2025 (1) TMI 180 - AT - Income Tax

Denial of deduction u/s 10AA - inadvertent mistake in e-filing of return of income - technical error/glitch in the software used by the assessee for preparing.xml file format wherein inadvertently the deduction u/s 10AA could not be captured in appropriate column of the computation of income - fourth year of claiming of deduction. HELD THAT - The assessee made his elaborate submissions before the Ld. Addl./JCIT(Appeals) with evidences stating that while e-filing the return there corrupt an error due to which the deduction claimed u/s 10AA was denied even though the assessee has duly furnished Form 56F in the prescribed Form by Chartered Accountant. Disallowance of the deduction claimed u/s 10AA of the Act arose due to a technical glitch/inadvertently the deduction could not be filled in the appropriate column of computation of Income. But the total income has been computing by allowing claimed deduction only. Upon reviewing the submissions made by the appellant and examining the data available on the system, the prima facie of the appellant's case is found to be acceptable as per the order of the Ld. Addl./JCIT(Appeals). No valid reason to interfere with the findings given for allowing the claim of deduction u/s 10AA of the Act to the assessee which was otherwise denied due to technical glitch in e-filing the return. Decided against revenue.

1. ISSUES PRESENTED and CONSIDERED

The primary legal issue presented in this case was whether the deduction claimed under Section 10AA of the Income Tax Act, 1961, by the assessee was rightfully denied by the Centralized Processing Center (CPC) due to a technical glitch during the e-filing of the income tax return.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant legal framework and precedents:

Section 10AA of the Income Tax Act, 1961, provides for a deduction in respect of profits derived by a unit set up in a Special Economic Zone (SEZ). The deduction is subject to certain conditions and procedural requirements, including the filing of prescribed forms and adherence to timelines.

Court's interpretation and reasoning:

The court considered the technical glitch as an inadvertent error that occurred during the e-filing process. It was observed that the assessee had consistently claimed the deduction under Section 10AA in previous years and had complied with the procedural requirements by submitting the necessary forms, such as Form 56F and Form 29C, within the stipulated time.

Key evidence and findings:

The evidence presented included the tax audit report under Section 44AB, Form 56F, and Form 29C, which were duly filed along with the income tax return. The court noted that the deduction under Section 10AA was reflected in the adjusted total income and the Alternate Minimum Tax (AMT) computation.

Application of law to facts:

The court applied the provisions of Section 10AA and the procedural requirements for claiming deductions. It concluded that the technical glitch did not negate the bona fide claim of the assessee, as the deduction was appropriately claimed in the return and supported by requisite documentation.

Treatment of competing arguments:

The Revenue's argument was based on the denial of the deduction due to the technical error in the e-filing process. However, the court found this argument insufficient to disallow the deduction, given the consistent past allowance of the deduction and the fulfillment of statutory requirements by the assessee.

Conclusions:

The court concluded that the technical glitch should not prevent the allowance of a legitimate deduction claim under Section 10AA. The appeal by the Revenue was dismissed, affirming the decision of the Ld. Addl./JCIT (Appeals) to allow the deduction.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning:

The court stated, "The disallowance of the deduction claimed under section 10AA of the Act arose due to a technical glitch/inadvertently the deduction could not be filled in the appropriate column of computation of Income. But the total income has been computed by allowing claimed deduction only."

Core principles established:

The judgment reinforced the principle that technical errors in e-filing should not undermine the substantive rights of taxpayers to claim legitimate deductions, especially when procedural compliance is otherwise demonstrated.

Final determinations on each issue:

The court upheld the allowance of the deduction under Section 10AA, dismissing the Revenue's appeal and affirming the decision of the Ld. Addl./JCIT (Appeals). The judgment emphasized the importance of considering the intent and compliance of the taxpayer, notwithstanding technical filing errors.

In summary, the judgment highlights the judiciary's approach to balancing procedural technicalities with substantive tax rights, ensuring that genuine claims are not denied due to inadvertent errors in the digital filing process.

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