Deduction under Section 80IBA allowed despite 16-day ITR delay due to bona fide Covid-19 cause and substantial compliance

The ITAT Jaipur allowed the assessee's appeal, holding that denial of deduction under section 80IBA solely due to a 16-day delay in filing the ITR was unjustified. The assessee's claim was not disputed on merits but rejected on a technical ground despite substantial compliance and a reasonable cause related to the Covid-19 period. The tribunal relied on Himachal Pradesh HC precedent to affirm the admissibility of the deduction. Since the assessee had a bona fide reason for the delay and was entitled to the computed deduction, it should not be subjected to tax liability it does not owe. The addition made without a show cause notice was also set aside.

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ISSUES:

Whether deduction claimed under section 80IBA of the Income Tax Act can be denied solely on the ground that the return of income was filed after the due date specified under section 139(1)?Whether disallowance of deduction under section 80IBA can be made by way of adjustment under section 143(1) of the Act'Whether interest under sections 234A, 234B, and 234C can be charged in the circumstances where deduction under section 80IBA is disallowed due to late filing of return'Whether a belated return filed under section 139(4) can be considered valid for claiming deductions under Chapter VIA, specifically under section 80IBA'Whether reasonable cause or bonafide reasons for delay in filing return within due date can be considered to allow deduction under section 80IBA despite late filing?

RULINGS / HOLDINGS:

Deduction under section 80IBA, which falls under Part C of Chapter VIA, is admissible only if the return of income is furnished on or before the due date specified under section 139(1) of the Act, as mandated by section 80AC(ii). Consequently, deduction cannot be allowed if the return is filed belatedly under section 139(4). The court held that "the provisions laid out in Section 80AC(ii), which came into effect on April 1, 2018, leave no room for ambiguity" and "no claims under any of the provisions in Part C of Chapter VIA will be entertained in the instance of a belated return."The disallowance of deduction under section 80IBA cannot be made by way of adjustment under section 143(1) of the Act, as such disallowance is not a prima facie adjustment; section 143(1) permits only prima facie adjustments, and denial of substantive deductions requires scrutiny assessment.Interest under sections 234A, 234B, and 234C is mandatory and consequential in nature when the deduction under section 80IBA is disallowed due to late filing of return; thus, such interest charges are upheld.Where there is a reasonable and bonafide cause for delay in filing the return within the due date, such as delay attributable to the assessee's tax consultant or extraordinary circumstances (e.g., Covid-19 pandemic), the courts may allow the deduction under section 80IBA despite late filing, treating section 80AC as a machinery provision that is directory rather than mandatory in such cases.Supporting documents like audit reports and claims under section 80IBA filed within the prescribed due date strengthen the assessee's claim, and where the return is filed within the extended period under section 139(4), the delay may be condoned if justified by facts and circumstances, including absence of mala fide intention and no loss to revenue.

RATIONALE:

The court applied the statutory framework of the Income Tax Act, particularly sections 139(1), 139(4), 80IBA, 80AC, and 143(1), alongside judicial precedents interpreting the interplay between timely filing of returns and entitlement to deductions under Chapter VIA.Section 80AC explicitly conditions the allowance of deductions under Part C of Chapter VIA on filing the return within the due date specified under section 139(1), making the timing of filing a statutory prerequisite for deduction claims.However, judicial interpretation, supported by decisions from various High Courts and Tribunals, has recognized section 80AC as a machinery provision, allowing for a directory rather than mandatory interpretation in cases of reasonable cause for delay, thereby enabling allowance of deductions despite belated returns filed within extended periods under section 139(4).The court relied on authoritative decisions including the Supreme Court's ruling in Prakash Nath Khanna, and various Tribunal decisions (e.g., Symbiosis Pharmaceuticals, Lunidhar Seva Sahkari Mandali Ltd., and PCIT vs. HIMUDA), which collectively emphasize that while the statutory language is clear, equitable considerations and bonafide reasons for delay can justify condonation of late filing and consequent allowance of deductions.The court distinguished cases where delays were not justified or supported by evidence, emphasizing the need for factual demonstration of reasonable cause, such as affidavits explaining delay due to tax consultant's misconduct or pandemic-related disruptions.It was noted that disallowance of deductions under section 80IBA is a substantive issue and cannot be conclusively determined by summary adjustments under section 143(1), which is limited to prima facie adjustments apparent from the return itself.The court also observed that denial of deduction merely on technical grounds of delayed filing, especially when there is no mala fide intent and no prejudice to revenue (e.g., payment of Alternate Minimum Tax), would be contrary to the principles of tax justice and equity.The decision reflects a doctrinal approach balancing strict statutory compliance with equitable relief in appropriate cases, marking a nuanced interpretation of procedural provisions in income tax law.

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