2020 (8) TMI 752 - AT - Income Tax

Disallowance u/s 10A - return of income is not filed within the due date prescribed u/s 139(1) of the Act for filing return of income - HELD THAT - As per the proviso below sec.10(1A) the deduction u/s 10A is not allowable, if the return of income is not filed within the due date prescribed u/s 139(1) for filing return of income. We have noticed earlier that the due date for filing return of income for the year under consideration was 30-09-2008 and it came to be filed on 01- 10-2008 due to technical glitches in computer system. Hence the assessee has filed an application before CBDT requesting it to condone the delay of 1 day in filing return of income. Admittedly, the purpose of making the said application was to request the CBDT to authorize the A.O. to admit the claim for deduction u/s 10A since the return of income through which the claim was made was filed beyond the date prescribed for claiming the deduction. CBDT has expressly stated that the condonation of delay in filing the return will not amount to acceptance of claims made in the return of income and hence the said condonation will not absolve the assessee from complying with the condition prescribed under the proviso to section 10A(1A) of the Act, which mandates furnishing of return of income on or before the due date specified u/s 139(1) of the Act. We are of the view that the tax authorities have misunderstood the objective of sec.119(2)(b) of the Act as well as the order passed by CBDT. In our view, the order passed by the CBDT only states that the same should not be construed as automatic acceptance of claim for deduction u/s 10A of the Act. Hence, the order specifically makes it clear that the A.O. will be authorized to deal with the claims made in the return of income on merits. So, in our view, the CBDT has in fact relaxed the condition prescribed in the proviso to section 10A(1A) (referred above) by condoning the delay in filing return of income. Assessee shall be deemed to have been complied with the condition prescribed in the proviso to section 10(1A) of the Act with regard to the filing of return of income. Restore the matter to the file of the A.O. for examining the claim made by the assessee u/s 10A - Appeal filed by the assessee is allowed.

Summary

Issues:
1. Disallowance of claim made by the assessee u/s 10A of the Income-tax Act,1961.
2. Re-opening of assessment u/s 147 of the Act due to delayed filing of return.
3. Condonation of delay in filing return of income by the Central Board of Direct Taxes (CBDT).
4. Interpretation of provisions of section 119(2)(b) of the Act.
5. Whether the assessee complied with the conditions prescribed in the proviso to section 10A(1A) of the Act.

Analysis:
1. The appeal was against the disallowance of the claim made by the assessee u/s 10A of the Act. The assessee, a software development company, claimed deduction u/s 10A for the assessment year 2008-09. The return of income was delayed by 10 minutes due to technical issues, filed on 1.10.2008 instead of 30.9.2008. The claim was disallowed by the Assessing Officer (A.O.) in the re-opened assessment under section 147 of the Act.

2. The A.O. re-opened the assessment based on the delayed filing of the return beyond the due date. The assessee challenged this decision before the Ld. CIT(A) and also filed an application before the CBDT to condone the delay in filing the return of income. The CBDT, after examining the matter, condoned the delay but clarified that it does not amount to automatic acceptance of claims made in the return.

3. The Tribunal analyzed the provisions of section 119(2)(b) of the Act, which allows for the admission of applications or claims for exemptions or deductions after the prescribed period. The CBDT's order was seen as authorizing the A.O. to deal with the claim on merits, not automatically accepting it. The Tribunal held that the CBDT's order effectively relaxed the condition prescribed in the Act regarding the filing of the return of income.

4. The Tribunal concluded that the CBDT's order should not be construed as automatic acceptance of the claim for deduction u/s 10A. The A.O. was to examine the claim on its merits. Consequently, the Tribunal set aside the Ld. CIT(A)'s order and restored the matter to the A.O. for further examination of the claim made by the assessee u/s 10A of the Act.

5. In summary, the Tribunal allowed the appeal filed by the assessee, emphasizing that the CBDT's condonation of the delay in filing the return of income should be considered as compliance with the conditions prescribed in the proviso to section 10A(1A) of the Act. The decision was pronounced on 31.07.2020.