Failure To Digitally File Audit Report Not Fatal To Claims Under Sec 80-IA(7) Of Income Tax Act: Delhi HC

The Division Bench of Justice Yashwant Varma and Justice Ravinder Dudeja observed, “Viewed in that light, in our considered opinion, as long as that 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 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).”

Advocates Satyen Sethi and Arta Trana Panda appeared for the Petitioner while SSC Vipul Agarwal, JSCs Gibran Naushad and Sakashi Shairwal appeared for the Respondents.

Two writ petitions were filed by the Petitioner pertaining to the Assessment Years 2014-15 and 2013-14 respectively, impugning the reassessment action initiated in terms of notices under Section 148 of the IT Act. The principal question 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 Petitioner contended that a 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 respondents on the other hand would urge us to hold that the statutory prescriptions comprised in Section 80-IA(7) were mandatory and the actions initiated under Section 148 thus justified.

The Court said that Section 80-IA(7) is directory in nature and noted that it is as it existed prior to its amendment in terms of the Finance Act, 2020, only placed a requirement of the assessee furnishing the Audit Report along with his Return of Income in the prescribed form. The requirement of the said report being furnished electronically, however, came to be introduced for the first time in 2013 which is when Rule 12 came to be amended. However, the requirement of electronic submission of Form 10CCB stood confined to Rule 12 since Section 80-IA(7) had not been amended.

“We note that the various decisions which speak of the electronic submission of the Audit Report being directory and procedural were all rendered prior to the amendments introduced by Finance Act, 2020. These writ petitions too are concerned with actions initiated prior to the passing of Finance Act, 2020 and the amendments consequently made in Section 80-IA (7). The present decision is thus not liable to be read as an exposition on the legal position which would prevail post 2020 or the likely impact in light of the inclusion of the phrase “…before the specified date referred to in section 44AB...”. We thus leave that question open to be examined in an appropriate case.”, the Court held.

The Court also considered the decisions of the Apex Court in Principal Commissioner of Income Tax – III & Anr. vs. Wipro Limited (2022) and Commissioner of Income Tax vs. G.M. Knitting Industries (P) Ltd. (2015). The Court said that the decision in Wipro Limited significantly observed that Section 10B(8) being an exemption provision not being liable to be compared with Section 32(1)(ii-a) and which was concerned with a claim for additional depreciation. Since such a declaration would have an immediate and indelible bearing on the assessment of the Return of Income itself, it would clearly be liable to be viewed as a mandatory requirement warranting such a declaration being made at the outset itself and the statutory prescriptions made in that regard being liable to be strictly adhered to, the Court added.

In this regard, the Court held, “The aforesaid position may be contrasted with Section 80-IA(7), and which is principally concerned with deductions that may be claimed and the Audit Report being made available for examination by the AO. In these writ petitions, we are in any case concerned solely with whether a failure to digitally upload the Audit Report could be said to be destructive. It is for the aforenoted reasons that we are inclined to hold that Wipro Limited is distinguishable and that it would be the principles enunciated in G.M. Knitting which would govern the present matters.”

Accordingly, the Court allowed the writ petitions and quashed the impugned notices issued under Section 148 of the Act and the consequent initiation of reassessment proceedings.

Cause Title: Shree Bhavani Power Projects v. Income Tax Officer, Ward 23(3) and Anr. (Neutral Citation: 2024:DHC:6077-DB)

Appearances:

Petitioner: Advocates Satyen Sethi and Arta Trana Panda

Respondents: SSC Vipul Agarwal, JSCs Gibran Naushad and Sakashi Shairwal

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