2022 (4) TMI 1406 - AT - Income Tax

Disallowance of deduction claimed u/s 10AA - CIT(A) has confirmed the addition observing that since the Form No. 56F was to be filed electronically along with return of income which the appellant had failed, therefore the AO was right in disallowing the claim of appellant - HELD THAT - The order indicates that the assessee had filed copy of Form No. 56F vide letter dated 14.03.2016 to claim deduction u/s 10A during the assessment proceedings and on 22.03.2016 the assessment order was passed. The Bench is of considered opinion that the Proviso to Sub Rule 2 of Rule 12 of the Income Tax Rules, 1962 has made furnishing of report electronically mandatory and as per the Rule 12 cited before the Bench, which is available on page no. 2 to 11 of the paper book, as with regard to Section 10A this mandatory requirement is effective retrospectively from 01.04.2014 so in the present assessment year of 2013-14, it was not actually applicable. Then furnishing the report by electronic means is merely one of the modes and nothing is cited on behalf of revenue to show that the noncompliance would result into non-consideration of the report submitted in physical form. The judgment which ld. Counsel for assessee has cited firmly lay down that the requirements under various provisions of the Act requiring assessee to file any report, are generally directory in nature and the compliance is expected from the assessee any time before the framing of assessment. Particular reference can be made to the judgment of Commissioner of Income Tax vs Web Commerce (India) Pvt. Ltd. 2008 (12) TMI 13 - HIGH DELHI COURT . CIT(A) had fallen in error in confirming the addition, for mere reason that although hard copy was filed before the assessment was completed, the same was not filed electronically along with return of income. Decided in favour of assessee.

Summary

Issues:
Appeal against disallowance of deduction claimed u/s 10AA of the Income Tax Act, 1961 for assessment year 2013-14.

Analysis:
1. The appellant, engaged in warehousing services, filed a return of income for AY 2013-14 declaring income of NIL. The AO completed assessment u/s 143(3) of the Act, making additions totaling Rs. 69,95,410. The CIT(A) deleted one addition but confirmed disallowance of Rs. 51,49,533 u/s 10AA.

2. The grounds of appeal raised by the assessee challenged the CIT(A)'s decision, arguing that the disallowance was unjust. The appellant contended that the filing of Form 56F electronically was not mandatory for AY 2013-14 and that the hard copy was submitted before assessment completion.

3. The AR cited judicial pronouncements to support the argument that compliance before assessment completion suffices. The DR defended the tax authorities' findings. The Tribunal noted that the mandatory electronic filing requirement was effective retrospectively from 01.04.2014, not applicable to AY 2013-14.

4. The Tribunal emphasized that noncompliance with electronic filing did not invalidate the physical submission. Citing a Delhi High Court judgment, it held that requirements to file reports are generally directory, not mandatory. The Tribunal found fault with the CIT(A)'s decision, setting it aside and allowing the appeal.

5. The Tribunal concluded that the CIT(A) erred in confirming the addition solely based on the electronic filing requirement, as the hard copy submission before assessment completion satisfied the law. Consequently, the appeal was allowed, and the impugned order was set aside.

This detailed analysis covers the issues involved in the legal judgment comprehensively, highlighting the arguments presented, judicial precedents cited, and the Tribunal's reasoning leading to the final decision.