Section 80IC deduction allowed despite late return filing as delay was beyond assessee's control due to consultant's fault

The ITAT Chandigarh upheld CIT(A)'s decision allowing deduction under Section 80IC despite late filing of return. The Tribunal found the delay was beyond assessee's control due to tax consultant's fault, noting Section 80AC provisions are directory, not mandatory. The decision was supported by HC precedent in Ambey Developers case and CBDT Circular 37/2016 prohibiting revenue appeals where deduction is allowable. Additionally, the Tribunal confirmed deletion of addition for low gross profit, finding assessee's explanation for decline from 16.61% to 14.11% reasonable due to 50% turnover increase requiring reduced margins. The AO failed to controvert assessee's submissions regarding increased raw material costs and better resource management.

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Issues Involved:
1. Disallowance of Deduction under Section 80IC.
2. Addition due to Low Gross Profit.

Summary:

1. Disallowance of Deduction under Section 80IC:
The Department challenged the CIT(A)'s deletion of the disallowance of Rs. 1,43,23,507/- made by the AO under Section 80IC of the Income Tax Act, 1961. The AO disallowed the deduction citing that the return was filed beyond the due date specified under Section 139(1). The assessee argued that the delay was due to reasons beyond their control and that all necessary audit reports were filed in time. The CIT(A) deleted the disallowance, referencing the Tribunal's order for the previous assessment year (2013-14), which allowed the deduction despite a similar delay. The Tribunal upheld the CIT(A)'s decision, emphasizing that the delay was due to reasonable cause and that the provisions of Section 80AC are directory and not mandatory. The Tribunal also noted that the Department failed to show any difference in facts between the current and previous assessment years and that the Department's appeal against the Tribunal's order for AY 2013-14 was withdrawn.

2. Addition due to Low Gross Profit:
The Department contested the CIT(A)'s deletion of the addition made by the AO due to a fall in the gross profit rate from 16.61% to 14.11%. The AO made an addition of 2% without pointing out any defects in the books of account. The CIT(A) deleted the addition, noting that the AO did not reject the books of account and that the fall in gross profit was explained by the increase in turnover and raw material costs. The Tribunal confirmed the CIT(A)'s decision, citing case laws that mere decrease in gross profit does not justify an addition without finding specific defects in the books of account.

Conclusion:
The Tribunal dismissed the Department's appeal, confirming the CIT(A)'s deletion of both the disallowance under Section 80IC and the addition due to low gross profit. The Tribunal emphasized the importance of reasonable cause for delay and the necessity of finding specific defects in the books of account before making additions.

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