2018 (11) TMI 316 - AT - Income Tax

Disallowing deduction claimed u/s 80IA - disallowance for want of tax audit report in Form 10CCB along with the return of income - AO noted as form no. 10CCB to be e-filed along with the return of income and audit report has not been done - whether claim of such deduction should not be disallowed for bona-fide and procedural lapse ? - Held that - This is not the first year of claim of deduction under section 80IB and, therefore, it is not the case of the A.O. that the assessee s undertaking is not eligible for deduction under section 80IB. However, only for want of filing of form no. 10CCB along with the return of income and through e-filing, the AO has denied the claim of deduction under section 80IA. The assessee subsequently filed the form no. 10CCB during the assessment proceedings and also explained the reasons for not e-filing the form 10CCB along with the return of income. There is no dispute that the return of income was filed within the period of limitation provided under section 139(1) of the IT Act. Hence only because the assessee could not e-file the form no. 10CCB along with the return of income, the assessee cannot be denied the benefit of section 80IA. Also as the assessee had duly explained the reasons for not filing form no. 10CCB along with the return of income by way of filing the affidavit of the auditor of the assessee. Hence we allow the claim of the assessee and orders of the authorities below are set aside. - Decided in favour of assessee. Adhoc disallowance of certain expenses - Held that - In view of our finding on ground no. 1 regarding the claim of deduction under section 80IA, the expenses to the extent of the eligible business of the assessee shall have no revenue effect even if adhoc disallowance is made by the AO. Accordingly, the AO is directed to reconsider this issue in the light of the adjudication of ground no. 1.

Summary

Issues:
1. Disallowance of deduction claimed under section 80IA of the IT Act for want of tax audit report in Form 10CCB.
2. Adhoc disallowance of certain expenses.

Issue 1 - Disallowance of Deduction under Section 80IA:
The appellant contested the disallowance of deduction under section 80IA due to the absence of audit report in Form 10CCB filed along with the return of income. The Assessing Officer (AO) denied the deduction citing non-compliance with section 80IA(7). The appellant argued that the audit report was filed subsequently and should not lead to denial of deduction. The appellant relied on judicial precedents, including the case of CIT vs. Dr. L.M. Singhvi, to support their contention. However, the ld. CIT (A) upheld the AO's decision, emphasizing the mandatory e-filing requirement for the audit report under section 80IA(7) for the relevant assessment year. During the proceedings, the appellant explained the oversight in not e-filing the form no. 10CCB along with the return of income. The Tribunal noted that the return was filed within the statutory time limit and that the audit report was submitted during the assessment proceedings. Referring to the decision in CIT vs. Dr. L.M. Singhvi, the Tribunal held that the failure to e-file the form no. 10CCB should not disentitle the appellant from claiming the deduction under section 80IA.

Issue 2 - Adhoc Disallowance of Expenses:
The second ground of appeal pertained to adhoc disallowance of specific expenses by the authorities without pinpointing any specific instance or discrepancy. The Tribunal directed the Assessing Officer to reconsider this issue in light of the decision on the first ground regarding the deduction under section 80IA. The Tribunal highlighted that since the expenses relate to the eligible business of the appellant, any adhoc disallowance would have no revenue impact if the deduction under section 80IA is allowed. Consequently, the Tribunal allowed the appeal of the assessee, setting aside the orders of the lower authorities.

In conclusion, the Tribunal ruled in favor of the assessee, allowing the appeal concerning the disallowance of deduction under section 80IA and directing a reassessment of the adhoc disallowance of expenses based on the findings related to the deduction issue. The judgment emphasized the importance of compliance with procedural requirements while considering the eligibility for deductions under the IT Act.