2025 (7) TMI 881 - AT - Income Tax

Deduction u/s 80JJAA - claim denied as due date for submitting the return in the case of the appellant was 30.09.2023 and form 10DA was not filed within the time frame outlined by the act - inconsistency between the provisions of the income tax Act Income tax Rules - assessee vehemently submitted that the assessee company could not file Form 10DA along with the Tax Audit Report due to certain technical reasons although the same was ready duly signed by the Chartered Accountant on or before the due date HELD THAT - Section 80JJAA(2)(c) of the Act was substituted for along with the return of income the report of the accountant as defined in the Explanation below sub-section (2) of section 288 by the Finance Act 2020 w.e.f. 01-04-2020. Thus as per Section 80JJAA(2)(c) of the Act the assessee company must furnish the report of the Accountant in Form No. 10AD before the specified date referred to in Section 44AB of the Act .Therefore in the present case the due date of furnishing the report of the chartered accountant in Form No. 10DA was 30/09/2023 as per the provisions of the Act. We take a note of the fact that the Rule 12AB still stipulates that the report of an accountant is required to be furnished along with the return of Income. There is a discrepancy/inconsistency between the provision of the Income tax act and the Provision of the Income Tax Rules. Perhaps the legislature overlooked amending rule 19AB in consequent to the substitution of Section 80JJAA(2)(c) of the Act by the Finance Act 2020 w.e.f. 01-04-2020. If we consider the Rules then as per the Rule 12AB the assessee company had rightly furnished the Report of the accountant in form 10AD along with the return of income. When there is inconsistency between the provisions of the income tax Act Income tax Rules the provision of the income Tax Act will prevail. In holding so we rely on the decision of the Hon ble Delhi High Court in the case of National Stock Exchange Member vs Union Of India (Uoi) And Ors. 2005 (11) TMI 251 - HIGH COURT OF DELHI . We are of the opinion that in order to claim deduction u/s 80JJAA of the Act the report of an Accountant is required to be furnish one month prior to the date for furnishing the return of income under sub-section (1) of section 139 i.e. on or before 30/09/2023. Whether requirement of furnishing the report of an Accountant in form 10DA on or before the due date is mandatory to claim the deduction u/s 80JJA of the Act? - We are of the considered opinion that obviously the requirement of furnishing the report of an accountant is mandatory; however the filing thereof is a procedural aspect. Once the report of the Accountant in Form 10DA was available before the CPC at the time of passing intimation u/s 143(1) of the act even though the same may not be filed on or before the due date of furnishing the same the assessee is entitled to claim the deduction u/s 80JJAA of the Act. Thus when the report of an accountant was part of the record of the AO during the processing of the return of income the AO could not have denied the deduction claimed by the assessee u/s 80JJAA of the Act. In holding so we get the guidance support from the decision of G. M. Knitting Industries (P.) /Ltd. 2015 (11) TMI 397 - SC ORDER Assessee is claiming the deduction from the Asst. year 2019-20 onwards the Form 10DA for the Asst. year 2023-24 was filed even before the due date of filing the return and the same was also part of the record of the AO during the processing of the return of income the AO could not have denied the deduction claimed by the assessee u/s 80JJAA of the Act. AO has not verified the quantification of deduction claimed u/s 80JJAA by the assessee company we deem it fit proper to remit this issue to the file of AO with the above observations for the limited verification of quantification of the allowable deduction u/s 80JJAA. Appeal filed by the assessee is partly allowed for statistical purposes.

Summary

The core legal questions considered by the Tribunal in this appeal are:

1. Whether the deduction claimed under Section 80JJAA of the Income Tax Act, 1961 ("the Act") can be disallowed on the ground that Form 10DA was not filed within the prescribed time, despite being ready and signed before the due dateRs.

2. Whether the filing of Form 10DA along with the return of income, as mandated by Rule 19AB of the Income Tax Rules, 1962 ("the Rules"), is mandatory and absolute for claiming deduction under Section 80JJAARs.

3. Whether the provisions of the Act or the Rules would prevail in case of any inconsistency between them regarding the timing and manner of filing Form 10DARs.

4. Whether the Assessing Officer (AO) was justified in disallowing the entire deduction claimed under Section 80JJAA when only a part of the claim was found discrepantRs.

5. Whether the quantification of deduction under Section 80JJAA claimed by the assessee requires verification by the AORs.

Issue-wise Detailed Analysis:

1. Timeliness and Mandatory Nature of Filing Form 10DA for Claiming Deduction under Section 80JJAA

Legal Framework and Precedents: Section 80JJAA(2)(c) of the Act requires the assessee to furnish the report of an accountant (Form 10DA) before the specified date referred to in Section 44AB, which is one month prior to the due date for filing the return of income under Section 139(1). The relevant due date for the assessment year 2023-24 was 31/10/2023, making the specified date for Form 10DA filing 30/09/2023. Rule 19AB of the Rules mandates that the report of the accountant required under Section 80JJAA(2)(c) shall be in Form No. 10DA and shall be furnished along with the return of income.

Court's Interpretation and Reasoning: The Tribunal noted a discrepancy between the Act and the Rules. While the Act requires filing Form 10DA before the specified date (30/09/2023), the Rules require filing it along with the return of income (due on 31/10/2023). The Tribunal held that in case of such inconsistency, the provisions of the Act prevail over the Rules, relying on the hierarchy of laws as explained in the decision of the Hon'ble Delhi High Court (National Stock Exchange Member vs Union of India). Thus, the statutory requirement is to file Form 10DA on or before 30/09/2023.

Key Evidence and Findings: The assessee filed the Tax Audit Report (Forms 3CA & 3CD) on 28/09/2023, before the due date of 30/09/2023. However, Form 10DA, though dated 25/09/2023 and signed by the Chartered Accountant, was uploaded only on 26/10/2023 along with the return of income, which was filed before the due date of 31/10/2023.

Application of Law to Facts: The Tribunal acknowledged that the assessee could not upload Form 10DA by 30/09/2023 due to technical reasons, despite it being ready and signed on or before that date. The Tribunal took note that the deduction under Section 80JJAA had been consistently claimed by the assessee from assessment year 2019-20 onwards and was disclosed in the Tax Audit Report.

Treatment of Competing Arguments: The Revenue argued that the delay in filing Form 10DA cannot be condoned except by the jurisdictional Commissioner under Section 119(2)(b) of the Act and that the deduction quantification was not verified by the AO. The assessee argued for acceptance of the deduction since Form 10DA was available before the AO at the time of processing the return.

Conclusions: The Tribunal concluded that the filing of Form 10DA is mandatory but procedural in nature. Since the report was available before the AO during processing, the deduction should not have been denied outright. The Tribunal relied on the Supreme Court decision in Commissioner of Income-tax, Maharashtra v. G. M. Knitting Industries (P.) Ltd., which held that non-filing of a required form along with the return does not disentitle the assessee if the form is filed before the assessment order is passed.

2. Disallowance of Entire Deduction versus Partial Disallowance

Legal Framework and Precedents: Section 143(1)(a)(ii) of the Act allows the Assessing Officer to restrict deductions claimed if there is a discrepancy in the supporting documents.

Court's Interpretation and Reasoning: The Tribunal observed that the Central Processing Centre (CPC) had noted a discrepancy of Rs. 19,66,94,811/- in the deduction claimed (Rs. 35,71,25,441/- claimed minus Rs. 16,04,30,630/- supported by Form 10DA), but disallowed the entire amount without assigning any reason. The Tribunal found this approach arbitrary and unjustified.

Key Evidence and Findings: The assessee had disclosed the deduction in clause 33 of Form 3CD and had a consistent history of claiming this deduction in earlier years.

Application of Law to Facts: The Tribunal held that the AO or the CIT(A) should have restricted the deduction to the extent supported by Form 10DA and not disallowed the entire claim without reasoned justification.

Treatment of Competing Arguments: The Revenue did not provide any substantive rebuttal to this point beyond procedural objections.

Conclusions: The Tribunal found force in the assessee's contention and directed that the quantification of deduction be verified by the AO rather than outright denial.

3. Verification of Quantification of Deduction under Section 80JJAA

Legal Framework and Precedents: Section 80JJAA prescribes deduction equal to 30% of additional employee cost, subject to conditions and verification.

Court's Interpretation and Reasoning: The Tribunal noted that the AO had not examined the quantification of the deduction claimed. It was held that verification of the claim is necessary and should be done with due opportunity to the assessee.

Key Evidence and Findings: The assessee was directed to produce relevant documents and information to substantiate the claim.

Application of Law to Facts: The Tribunal remitted the issue to the AO for limited verification of the quantification of the allowable deduction under Section 80JJAA.

Treatment of Competing Arguments: The Revenue supported remand for verification, and the assessee agreed to cooperate.

Conclusions: The Tribunal ordered remand for verification with a direction to grant reasonable opportunity to the assessee.

4. Interest and Other Grounds Raised by the Assessee

The assessee had also raised grounds relating to disallowance of advance tax, levy of interest under Sections 234B and 234C, and non-consideration of judicial precedents. However, the Tribunal's order primarily focused on the core issue of deduction under Section 80JJAA and the procedural compliance regarding Form 10DA. No separate detailed findings were recorded on these ancillary grounds, indicating that they were either not pressed or found unmerited in the light of the main issue.

Significant Holdings:

"We are of the considered opinion that when there is inconsistency between the provisions of the Income Tax Act and the Income Tax Rules, the provision of the Income Tax Act will prevail."

"Once the report of the Accountant in Form 10DA was available before the CPC at the time of passing intimation under section 143(1) of the Act, even though the same may not be filed on or before the due date of furnishing the same, the assessee is entitled to claim the deduction under section 80JJAA of the Act."

"The AO could not have denied the deduction claimed by the assessee under section 80JJAA of the Act when the report of an accountant was part of the record during processing of the return of income."

"The quantification of deduction claimed under section 80JJAA requires verification by the AO with reasonable opportunity to the assessee."

Core principles established include:

- The statutory provision in the Income Tax Act overrides inconsistent provisions in subordinate legislation such as Rules.

- Procedural non-compliance, such as delayed filing of Form 10DA, may not disentitle an assessee to substantive benefits if the requisite documents are available before the AO at the relevant stage.

- The AO must verify the quantification of deductions claimed and cannot disallow the entire deduction without reasoned justification.

- The assessee is entitled to reasonable opportunity to substantiate claims before adverse orders are passed.

Final determinations on each issue:

- The deduction under Section 80JJAA claimed by the assessee cannot be denied merely on the ground of delayed filing of Form 10DA, given that the form was ready before the specified date and was available before the AO during processing.

- The disallowance of the entire deduction without reasoned explanation was improper.

- The matter is remitted to the AO for limited verification of the quantification of the deduction with a direction to grant the assessee reasonable opportunity.

- The appeal is partly allowed accordingly.