2023 (9) TMI 679 - AT - Income Tax

Revision u/s 263 - as per CIT AO had considered the assessee eligible for claiming deduction u/s 10AA of the Act in spite of the fact that mandatory Auditor s report in prescribed Form 56 was not filed before the due date of filing the return - HELD THAT - As during assessment proceedings in response to notices issued by the AO assessee had submitted justification of the deduction u/s 10AA of the Act. Thus, as such, the issue stood examined by the learned AO and also before the assessment order was passed, the Auditor s report in form 56 stood filed. The judgments relied by the learned AR were certainly then holding the field as in the case of Pr. CIT v. Wipro Ltd. 2022 (7) TMI 560 - SUPREME COURT held that filing of declaration under Section 10B is mandatory. Assessing Officer exercises quasi judicial powers so if in exercise of such powers an assessing officer accepts delayed compliances, which as per prevailing law he considered only directory in nature, that cannot make the assessment order erroneous, so as to justify the exercise of powers u/s 263 by the learned PCIT. The grounds raised in the appeals are allowed.

Summary

Issues involved: Appeal challenging orders passed by Principal Commissioner of Income Tax under section 263 of the Income-tax Act, 1961 for A.Y. 2017-18 and 2018-19.

Summary:

Issue 1: Eligibility for claiming deduction u/s 10AA of the Act
The learned PCIT exercised powers under section 263 of the Act due to the assessment orders being found erroneous and prejudicial to the interests of Revenue. The main contention was that the assessee was considered eligible for claiming deduction u/s 10AA despite the mandatory Auditor's report in prescribed Form 56 not being filed before the due date of filing the return.

Details: The return of income for both assessment years was filed after the due date, but Form 56 was submitted to the AO during the assessment proceedings. The learned AR argued that the Auditor's report was filed before the completion of the assessment, relying on judgments by the Hon'ble Delhi High Court. The Bench concluded that the issue was examined by the AO during the assessment proceedings, and the Auditor's report was filed before the assessment order was passed. Citing a recent Supreme Court judgment, it was held that delayed compliances, considered directory in nature under prevailing law, did not render the assessment order erroneous. Therefore, the grounds raised in the appeals were allowed, and both appeals were allowed, setting aside the impugned order.

Separate Judgement: No separate judgment was delivered by the judges in this case.