2019 (5) TMI 1122 - AT - Income Tax

Deduction u/s 80IB denied - non filing of income tax return before due date u/s 139(1) - For claiming deduction u/s 80IB assessee e-filed report and Form 10CCB and Form 3 CB 3CD for tax audit u/s 44AB online on 25.9.2013 and 23.9.2013 respectively - HELD THAT - As per provisions of Section 80AC of the Act for claim u/s 80IB assessee is required to furnish the return of income before the due date specified u/s 139(1) of the Act. As in the case of Symbosis Pharmaceuticals P Ltd V/s DCIT 2017 (11) TMI 1361 - ITAT CHANDIGARH wherein deduction u/s 80IC was claimed. Audit report was filed before the due date but income tax return was submitted on 31.3.2014 and deduction u/s 80IC was denied. The Coordinate Bench after considering jurisdictional pronouncements gave following observations holding that the claim of the assessee cannot be outset with as the return was filed within the extended period stipulated in section 139(4) of the Act and the assessee deserves to succeed in part. In the present case as the return of income though belated but filed subsequently on 22.4.2014 u/s 139(4) of the Act whereas the audit reports have been e filed before the due date of filing of return u/s 139(1) of the Act. We direct A.O to accept the tax audit reports submitted by the assessee in support of claim for deduction u/s 80IB. However the matter is remanded to the A.O for the purpose of verification as during the course of assessment proceedings the facts of the alleged claim u/s 80IB of the Act could not be examined on merits by the assessing authority. We therefore direct the Ld. A.O to examine the claim of the assessee u/s 80IB and if the conditions of Section 80IB of the Act are fulfilled then the deduction should be allowed and delay in filing of return of income should not affect in claiming the deduction by the assessee u/s 80IB - Appeal of the assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Denial of deduction under Section 80IB due to late filing of the income tax return.
2. Whether the provisions of Section 80AC are directory or mandatory.

Detailed Analysis:

1. Denial of Deduction under Section 80IB due to Late Filing of Income Tax Return:
The primary issue in this case revolves around the denial of the deduction under Section 80IB of the Income Tax Act, 1961, due to the late filing of the income tax return by the assessee. The assessee filed its return of income on 22.4.2014, which was beyond the due date prescribed under Section 139(1) of the Act. The Assessing Officer (A.O.) disallowed the deduction of Rs. 12,62,094/- claimed under Section 80IB, citing that the return was filed after the due date, as mandated by Section 80AC of the Act. This decision was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)], who confirmed the disallowance.

2. Whether the Provisions of Section 80AC are Directory or Mandatory:
The assessee argued that the audit report for claiming the deduction under Section 80IB was filed before the due date (30.9.2013), and the delay in filing the return was due to a mistake by the staff of the tax consultant. The assessee contended that the provisions of Section 80AC should be considered directory and not mandatory, especially when the audit report was filed within the due date. The Tribunal observed that similar issues had been addressed in various judicial precedents, where the courts held that the provisions of Section 80AC are directory in nature, allowing for the consideration of reasonable causes for the delay in filing the return.

Tribunal's Observations and Decision:
The Tribunal noted that the assessee had e-filed the audit report in Form 10CCB and the tax audit report under Section 44AB before the due date, even though the return of income was filed late. The Tribunal referred to the case of Symbiosis Pharmaceuticals P Ltd vs. DCIT, where it was held that the claim for deduction should not be denied if the return is filed within the extended period under Section 139(4) of the Act, provided the audit report was filed on time.

The Tribunal emphasized that the delay in filing the return was due to reasons beyond the control of the assessee and that the supporting documents for the claim were available well within the extended time. It was observed that the provisions of Section 80AC are procedural and directory, allowing the authorities to consider reasonable causes for the delay.

Remand for Verification:
The Tribunal directed the A.O. to accept the tax audit reports submitted by the assessee and to verify the conditions under Section 80IB. If the conditions are fulfilled, the deduction should be allowed, and the delay in filing the return should not affect the claim. The matter was remanded to the A.O. for verification and examination on merits.

Conclusion:
The appeal of the assessee was allowed for statistical purposes, with the direction to the A.O. to examine the claim for deduction under Section 80IB and to allow the deduction if the conditions are met, despite the delay in filing the return. The order was pronounced in the open court on 16.05.2019.