2021 (1) TMI 470 - AT - Income Tax

Exemption u/s. 80IC - assessee has not filed return of income u/s.139(1) - HELD THAT - As per the provisions of section 80 AC it is mandatory for the assessee to file return of income u/s.139 (1) to be eligible to claim deduction u/s. 80-IA or 80-IB, or 80-IAB or 80-IC or 80-ID or 81-E. It is undisputed that assessee has not filed return of income under section 139 (1). Hence, as per the provisions of the act, the assessee is not entitled to claim the deduction. The assessee is also aware of this provision. Hence, the assessee has filed condonation application before the CBDT. There is no information about the CBDT condoning the same. We affirm the order of authorities below that since the assessee has not followed the mandate of the act to be eligible to the above said deduction, the assessee s appeal is to be dismissed.

Summary

Issues Involved:
1. Condonation of delay in filing the return of income.
2. Disallowance of deduction claimed under Section 80-IC of the Income Tax Act, 1961.
3. Interpretation of Section 80AC regarding mandatory filing of return by the due date.
4. Reasonable cause and genuine hardship under Section 119(2)(b) of the Income Tax Act, 1961.

Issue-Wise Detailed Analysis:

1. Condonation of Delay in Filing the Return of Income:
The assessee argued that the learned Commissioner of Income Tax (Appeals) erred by ignoring the pending petition filed with the Central Board of Direct Taxes (CBDT) for condonation of delay in filing the return of income within the prescribed time under Section 139(1) of the Income Tax Act. The assessee had submitted a petition to the CBDT requesting for condonation of delay due to reasons such as software issues and the illness of a director. However, the Assessing Officer (A.O.) and the CIT(A) did not take cognizance of this petition, and there was no information about the CBDT condoning the delay.

2. Disallowance of Deduction Claimed Under Section 80-IC:
The A.O. disallowed the deduction claimed under Section 80-IC amounting to ?3,86,53,415/- because the assessee failed to file the return of income by the due date prescribed under Section 139(1). The A.O. referred to Section 80AC, which mandates filing the return by the due date to claim deductions under Sections 80IA, 80IB, 80IAB, 80IC, etc. The CIT(A) upheld this disallowance, stating that the provisions of Section 80AC are clear and mandatory, and there is no provision in the Income Tax Act to waive this condition.

3. Interpretation of Section 80AC Regarding Mandatory Filing of Return by the Due Date:
The assessee contended that the provisions of Section 80AC should be interpreted liberally, citing various judicial pronouncements. However, the CIT(A) and the tribunal relied on the clear language of Section 80AC, which explicitly states that no deduction shall be allowed unless the return is filed on or before the due date specified under Section 139(1). The tribunal noted that the Hon'ble Supreme Court in the case of Commissioner of Customs (Import) vs. Dilip Kumar and Company & Ors. has expounded that in case of exemption provisions, the same should be construed in favor of revenue in case there is any ambiguity.

4. Reasonable Cause and Genuine Hardship Under Section 119(2)(b):
The assessee argued that the delay in filing the return was due to reasonable causes such as software transition issues and the illness of a director. The CIT(A) examined these reasons and found them insufficient to justify the delay. The CIT(A) noted that the new software was introduced in 2011, and the appellant had sufficient time to check its functionality. The CIT(A) also observed that the directors were able to run the business effectively despite the illness, and filing the return of income is a small part of overall business operations, which should have been managed by the accounts team and Chartered Accountants.

Conclusion:
The tribunal upheld the orders of the authorities below, affirming that the assessee did not comply with the mandatory requirement of filing the return of income within the due date prescribed under Section 139(1) to be eligible for the deduction under Section 80IC. The tribunal dismissed the appeal, stating that the provisions of Section 80AC are clear and unambiguous, and there is no scope for any other interpretation. The tribunal also noted that the Hon'ble Supreme Court's decision in Dilip Kumar & Co. supports a strict interpretation of exemption provisions in favor of the revenue.