2011 (11) TMI 76 - AT - Income Tax

Claim of deduction u/s 80IC - requirement of filing of return u/s 139(1) - held that - The system of e-filing the return of income was introduced from assessment year 2006-07 for corporates tax payers and from assessment year 2007-08 for both the companies and the firms to whom provisions of section 44AB are applicable. - where in the original return of income the claim made by the assessee was not reflected in the e-return form filed by the assessee because of systems error, though tax payable is reflected at nil, which would be so when the total income after deductions is nil. Where, on the filing of the revised return the said error was corrected, the assessee cannot be said to have not fulfilled the provisions of section 80IC of the Act in furnishing the return of income prescribed u/s 139(1) of the Act, keeping in mind that this was first year of e-filing of return of income by the assessee. - Decided in favor of assessee - matter remanded to AO to verify the claim of deduction u/s 80IC of the Act in line with the similar claim being made by the assessee in the earlier year.

Summary

Issues:
- Disallowance of deduction u/s 80IC for failure to claim in original return
- System error in e-filing leading to deduction claim discrepancy
- Interpretation of provisions under section 80AC and 80A of the Income Tax Act
- Validity of revised return filing and claim for deduction under Chapter VI-A
- Compliance requirements for e-filing returns and audit report submission

Analysis:
1. Disallowance of deduction u/s 80IC: The appeal contested the addition of Rs. 31,43,965 by disallowing the deduction u/s 80IC due to failure to claim it in the original return filed by the assessee. The Assessing Officer held that under section 80AC, no deduction shall be allowed unless the return is filed before the due date specified u/s 139(1). The CIT (A) upheld this decision.

2. System error in e-filing: The assessee claimed to have initially included the deduction under section 80IC in the original return but due to a system error, it was not reflected. The revised return filed later rectified this discrepancy. The Tribunal acknowledged the system error and the subsequent correction made by the assessee.

3. Interpretation of relevant provisions: The Tribunal referred to section 80A which mandates that deductions under specified sections are allowed only if the return is furnished before the due date u/s 139(1). The explanation regarding the due date and revised return filing under section 139(1) was crucial in determining the admissibility of the deduction.

4. Validity of revised return and deduction claim: The Tribunal accepted the assessee's argument that the error in the original return was rectified through the revised return filed within the prescribed time. It emphasized that the assessee fulfilled the provisions of section 80IC by correcting the error and claiming the deduction in the revised return.

5. Compliance requirements for e-filing: The Tribunal highlighted the introduction of e-filing for certain categories of taxpayers and the necessity for firms falling under section 44AB to file returns electronically. The assessment considered the mandatory e-filing requirement for the assessee and the need to incorporate audit report details for claiming deductions like under section 80IC.

6. Final decision: The Tribunal allowed the appeal for statistical purposes, directing the Assessing Officer to verify the claim of deduction u/s 80IC in line with previous years and provide a reasonable opportunity for the assessee. The decision emphasized the importance of rectifying errors in returns and ensuring compliance with e-filing regulations and deduction provisions under the Income Tax Act.