Shiva Neeti Developers, Kanpur V. Income Tax Officer, Ward-3(4), Kanpur

ITA 699/LKW/2017

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9910 (ITAT-LUCKNOW)
• Duration Of Justice: 4 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 18-10-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 05-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Question of law; Reasonable cause; Bonafide mistake; Set aside
• Section: 143(3); 80IB; 80IA; 143(2); 139(1); 139(4); 44AB; 73; 13; 119

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH “SMC”, LUCKNOW BEFORE SHRI. VIJAY PAL RAO, JUDICIAL MEMBER ITA No.699/LKW/2017 Assessment Year: 2014-15 Shiva Neeti Developers 3A/185, Azad Nagar Kanpur v. The Income Tax Officer Ward 3(4) Kanpur TAN/PAN:ABQFS8644D (Appellant) (Respondent) Appellant by: Shri Abhinav Mehrotra, Advocate Respondent by: Shri Amit Nigam, D.R. Date of hearing: 19 10 2022 Date of pronouncement: 21 10 2022 O R D E R This appeal by the assessee is directed against the order dated 21.8.2017 of the ld. CIT(A)-I, Kanpur for the Assessment Year 2014-15. 2. The assessee has raised the following grounds: 1. That the Ld. Commissioner of Income Tax (Appeals-1) has erred in law as well as on facts in not appreciating the real facts of the case while confirming disallowance of exemption u/s. 80IB amounting to Rs.44,68,160/-. 2. That the Ld. Commissioner of Income Tax (Appeals-1) has further erred in law as well as on facts in not appreciating that the assessee was not liable to get its accounts audited u/s. 44AB of the Act and therefore was not liable to file return of income and report in form no. 10CCB electronically and a paper return could be filed. 3. That the Ld. Commissioner of Income Tax (Appeals-1) has further erred in law as well as on facts in not appreciating the fact that report in form No. 10CCB could Page 2 of 13 be submitted at any time before completion of the assessment which has been done in the instant case. 4. That the Ld. Commissioner of Income Tax (Appeals-1) has further erred in law as well as on facts in applying provisions of Sec. 80AC holding that since the return of income has not been filed in time as per provisions of Sec. 139(1), deduction u/s. 80IB is not allowable. 5. That the Ld. Commissioner of Income Tax (Appeals-1) has further erred in law as well as on facts in not appreciating the reasonable cause in not filing the -return of income in time. 6. That the Ld. Commissioner of Income Tax (Appeals-1) has further erred in law as well as on facts in not appreciating that where there are conflicts of opinions of the various benches of the ITAT on the provision u/s 80AC of requirement of return filing before due date to claim deduction u/s 801B, the deduction should been allowed on the basis that the decision favourable to the assessee should have been accepted. 7. That the Ld. Commissioner of Income Tax (Appeals-1) has further erred in law as well as on facts in not appreciating that provisions of section 80IB are incentive provisions and the same were to be liberally construed in furtherance of the objective of promoting the incentives. 8. That the Ld. Commissioner of Income Tax (Appeals-1) has further erred in law as well as on facts in not appreciating that in view of Circular No. 40 dated 11.4.1955 issued by the CBDT in support of his claim that the AO should not have taken the benefit of assessee’s ignorance and bonafide mistake in filing the return within the time limit specified in Section 139(1) of the Act. According to him the AO ought to have condoned such delay and allowed the benefit of Section 80IB of the Act to the assessee. Page 3 of 13 9. That the order of the ld. Commissioner of Income Tax (Appeals-1) is bad in law and against the principles of natural justice. 3. The solitary issue arises in this appeal of the assessee is whether in the facts and circumstances of the case, the ld. CIT(A) is justified in upholding the disallowance of deduction under section 80IB of the Income Tax Act, 1961 made by the Assessing Officer for want of filing the audit report in Form No.10CCB electronically/online. The assessee firm has filed its return of income on 24.3.2015 for the year under consideration and declared Nil income after claiming deduction under section 80IB of the Act. The case of the assessee was selected for scrutiny under CASS. Accordingly, the assessing officer issued notice under section 143(2) on 31.8.2015. During the scrutiny assessment. The Assessing Officer noted that the assessee partnership firm is engaged in construction of houses in the name and style of M/s Shiva Neeti Developers. The total sale of the assessee for the year under consideration was Rs.58.80 lakhs. The net profit was of Rs.44,68,162/-. The Assessing Officer found that the assessee has not submitted online audit report in the prescribed Form No.10CCB for the year under consideration. The assessee had furnished the audit report in Form No.10CCB manually. For want of submitting the audit report electronically, the Assessing Officer disallowed the claim of deduction under section 80IB of the Act. The assessee challenged the action of the Assessing Officer before the ld. CIT(A) and contended before him that filing of the audit report in Form No.10CCB electronically is not mandatory but directory. The assessee explained the difficulty in uploading the audit report and therefore, it was contended that the claim of deduction under section 80IB of the I.T. Act cannot be denied solely on the Page 4 of 13 ground that the assessee has not submitted the audit report online, but it was submitted manually. The ld. CIT(A) confirmed the disallowance made by the Assessing Officer on two counts, (i) that the assessee has not submitted the audit report in Form No.10 CCB electronically and father (ii) the return of income filed by the assessee was also belated and not within the due date as prescribed under section 139(1) of the Act. 4. Aggrieved by the impugned order of the ld. CIT(A), the assessee has filed the present appeal. The ld. Counsel for the assessee has submitted that so far as the disallowance of the claim of deduction under section 80IB of the Act, for want of filing of the audit report in Form No.10CCB electronically is concerned, the same is covered by the judgement, dated 7.4.2017 of the Hon’ble jurisdictional High Court in the case of CIT vs. M/s Fortune Foundation Engineers & Consultants Private Limited in Income Tax Appeal No. 6 of 2012. The ld. Counsel for the assessee has referred to the substantial question of law framed in the said case by the Hon’ble High Court and submitted that the issue before the Hon’ble High Court was the same as in the case of the assessee regarding disallowance of claim of deduction under section 80IB of the I.T. Act for non-filing of the audit report in Form No.10CCB. In that case it was held that as per the provisions of section 80IB(13) read with section 80IA(7) of the I.T. Act, filing of the audit report in Form No.10CCB is not mandatory, but directory. On the strength of the judgement of the Hon’ble jurisdictional High Court (supra), the ld. Counsel for the assessee has submitted that when filing of the audit report in Form No.10 CCB is directory and not mandatory, then the claim of the assessee under section 80IB of the I.T. Act cannot be denied, merely because the assessee has presented the report Page 5 of 13 manually and not electronically. He has also relied upon the decision of the Hon’ble Ahmedabad Bench of the Tribunal, dated 4.6.2010 in the case of ITO vs. Horizon Microtech Pvt. Ltd. in ITA No.1619/AHD/2007 and C.O No.143/AHD/2007. The learned Counsel for the assessee has submitted that the disallowance made by the Assessing Officer for want of filing of the audit report in Form No.10CCB electronically is unjustified and unwarranted when the assessee filed the audit report manually during the course of assessment proceedings. He has also referred to the order of the ld. CIT(A)-I, Kanpur, dated 29.6.2018 for Assessment Year 2015 – 16 in the assessee’s own case and submitted that an identical issue has been decided by the ld. CIT(A) for the subsequent year in favour of the assessee and the claim of the assessee was allowed. 5. As regards the fresh issue taken up by the ld. CIT(A), the ld. Counsel for the assessee has submitted that the ld. CIT(A) has not issued a show cause notice before deciding the issue against the assessee, which amounts to enhancement of the assessment. The ld. Counsel for the assessee further has submitted that the order of the ld. CIT(A), so far as fresh issue relating to filing of return of income belatedly, is in violation of the provisions of section 251(2) of the I.T. Act. 6. On the other hand, the ld. D.R. has submitted that it is a case of non-compliance of the provisions of the Income Tax Act required for claiming deduction, under section 80IB of the Act. The assessee has defaulted to submit the audit report in Form No.10CCB electronically and further there is a delay in filing of the return of income, which is mandatory condition for the claim of deduction under section 80IB of the Act. The ld. D.R. has relied on the orders of the authorities below. Page 6 of 13 7. I have considered the rival submissions as well as the relevant material available on record. The Assessing Officer has disallowed the claim of deduction under section 80IB of the Act on the ground of non-filing of the audit report in Form No.10CCB electronically. The relevant part of the order of the Assessing Officer, viz. para 3 of the assessment order is reproduced, as under: “3. During the course of assessment proceedings it is found that the assessee has not submitted the online audit report for the year under consideration. The Ld. AR during the course of assessment proceedings was required to explain as to why the case of the assessee has not been audited and the audit report not been filed electronically. The Ld. AR submitted the Form no, 10CCB manually and submitted that due to unavoidable circumstances the audit report could not be uploaded electronically. The Ld. AR during the course of assessment proceedings was informed that the deduction u/s 80IB is admissible only if the accounts of the eligible undertakings have been audited by a Chartered Accountant, and the audit report duly signed and verified.by such accountant is furnished alongwith the return of income. A separate report in Form No. 10CCB is required to be furnished claiming deduction u/s 80IB and the same shall be accompanied by the Profit and Loss account and the Balance Sheet of the undertaking. From 01.04.2014 the audit report should only be submitted electronically. In the case of the assessee, the Form no. 10CCB has been signed by the Chartered Accountant on 14.08.2014 and the same has not been filed electronically. Therefore, the deduction u/s 80IB .claimed by the assessee is disallowed and added back to the income of the assessee. Addition.... Rs.44,68,162/-“ 8. The facts recorded by the Assessing Officer are not in dispute, as the assessee has filed the audit report in Form No.10CCB during the course of assessment proceedings manually and it was not filed electronically. The Assessing Officer Page 7 of 13 has further mentioned that from 1.4.2014, audit reports should only be submitted electronically, which means that the submission of audit report in Form No.10CCB is made mandatory only from the year under consideration and hence this is the first year for mandatory submission of the audit report in Form No.10CCB electronically. The assessee has explained the reasons for not filing the audit report electronically due to technical reasons and glitches and therefore, the explanation of the assessee clearly reveals a bona-fide reason for not filing the audit report in Form No.10CCB electronically. Even otherwise, this is the first year for mandatory filing the audit report in Form No.10CCB electronically and, therefore, the reasons explained by the assessee could not be rejected as such. 9. The Hon'ble jurisdictional High Court in the case of CIT vs. M/s Fortune Foundation Engineers & Consultants Private Limited, 81 taxmann.com 189 (Alld) considered the issue of denial of claim of deduction under section 80IB(10) of the I.T. Act for want of filing the audit report in form No.10CCB, vide paras 40 to 45 of its judgement, as under: “40. With regard to question no. 2 in ITA No. 73 of 2010, we are of the view that it is not mandatory. This question is regarding filing of audit report in form 10CCB. If it is not filed alongwith return but filed before assessment, will it amount to non-compliance of Section 80IB (13) read with Section 80IA (7). 41. In CIT v. Ace Multitaxes System (P) Ltd. [2009] 317 ITR 207 (Kar.), it was held that when a relief is sought for under Section 80-IB of Act, 1961, there is no obligation on the part of Assessee to file return accompanied by audit report, thereby, holding that same is not mandatory. 0. Same view was taken by Delhi High Court in CIT v. Contimeters Electrical (P) Ltd. [2009] 317 ITR 249/178 Page 8 of 13 Taxman 422; by Madras High Court in CIT v. Jayant Patel [2001] 248 ITR 199/117 Taxman 707. 42. Supreme Court in CIT v. G.M. Knitting Industries (P) Ltd. [2015] 376 ITR 456/[2016] 71 taxmann.com 35 dismissed appeal of Revenue and confirmed the view taken by Madras High Court holding that filing of audit report and form 10CCB along with return is not mandatory. 43. In view of above, we answer question no. 2 in ITA No. 73 of 2010 in favour of Assessee and against Revenue, holding that it is not mandatory and only directory and Assessee cannot be made to suffer if it filed audit report in form 10CCB in the course of assessment proceedings and not alongwith return. 44. Question No. 1 in ITA No. 29 of 2014 has to be answered partly in favour of Assessee and partly in favour of Revenue. 45. Clause (d) of Section 80IB (10) came to be inserted for the first time, is prospective and shall not apply to housing projects approved before 1.4.2004 but the same effect is not applicable to other parts of Section 80IB (10) and in particular clause (a) with which Assessee in the present appeals is concerned. The aforesaid clause has to be observed by Assessee even if its project stands approved before 1.4.2004 and in this regard a detailed judgement has already been given on Arif Industries Ltd. (supra). and for the reasons stated therein in respect of Section 80IB(10)(a), as amended w.e.f. 1.4.2005, we answer that it will apply to the projects approved before 1.4.2004 also and it is only clause (d), came to be inserted w.e.f. 1.4.2005, which is prospective.” 10. The Hon’ble High Court has held that this is not mandatory, but only directory to submit the audit report in Form No.10CCB electronically in accordance with the provisions of section 80IB(13) read with section 80IA(7) of the I.T. Act along with the return of income, but if the audit report in Form Page 9 of 13 No.10CCB is filed during the course of assessment proceedings, the assessee cannot be made to suffer. 11. Further, the ld. CIT(A)-I, Kanpur for the assessment year 2015 – 16 in the assessee’s own case has decided the identical issue in favour of the assessee, as under: “I have gone through the above submissions of the appellant and the order of the AO. From the order it emanates that except for uploading of the audit report along with the return of income, all other aspects of section 80IB were duly met by the appellant on which the AO has objected. Further this is not the first year and in earlier years as well the appellant has got the deduction u/s 80IB. In fact the appellant is an old assessee and has been claiming deduction u/s 80IB since 2010-11. The deduction u/s 80IB has been allowed u/s 143(3) by the AO for the assessment year 2012-13. The return of Income for the relevant year was also filed by the appellant before the due date and the appellant had duly made a claim for deduction u/s 80IB. Thus the only fact is the time of submission of the audit report in form 10CCB. I have gone through the various decisions cited by the appellant, The filing of report u/s. 10CCB, though is mandatory for allowance of deduction u/s 80IB but keeping in view the fact that the appellant had uploaded the audit report u/s 80IB in form' 10CCB for claiming a deduction u/s 80IB and the fact that the appellant did not get any intimation as to the return being defective, it is well established, that appellant was of the bonafide view that the report was also uploaded. The appellant has filed the hard copy of the report with the AO, which is evident from the assessment order, AO has not disputed the fact that the report had been prepared before the due date of filing of return, as is also evident from" the assessment order. Subsequently, the appellant uploaded the report also before the completion of the assessment. Appellant fulfills all other conditions of eligibility of deduction u/s 80IB, therefore it is held that the appellant is entitled to deduction u/s 80IB. A section, which is beneficial .in' nature, once duly complied with, should be construed liberally to provide the benefit it Page 10 of 13 intends to do so. In view of the above the deduction of Rs.45,21,570.00, claimed by the appellant u/s 80IB of the Income Tax Act is allowed.” 12. So far as the claim of deduction under section 80IB of the I.T. Act for want of filing of the audit report in Form No.10CCB electronically is concerned, the issue is settled in favour of the assessee. Accordingly, this issue of denial of deduction under section 80IB for want of filing of audit report in Form No.10CCB electronically is decided in favour of the assessee and the orders of the authorities below to the extent of this issue is set aside. 13. As regards the fresh issue taken up by the ld. CIT(A) during the course of appellate proceedings, it is manifest from the impugned order of the ld. CIT(A) that he has considered this fresh issue without issuing a show cause notice to the assessee. The relevant part of the order of the ld. CIT(A) on this issue is as under: “Let us go through the provisions of section 80AC of the Act which provides that: "deduction u/s SO IB shall be allowed to assessee only if the assessee furnishes a return of his, income on or before the due date specified under sub-section 139(1);" It is seen that the return for A.Y. 2014-2015 was filed on 24.03.2015 with a delay of 114 days and the audit u/s 10CCB was allegedly completed on 14.08.2014 and filed before the AO on 16.09.2016 with a delay of more than 2 years i.e. 790 days. The AO has missed on the fact that the return was not filed u/s 139(1) but filed belatedly u/s 139(4) as due date was 30th November, 2014. Therefore fresh issue arises if the assesse is entitled to claim u/s 80IB if return id not filed u/s 139(1). There are thus two defaults: - Page 11 of 13 1. Delay in filing of return u/s 139(1) 2. No uploading of from 10CCB under with AO as well as ROC or filing it when the return was filed u/s 139(4) Another issue that arises for consideration is whether the Assessing Officer was justified in disallowing the assessee's claim for deduction under S. 80IB on the ground that the audit report in Form 10CCB was not filed even along with the return of income filed u/s 139(4) . -that s. 139(1) of the Act provides for due dates for filing the return of income. Accordingly, the due date for filing the return of income of for assesse was 30 November as per CBDT circular at annexure. However, s. 139(4) of the Act carves out an exception (extension) to the, time limit under section 139(1) for filing the return of income; - that as per the provisions of s. 139(4), it is clear, that the time limit for filing the return of income is neither inflexible nor inelastic. Ass.ese filed his return on 24.03.201.5.with a delay of 114 days u/s 139(4) The question that arises, therefore, that as regards the allowance of deduction under section 80-IB of the Act is whether the provisions of s. 80IB are applicable to the assessee or whether the assessee falls Within the ambit of the deduction u/s 80IB but not the time limit for filing the return of income by him mentioned in s. 80AC of the Act. This view is further reinforced by the provisions of s. 119 of the Act; (ii) As per the provisions of s. 119 of the Act, the Board may for avoiding genuine hardship to the assessees relax any requirement contained in any of the provisions of Ch. IV or Ch. VI-A, where the assessee has failed to comply with any requirement specified in such provision for claiming deduction there-under, subject to the conditions that the default in complying with such requirement was due to circumstances beyond the control of the assessee; and the assessee has complied with such requirement before the completion of assessment in relation to the previous year in which such deduction is claimed; Page 12 of 13 - that it is clear, therefore, that the provision contained in s. 80AC as regards the time limit for filing the return of income is directory but not mandatory in view of the aforesaid provisions of the Act permitting relaxation of the time limit for filing the return. It is to be distinctly understood that such relaxation is statutory in nature (as it is allowed by the Statute itself) and not administrative in character. It is settled position of law that filing of Income return u/s 139(1) and audit report in Form 10CCB is mandatory and prerequisite for deduction under S. 80IB, Certificate from the Auditor in Form No. 10CCB as required under rule 18BBB of the I.T. Rules on the eligibility for deduction u/s 80-IB. Both these provisions have not been complied by the assesse and documents have not been furnished to the Department.” 14. When the ld. CIT(A) has not issued a show cause notice before considering and deciding the issue of late filing of the return of income by the assessee and consequently denying the claim of deduction under section 80IB of the act, then it would certainly violates the principles of natural justice. The ld. Counsel for the assessee has submitted that the ld. CIT(A) has violated the provisions of section 251(2) of the I.T. Act before passing the impugned order, as there is enhancement of the assessment by the ld. CIT(A) without issuing show cause notice. However, the outcome of the denial of deduction under section 80IB of the Act, on the ground of late filing of the return of income, would not be more than the disallowance of deduction made by the Assessing Officer and consequently it is not the case of enhancement of the assessment, but the disallowance of deduction as made by the Assessing Officer has been further strengthened by the ld. CIT(A) by taking the issue of late filing of the return of income. In any case, since the ld. CIT(A) has not issued any show cause notice to the assessee before taking up Page 13 of 13 this issue and passed the order on the same, therefore, it is a clear case of violation of the principles of natural justice, which renders the impugned order of the ld. CIT(A) not sustainable. Accordingly, the order of the ld. CIT(A) to the extent of taking up the fresh issue and deciding the same against the assessee is set aside and the matter is remanded to the record of the ld. CIT(A) for deciding the same after giving an opportunity of hearing to the assessee on this issue. It is clarified that the issue with respect to the late filing of the return of income is remanded to the record of the ld. CIT(A) and the remand proceedings before the ld. CIT(A) are confined only on the said issue. 15. In the result, the appeal of the assessee is partly allowed. Order is pronounced in the open Court on 21/10/2022. Sd/- [VIJAY PAL RAO] JUDICIAL MEMBER DATED:21/10/2022 JJ: Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR By order Assistant Registrar