2022 (8) TMI 509 - AT - Income Tax

Rectification u/s 154 - Deduction u/s 80IB - Deduction denied as audit report in Form-10CCB was not filed along with the return of income and was only filed after the intimation u/s. 143(1) was issued - assessee, on receipt of intimation u/s. 143(1), filed application u/s. 154 after uploading the copy of audit report in Form-10CCB, which was rejected by CPC and therefore, appeal was filed before ld. CIT(A) against the order passed by the CPC u/s. 154 which again was dismissed by ld. CIT(A) by holding that no mistake was apparent from the record - HELD THAT - As it is undisputed fact that the claim of the assessee u/s. 80IB has not been allowed by the authorities below only because of the reason that the audit report in Form-10CCB was not filed along with return of income and was only filed after receipt of intimation u/s. 143(1) and therefore, the assessee filed rectification applications u/s. 154 of the Act after uploading Form-10CCB which was rejected by CPC. The ld. CIT(A) has rejected the appeals by holding that there was no mistake apparent from record. However, while holding so, he escaped the contents of Circular No.689 dated 24.8.1994 which clearly directs the Officers to allow rectification u/s. 154 for non filing of audit report or other evidence which could not be filed with the return of income. Also taking cognizance of this circular the Hon'ble High Court of Karnataka in the case of ITO vs. Smt. Mandira D Vakharia 2000 (11) TMI 48 - KARNATAKA HIGH COURT has decided similar issue in favour of the assessee - We merit in the arguments of assessee and therefore, the appeals of the assessee are allowed.

Summary

Issues Involved:
1. Disallowance of deduction under section 80IB of the Income Tax Act, 1961.
2. Rejection of rectification application under section 154 of the Income Tax Act, 1961.
3. Alleged procedural errors and denial of natural justice in the assessment process.

Detailed Analysis:

1. Disallowance of Deduction under Section 80IB:
The primary issue in these appeals is the denial of exemption under section 80IB due to the non-filing of the audit report in Form-10CCB along with the return of income. The appellant's auditor omitted to upload the audit report, leading to the Centralized Processing Centre (CPC) rejecting the claim. The appellant subsequently filed the audit report with a rectification application under section 154, which was also rejected by the CPC. The appellant argued that, according to CBDT Circular No. 689 dated 24.8.1994, rectification should be allowed if the audit report is filed after the return of income. The Tribunal found merit in the appellant's arguments, noting that the authorities below failed to consider the circular which directs officers to allow rectification under section 154 for non-filing of audit reports initially. The Tribunal cited the Karnataka High Court's decision in the case of ITO vs. Smt. Mandira D Vakharia, which supported the appellant's position that subsequent filing of the audit report should be considered for rectification.

2. Rejection of Rectification Application under Section 154:
The appellant's rectification application was rejected by the CPC on the grounds that the audit report was not available when the original intimation under section 143(1) was issued. The CIT(A) upheld this rejection, stating there was no apparent mistake from the record. However, the Tribunal disagreed, emphasizing that the CBDT Circular No. 689 explicitly allows for rectification if evidence is subsequently furnished. The Tribunal concluded that the authorities below erred in not considering the circular and the judicial precedent which support the appellant's claim for rectification.

3. Alleged Procedural Errors and Denial of Natural Justice:
The appellant contended that the CIT(A) dismissed the appeal without providing a reasonable opportunity to be heard, thus violating principles of natural justice. The Tribunal did not explicitly address this procedural issue in detail but implicitly acknowledged the appellant's grievances by allowing the appeals based on the substantive issues related to the disallowance and rectification.

Conclusion:
The Tribunal allowed the appeals, finding that the appellant was entitled to the deduction under section 80IB and that the rectification application should have been accepted based on the subsequent filing of the audit report. The Tribunal's decision was grounded in the interpretation of CBDT Circular No. 689 and supported by the Karnataka High Court's ruling in a similar case. The appeals were allowed, and the disallowances were directed to be deleted.