2024 (11) TMI 1467 - AT - Income Tax

Deduction u/s. 80JJAA - claim denied as Form 10DA was not filed by the assessee within the due date prescribed - HELD THAT - From 10DA was digitally signed on 14.10.2023 and uploaded in the income tax website on 28.10.2023 before filing return of income. We have also gone through the tax audit report Form 3CD at sl. No. 33 it is evident that tax auditor has reported about the deduction u/s. 80JJAA and there is no variation reported in Form 10DA. Form 3CD was signed on 30.09.2023 which is prior to one month from filing of return of income. It clearly shows that details were certified by tax auditor only there is delay for certifying and uploading Form 10DA. As relying on Akuntha Projects P. Ltd. 2024 (5) TMI 1076 - ITAT AHMEDABAD we allow the appeal of the assessee.

Summary

The core legal questions considered in this appeal revolve around the eligibility of the assessee to claim deduction under section 80JJAA of the Income-tax Act, 1961, specifically:

• Whether the failure to file Form 10DA (accountant's report) within the prescribed due date, as mandated under Rule 19AB of the Income-tax Rules, results in denial of deduction under section 80JJAA.
• The nature of the requirement to file Form 10DA-whether it is mandatory and jurisdictional or merely procedural and directory.
• The applicability of judicial precedents concerning the timing and manner of filing statutory audit reports or certificates required for claiming deductions or exemptions under the Income-tax Act.
• The effect of late filing of Form 10DA but before the processing of the return or assessment order on the entitlement to deduction under section 80JJAA.

Issue-wise detailed analysis:

1. Mandatory vs. Directory Nature of Filing Form 10DA under Section 80JJAA

The legal framework requires that an accountant's report in Form 10DA must be filed at least one month prior to filing the return of income under section 139(1), as per Rule 19AB. Non-compliance with this timing condition was the basis for denial of deduction by the Assessing Officer and upheld by the CIT(Appeals).

The Court examined the statutory provisions and the relevant rules, as well as authoritative precedents, to determine whether the timing of filing Form 10DA is a substantive condition precedent to the claim of deduction or a procedural formality.

Reliance was placed on the Supreme Court judgment in the case of Pr. CIT v. Wipro Limited, which emphasized strict construction of statutory provisions related to deductions and carry forward of losses, indicating the importance of compliance with procedural mandates. However, the Court also considered other precedents, including the Gujarat High Court decision in Association of Indian Panelboard Manufacturer v. Dy. CIT, which held that while furnishing the audit report is mandatory, the mode and stage of filing are procedural aspects. The Court noted that if the audit report is available with the Assessing Officer before assessment, non-filing along with the return should not disentitle the assessee from claiming deduction.

Further, the Court referred to the ITAT Ahmedabad decision in Akuntha Projects (P) Ltd., which held that availability of the accountant's report with the Assessing Officer before assessment proceedings is a substantive requirement, but the timing of filing is procedural. This principle was reinforced by the Gujarat High Court's observations that procedural delays in filing should not defeat substantive rights.

2. Application of Law to Facts and Evidence

In the instant case, the tax audit report in Form 3CD was signed and certified on 30.09.2023, prior to the due date for filing the return (28.10.2023). Form 10DA was digitally signed on 14.10.2023 and electronically filed on 28.10.2023, i.e., after the prescribed due date of 30.09.2023 but before filing the return.

The Court noted that the delay in filing Form 10DA was due to technical difficulties faced by the Chartered Accountant, and there was no dispute on the quantum of deduction claimed. The Form 10DA was available with the Central Processing Centre (CPC) at the time of processing the return under section 143(1).

The Court applied the principles from the cited precedents, concluding that since the substantive requirement of furnishing the accountant's report was fulfilled before assessment, the procedural delay in filing Form 10DA should not result in denial of deduction under section 80JJAA.

3. Treatment of Competing Arguments

The Revenue contended that strict compliance with the due date for filing Form 10DA is mandatory and non-compliance disentitles the assessee from claiming deduction. They relied on the Supreme Court's strict construction approach and the CIT(Appeals) order confirming the disallowance.

The assessee argued that the filing of Form 10DA is directory and procedural, that the report was certified timely, and that the delay in electronic filing was due to technical issues. They relied on precedents supporting a liberal interpretation, emphasizing availability of the report with the assessing authority before assessment.

The Court balanced these views, giving precedence to the principle that procedural lapses should not defeat substantive rights when the essential conditions for claiming deduction are satisfied. The Court distinguished the strict construction approach by clarifying that it applies to substantive conditions, not procedural formalities.

4. Key Findings and Conclusions

The Court found that:

• The tax audit report (Form 3CD) was certified before the due date, and the Form 10DA was filed before the return, albeit after the prescribed deadline.
• The delay in filing Form 10DA was procedural and did not affect the substantive right to claim deduction under section 80JJAA.
• The Form 10DA was available with the CPC at the time of processing the return under section 143(1), satisfying the substantive requirement.
• There was no dispute on the amount of deduction claimed.

Accordingly, the Court held that the denial of deduction on the ground of late filing of Form 10DA was not justified.

Significant holdings include the following verbatim excerpts:

"Although the requirement of furnishing report was mandatory, filing thereof is a procedural aspect. Once it is seen that the audit report... was available with the Assessing Officer when he processed the return of income under Section 143(1) of the Act... the Assessing Officer could not have denied the exemption claimed... on the ground that the audit report was not filed."

"Filing of audit report is held to be substantive requirement but not the mode and stage of filing, which is procedural. Once the audit report... is filed to be available with the Assessing Officer, before assessment proceedings take place, the requirement of law is satisfied."

The Court also reiterated the principle from the Supreme Court in CIT v. G. M. Knitting Industries (P.) Ltd. that even if a certificate required for claiming deduction is not filed along with the return, but is filed before the final assessment order, the deduction is allowable.

In conclusion, the Court held that the assessee is entitled to the deduction under section 80JJAA despite the delayed filing of Form 10DA, since the substantive conditions were met and the delay was a procedural lapse. The appeal was allowed accordingly.