2025 (4) TMI 1437 - AT - Income Tax

Deduction u/s 80IC - assessee has failed to file the Audit Report in Form 10CCB within stipulated time period provided under the Act - extension of the period of limitation falling under Covid-19 period - HELD THAT - In the instant case the due date of filing of return of income was extended upto 15.02.2021. However the Audit Report was filed only on 15.02.2021 simultaneously alongnwtih return of income filed on the same day. Thus the assessee has failed to comply with the provisions of Rule 18BBB of the Rules. However in view of the judgement of Hon ble Supreme Court in the case of Suo Moto Writ Petition 2022 (1) TMI 385 - SC ORDER the period of limitation was extended by the Hon ble Supreme Court upto 31.05.2022. Therefore there was no delay in filing the Audit Report by the assessee in Form 10CCB. Co-ordinate Bench of the Tribunal in the case of Sanjay Kukreja 2024 (2) TMI 41 - ITAT DELHI has also expressed the view that filing of Audit Report alongwith return of income is not mandatory but directory and if the Audit Report is filed at any time before framing the assessment it would be sufficient to hold that the assessee has complied with the provision of filing of Audit Report. We are of the view that there is no delay in filing the Audit Report in Form 10CCB in the instant case. Therefore we allowed the said Audit Report to be considered for deduction u/s 80IC however we are not aware whether the other conditions for claiming deduction u/s 80IC have been coupled with or not. Therefore the AO is directed to verify all such conditions and if it is found that the assessee has duly complied with all conditions the deduction claimed u/s 80IC be allowed. Appeal of the assessee is allowed.

Summary

The core legal questions considered in this appeal are:

1. Whether the delay in filing the Audit Report in Form 10CCB, required under section 80IC of the Income Tax Act, 1961, is mandatory or merely directory, and whether such delay justifies disallowance of deduction claimed under section 80IC.

2. Whether the extension of limitation period by the Hon'ble Supreme Court due to the Covid-19 pandemic applies to the filing of Form 10CCB, thereby condoning any delay in filing.

3. Whether the assessee complied with the procedural requirements under Rule 18BBB of the Income Tax Rules, 1962, which mandates filing of the Audit Report one month prior to the due date of filing the return of income.

4. The extent of discretion available to the Assessing Officer (AO) and appellate authorities in allowing the deduction under section 80IC when the Audit Report is filed late but before assessment.

Issue-wise Detailed Analysis:

Issue 1: Mandatory vs. Directory Nature of Filing Audit Report in Form 10CCB

The relevant legal framework includes section 80IC of the Income Tax Act, 1961, which allows certain deductions subject to fulfillment of prescribed conditions, including filing of an Audit Report in Form 10CCB. Rule 18BBB of the Income Tax Rules, 1962 prescribes that the Audit Report should be filed one month before the due date of filing the return of income.

Precedents considered include the decision of the Co-ordinate Bench of the Tribunal in Sanjay Kukreja vs ACIT, which held that delay in filing the Audit Report in Form 10CCB before the due date is directory and not mandatory. This position was supported by several High Court judgments including CIT vs AKS Alloys Pvt. Ltd. (Madras), CIT vs Contimeters Electricals (Delhi), CIT vs Web Commerce (Delhi), CIT vs Punjab Financial Corporation (P&H), CIT vs Print Systems & Products (Madras), CIT vs Medicaps Ltd. (MP), CIT vs Shivanand Electronics (Bombay), and CIT vs G. Krishnan Nair (Kerala).

The Court interpreted these precedents to mean that filing the Audit Report simultaneously with or even after filing the return of income, but before completion of assessment, suffices compliance with section 80IC requirements. The Court reasoned that the procedural requirement of filing the Audit Report one month prior is not a condition precedent to claim deduction but a directory provision.

Evidence showed that the assessee filed the Audit Report on 15.02.2021, the same day as the return of income, which was the extended due date. The Assessing Officer had disallowed the deduction on the ground that the Audit Report was not filed one month prior as mandated by Rule 18BBB.

The Court applied the law to facts by relying on the aforementioned precedents and concluded that the delay in filing the Audit Report was not fatal to the claim of deduction under section 80IC.

The Revenue's argument that the assessee was a habitual defaulter and failed to file the Audit Report on time was considered but rejected, as the Court emphasized the non-mandatory nature of the timeline for filing Form 10CCB.

Conclusion: The Court held that the delay in filing the Audit Report in Form 10CCB is directory and not mandatory, and such delay does not disentitle the assessee from claiming deduction under section 80IC.

Issue 2: Applicability of Supreme Court's Extension of Limitation Period Due to Covid-19

The Hon'ble Supreme Court, in Suo Moto Writ Petition SMW(C) No.03/2022, extended the period of limitation for filing various documents falling during the Covid-19 pandemic period up to 31.05.2022.

The assessee relied on this extension to argue that the delay in filing Form 10CCB was condoned by the Supreme Court's order, effectively negating any delay.

The Court accepted this submission, observing that since the Audit Report was filed on 15.02.2021, which falls within the extended limitation period, there was effectively no delay in filing under the extended timeline.

This interpretation was reinforced by the Court's reliance on the Supreme Court's order and the principle that limitation periods extended by the Supreme Court apply to procedural compliances under the Income Tax Act.

Conclusion: The Court concluded that the delay in filing Form 10CCB was condoned by the Supreme Court's extension of limitation period due to Covid-19, and hence, no delay existed for the purpose of claiming deduction under section 80IC.

Issue 3: Compliance with Rule 18BBB of the Income Tax Rules, 1962

Rule 18BBB prescribes that the Audit Report in Form 10CCB must be filed one month prior to the due date of filing return of income.

In the instant case, the due date was extended to 15.02.2021, but the Audit Report was filed on the same day, i.e., 15.02.2021, thus not complying with the one-month prior requirement.

The AO disallowed the deduction on this ground.

However, the Court noted that the requirement under Rule 18BBB is procedural and directory, as established by the precedents cited above.

Moreover, the Court emphasized that the filing of the Audit Report before the completion of assessment satisfies the substantive requirement of section 80IC.

Conclusion: The Court held that non-compliance with the one-month prior filing requirement under Rule 18BBB does not disentitle the assessee from claiming deduction under section 80IC, provided the Audit Report is filed before assessment.

Issue 4: Discretion of Assessing Officer and Appellate Authorities in Allowing Deduction

The Revenue contended that the assessee was a habitual defaulter and delayed filing of the Audit Report and appeal, thus justifying disallowance of deduction.

The Court observed that the delay was neither intentional nor deliberate.

Further, reliance on the Supreme Court's extension of limitation period and the Tribunal's precedent in Sanjay Kukreja indicated that procedural delays in filing Form 10CCB should not lead to automatic disallowance of deduction.

The Court directed the AO to verify whether other substantive conditions for claiming deduction under section 80IC were fulfilled by the assessee.

Only upon satisfaction of all such conditions should the deduction be allowed.

Conclusion: The Court held that the AO has discretion to allow the deduction if all conditions are met, notwithstanding procedural delays in filing the Audit Report, especially when such delays are condoned or held directory.

Significant Holdings:

"In view of the judgement of Hon'ble Supreme Court in the case of Suo Moto Writ Petition (supra), the period of limitation was extended by the Hon'ble Supreme Court upto 31.05.2022. Therefore, there was no delay in filing the Audit Report by the assessee in Form 10CCB."

"The Co-ordinate Bench of the Tribunal in the case of Sanjay Kukreja (supra) has also expressed the view that filing of Audit Report alongwith return of income is not mandatory but directory and if the Audit Report is filed at any time before framing the assessment, it would be sufficient to hold that the assessee has complied with the provision of filing of Audit Report."

"We are of the view that there is no delay in filing the Audit Report in Form 10CCB in the instant case. Therefore, we allowed the said Audit Report to be considered for deduction under section 80 IC of the Act."

"The AO is directed to verify all such conditions and if it is found that the assessee has duly complied with all conditions, the deduction claimed under section 80 IC be allowed."

The core principles established include:

• Delay in filing the Audit Report in Form 10CCB required under section 80IC is directory and not mandatory, provided the report is filed before assessment.
• Extension of limitation period by the Supreme Court due to Covid-19 applies to filing of Form 10CCB, effectively condoning delays within that period.
• Procedural non-compliance with Rule 18BBB's one-month prior filing requirement does not automatically disentitle the assessee from claiming deduction under section 80IC.
• The Assessing Officer must verify substantive compliance with all conditions of section 80IC before allowing the deduction, notwithstanding procedural delays that are condoned or held directory.

Final determinations:

The appeal was allowed with directions to the AO to verify compliance with all substantive conditions for claiming deduction under section 80IC. The Audit Report filed on 15.02.2021 was held to be timely in view of the Supreme Court's extension of limitation and the directory nature of the filing requirement. Consequently, the deduction under section 80IC was to be allowed if all other conditions were met.