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2024 (8) TMI 938 - HC - Income TaxReopening of assessment u/s 147 - failure on the part of the petitioner to electronically upload Form 10CCB along with its Return of Income and as per the time frames contemplated under Section 139 - directory and procedural requirement - HELD THAT - The Proviso clearly required the respondents to establish that income liable to tax had escaped assessment on account of a failure of the petitioner to make a full and true disclosure of all material facts. In our opinion a failure to digitally upload a Form cannot lead one to conclude that the assessee had failed to make a full and true disclosure. In any event, the respondents have woefully failed to establish or assert how that folly, if it may be so termed, resulted in escapement of income. The Section 148 action would thus and following the view taken by us in Associated Chambers be liable to be struck down on this short ground alone. Also reassessment actions for AYs 2013-14 and 2014-15 were commenced with the issuance of notices u/s 148 - An action to reopen assessment prior to the amendments introduced by virtue of Finance Act, 2021 could have at best been initiated within a period of four years and subject to a maximum of six years in terms of the provisions of Section 149 as it existed at the relevant time. The reassessment action, insofar as AY 2013-14 is concerned, being beyond the maximum window of six years would thus falter and fail on this score additionally. Legal requirements flowing from Section 80-IA read along with Rule 12 - We find that insofar as the directory nature of Section 80-IA (7) is concerned, the same stands conclusively answered by this Court in Contimeters Electricals 2008 (12) TMI 4 - HIGH COURT DELHI and the aforesaid position having been followed consistently by various other High Courts. We thus find no justification to tread down a different path or deviate from a position in law which has clearly held the field for some time. Analysed independently, we note that Section 80-IA (7) as it existed prior to its amendment in terms of Finance Act, 2020, only placed a requirement of the assessee furnishing the Audit Report along with his Return of Income in the prescribed form. Discernibly, Section 80-IA (7) as it stands in its present form uses the expression before the specified date referred to in section 44AB and the assessee furnishes by that date . Thus, it is only by virtue of Finance Act, 2020 that Section 80-IA (7) now embodies a stipulation for the Audit Report being furnished before the specified date referred to in Section 44AB. The requirement of the said report being furnished electronically, however, came to be introduced for the first time in 2013 and which is when Rule 12 came to be amended. However, at this point in time, the requirement of an electronic submission of Form 10CCB stood confined to Rule 12 since Section 80-IA (7) had not been amended in the manner noted above. As long as that Audit Report was duly furnished to the AO and was available to be scrutinized and examined by that authority during the assessment proceedings, the provisions of Section 80-IA (7), as it stood prior to the amendments introduced in 2020, would be recognized to have been substantially fulfilled. In any event, a failure to digitally file that report cannot be countenanced to be fatal to the claim that may be laid in terms of Section 80-IA (7). We note that the various decisions which speak of the electronic submission of the Audit Report being directory and procedural were all rendered prior to the amendments introduced by Finance Act, 2020. These writ petitions too are concerned with actions initiated prior to the passing of Finance Act, 2020 and the amendments consequently made in Section 80-IA (7). The present decision is thus not liable to be read as an exposition on the legal position which would prevail post 2020 or the likely impact in light of the inclusion of the phrase before the specified date referred to in section 44AB . We thus leave that question open to be examined in an appropriate case. We also bear in mind the indubitable fact that Section 10B (8) is clearly couched in terms more imperative than Section 80-IA (7). This becomes manifest from a reading of that provision and which requires the assessee to furnish a declaration before the AO that it chooses not to be assessed in accordance with that provision and the said declaration being liable to be furnished before the due date for furnishing of a Return of Income under Section 139 (1). This requirement has always existed in Section 10B from inception and since its insertion by virtue of Finance Act, 1988. This is a significant distinguishing feature bearing in mind the indisputable position of the Audit Report being tied to the specified date contemplated in Section 44AB was a stipulation which came to be introduced for the first time and with sufficient certitude by virtue of Finance Act, 2020. Writ petitions allowed. We thus quash the impugned notices issued u/s 148 and the consequent initiation of reassessment proceedings quashed. - Decided in favour of assessee.
Issues Involved:
1. Validity of reassessment action under Section 148 of the Income Tax Act, 1961. 2. Requirement of electronically uploading Form 10CCB with the Return of Income. 3. Procedural vs. mandatory nature of filing an audit report under Section 80-IA (7). 4. Applicability of decisions from various High Courts and the Supreme Court. Detailed Analysis: 1. Validity of Reassessment Action under Section 148 The court examined whether the failure to electronically upload Form 10CCB constituted a valid ground for reassessment under Section 148. The petitioner argued that the digital filing of the audit report was procedural and that the statutory prescriptions had been substantially complied with. The respondents contended that the statutory prescriptions under Section 80-IA (7) were mandatory, justifying the reassessment action. The court noted that the reasons for invoking Section 148 did not indicate any escapement of income, which is a pre-condition for invoking Section 148. The court stated, "the only allegation leveled against the petitioner is of its failure to digitally upload the Audit Reports," which does not meet the prescription of the First Proviso to Section 147. The reassessment action was thus liable to be struck down on this ground alone. 2. Requirement of Electronically Uploading Form 10CCB The court considered the statutory scheme and amendments over time. Rule 12 of the Income Tax Rules, 1962, amended by the Income Tax (Seventh Amendment) Rules, 2013, required the audit report to be furnished electronically. However, Section 80-IA (7) as it stood at the relevant time did not specify electronic submission but required the audit report to be furnished along with the return of income. The court found that the requirement of electronically submitting Form 10CCB was introduced in 2013 but was not explicitly tied to the statutory obligations under Section 80-IA (7) until the Finance Act, 2020. The court concluded that a failure to digitally file the report could not be considered fatal to the claim under Section 80-IA (7). 3. Procedural vs. Mandatory Nature of Filing an Audit Report The court referred to various High Court decisions, including its own in Commissioner of Income Tax vs. Contimeters Electricals (P.) Ltd., which held that the filing of an audit report is procedural and not mandatory. The court noted that the requirement of filing the audit report electronically was procedural and that substantial compliance was achieved as long as the audit report was submitted before the assessment was completed. The court stated, "In our considered opinion, as long as that Audit Report was duly furnished to the AO and was available to be scrutinized and examined by that authority during the assessment proceedings, the provisions of Section 80-IA (7)... would be recognized to have been substantially fulfilled." 4. Applicability of Decisions from Various High Courts and the Supreme Court The court examined the decision in Principal Commissioner of Income Tax - III & Anr. vs. Wipro Limited, which held that the filing of a form coinciding with the return of income is a mandatory pre-condition for claiming benefits. However, the court distinguished this case from the present matter, noting that Section 10B (8) dealt with exemption provisions, whereas Section 80-IA (7) dealt with deductions. The court emphasized that the decision in G.M. Knitting Industries (P) Ltd., which allowed deductions even if the audit report was not filed with the return but submitted during the assessment proceedings, was more applicable to the present case. Conclusion The court allowed the writ petitions, quashing the impugned notices under Section 148 and the consequent initiation of reassessment proceedings for AYs 2013-14 and 2014-15. The court held that the failure to digitally upload the audit report did not justify reassessment and that the procedural requirement of filing the audit report was substantially complied with.
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