2022 (5) TMI 1659 - AT - Income Tax

Disallowance of deduction claimed u/s 80IC - validity of adjustment u/s 143(1) - Assessee not filed Form No. 10CCB in support of its claim of deduction along with the return but in the tax audit report in Form 3CD - procedural irregularity and legitimate quantification for disallowance - HELD THAT - If the adjustment has been made on the basis of first defect i.e., for procedural irregularity then according to the decisions referred by the ld. Counsel for the assessee, this irregularity is not fatal enough to deny the claim of deduction u/s 80IC. More so, when in response to the first proposed adjustment, the assessee has reiterated submission of Form 10CCB. As far as the arguments raised by the ld. D/R is concerned, if a disallowance is to be made after filing of Form 10CCB, then it is a debatable issue and the same is not permissible u/s 143(1) in a prima facie adjustment and the assessee should have been given a notice for that. If a disallowance is required to be established by arguments and long drawn process of reasoning on points, which there may conceivably be two opinions about, then the case should have been selected for scrutiny assessment. Thus, we delete the disallowance of deduction u/s 80IC made by the AO and upheld by the ld. CIT(A) and allow the appeal of the assessee.

Summary

Issues:
Disallowance of deduction claimed u/s 80IC of the Income Tax Act.

Detailed Analysis:

1. Background and Appeal: The appeal was filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals), Kolkata, regarding the disallowance of a deduction claimed u/s 80IC of the Income Tax Act for the Assessment Year 2019-20.

2. Facts of the Case: The assessee filed its return of income but did not submit Form No. 10CCB in support of the deduction claimed u/s 80IC along with the return. The tax audit report in Form 3CD reflected the claim, and Form 10CCB was uploaded later but not accepted by the computerized system, resulting in an adjustment under section 143(1)(a)(ii) of the Act.

3. First Appellate Authority's Decision: The ld. CIT(A) upheld the adjustment, noting that the audit report was obtained after the due date, relevant columns were not filled, and cited case laws where deductions were allowed when reports were obtained within the due date but not submitted along with the return.

4. Arguments of the Assessee: The assessee argued that the non-submission of Form 10CCB along with the return was a curable irregularity, citing relevant court judgments. It was contended that there was no lapse as the form was submitted before the adjustment was made.

5. Revenue's Submission: The ld. Sr. D/R contended that the audit report was obtained within the prescribed time limit but lacked clarity on how the deduction was calculated, justifying the adjustment made.

6. Tribunal's Decision: The Tribunal considered two issues - procedural irregularity and legitimate quantification for disallowance. It noted that the irregularity of not submitting Form 10CCB along with the return was not fatal to deny the deduction u/s 80IC, especially when the form was submitted before the adjustment. The Tribunal highlighted that a debatable issue requiring a detailed process should have led to a scrutiny assessment rather than a prima facie adjustment u/s 143(1). Consequently, the disallowance of the deduction was deleted, and the appeal of the assessee was allowed.

7. Conclusion: The Tribunal ruled in favor of the assessee, allowing the appeal and deleting the disallowance of the deduction claimed u/s 80IC. The decision was pronounced in Kolkata on May 20, 2022.