2025 (6) TMI 489 - AT - Income Tax

Rejection of deduction u/s 80IB - audit report in Form-10CCB was not filed along with the ITR and was only filed after the receipt of intimation u/s 143(1) - AR submitted that auditor of the assessee who was also dealing with tax matters omitted to upload the audit report in Form-10CCB and on receipt of intimation u/s 143(1) filed an application u/s 154 after uploading the copy of audit report in Form-10CCB which was rejected by the AO-CPC - HELD THAT - This case is squarely covered in the case of Satish Cold Storage 2022 (8) TMI 509 - ITAT LUKCNOW wherein held assessee would be entitled to the deductions in the rectification under section 154 to the extent permitted by the Board s Circular No. 669 dated 25-10-1993. The AO was not right in law in disallowing the rectification application only on the ground that the assessee had failed to furnish the audit report along with the return of income. We therefore allow the deduction under section 80IB of the Act. The assessee gets consequential relief on this score. Disallowance made in respect of employee contributions to provident fund deposited after the specified date - HELD THAT - Since it has been deposited after due date. We therefore following the ratio laid down in the case of Checkmate Services Pvt. Ltd 2022 (10) TMI 617 - SUPREME COURT (LB) uphold the said disallowance. Appeal of the assessee is partly allowed

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal are:

(a) Whether the deduction claimed under section 80IB of the Income Tax Act, 1961 (the Act) can be allowed despite the non-filing of the audit report in Form No. 10CCB along with the original return of income, and if such omission can be rectified subsequently by filing the form after receipt of intimation under section 143(1) of the Act;

(b) Whether the non-filing of Form No. 10CCB with the original return constitutes a fatal defect that disentitles the assessee from claiming deduction under section 80IB;

(c) Whether the disallowance of deduction under section 36(1)(va) of the Act in respect of employee contributions to Provident Fund (PF) deposited after the due date is justified;

(d) Whether the lockdown period and judicial pronouncements allowing condonation of delay in statutory compliances during the COVID-19 pandemic period can be invoked to excuse belated PF payments;

(e) The applicability and scope of rectification under section 154 of the Act in cases where requisite audit reports or certificates are furnished after the due date of filing the return;

(f) The relevance of prior years' allowance of deduction under section 80IB for the same assessee in determining the claim for the current assessment year;

(g) The interpretation and application of relevant CBDT circulars and judicial precedents regarding prima facie disallowance under section 143(1)(a) of the Act and subsequent rectification under section 154.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) & (b): Deduction under section 80IB and non-filing of Form 10CCB with original return

Relevant legal framework and precedents: Section 80IB of the Act provides for deduction subject to fulfillment of certain conditions including furnishing of audit report in Form 10CCB along with the return. Section 143(1)(a) authorizes prima facie disallowance of claims lacking requisite supporting documents. Section 154 permits rectification of mistakes apparent from record. CBDT Circular Nos. 669 (dated 25-10-1993) and 689 (dated 24-08-1994) clarify that where evidence is furnished subsequently, rectification under section 154 should be allowed. Judicial precedents include the Supreme Court decision in Checkmate Services Pvt. Ltd. emphasizing strict compliance with conditions for deductions, and High Court decisions in Craftsman Automation P. Ltd., L-Cube Innovative Solutions P. Ltd., and Mandira D Vakharia supporting rectification where audit certificates are furnished late but within rectifiable limits.

Court's interpretation and reasoning: The Tribunal noted that the assessee failed to file Form 10CCB along with the original return due to an omission by the computer operator. However, the form was filed subsequently after receipt of intimation under section 143(1). The AO-CPC and CIT(A) disallowed the deduction strictly on the ground of non-filing of Form 10CCB with the return, relying on the Supreme Court's ruling in Checkmate Services Pvt. Ltd. that conditions for deduction must be strictly complied with.

The Tribunal, however, distinguished the present case by referring to the CBDT circulars and the judicial pronouncements from High Courts and the Tribunal (SMC Bench, Lucknow) in Satish Cold Storage, which held that if requisite audit reports are filed subsequently, rectification under section 154 should be allowed. The Tribunal emphasized that the illustrations in the CBDT circular are not exhaustive and the phrase "and the like" includes provisions such as section 80IB. The Tribunal held that the AO was not justified in rejecting the rectification application solely on the basis of delay in filing Form 10CCB.

Key evidence and findings: The assessee's history of claiming deduction under section 80IB in previous years without objection, the filing of Form 10CCB after intimation under section 143(1), and the absence of any dispute on eligibility for deduction except for the procedural lapse.

Application of law to facts: The Tribunal applied the CBDT circular and judicial precedents to hold that the omission was a procedural defect that could be rectified under section 154, and the deduction under section 80IB should be allowed accordingly.

Treatment of competing arguments: The Revenue relied on strict compliance as per Supreme Court precedent and the absence of Form 10CCB with the original return. The Tribunal rejected this rigid approach, relying on the principle of allowing rectification when evidence is furnished subsequently as per CBDT circular and High Court rulings.

Conclusion: The deduction under section 80IB cannot be denied solely for non-filing of Form 10CCB with the original return if the form is filed subsequently and rectification is sought. The Tribunal allowed the deduction accordingly.

Issue (c) & (d): Disallowance of deduction under section 36(1)(va) for belated PF contributions and effect of lockdown

Relevant legal framework and precedents: Section 36(1)(va) disallows deduction for employer's contribution to PF if not deposited within the due date. The Supreme Court in Checkmate Services Pvt. Ltd. reinforced strict compliance with statutory conditions for deductions. The appellant invoked the lockdown period and Supreme Court circulars condoning delays between April 2020 and September 2021.

Court's interpretation and reasoning: The Tribunal upheld the disallowance of Rs. 6,808/- for belated PF contributions, following the Supreme Court's strict approach that statutory deadlines must be complied with for claiming deductions. The lockdown was not accepted as sufficient cause for condonation in this case.

Key evidence and findings: The PF contributions were deposited after the due date, and no sufficient cause was established to justify the delay.

Application of law to facts: The Tribunal applied the Supreme Court's ruling to uphold disallowance, emphasizing the statutory requirement for timely deposit of PF contributions.

Treatment of competing arguments: The appellant's argument of lockdown-related delay was rejected as inadequate to excuse non-compliance with statutory deadlines.

Conclusion: The disallowance under section 36(1)(va) for belated PF payment was upheld.

Issue (e): Scope of rectification under section 154 for late filing of audit reports or certificates

Relevant legal framework and precedents: Section 154 allows rectification of mistakes apparent from record. CBDT Circular No. 669 clarifies that if evidence required to substantiate a deduction is furnished after filing the return, rectification should be allowed to the extent possible. High Court decisions in Mandira D Vakharia and others have held that non-filing of audit reports with the original return is not fatal and rectification should be allowed.

Court's interpretation and reasoning: The Tribunal held that the Board's circular and judicial precedents mandate that rectification under section 154 should be allowed where audit reports are filed belatedly but within the permissible period. The illustrations in the circular are not exhaustive and include similar provisions like section 80IB.

Key evidence and findings: The assessee had filed the audit report in Form 10CCB after the original return but before the conclusion of assessment proceedings.

Application of law to facts: The Tribunal applied the circular and precedents to hold that rectification should be allowed and the deduction granted.

Treatment of competing arguments: The Revenue's contention that the rectification application was not maintainable was rejected based on the Board's circular and High Court rulings.

Conclusion: Rectification under section 154 is permissible for late filing of audit reports required for claiming deduction under section 80IB.

Issue (f): Relevance of prior years' allowance of deduction under section 80IB

Relevant legal framework and precedents: Each assessment year is treated as a separate unit with its own facts and conditions. Prior allowance of deduction does not automatically entitle the assessee to claim deduction in subsequent years if conditions are not met.

Court's interpretation and reasoning: The CIT(A) had rejected the contention that prior years' allowance of deduction should influence the current year's claim. The Tribunal did not find it necessary to overturn this principle but allowed deduction on the basis of rectification and subsequent filing of Form 10CCB.

Key evidence and findings: The assessee had claimed and been allowed deduction in prior years without objection.

Application of law to facts: The Tribunal acknowledged the principle but allowed deduction on rectification grounds, not merely on the basis of prior years' allowance.

Treatment of competing arguments: The Revenue relied on the principle of separate assessment years; the Tribunal agreed but found rectification applicable.

Conclusion: Prior years' allowance is not determinative but the deduction was allowed on rectification grounds.

Issue (g): Interpretation and application of CBDT circulars and judicial precedents regarding prima facie disallowance under section 143(1)(a) and rectification

Relevant legal framework and precedents: CBDT Circular No. 669 clarifies scope of prima facie disallowance under section 143(1)(a) and the permissibility of rectification under section 154 if evidence is furnished subsequently. Judicial decisions have upheld this approach.

Court's interpretation and reasoning: The Tribunal extensively analyzed the circular and judicial rulings, concluding that the illustrations given in the circular are not exhaustive and the principle applies broadly to similar provisions, including section 80IB. The Tribunal emphasized that the AO's disallowance without allowing rectification was contrary to the Board's instructions and judicial precedents.

Key evidence and findings: The assessee furnished the audit report after filing the return but before completion of assessment proceedings.

Application of law to facts: The Tribunal applied the circular and precedents to hold that the disallowance was not justified without allowing rectification.

Treatment of competing arguments: The Revenue's narrow interpretation of the circular was rejected.

Conclusion: The CBDT circular and judicial precedents mandate allowing rectification for late filing of audit reports required for claiming deductions.

3. SIGNIFICANT HOLDINGS

"One of the rules of interpretation of a tax statute is that if a deduction or exemption is available on compliance with certain conditions, the conditions are to be strictly complied with. This rule is in line with the general principle that taxing statutes are to be construed strictly, and that there is no room for equitable considerations."

"The illustrations and instances given by the Board are not exhaustive. The intention behind the Board's circular is that in case the audit report required to be filed was not furnished with the return of income, then the deduction claimed can be disallowed as a prima facie adjustment. But, if it is furnished subsequently, then rectification should be carried out to the extent permitted by the Board's Circular No. 669 dated 25-10-1993."

"The Assessing Officer was not right in law in disallowing the rectification application only on the ground that the assessee had failed to furnish the audit report along with the return of income."

"Each Assessment Year is a separate unit governed by its own peculiar facts."

"The disallowance of deduction under section 36(1)(va) of the Act for belated deposit of Provident Fund contribution is upheld following the Supreme Court's ruling in Checkmate Services Pvt. Ltd."

Final determinations:

- The deduction under section 80IB of the Act cannot be denied solely on account of non-filing of Form 10CCB with the original return if the form is filed subsequently and rectification is sought under section 154.

- The AO is obligated to allow rectification under section 154 to permit the deduction once the audit report is furnished, consistent with CBDT circulars and judicial precedents.

- The disallowance of deduction under section 36(1)(va) for belated PF contributions is justified and upheld.

- The lockdown period does not constitute sufficient cause for condonation of delay in PF payments for the purpose of claiming deduction.