Fastner Commodeal Private Limited Vs ADIT (ITAT Kolkata)
ITAT Kolkata dealt with an assessee-company’s claim for concessional taxation under Section 115BAA for AY 2020-21 where Form No. 10-IC had not been electronically filed within the prescribed time. Fastner Commodeal Private Limited filed its return declaring income of Rs. 58,69,56,530/- and computed tax at 22%, surcharge at 10% and cess at 4% on the footing that it had opted for Section 115BAA. However, while processing the return under Section 143(1), CPC calculated tax at 25%, surcharge at 12%, cess at 4% and consequential interest, resulting in a demand of Rs. 2,96,02,670/-. The dispute therefore centred on whether failure to electronically furnish Form 10-IC within the prescribed time defeated the assessee’s otherwise claimed option for taxation under Section 115BAA.
Before the CIT(A), the assessee submitted that it had opted for Section 115BAA while filing its return and sought an opportunity to furnish Form 10-IC so that the concessional rate could be allowed. The CIT(A), however, upheld the adjustment because Form 10-IC had not been filed with the return and the assessee had also failed to comply with the extended timeline contemplated by CBDT Circular No. 6/2022 dated 17.03.2022. The Circular had been issued to address difficulties experienced by domestic companies in the first year of Form 10-IC and provided for condonation subject to prescribed conditions.
Before the Tribunal, the assessee explained that AY 2020-21 was the first year in which Section 115BAA was being applied and that Form 10-IC could not be uploaded because of technical problems with the portal, apart from difficulties prevailing during the pandemic. According to the assessee, all substantive conditions necessary for Section 115BAA taxation had otherwise been fulfilled. It argued that non-filing of the prescribed form was a procedural lapse which should not result in denial of the concessional tax regime. The assessee relied upon several judicial precedents concerning belated filing of audit reports and prescribed forms to contend that substantive statutory benefits should not be denied merely because a procedural document was furnished late.
The Revenue opposed the appeal on the ground that filing Form 10-IC was a requisite condition for exercising the option under Section 115BAA. According to the Department, the assessee neither furnished the form within the period prescribed under Section 139(1) nor within the extended period provided by CBDT Circular No. 6/2022. Consequently, the CIT(A)’s order denying the concessional rate was argued to be in accordance with law.
The Tribunal observed that the assessee was a domestic company eligible to claim Section 115BAA benefit provided the prescribed conditions were fulfilled. Thus, the central question was whether non-filing of Form 10-IC electronically by the prescribed date was fatal to the claim. The Tribunal drew support particularly from Gujarat Paguthan Energy Corporation (P) Ltd. Vs DCIT, where a delayed audit report in the context of Section 80-IA was accepted, and CIT Vs Web Commerce (India) (P) Ltd., where the Delhi High Court held that furnishing the prescribed audit report along with the return was directory and that filing it before completion of assessment amounted to compliance. TaxGuru’s subsequent reporting of the Fastner Commodeal principle likewise records these two authorities as the precedents relied upon for treating such procedural filing requirements accordingly.
Applying that principle, the Tribunal noted that the assessee had specifically requested the CIT(A) to permit filing of Form 10-IC before the appropriate authority. Since an appeal is a continuation of assessment proceedings and the CIT(A) possesses co-terminus powers with the Assessing Officer, the CIT(A) was required to consider Form 10-IC rather than reject the substantive claim merely on account of its earlier non-filing. Accordingly, the issue was restored to the Assessing Officer with a direction to consider Form 10-IC and grant the Section 115BAA benefit if the assessee satisfied all the other conditions prescribed by law. The appeal was therefore allowed for statistical purposes.
Cases Discussed
- Gujarat Paguthan Energy Corporation (P) Ltd. Vs DCIT (Gujarat High Court), 225 Taxman 70 (Guj.) — Relied upon for the principle that where the prescribed audit report was furnished during assessment proceedings, deduction under Section 80-IA could not be denied merely because the report had not accompanied the return. TaxGuru material confirms this precedent and its procedural-compliance principle.
- CIT Vs Web Commerce (India) (P) Ltd. (Delhi High Court), (2009) 318 ITR 135 / 178 Taxman 310 (Delhi) — Relied upon for holding that furnishing the audit report with the return under Section 80-IA(7) was directory and compliance before completion of assessment was sufficient.
- Zenith Processing Mills Vs CIT (Gujarat High Court), (1996) 219 ITR 721 — Cited by the assessee in support of the proposition that a procedural requirement concerning furnishing of the prescribed report should not defeat the substantive claim merely because the report was furnished subsequently. TaxGuru-hosted judicial material records the ruling that the relevant requirement was directory and permitted production of the report at a later stage.
- CIT Vs Gujarat Oil & Allied Industries (Gujarat High Court), (1993) 201 ITR 325 — Cited for the principle of substantial compliance with procedural requirements relating to furnishing of an audit report.
- CIT Vs Sakal Relief Fund (Bombay High Court), (2017) 81 taxmann.com 396 — Cited by the assessee in support of its procedural-compliance argument. TaxGuru-hosted material records the Bombay High Court’s treatment of delayed statutory form filing in the context of Section 11.
- CIT Vs National Taj Traders (Supreme Court), (1980) 121 ITR 535 — Cited by the assessee; the decision concerns statutory interpretation, including interpretation of machinery provisions in a manner consistent with the statutory scheme.
- CIT Vs Kaira District Co-operative Milk Producers Union Ltd., (1979) 116 ITR 319 — Cited by the assessee in support of its submissions concerning procedural compliance.
- Goodyear India Ltd. Vs State of Haryana & Ors., (1991) 188 ITR 403 (Supreme Court) — Cited by the assessee in support of its submissions.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This appeal of the assessee for the assessment year 2020-21 is directed against the order dated 31.07.2023 passed by the ld. Commissioner of Income-tax, Appeals, NFAC, Delhi [hereinafter referred to as ‘the ‘ld. CIT(A)’].
2. Brief facts of the case are that the assessee has filed its return of income for the A.Y. 2020-21 declaring income of Rs. 58,69,56,530/- on which Income tax @ 22% along with surcharge @ 10% and cess @ 4% was paid. The return of income filed by assessee was processed and assessee company has received an intimation u/s 143(1) of the Act under which tax on the total income was calculated @ 25% along with surcharge @ 12%, cess @ 4% and interest thereby raising a total demand of Rs. 2,96,02,670/- without taking cognizance of the fact that appellant had duly opted for benefit of the taxation rate u/s 115BAA of the Act.
3. Aggrieved by the above order, assessee went into appeal before the ld. CIT(A) where assessee filed its submission which is recorded in para 4 of the order. In the submission, the assessee had stated that assessee company while filing the return of income opted to be taxed as per provisions of section 115BAA of the Act. However, CPC while processing the return of income an intimation was issued on 24.12.2021 wherein assessed the total income of the assessee by calculating @ 25% along with surcharge @ 12%, cess @ 4% and interest thereon raising a total demand of Rs. 2,96,02,670/- without taking cognizance of the fact that appellant had duly opted for benefit of the taxation rate u/s 115BAA of the Act. The assessee prayed before the ld. CIT(A) to allow the claim of the assessee by giving an opportunity to file Form No. 10IC of the Act in order to avail the benefit of lower taxation rate u/s 115BAA of the Act.
4. However, the ld. CIT(A) after considering the submission of the assessee upheld the action of the assessing officer by holding that assessee has not filed Form No. 10IC at the time of filing of return, the ld. CIT(A) also stated in its order that the assessee has failed to submit Form No. 10IC of the Act in terms of the CBDT Circular No. 6 of 2022 dated 17.03.2022 where it is clearly stipulates that one of the condition of delay in filing Form No. 10IC for A.Y. 2020-21 is to be condoned if the said form is e-filed on or before 30.06.2022 or 3 months from the end of the month in which the circular is issued whichever is later. Accordingly, the claim of the assessee was denied by ld. CIT(A) by citing the circular issued by CBDT.
5. Aggrieved by the order of ld. CIT(A), assessee is in appeal before the Tribunal.
6. We have heard the submission of both the parties. The ld. AR of the assessee submits that while filing the return of income electronically, the assessee opted for tax u/s 115BAA of the Act being domestic company. The assessee could not upload/filed Form No. 10IC online due to technical problem in the portal as well as pandemic was prevailed on that point of time. However, assessee has fulfilled all the requisite conditions to be taxed u/s 115BAA of the Act. He further stated that it was the first year of application of section 115BAA of the Act to avoid technical reasons for non- uploading and for such hardship, the CBDT also issuedCircular No. 6/22 dated 17.03.2022 for extending time period for filing Form No. 10IC. The condition of Circular was that the return of income was to be filed on or before due date specified u/s 139(1) of the Act and Form 10IC be filed electronically on or before 30.06.2022 or three months from the end of month in which CBDT Circular is issued. The ld. AR stated that the assessee has filed its return of income before issuance of aforesaid circular. The only lapse is on the part of assessee is that they could not upload Form 10IC on ITBA system due to technical glitch on the portal at that point of time when return of income was filed.
7. The ld. AR further submitted that CBDT Circular No. 6/2022 was issued on 17.03.2022 for extending time period for filing Form 10IC after intimation issued by CPC dated 24.12.2021 in the case of assessee. Therefore, the assessee could not take any remedial measure before the appropriate authority. Since intimation was already issued by rejecting the claim of assessee. The ld. AR of the assessee submits that in a similar nature of cases wherein audit report or other forms are filed out of time, in such cases due to Fastner Commodeal Private Limited procedural lapse, various High Courts and benches of Tribunal, assessee has entitled for deduction as per provision of the Act. To support such submission, the ld. AR of the assessee has relied on the following case laws:
“i. Zenith Processing Mills vs CIT 219 ITR 721 (Guj) ii. CIT vs Gujarat Oil & Allied Industries (1993) 201 ITR 325 (Guj) iii. Gujarat Paguthan Energy Corporation (P) Ltd. vs DCIT 225 Taxman 70 (Guj). iv. CIT vs Web Commerce India (P) Ltd. (2009) 318 ITR 135 (Delhi) v. CIT vs Kaira District Co-operative Milk Producers Union Ltd. (1979) 116 ITR 319 vi. CIT vs Sakal Relief Fund (2017) 81 Taxmann.com 396 (Bom) vii. CIT vs National Taj Traders (1980) 121 ITR 535 (SC) viii. Goodyear India Ltd. vs. State of Haryana & Ors. (1991) 188 ITR 403 (SC).”
8. On the other hand, ld. Sr. DR submits that assessee has not fulfilled the requisite condition for availing the benefit of section 115BAA of the Act. The assessee has not uploaded Form 10IC before or at the time of filing of return of income within the time period as prescribed u/s 139(1) of the Act. Even as per CBDT Circular No. 6/2022, the assessee has not uploaded such form before stipulated time as prescribed. Thus, the order of ld. CIT(A) is as per law.
9. We after hearing the rival submission of the parties and perused the material available on record find that the assessee is a domestic company and eligible to avail the benefit of tax u/s 115BAA of the Act, provided the assessee fulfilled the requisite condition for availing such benefit. The point of dispute in the appeal is only in relation to lower authorities are that assessee has not filed Form No. 10IC electronically before due date for filing return of income u/s 139(1) of the Act. The case of the assessee is Fastner Commodeal Private Limited that Form 10IC could not be uploaded on ITBA portal due to technical glitch and it was the first year of availing such benefit. The only question for our consideration is whether non-filing of Form No. 10IC on ITBA portal is fatal to the assessee or not in availing the benefit of section 115BAA.
10. We find that the Hon’ble High Court in Gujarat Paguthan Energy Corporation (P) Ltd. Vs DCIT (supra) while considering the eligibility of deduction of Section 80-IA of the Act, wherein the assessee is required to furnish audit report before due date of filing return of income, and such audit report was filed during assessment proceedings, the assessee was held to be eligible for deduction under Section 80-IA of the Act. Further, Hon’ble Delhi High Court in CIT vs Web Commerce (India) (P) Ltd. (2009) 318 ITR 135/178 Taxman 310 (Delhi) also held that once audit report is filed before framing of assessment, the provisions of Section 80-IA (7) would be complied as furnishing of such report at the time of filing of return is directory in nature and not mandatory. Considering the similar principle that the assessee prayed before the ld. CIT(A) to allow it to file Form 10-IC before the appropriate authority in order to claim the benefit u/s 115BAA of the Act. It is settled principles under law that appeal is a continuation of assessment proceedings and the ld. CIT(A) has co-terminus power as of Assessing Officer, therefore, the ld. CIT(A) was required to consider the report in Form 10-IC. In view of the above factual and legal discussion, the ground of appeal raised by the assessee is restored back to the file of assessing officer to consider the report in Form-10IC and allow relief to the assessee, if the assessee fulfil all Fastner Commodeal Private Limited other requisite condition as per law. In the result, the grounds of appeal raised by the assessee are allowed for statistical purpose.
11. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 07.03.2024.
