assessee filed a rectification request under section 154 which was also rejected by CPC vide order dt. 15/10/2019. 4. Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A), NFAC, Delhi who has since sustained the said addition and not accepting the assessee’s contention that filing of Form 10CCB is only procedural in nature and deduction cannot be denied on the said ground. 5. Against the said finding and the direction of the Ld. CIT(A), NFAC, Delhi, the Assessee is in appeal before this Tribunal. 6. In the aforesaid factual matrix, it was submitted that there is no dispute that the assessee is eligible for exemption under section 80IA in respect of Electricity generation and supply to the Electricity Department and the only reason why the claim of the assessee has been denied is on account of delay in filing of Form 10CCB of the Act. It was submitted that it has been held by various Benches of the Tribunal as well as by the various High Courts that filing of Form 10CCB is only procedural in nature and the same can be filed even during the course of assessment proceedings. 6.1 In this regard, our reference was drawn to the decision of Hon’ble Punjab & Haryana High Court in case of CIT Vs. Gupta FABS reported in 274 ITR 620, Mumbai Tribunal in case of ACIT Vs. Celerity Power LLP reported in 100 Taxmann.com 129, Karnataka High Court in case of Sutures India (P) Ltd. Vs. CIT reported in 431 ITR 332 and Lucknow Tribunal in case of Satish Cold Storage Vs. DCIT reported in 142 taxmann.com 478. 7. Per contra, the Ld. DR submitted that the assessee filed its return of income on 09/10/2017 declaring income of Rs. 1,82,52,640/- without enclosing Form 10CCB. It was submitted that the deduction claimed under section 80IA was not allowed due to non filing of Form 10CCB alongwith return of income, 4 various opportunities were provided by the CPC, Bangalore and thereafter, the assessee uploaded Form 10CCB on 16/03/2019 and has also e-filed revised return of income on 22/03/2019. 7.1 It was further submitted that as per Form 10CCB filed with revised ROI, the assessee has earned income for the purpose of deduction under section 80IA by way of power generation through installation of wind mill. The gross sales has been shown at Rs. 9,23,911/- and net profit has been shown at 9,16,840/-. The date of commencement is 05/03/2012 and initial assessment year from which the deduction has been claimed is Assessment Year 2015-16. It was submitted that the assessee has claimed 100% deduction and net profit declared is at 99.23%. Therefore the malafide intention for non filing Form 10CCB alongwith return of income cannot be ruled out. Further reliance was placed on the decision of Ld. CIT(A) wherein he has held that the filing of Form 10CCB is not procedural in nature as well as reliance was placed on the decision of Hon’ble Supreme Court in case of PCIT Vs. M/s Wipro Limited in Civil Appeal No. 1449 of 2022. 8. We have heard the rival contentions and perused the material available on the record. The undisputed facts which are emerging from the records are that the assessee has claimed deduction under section 80IA(4)(iv) in respect of profits from generation and supply of electricity to the Electric Department while filing its return of income which has been filed on 09/10/2017 well before the due date of filing the return on 07/11/2017. It is also an admitted fact that Form 10CCB which is required in respect of claim of deduction under section 80IA(4)(iv) of the Act has been uploaded on the Income Tax portal by the assessee subsequently on 16/03/2019. The CPC Bangalore while processing the return of income has failed to take cognizance of the Form 10CCB uploaded by the assessee and has denied the claim of deduction under section 80IA for the reason that Form 10CCB has not been filed within due date. 5 9. In this regard, we refer to the relevant provision of the Act in terms of Sub Section (7) to Section 80IA which read 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, 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 duly signed and verified by such accountant. 10. The provisions talks about the audit of the accounts of the undertaking before the specified date and furnishing the report of such audit by the said date. The said provision as well as similar worded provisions contained in chapter VI-A have been subject matter of various decisions by Hon’ble Courts as well as the Coordinate Benches. 11. In this regard, we refer to the decision of Hon’ble Punjab & Haryana High Court in case of CIT Vs. Gupta FABS. In this case, the AO rejected the assessee’s claim for deduction in terms of Section 80HHC on the ground that it had not filed audit report in Form 10CCAB with return of income. The Commissioner (Appeals) confirmed the order of the AO, however the Tribunal directed the AO to allow deduction under section 80HHC and on reference, Hon’ble High Court referring to the Full Bench decision in case of CIT Vs. Punjab Financial Corporation [2002] 254 ITR 6 wherein it was held that while Sub Section(1) of Section 32AB was mandatory, Sub Section (5) thereof was not mandatory and the assessee’s claim for deduction cannot be rejected only on the ground that non filing of audit report alongwith the return of income, it was held that Sub Section (5) of Section 32AB is not mandatory and AO has discretion to entertain the audit report even though it has not been filed with the return and give benefit of the deduction to the assessee in terms of Section 32AB(1) of the Act. It was held by the Hon’ble High Court that the question as to whether the statute is mandatory or directory depends upon the intent of the Legislature and not upon the 6 language in which the intent is clothed. The meaning of intention of the Legislature must govern and these are to be ascertained not only from the phraseology of the provisions but also by considering its nature, its design and the consequences which would follow from construing it from one way or other. It was held by the Hon’ble High Court that the use of the word ‘shall’ in a statutory provision, though generally taken in a mandatory sense, does not necessarily mean that in every case it shall have that effect. On the other hand it is not always correct to say that where the word “may” has been used, the statute is only permissive or directory in the sense that non compliance with those provisions will not render the proceedings invalid. It was accordingly held that since the provision of Section 80HHC of the Act are substantially similar to section 32AB(5), they have no hesitation to hold that the Tribunal did not commit any error by granting relief to the assessee. 12. The Coordinate Mumbai Bench in case of Celerity Power LLP (supra) has also held that filing of audit report is procedural and directory in nature and Form 10CCB could be filed by the assessee at the appellate stage and the relevant findings are contained at para 22 which read as under: “We find that filing of an audit report is procedural and directory in nature, and the same could also be validly filed by an assessee at the appellate stage. Our aforesaid view stands fortified by the judgment of the Hon’ble High Court of Madhya Pradesh in the case of CIT v. Medicaps Ltd. (2010) 323 ITR 554 (para 22), CIT Vs. Gujarat Oil & Allied Industries [1993] 201 ITR 325 (Guj.), wherein the High Court while allowing the claim of deduction raised by the assessee under Sec. 80- IA(2), on the basis of the 'audit report which was filed by the assessee for the first time during the course of the appellate proceedings, had observed as under: 10. On the issue of filing the audit report at the appellate stage, the Tribunal by placing reliance upon the various judgments, held that filing the audit report is procedural and directory in nature and the same can be filed at the appellate stage. It is also worth noting that before the Tribunal, the complete details were disclosed in respect of the production in second unit. As regards the claim under s. 80-1A(2) the statements have been found to be supported by the data and figures and the Tribunal has found that proper books of accounts were maintained and were audited and the audit reports in prescribed forms were filed." 7 A similar view that filing of an 'audit report is procedural and directory in nature, and the same could also be validly filed by the assessee at the appellate stage, had been taken by the Hon'ble High court of Gujarat in Gujarat Oil & Allied Industries [1993] 201 ITR 325 (Guj.) and the Hon'ble High Court of Punjab & Haryana in CIT v. Jaideep Industries [1989] 180 ITR 81/45 Taxman 444. In so far, the admission of the 'additional evidence' by the CIT(A) is concerned, we find that the Hon'ble High Court of Bombay in the case of Smt Prabhavati S. Shah v. CIT [1998] 231 ITR 1/100 Taxman 404, has held that if a documentary evidence is necessary to decide the controversy, the CIT(A) should admit it or call for it pursuant to its powers under Sec. 250(4) of the Act. We find that in the case before us, the CIT(A) observed that as the assessee remained under a bona fide belief that it was eligible to 'carry forward' and 'set off the losses of the erstwhile company, was thus for the said reason prevented by sufficient cause from producing the 'audit report' before the A.O within the meaning of sub-clauses (b) & (c) of sub-rule (1) of Rule 46A of the Income-tax Rules, 1962. In the backdrop of the aforesaid facts, in our considered view the CIT(A) after calling for the objections of the A.O had fairly exercised his discretion and admitted the 'audit report' filed by the assessee in 'Form 10CCB' before him as an 'additional evidence'. We have further deliberated on the merits as regards the allowing of the claim of deduction under Sec. 80-IA by the CTT(A), and are persuaded to subscribe to the view taken by him. We thus being of the considered view that the CIT(A) has rightly admitted the 'audit report' filed by the assessee in 'Form 10CCB' during the course of the appellate proceedings, and therein allowed the claim of deduction raised by the assessee under Sec. 80-1A, thus uphold his order in context of the issue under consideration. The Ground of appeal No. 3 raised by the revenue is dismissed.” 13. Similarly, the Hon’ble Karnataka High Court in case of Sutures India (P.) Ltd. Vs. CIT (supra) has held that the assessee company can file audit report in Form 10CCB even at appellate stage so as to eligible for deduction under section 80IA of the Act and the relevant findings are contained at para 8 & 9 which read as under: “8. In the backdrop of aforesaid well settled legal position, we may advert to the facts of the case. The assessee had filed Form No. 10CCB of the Act along with written submissions before the Commissioner of Income- tax (Appeals), which was acknowledged by him in the order dated 11-3-2008. A bench of this court in CIT v. Ace Multitaxes Systems (P) Ltd. [2009] 317 ITR 207 (Kar.) has taken a view that assessee is entitled to deduction under section 801A of the Act even if the audit report is filed at the appellate stage. Similar view has been taken by Madras High Court in A.N. Arunachalam (supra). Thus, the view taken by the assessing officer with regard to eligibility of the assessee to claim deduction under section 801A of the Act was one of the possible views. We are fortified in our aforesaid conclusion in view of the order passed by the Commissioner of Income-tax under section 263 of the Act. The relevant extract of which reads as under. "The order u/s. 143(3) dated 14-06-2005 is, therefore, modified to the extent that deduction claimed u/s. 801 A is withdrawn and for the purpose of computing 8 deduction w/s. 80HHC, deduction allowable w/s. SOIA has to be reduced from the business profits. Since deductions u/s. 801A is being denied, there will be no change in the computation of deduction u/s. 80HHC for the time being. However, in case it is held by the appellate authority that the assessee is entitled to deduction u/s. 801A, the deduction u/s. 80HHC will have to be recomputed keeping in mind the provisions of section 801A(9)". 9. Thus the order passed by the Commissioner of Income-tax itself discloses that two views are possible. Therefore it is not necessary for us to deal with various contentions made by learned counsel for the parties. In the result the substantial questions of law are answered in favour of the assessee and against the revenue. In the result, the order dated 11-3-2008 passed by the Commissioner of Income- tax and order dated 23-11- 2009 passed by the Tribunal are hereby quashed.” 14. In case of Satish Cold Storage Vs. DCIT (supra), the Lucknow Bench of the Tribunal has also held that where assessee’s claim was rejected for want of filing of the audit report, in view of the CBDT Circular No. 689 of 1994 dt. 24/08/1994, the AO was required to consider rectification application filed by the assessee since a copy of the said report in Form 10CCB was uploaded by the assessee on receipt of intimation under section 143(1) of the Act. In para 4, the Coordinate Bench has referred to the CBDT Circular No. 689 dt. 24/08/1994 and has held as under: “I have heard the rival parties and have perused the material available on record. I find that it is undisputed fact that the claim of the assessee u/s, 801B has not been allowed by the authorities below only because of the reason that the audit report in Form-10CCB was not filed along with return of income and was only filed after receipt of intimation u/s. 143(1) and therefore, the assessee filed rectification applications u/s. 154 of the Act after uploading Form-10CCB which was rejected by CPC. The Id. CIT(A) has rejected the appeals by holding that there was no mistake apparent from record. However, while holding so, he escaped the contents of Circular No. 689 dated 24-8-1994 which clearly directs the Officers to allow rectification u/s. 154 for non filing of audit report or other evidence which could not be filed with the return of income.” 15. Thereafter, the Coordinate Bench has referred to the decision of Hon’ble Karnataka High Court in case of Smt. Mandira D. Vakharia wherein the said CBDT Circular had come up for consideration before the Hon’ble High Court and it was held that the assessee would be entitled to deduction while moving the rectification application under section 154 as permitted by the Board’s Circular No. 669 dt. 25/10/1993 and the AO was not right in law in disallowing the 9 rectification application only on the ground that the assessee had failed to furnish the audit report alongwith the return of income. 16. We therefore find that Hon’ble Courts and the various Benches of the Tribunal have consistently held that the filing of the audit report is procedural in nature and the same can be filed even upto the stage of the appellate proceedings. In the instant case, the assessee has made the claim under section 80IA while filing the return of income and subsequently has filed the Form 10CCB on 16/03/2019 which the CPC, Bangalore has failed to take cognizance while processing the return of income. We therefore find that there is a mistake apparent from the record in terms of not considering the Form 10CCB so filed by the assessee. Therefore we hereby direct the AO to take Form 10CCB into consideration and allow the claim so made by the assessee under section 80IA of the Act. 17. Now coming to the decision of Hon’ble Supreme Court in case of Pr. CIT Vs. M/s Wipro Limited, we find that the said decision was rendered in the context of Section 10B(8) of the Act and further the Hon’ble Supreme Court, while referring to its earlier decision in case of CIT, Maharastra Vs. G.M. Knitting Industries Pvt. Ltd. (2016) 12 SCC 272 wherein it was held that while filing the audit report was mandatory and the requirement that it should be filed alongwith the return was only directory, held that Chapter III and Chapter VIA of the Act operate in different realms and principles of Chapter III, which deals with incomes which do not form part of total income cannot be equated with mechanism provided for deductions in Chapter VIA which deals with deduction to be made in computing total income. It was further held that none of the decisions relied upon on behalf of the assessee on interpretation of Chapter VIA shall be applicable while considering the claim under section 10B(8) of the Act. We therefore find that the said decision is in the context of Section 10(8) of the Act which as per the decision of Hon’ble Supreme Court cannot be equated 10 with the deduction under Chapter VIA and therefore the said decision does not support the case of the Revenue in the instant case. 18. In the result, appeal of the Assessee is allowed. Order pronounced in the open Court on 05/09/2023. Sd/- Sd/- आकाश दीप जैन िवᮓम ᳲसह यादव (AAKASH DEEP JAIN) ( VIKRAM SINGH YADAV) उपा᭟यᭃ / VICE PRESIDENT लेखा सद᭭य/ ACCOUNTANT MEMBER AG Date: 05/09/2023 आदेश कᳱ ᮧितिलिप अᮕेिषत/ Copy of the order forwarded to : 1. अपीलाथᱮ/ The Appellant 2. ᮧ᭜यथᱮ/ The Respondent 3. आयकर आयुᲦ/ CIT 4. िवभागीय ᮧितिनिध, आयकर अपीलीय आिधकरण, च᭛डीगढ़/ DR, ITAT, CHANDIGARH 5. गाडᭅ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar
Other Referred Cases
CIT Vs. Gupta FABS, ACIT Vs. Celerity Power LLP, Sutures India (P) Ltd. Vs. CIT, Satish Cold Storage Vs. DCIT, PCIT Vs. M/s Wipro Limited
Laws Referred To
Income Tax Act
1:1 Consultation on Salary Structuring
₹1
1:1 Consultation on Startup Fundraising
₹5000
1:1 Consultation on FEMA Compliance
₹1
Research Collaboration Agreement
₹0
Sales Forecasting Sheet
₹100
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