Not Mandatory To File Audit Report Along With Return, Can Be Filed Anytime Before Assessment Completion: Delhi High Court

The Delhi High Court has held that the assessee was entitled to claim deductions even where the audit report had not been filed with the return but was submitted before the assessment was completed.

The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that Section 10B(8) is clearly couched in terms more imperative than Section 80-IA(7). This becomes manifest from a reading of that provision, which requires the assessee to furnish a declaration before the AO that it chooses not to be assessed in accordance with that provision, and the said declaration is liable to be furnished before the due date for furnishing a return of income under Section 139(1). The requirement has always existed in Section 10B since its inception and since its insertion by virtue of the Finance Act of 1988. It is a significant distinguishing feature, bearing in mind that the indisputable position of the audit report being tied to the specified date contemplated in Section 44AB was a stipulation that came to be introduced for the first time and with sufficient certitude by virtue of the Finance Act, 2020.

The petitioner/assessee has challenged the reassessment action initiated in terms of notices issued under Section 148 of the Income Tax Act, 1961.

The petitioner submitted a Return of Income for AY 2013–14 on September 30, 2013, claiming deductions as per Section 80-IA(4)(iv)(a) of the Income Tax Act. A tax audit report in Form 3CA under Section 44AB was filed electronically on September 30, 2013, along with the Return of Income, and the audit report in Form 10CCB was filed manually before the Assessing Officer on February 12, 2016. The AO concluded the assessment in terms of Section 143(3), allowing the deductions claimed by virtue of Section 80-IA, which becomes evident from a perusal of the assessment order dated February 29, 2016. The notice under Section 148 came to be issued.

The issue raised was whether a failure on the part of the petitioner to electronically upload Form 10CCB along with its Return of Income and as per the time frames contemplated under Section 139 would constitute a valid ground for the reassessment action being initiated or for the respondents asserting that income liable to tax had escaped assessment.

The petitioners contended that a digital filing of the audit report along with the return of income was merely procedural and directory, and the statutory prescriptions had been substantially complied with.

The department submitted that the statutory prescriptions in Section 80-IA(7) are mandatory and the actions initiated under Section 148 are thus justified.

The court, while quashing the reassessment notice, held that the audit report was duly furnished to the AO and was available to be scrutinized and examined by that authority during the assessment proceedings. The provisions of Section 80-IA(7), as they stood prior to the amendments introduced in 2020, would be recognized as having been substantially fulfilled. In any event, a failure to digitally file that report cannot be countered as being fatal to the claim that may be laid in terms of Section 80-IA(7).

Counsel For Petitioner: Satyen Sethi

Counsel For Respondent: Vipul Agarwal

Case Title: Shree Bhavani Power Projects Pvt. Ltd. Versus ITO

Case No.: W.P.(C) 8972/2019

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