In a recent ruling of Delhi High Court the writ petitions were allowed, quashing the reassessment proceedings of the respondents as mere failure to digitally upload Audit Report doesn’t contribute to non-disclosure of material facts.
Two writ petitions were filed in the assessment year 2014-15 and 2013-2014 impugning the assessment notices issued under Section 148 of Income Tax Act, 1961. The main issue of the case was whether failure from the part of the petitioner to electronically upload Form 10CCB along with Return of Income would constitute a valid ground for the reassessment action.
The petitioner Sree Bhavani Power Projects represented by Advocates Satyen Sethi and Arta Trana Panda, stated that the petitioner had submitted a return of income for Assessment Year 2013-14 claiming deductions under Section 80-IA(4)(iv)(a) of the Act.
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The tax report in the form 3CA under Section 44AB was filed electronically along with the Return of Income and Audit Report in Form 10CCB was filed manually before the Assessing Officer.
The AO allowed the deductions claimed by way of Section 80-IA. Following this an impugned notice was issued under Section148 of the Act.
The petitioner’s counsel contended that filing of an audit report is a procedural requirement and would detract from the right of an assessee to claim deductions which would otherwise be permissible in terms of Section 80-IA. It was also submitted that the provisions are distinct from the statutory obligations which were imposed upon an assessee in terms provisions prior to the amendments in the Finance Act, 2020.
The counsel contended that as Rule 12(2) came into existence in the statute book after 2013
Amendment cannot possibly be interpreted so as to eclipse the directory character of Section 80 IA(7), also a failure to electronically upload the audit report will be viewed as a mere procedural irregularity and the same can’t be equated as illegality.
The petitioner’s counsel questioned the action for reassessment and stated that while reasoning the reopening of assessment the respondents did not allege that there was a failure on part of petitioner in fully disclosing material particulars.
The original assessment was made in accordance with Section 143(3), hence the respondents have no authority to reopen the assessment unless the assessee had failed in disclosing material facts.
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The learned counsel of respondent contended that Rule 12 after its amendment in 2013, in unequivocal terms requires an assessee seeking deductions in terms of Section 80-IA to furnish the Audit Report electronically. Even when viewed in light of section 80-IA(7) prior to amendments there exists the need to submit audit reports electronically.
The respondent’s counsel urged the bench to dismiss the writ petitions consequent to failure on the part of the writ petitioners to meet the two conditions of submitting form 10CCB electronically along with return of income.
The division bench comprising Justice Yashwant Varma and Justice Ravinder Dudeja observed that the petitioner had been assessed for AYs 2013-14 and 2014-15 under Section 143(3), the provision required the respondents to establish a failure of the petitioner in making full disclosure of material facts.
The bench stated that a failure to digitally upload a form cannot cannot lead to the conclusion that the assessee had failed to make full disclosure. As far as the reassessment of AY 2013-14 is concerned would fail for being beyond the maximum window of 6 years.
Section 80-IA(7) prior to its amendments in terms of Financial Act, 2020, only placed a requirement of furnishing audit reports along with return of income in the prescribed form. Thus by virtue of Finance Act, 2020 that Section 80-IA(7) now embodies a stipulation for the Audit Report being furnished before the specified date referred to in Section 44AB.
A failure to digitally file that report cannot be countenanced to be fatal to the claim laid in terms of Section 80-IA .
Accordingly the writ petition was allowed and impugned notices issued under Section 148 of the Act and initiation of reassessment proceedings were quashed.
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