Appeal allows deduction claim under section 10AA despite delayed Auditor's report filing

The appeal challenging orders passed by the Principal Commissioner of Income Tax under section 263 of the Income-tax Act for A.Y. 2017-18 and 2018-19 was allowed. The issue revolved around the eligibility for claiming deduction under section 10AA of the Act. The court held that the delayed filing of the Auditor's report, considered directory, did not render the assessment order erroneous. As the Auditor's report was filed before the assessment order was passed, the grounds raised in the appeals were allowed, setting aside the impugned order.

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Issues involved: Appeal challenging orders passed by Principal Commissioner of Income Tax under section 263 of the Income-tax Act, 1961 for A.Y. 2017-18 and 2018-19.

Summary:

Issue 1: Eligibility for claiming deduction u/s 10AA of the Act
The learned PCIT exercised powers under section 263 of the Act due to the assessment orders being found erroneous and prejudicial to the interests of Revenue. The main contention was that the assessee was considered eligible for claiming deduction u/s 10AA despite the mandatory Auditor's report in prescribed Form 56 not being filed before the due date of filing the return.

Details: The return of income for both assessment years was filed after the due date, but Form 56 was submitted to the AO during the assessment proceedings. The learned AR argued that the Auditor's report was filed before the completion of the assessment, relying on judgments by the Hon'ble Delhi High Court. The Bench concluded that the issue was examined by the AO during the assessment proceedings, and the Auditor's report was filed before the assessment order was passed. Citing a recent Supreme Court judgment, it was held that delayed compliances, considered directory in nature under prevailing law, did not render the assessment order erroneous. Therefore, the grounds raised in the appeals were allowed, and both appeals were allowed, setting aside the impugned order.

Separate Judgement: No separate judgment was delivered by the judges in this case.

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