Returns and audit report filed 14.02.2021 treated timely under Section 139 due to TOLA extension; demand withdrawn

The HC held the assessee's returns and audit report filed on 14.02.2021 were timely under Section 139 and the TOLA extension to 31.03.2021, and that the assessing authority wrongly disallowed expenses and raised demand by ignoring the CBDT notification extending filing time. The impugned order was set aside; the HC directed the revenue to withdraw the consequential demand and to open the e-portal for uploading any pending reports.

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The issues presented and considered in the judgment are as follows:1. Whether the impugned order disallowing expenses and issuing a consequential demand against the petitioner for the Assessment Year 2020-21 is valid.2. Whether the petitioner's failure to file IT returns and audit reports within the due date due to the COVID-19 pandemic justifies the disallowance of expenses and consequential demand.Issue-wise detailed analysis:Issue 1:Relevant legal framework and precedents:- Section 139 of the Income Tax Act- The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA Act)Court's interpretation and reasoning:- The petitioner failed to file IT returns and audit reports within the due date citing the COVID-19 pandemic as the reason.- The respondent disallowed expenses and issued a consequential demand against the petitioner.- The respondent referred to the provisions of Section 12A(1)(b) of the Income Tax Act regarding the filing of audit reports.- The government extended time limits for filing reports and returns due to the pandemic.Key evidence and findings:- The reports and audit reports were filed on 14.02.2021.- The due dates for filing reports were extended till 31.03.2021 due to COVID-19.Application of law to facts:- The court found that the reports were filed on time according to the extended due dates.- The impugned order disallowing expenses and consequential demand was based on reasons of delay without considering the notification extending time limitations.Conclusions:- The impugned order disallowing expenses and issuing a consequential demand against the petitioner was set aside.- The respondent was directed to remove the consequential demand and open the E portal for uploading reports.Significant holdings:- "Therefore, the returns were filed on time in accordance with the provisions of Section 139 of the Income Tax."- The impugned order disallowing expenses and consequential demand was set aside.Core principles established:- Compliance with extended due dates due to COVID-19 pandemic is considered valid for filing reports and returns.- Failure to consider government notifications extending time limitations may result in the reversal of decisions disallowing expenses.Final determinations on each issue:- The impugned order disallowing expenses and consequential demand was set aside.- The petitioner's filing of reports within the extended due dates was considered valid.Overall, the court found in favor of the petitioner, setting aside the impugned order and directing the respondent to remove the consequential demand against the petitioner.

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