The Delhi High Court has ruled that a deduction under Section 80-IA(7) of the Income Tax Act cannot be denied solely because the assessee failed to digitally file an audit report.
In the case, the petitioner filed a Return of Income for AY 2013-14 on September 30, 2013, claiming deductions under Section 80-IA(4)(iv)(a) of the Income Tax Act. Alongside this, a tax audit report in Form 3CA under Section 44AB was electronically filed, and the audit report in Form 10CCB was manually submitted to the AO on February 12, 2016. The AO completed the assessment under Section 143(3), allowing the deductions claimed under Section 80-IA, as evidenced in the assessment order.
The tax department argued that the petitioner failed to digitally submit Form 10CCB as required by the amended Rule 12 of the Income Tax Rules, 1962, effective from April 1, 2013, which mandated online submission of audit reports. The department claimed that this failure amounted to non-disclosure of complete particulars, justifying the reassessment notice issued under Section 148.
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The petitioner challenged the reassessment action, arguing that the digital filing requirement was procedural and not mandatory, and that the statutory obligations were substantially fulfilled.
The bench noted that, “Analysed independently, we note that Section 80-IA(7) as it existed prior to its amendment in terms of Finance Act, 2020, only placed a requirement of the assessee furnishing the Audit Report along with his Return of Income in the prescribed form. Discernibly, Section 80-IA(7) as it stands in its present form uses the expression “…before the specified date referred to in section 44AB and the assessee furnishes by that date…”. Thus, it is only 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.”
The requirement of the said report being furnished electronically, however, came to be introduced for the first time in 2013 and which is when Rule 12 came to be amended. However, at this point in time, the requirement of an electronic submission of Form 10CCB stood confined to Rule 12 since Section 80-IA(7) had not been amended in the manner noted above, it was further observed.
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Justices Yashwant Varma and Ravinder Dudeja noted that since the audit report was submitted to the Assessing Officer (AO) and available for examination during the assessment process, the requirements of Section 80-IA(7), as they stood before the 2020 amendments, were effectively met. The court further held that the failure to file the report digitally should not be considered fatal to the claim under Section 80-IA(7).
The court, in favour of the petitioner, ruled that the reassessment action for AY 2013-14, being initiated beyond the six-year limitation period, was invalid and must be set aside.
Satyen Sethi appeared as Counsel for the Petitioner and Vipul Agarwal represented the Respondent.
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