Substantial compliance for belated audit reports limits denial of deduction, and late filing alone cannot justify processing adjustment.

A belated audit report filed before completion of assessment did not, by itself, defeat a deduction claim where substantial compliance was otherwise shown, so denial of deduction merely for late filing of Form 10CCB was not justified at the processing stage under section 143(1). The matter was restored for limited verification of eligibility under section 80IC on merits. The direction to the assessee to seek condonation of delay before the CIT(Exemption) was also held unsustainable, as that jurisdiction did not lie on the facts stated.

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Issues: (i) whether the CIT(A) could direct the assessee to seek condonation of delay before the CIT(Exemption) in relation to the belated filing of Form 10CCB; and (ii) whether deduction under section 80IC could be denied at the processing stage under section 143(1) merely because Form 10CCB was filed after the prescribed due date but before completion of assessment.

Issue (i): whether the CIT(A) could direct the assessee to seek condonation of delay before the CIT(Exemption) in relation to the belated filing of Form 10CCB;

Analysis: The order of the first appellate authority proceeded on the footing that condonation of delay in filing the prescribed report had to be sought before the CIT(Exemption). That direction was held to be erroneous because the cited jurisdiction did not lie with the Exemption charge on the facts of the case.

Conclusion: The direction to approach the CIT(Exemption) was unsustainable.

Issue (ii): whether deduction under section 80IC could be denied at the processing stage under section 143(1) merely because Form 10CCB was filed after the prescribed due date but before completion of assessment.

Analysis: The statutory requirement to furnish the audit report was treated in the light of prior judicial decisions holding that belated filing before completion of assessment amounts to substantial compliance. On that approach, the deduction could not be rejected merely because the report was filed after the due date, and the adjustment made while processing the return was not justified on that ground alone. At the same time, the claim still required verification of eligibility under section 80IC.

Conclusion: Denial of the deduction solely for belated filing of Form 10CCB was not justified, and the matter was restored for limited verification.

Final Conclusion: The assessee obtained relief against the erroneous appellate direction and the mechanical denial of the claim, but the deduction claim was sent back to the Assessing Officer for verification on merits.

Ratio Decidendi: A statutory audit report filed after the due date but before completion of assessment cannot, by itself, defeat a deduction claim where substantial compliance is otherwise shown; any processing adjustment denying the claim must remain within the permissible scope of section 143(1).

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