Section 80-IA(7) Deduction Can't Be Denied For Failure To Digitally File Audit Report: Delhi High Court

The Delhi High Court has held that the deduction under Section 80-IA(7) of the Income Tax Act cannot be denied for the mere failure of the assessee to digitally file an audit report.

The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that Audit Report was duly furnished to the AO and was available to be scrutinised and examined by that authority during the assessment proceedings, the provisions of Section 80-IA(7), as it stood prior to the amendments introduced in 2020, would be recognized to have been substantially fulfilled. In any event, a failure to digitally file that report cannot be countenanced to be fatal to the claim that may be laid in terms of Section 80-IA(7).

The petitioner/assessee 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.

The department was of the view that Rule 12 of the Income Tax Rules, 1962, which came to be amended by the Income Tax (Seventh Amendment) Rules, 20135, w.e.f. April 1, 2013, introduced the requirement of an online submission of the audit report in Form 10CCB. The petitioner had failed to point out the failure to digitally submit the report, and this would constitute a non-disclosure of true and complete particulars. The reassessment notice under Section 148 came to be issued.

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

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.

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

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

The court, while allowing the appeal, held that the reassessment action for AY 2013–14, being beyond the maximum window of six years, would thus falter and fail.

Counsel For Petitioner: Satyen Sethi

Counsel For Respondent: Vipul Agarwal

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

Citation: 2024 LiveLaw (Del) 918

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

Click Here To Read The Order