In a significant ruling, the Income Tax Appellate Tribunal ( ITAT ) Pune Bench has set aside an addition of Rs. 28.57 lakhs made under Section 143(1) of the Income Tax Act, 1961. The tribunal held that the Assessing Officer ( AO ) erred in disallowing the deduction claimed under Section 80IAC without providing an opportunity to the assessee to explain the delay in filing the audit report. The case was remanded back for reconsideration with instructions to follow due process.
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The case was filed by Roxiler Systems Pvt. Ltd., a Pune-based company engaged in software development, against the order of the Commissioner of Income Tax ( Appeals )-NFAC, Mysore, for the Assessment Year 2022-23. The dispute revolved around the rejection of the assessee’s claim for deduction under Section 80IAC on the grounds that the audit report in Form 10CCB was filed after the statutory deadline.
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The assessee’s counsel, Sharad S. Vaze and Amod S. Vaze, argued that while the audit report was indeed filed late, it was available before the completion of assessment, and hence, should have been considered. The counsel cited several judicial precedents, including CIT vs. G.M. Knitting Industries (P.) Ltd. and CIT vs. Shivanand Electronics, to support the contention that a delay in filing an audit report does not automatically invalidate an otherwise legitimate deduction.
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The Revenue, represented by Arvind Desai, defended the addition, contending that since the audit report was not submitted within the statutory time frame, the CPC Bengaluru was justified in disallowing the claim. The CIT(A) upheld this stance, leading to the present appeal before the ITAT.
Upon review, the tribunal noted that the audit report was digitally signed by the auditor before the extended deadline prescribed by CBDT Circular No. 19/2022. The ITAT further observed that technical difficulties often hinder timely filing, and the assessee had a reasonable cause for the delay. It also emphasized that the AO should have provided an opportunity for the assessee to justify the delay before rejecting the deduction claim outright.
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The bench, comprising Dr. Dipak P. Ripote (Accountant Member) and Vinay Bhamore (Judicial Member), ruled that procedural fairness demands that an assessee be given a chance to explain genuine delays. Citing the Supreme Court’s ruling in G.M. Knitting Industries (P.) Ltd., the tribunal held that since the audit report was available during the assessment process, the AO should have considered it rather than outrightly rejecting the claim.
In conclusion, the ITAT set aside the disallowance and directed the AO to reconsider the assessee’s claim while ensuring adherence to the principles of natural justice.
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