2022 (11) TMI 1178 - HC - Income Tax

Validity of order of ITAT deciding the issue raised first time without proper notice to assessee - Deduction u/s 80IA - deduction was not claimed in the original return but was claimed in the revised return - whether the assessee was required to electronically upload the audit report in Form 10CCB before the due date prescribed under the Act? - HELD THAT - As pointed out earlier the Tribunal has rightly taken note of the settled legal position and held that if the defect be procedural it can be cured at a subsequent stage namely at the stage of filing the revised return or even during the course of assessment proceedings. If that was the finding of the learned Tribunal the natural consequence that has to flow is to allow the appeal of the assessee. However, assessee s appeal has been dismissed on the ground that the audit report has not been filed within the time prescribed under the statute. Tribunal though noted that such prescription of time limit was pursuant to an amendment it failed to take note of the fact as to whether such a amendment would apply to the assessment year under consideration namely A.Y. 2014-15. The amendment to the Act was brought about by the Finance Act 2020 (No. 12 of 2020) dated 27.3.2020. In Section 35 of the Finance Act the amendment brought out to Section 80IA of the Act in sub Section (7) has been mentioned. It has to be noted that Finance Act, 2020 came into force on 1.4.2020. If that be so, Tribunal without examining as to whether such an amendment could apply to the assessee s case had directed to the assessing officer to verify such a matter. Advocate appearing for the appellant submitted that such an issue was never raised by the revenue at any earlier point of time. As could be seen from the materials available on record the assessing officer has not taken such a view, obviously he could not have done so because the assessment order was passed on 29th December, 2016, much earlier to the amendment. The CIT(A) also could not have taken note of the amendment because the order passed by the CIT(A) is dated 28th February, 2019. Therefore, if an issue is to be raised by the learned Tribunal suo-motu for the first time then the assessee is entitled to notice of such an issue being raised and should have afforded an opportunity to the assessee to put forth their submission. We find that such procedure was not adopted by the Tribunal. In any event, the learned Tribunal in paragraph 18 of its order having rightly noted the legal position ought to have granted relief to the assessee. Failure to do so, would result in order passed by the learned Tribunal liable to be set aside. Tribunal though noted the correct legal position has taken note of the subsequent amendment in the Act requiring the audit report to be filed in prescribed manner within the prescribed time. As mentioned by us above, this issue was never an issue pointed out to the assessee at any earlier point of time and it appears that the issue had been taken up for consideration when the case was heard and orders were reserved by the learned Tribunal. In any event, such point could not have been put against the assessee when the same was never the case of the revenue before the Tribunal. The appeal filed by the assessee is to be allowed. The order passed by the learned Tribunal as well as order passed by the CIT(A) are set aside and also the order passed by the assessing officer dated 29.12.2016 in so far as it disallows the deduction claimed under Section 80IA of the Act are set aside and there will be a direction to the assessing officer to allow the said deduction claimed by the assessee under Section 80IA of the Act. Decided in favour of the assessee.

Summary

Issues:
1. Interpretation of Sections 80IA(4)v, 80IA(7), and 80AC along with Income Tax Rules for filing audit report.
2. Requirement of filing audit report electronically before the due date under the Income Tax Act.
3. Procedural lapses in claiming deductions and the ability to cure them during assessment proceedings.
4. Applicability of the amendment introduced by the Finance Act, 2020 to the assessment year 2014-15.

Analysis:
1. The appellant challenged the order of the Income Tax Appellate Tribunal regarding the interpretation of Sections 80IA(4)v, 80IA(7), and 80AC, along with Income Tax Rules. The Tribunal required electronic filing of audit reports before the due date, which the appellant contested. The Court noted various legal precedents supporting the curability of procedural lapses during assessment proceedings. The appellant argued that the amendment introduced by the Finance Act, 2020 did not apply to the assessment year in question, 2014-15.

2. The main issue revolved around whether the assessee was obligated to upload the audit report electronically before the due date specified under the Income Tax Act. The Assessing Officer disallowed a deduction claimed by the assessee under Section 80IA due to it being claimed in a revised return rather than the original return. The Court highlighted the Tribunal's acknowledgment of the curability of such procedural lapses during assessment proceedings.

3. The Court emphasized the importance of allowing the correction of procedural lapses, as held in various High Court decisions. The appellant relied on legal precedents to support the argument that certain requirements, such as filing a special audit report along with the return, were procedural and not mandatory. The Tribunal's failure to grant relief to the assessee based on a time limit prescription introduced by an amendment was deemed incorrect.

4. The Court delved into the applicability of the Finance Act, 2020 amendment to the assessment year 2014-15. It noted that the amendment came into force on 1.4.2020, after the assessment order and the Commissioner of Income Tax (Appeals) decision. The Court found fault with the Tribunal for not considering whether the amendment applied to the assessee's case and for not affording the assessee an opportunity to address this issue. The appeal was allowed, setting aside previous orders and directing the assessing officer to allow the deduction claimed under Section 80IA of the Act.

In conclusion, the Court ruled in favor of the assessee, highlighting the importance of procedural fairness and the correct interpretation of tax laws in determining tax liabilities and deductions.