2025 (1) TMI 1639 - AT - Income Tax

Delay in audit report due to portal glitches; AO ordered to accept Form 10CCB and allow deduction under Section 80IA

ITAT allowed the appeal, holding the delay in acceptance of the audit report was due to technical glitches on the Income Tax portal and not assessee ... Denial of deduction u/s 80IA - audit report could not be filed within the stipulated time - intimation u/s 143(1) disallowing the deduction claimed u/s 80IA on the ground that the audit report was not filed by the assessee within the extended due date - HELD THAT:- There is no dispute about the facts that the extended due date for filing the audit report was 15th February 2022 and the auditor had duly uploaded the audit report on the extended due date from their Income Tax portal however, the assessee could not accept the audit report on the same date due to technical glitches on the Income Tax portal. It is found that the assessee made genuine efforts to comply with the statutory requirement, as evident from record that grievances were raised on 15th February 2022 and 12th March 2022 regarding the technical issues and attempts were made to resolve the issue through proper channels, which remained unresolved. The failure to file the audit report within the due date was solely attributable to technical glitches and not due to any default or negligence on the part of the assessee. Assessee should not suffer adverse consequences for reasons beyond its control. We direct the AO to accept the audit report i.e. form 10CCB in physical form and, after verifying the same, allow the deduction claimed u/s 80IA of the Act as per the law. Accordingly, the appeal of the assessee is allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the delay of 21 days in filing the appeal before the Tribunal should be condoned where the assessee filed an affidavit attributing the delay to its tax consultant's engagement and the Revenue raised no objection. 2. Whether deduction under Section 80IA(7) (read with rule 18BBB and section 44AB) can be denied where the auditor uploaded Form 10CCB on the extended due date but the assessee could not accept/confirm the upload on the e-filing portal due to technical glitches. 3. Whether a mechanical intimation under section 143(1) disallowing a deduction solely on the ground of non-acceptance of Form 10CCB on the e-filing portal (despite auditor having uploaded the audit report on time and the assessee having taken steps to report portal glitches) is void, and whether the AO/Tribunal should be directed to accept the audit report in physical form and allow the deduction after verification. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Condonation of Delay in Filing Appeal Legal framework: Principles governing condonation of delay require demonstration of sufficient cause for delay; the Revenue may object, but absence of objection is a relevant consideration. Precedent Treatment: No specific precedent was cited in the record; the Tribunal applied ordinary principles of condonation of delay. Interpretation and reasoning: The assessee filed an affidavit explaining that the delay resulted from the tax consultant's engagement in time-barred tax audit returns. The Revenue raised no objection to condonation. The Tribunal found the explanation credible and the lack of objection by Revenue persuasive. Ratio vs. Obiter: Ratio - delay of 21 days in filing appeal was condoned based on sufficient cause and non-objection from Revenue. Conclusion: The Tribunal condoned the 21-day delay and admitted the appeal for adjudication. Issue 2 - Availability of Section 80IA Deduction Where Form 10CCB Not Accepted Online Due to Portal Technical Glitches Legal framework: Deduction under Section 80IA is conditional on compliance with statutory/formal requirements, including filing/uploading of audit report in Form 10CCB within the prescribed/extended due date; rule 18BBB and section 44AB set out related audit and certification obligations. CPC/section 143(1) intimation may reflect adjustments based on compliance records. Precedent Treatment: The record does not reference controlling precedents. The Tribunal considered facts and applied principles of substantive entitlement versus procedural compliance. Interpretation and reasoning: The undisputed facts were (a) extended due date for Form 10CCB was 15.02.2022; (b) the auditor uploaded the audit report from the auditor's portal on that date; (c) the assessee could not accept the report on the assessee's portal on the same date due to technical glitches; and (d) the assessee lodged grievances with the e-filing system on 15.02.2022 and again on 12.03.2022. The Tribunal found these efforts demonstrative of genuine compliance attempts and that failure to complete the online acceptance was attributable solely to portal technicalities beyond the assessee's control. The Tribunal reasoned that substantive compliance (audit report prepared and uploaded on time by the auditor, physical Form 10CCB executed with sign and UDIN and issued within the due date) should not be negated by an inability to complete an online procedural step caused by the Department's software. The Tribunal emphasized that procedural glitches should not defeat legislative intent to allow substantive deductions where statutory conditions are otherwise met. Ratio vs. Obiter: Ratio - where an assessee demonstrates that statutory conditions for a deduction were complied with and non-compliance with an online procedural requirement resulted from technical glitches outside the assessee's control, the assessee should not be denied the deduction; the audit report/form may be accepted in physical form after verification. Obiter - observations on the general unfairness of 'procedural supremacy' over substantive rights in faceless/mechanical intimations. Conclusion: The Tribunal directed the Assessing Officer to accept the audit report (Form 10CCB) in physical form, verify it, and allow the deduction under Section 80IA as per law. Issue 3 - Validity of Mechanical Intimation under Section 143(1) Disallowing Deduction Solely for Non-Acceptance on Portal Legal framework: Intimations under section 143(1) are based on processing of returns and related records; however, substantive entitlement to deductions depends on compliance with statutory conditions. Administrative or technical errors in the Department's e-filing infrastructure may affect automated processing. Precedent Treatment: No precedent was cited. The Tribunal addressed the propriety of mechanically disallowing a deduction where the underlying cause was a portal fault and where factual evidence showed compliance efforts. Interpretation and reasoning: The Tribunal treated the CPC intimation as a mechanical outcome of the portal's records showing non-acceptance of Form 10CCB. Given documentary evidence that the auditor had uploaded the report on time and that the assessee had raised grievances promptly, the Tribunal concluded the intimation could not be allowed to operate so as to defeat substantive compliance. The Tribunal found that the intimation's disallowance, being rooted solely in an online procedural failure for which the assessee was not responsible, ought not to cause adverse tax consequence. Consequently, the Tribunal ordered that the AO accept and verify the physical audit report and correct the intimation by allowing the deduction if verification is satisfactory. Ratio vs. Obiter: Ratio - a mechanical/intimation-based disallowance premised solely on a procedural non-acceptance caused by portal technicality is not a valid basis to deny a deduction where the assessee can demonstrate substantive compliance and efforts to resolve the portal issue. Obiter - commentary criticizing mechanistic application of procedure over legislative intent in faceless processing systems. Conclusion: The mechanical intimation under section 143(1) disallowing the Section 80IA deduction on the sole ground of non-acceptance of Form 10CCB on the portal was set aside; the AO was directed to accept the physical Form 10CCB, verify it, and allow the deduction if the verification is in order. Cross-References Issues 2 and 3 are interlinked: the Tribunal's conclusions on the 80IA entitlement (Issue 2) flow from its determination that the CPC's mechanical disallowance (Issue 3) was inappropriate where the failure to complete an online procedural step was due to departmental technical glitches and the assessee had otherwise complied with statutory requirements. Outcome The Tribunal condoned the delay in filing the appeal and allowed the appeal on merits by directing acceptance and verification of the physical audit report (Form 10CCB) and allowance of the Section 80IA deduction if verification is satisfactory.