2016 (12) TMI 1790 - AT - Income Tax

Deduction u/s. 80I 80IB - appellant submitting return beyond due date - HELD THAT - The undisputed fact is that the return of income for the year under consideration was not furnished on or before the due date as per the provisions of section 139(1). In our considered opinion provisions of section 80AC of the Act squarely apply on the facts of the case in hand section 80AC reads as under - Where in computing the total income of an assessee of the previous year relevant to the assessment year commencing on the 1st day of April 2006 or any subsequent assessment year any deduction is admissible under section 80IA or section 80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80- IE no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub- section (1) of section 139 . - Decided in favour of revenue

Summary

Issues Involved:
1. Deduction under Section 80IA and 80IB of the Income Tax Act.
2. Filing of return beyond the due date specified under Section 139(1).
3. Compliance with provisions of Section 80AC of the Income Tax Act.
4. Authority of CIT(A) in allowing deductions without proper verification.
5. Impact of pending demerger petition on filing returns.

Detailed Analysis:

1. Deduction under Section 80IA and 80IB of the Income Tax Act:
The assessee, a Private Limited Company engaged in the manufacturing of sponge iron, claimed deductions under Sections 80IA and 80IB amounting to ?7,66,56,588 and ?6,49,65,494 respectively. The Assessing Officer (AO) disallowed these deductions since the return was filed after the due date specified under Section 139(1) of the Act. The assessee argued that the delay was due to a pending demerger petition before the High Court, which was beyond their control.

2. Filing of return beyond the due date specified under Section 139(1):
The AO disallowed the deductions under Sections 80IA and 80IB, citing that the return was filed beyond the due date as per Section 139(1). The assessee contended that the delay was due to abnormal circumstances, specifically a pending demerger petition, which prevented the timely filing of returns.

3. Compliance with provisions of Section 80AC of the Income Tax Act:
The AO's decision to disallow the deductions was based on Section 80AC, which mandates that deductions under Sections 80IA and 80IB are not permissible unless the return is filed within the due date specified under Section 139(1). The CIT(A) allowed the deductions, considering the delay as reasonable and beyond the assessee's control, thus not strictly adhering to Section 80AC.

4. Authority of CIT(A) in allowing deductions without proper verification:
The CIT(A) allowed the deductions without re-examining the factual aspects of the assessee's claim, relying on the Director General of Income Tax (Investigation)'s finding that the assessee fulfilled all requirements for deductions under Sections 80IA and 80IB, except for the timely filing of returns. The Revenue argued that this was a violation of Rule 46A(3) of the IT Rules, as the AO was not given an opportunity to examine the reasons for the delayed filing.

5. Impact of pending demerger petition on filing returns:
The assessee cited a pending demerger petition before the High Court as the reason for the delayed filing of returns. The CIT(A) accepted this explanation, noting that the delay was due to non-cooperation from a family member, which was beyond the assessee's control. The CIT(A) referenced similar cases where deductions were allowed despite delayed filings due to unavoidable circumstances.

Conclusion:
The Tribunal, after considering the rival contentions and the legal provisions, concluded that the provisions of Section 80AC are mandatory. The Tribunal emphasized that the return must be filed within the due date specified under Section 139(1) to avail deductions under Sections 80IA and 80IB. The Tribunal cited precedents from the Special Bench and Co-ordinate Bench, which upheld the mandatory nature of Section 80AC. Consequently, the Tribunal allowed the Revenue's appeals, overturning the CIT(A)'s decision to allow the deductions despite the delayed filing of returns.

Order:
Both appeals by the Revenue were allowed, and the deductions claimed by the assessee under Sections 80IA and 80IB were disallowed due to the non-compliance with the due date requirement under Section 139(1) as mandated by Section 80AC. The order was pronounced in the open court on 09/12/2016.