2025 (8) TMI 1042 - AT - Income Tax

Assessee eligible for deduction under s.80IC despite revised return and late audit report filed after original s.139(1) claim

Bhagwan Precision Versus ACIT, Rohtak.

Bhagwan Precision Versus ACIT, Rohtak. - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether a deduction under section 80IC is allowable where it was claimed in the original return filed under section 139(1) but the statutory audit report in Form 10CCB was filed later with a revised return under section 139(5) before completion of assessment. 2. Whether the requirement to file the audit report (Form 10CCB) along with the return for claiming deduction under Chapter VI-A (specifically section 80IC) is mandatory (jurisdictional) or directory such that filing the audit report before completion of assessment suffices. 3. Whether mere processing of a revised return and rejection of the deduction by CPC on the ground that Form 10CCB was not e-filed within the due date precludes allowance of the deduction where the original return contained the claim. 4. Ancillary: Whether denial of deduction by way of intimation under section 143(1) without granting opportunity is impermissible (raised but not separately decided beyond its relation to issues 1-3). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Allowability of section 80IC deduction when claimed in original return but audit report filed with revised return before completion of assessment Legal framework: Section 80IC (Chapter VI-A) confers specified deductions; section 80AC/80A(5) conditions claims under Chapter VI-A on the return of income being furnished on or before the due date specified under section 139(1). Section 139(5) permits filing of a revised return. Statutory audit report requirement for certain deductions is effected via Form 10CCB (and audit under section 44AB). Precedent treatment: Several tribunals and high court decisions have addressed analogous issues under sections 80-IA/80J, holding that filing of the audit report along with the return is directory and substantial compliance occurs if the audit report is filed before completion of assessment. The judgment follows that line of authority (e.g., decisions treating filing of the audit report as directory). The decision cites and relies on those precedents rather than distinguishing or overruling any. Interpretation and reasoning: The Court observes that the statutory scheme aims at claim being made in the return of income; section 80AC requires return filed on or before the due date but does not categorically prohibit cure by subsequent filing of supporting audit report if the claim itself was included in the timely return. The assessee had claimed the deduction in the original return filed under section 139(1). The audit report (Form 10CCB) was furnished subsequently with a revised return filed under section 139(5), and crucially, the audit report was submitted before completion of assessment. The Court reasons that what is material is the claim in the return (as required by section 80AC) and substantial compliance with the supporting-document requirement is achieved if the audit report is filed prior to assessment completion. Ratio vs. Obiter: Ratio - A claim under section 80IC that is made in the original return filed under section 139(1) is not defeated by subsequent filing of the required audit report with a revised return under section 139(5), provided the audit report is submitted before completion of the assessment. Obiter - Observations on the equivalence of wording across Chapter VI-A provisions and illustrative policy considerations drawn from other chapter provisions (e.g., 80-IA and 80J analogies) are persuasive but ancillary. Conclusion: Deduction under section 80IC held allowable where (a) the deduction was claimed in the timely original return under section 139(1), and (b) the audit report in Form 10CCB was filed with a revised return under section 139(5) before completion of assessment. Issue 2 - Mandatory versus directory nature of filing Form 10CCB with the return Legal framework: Statutory provisions require production of audit report in specified situations to substantiate claims for Chapter VI-A deductions. The language of companion provisions in Chapter VI-A has been interpreted in prior authorities. Precedent treatment: The Court expressly follows a line of judicial authority (including High Court decisions and tribunal rulings) that treats the requirement to file the audit report along with the return as directory rather than mandatory, allowing cure by filing before assessment completion. The Court refers to authoritative decisions holding similar provisions (e.g., provisions akin to section 80-IA(7) and section 80J(6A)) to be directory. Interpretation and reasoning: The Court reasons that requiring literal contemporaneous filing of the audit report with the original return would produce harsh results where the substantive claim has been made in the timely return and the audit report is furnished subsequently but prior to assessment completion. The Court finds substantial compliance where the audit report is supplied before assessment is finalized, aligning with established precedents. Ratio vs. Obiter: Ratio - The statutory requirement to file the audit report along with the return is directory; filing the audit report before completion of assessment satisfies the requirement for entitlement to the deduction under section 80IC. Obiter - Comparative commentary on other decisions and policy rationale is persuasive but not essential to the holding. Conclusion: Filing Form 10CCB contemporaneously with the original return is not a mandatory jurisdictional precondition; submission of the audit report before completion of assessment constitutes compliance and permits allowance of the deduction. Issue 3 - Effect of CPC processing/rejection under section 143(1) for non e-filing within due date where original return contained the claim Legal framework: Processing under section 143(1) may result in intimation rejecting certain claims, but the entitlement to deductions depends on substantive compliance with statutory conditions and on whether defects are curable before completion of assessment. Precedent treatment: Authorities cited support reversal of automated or initial rejections where the taxpayer rectifies supporting documentation prior to completion of assessment and where the claim was originally made in the timely return. Interpretation and reasoning: The Court observes that CPC's intimation rejecting the claim on technical ground of Form 10CCB not being e-filed within the due date does not override the substantive compliance achieved by filing the audit report before assessment completion when the claim was present in the original return. The Court treats the CPC's processing result as a procedural step that cannot defeat the statutory entitlement where defects have been cured in time. Ratio vs. Obiter: Ratio - Rejection of a deduction by automated processing on the ground of non e-filing of Form 10CCB does not preclude allowance where the original return contained the claim and the audit report was furnished before completion of assessment. Obiter - Observations on CPC procedures and electronic filing formalities are explanatory. Conclusion: The deduction cannot be denied solely on the basis of CPC processing/intimation under section 143(1) where the taxpayer made the claim in the original return and furnished the required audit report before completion of assessment; such a technical rejection is not determinative of entitlement. Issue 4 - Denial of deduction without being called / opportunity to be heard (ancillary) Legal framework: Principles of natural justice and statutory appellate/assessment safeguards require opportunity to be heard when adverse consequences follow; section 143(1) intimations and subsequent assessment actions must respect such principles where material facts are contested. Precedent treatment: Not separately adjudicated in depth but addressed in context of remedial cure by filing Form 10CCB prior to assessment completion and reliance on precedents permitting acceptance of claims cured before assessment. Interpretation and reasoning: The Court's reasoning that the claim was properly made in the original return and the audit report furnished before assessment completion implicitly addresses procedural fairness concerns-denial on technical grounds without recognizing curative compliance would be contrary to the statutory scheme and precedents. Ratio vs. Obiter: Obiter - The point was raised by the appellant, and the decision's primary holdings (Issues 1-3) render separate detailed pronouncement unnecessary; however, the Court's allowance implicitly finds that denial without regard to cured compliance would be impermissible. Conclusion: Where entitlement is established by timely claim and curative submission of the audit report before completion of assessment, a denial effected by intimation without consideration of such compliance is not upheld. Overall Conclusion The Court holds that the assessee's deduction under section 80IC is allowable: the deduction was claimed in the original return filed under section 139(1); the statutory audit report in Form 10CCB was filed with a revised return under section 139(5) before completion of assessment; and the requirement to file the audit report with the return is directory so that filing before assessment completion satisfies the statutory condition. Accordingly, the appeal is allowed and the deduction is restored.