Case Law Details
ACIT Vs Gondwana Engineers Ltd. (ITAT Nagpur)
ITAT Nagpur held that once the return of income has been filed belatedly, no benefit under section 80IA of the Income Tax Act is allowed. Accordingly, deduction u/s. 80IA disallowed.
Facts- The assessee is an engineering company and deals in designing, constructing, erecting, developing, commissioning and maintaining water treatment plants and projects of various types treating raw water into potable water and other related engineering works for various Municipal Corporation and other Governmental authorities.
Assessee filed the return of income u/s. 139(1) on 01/12/2014. However, in the return of income, no deduction u/s. 801A of the Income Tax Act, 1961 was claimed. The assessee thereafter filed a revised return of income on 10/09/2015 and claimed deduction u/s. 801A. AO, however, disallowed the said claim.
At the very onset, the issue for adjudication here is, whether the benefit under section 80IA of the Act can be granted to the assessee in case of filing of return of income belatedly.
Conclusion- Hon’ble Calcutta High Court in CIT v/s Shelcon Propertyies (P) Ltd. has held that the benefit in the present case can only be claimed in case of fulfillment of the preconditions laid down under section 80AC of the I.T. Act. When the preconditions have not been fulfilled, the benefit cannot be claimed. There is, as such, no reason to find out whether the direction is directory or mandatory. In any event, when the provision is that the benefit cannot be claimed if the return has not been filed on or before the prescribed day, in our view, it is a mandatory direction which prescribes the consequence of omission to file the return in time.
Held that once the return of income has been filed belatedly, no benefit under section 80IA of the Act is allowed.
FULL TEXT OF THE ORDER OF ITAT NAGPUR
The present appeal has been filed by the Revenue challenging the impugned order dated 31/10/2019, passed by the learned Commissioner of Income Tax (Appeals)–1, Nagpur, [“learned CIT(A)”], for the assessment year 2014–15.
2. In its appeal, the Revenue has raised following grounds:–
“1. On the facts and circumstances of the case and in law; the Ld. CIT(Appeals), Nagpur has erred in holding that the return of income filed on 01.12.2014 was filed within time limit and was according to law as the due date for filing of return of income u/s 139(1) was 30.11.2014.
2. On the facts and circumstances of the case and in law; The Ld. CIT(Appeals), Nagpur has erred in holding that the original return filed on 01.12.2014 being valid return u/s 139(1) could be validly revised u/s 139(5).
3. On the facts and circumstances of the case and in law; the Ld CIT(Appeals), Nagpur has erred in holding that the assessee was eligible for revising its return of income u/s 139(5) and hence can claim the deduction of Rs. 9,05,20,790/- u/s 801A(4) of the I.T. Act, 1961 which inadvertently remained to claim in the original return of income filed on 01.12.2014 u/s 139(1) as the return filed on 01.12.2014 is filed after due date and hence as per provisions of section 80AC no deduction u/s 80IA, etc. would be allowed unless the return of income is filed before the due date specified in section 139(1), which was 30.11.2014 in the instant case.
4. On the facts and circumstances of the case and in law; the Ld CIT(Appeals), Nagpur has erred in treating the assessee as contractor but it was seen that the assessee was worked under M/s Doshin Veolia Water Solution Pvt Ltd who is the principal contractor hence the assessee is sub- contractor and the deduction claimed u/s 80IA(4)(b) is not allowed to the assessee.
5. On the facts and circumstances of the case and in law; the CIT(Appeals), Nagpur has erred in accepting contrasting view that at one point assessee has entered into Joint Venture and executed three projects namely (1) Stp. Ludhiana (ii) Stp 50MLD Jalandhar and (iii) Stp 50MLD Nogalkarar, Jalandhar and on the same project assessee himself has claimed deduction u/s 801A, whereas he can only be termed as sub- contractor for these projects.
6. Any other grounds which may be raised at the time of hearing.”
3. The factual matrix is, the assessee is an engineering company and deals in designing, constructing, erecting, developing, commissioning and maintaining water treatment plants and projects of various types treating raw water into potable water and other related engineering works for various Municipal Corporation and other Governmental authorities. During the year, assessee filed the return of income under section 139(1) on 01/12/2014, (30/11/2014 being Sunday) declaring total income of ` 10,23,01,541. The audit report in Form no.3CA, was already filed on 26/11/2014. However, in the return of income, no deduction under section 801A of the Income Tax Act, 1961 (“the Act”) was claimed. The assessee thereafter filed a revised return of income on 10/09/2015 and claimed deduction under section 801A of the Act at ` 9,05,20,790, and declared net income at ` 1,17,80,750. The Assessing Officer, however, disallowed the said claim on various grounds, but mainly on two grounds, firstly, the last date or due date of filing the return of income under section 139(1) for the assessment year 2014-15 was 30/11/2014 and, however the return of income was filed on 01/12/2014. Thus, this return of income was treated as valid return under section 139(1) of the Act. Since there was no valid return under section 139(1), the same could not be revised and, hence, the revised return of income dated 10/09/2015, was invalid and no cognizance thereof can be taken. In the return of income filed on 01/12/2014, there was no claim under section 80IA of the Act and, hence, under the provisions of section 801A of the Act, deduction cannot be allowed; and Secondly, according to the Assessing Officer the contracts entered into by the assessee with various Municipal Corporation and Govt. Authorities were in the nature of works contract and not the contract of infrastructure facility as contemplated in section 801A(4) Explanation (c) i.e., water supply project, water treatment system etc., and hence the assessee was not entitled to claim deduction under section 801A as provided in Explanation to section 801A stated after 80IA(13) of the Act.
4. At the very onset, the issue for our adjudication is, whether the benefit under section 80IA of the Actcan be granted to the assessee in case of filing of return of income belatedly. In this regard, we find that the Co–ordinate Bench of the Tribunal, Nagpur Bench, Nagpur, in SMS Infrastructure Ltd. v/s DCIT, ITA no.566/Nag./2016, vide order dated 03/06/2024, the very same Bench has decided this issue by observing as follows:–
“7. We have heard the rival arguments, perused the material available on record and gone through the orders of the authorities below It is admitted fact that the assessee has filed a return of income belated and claimed under section 80IA of the Act. The Assessing Officer, without verifying whether the return of income is filed in time or not, allowed the claim. When the assessee is making a claim, he has to file return of income in time otherwise as per the provisions of section 80AC of the Act, no deduction under section 80ITA of the Act would be allowed. Prima-facie, the Assessing Officer committed a patent mistake allowing the claim of the assessee. The mistake committed by the Assessing Officer is a mistake apparent on record. In our opinion, the mistake committed by the Assessing Officer which is apparent on record can be rectified by the Assessing Officer under section 154 of the Act. In this case, the Assessing Officer has rightly invoked provisions of section 154 of the Act and rectified the mistake committed by him. Moreover, the rectification done by the Assessing Officer in this case is not at all a debatable issue for the reason that it is an admitted fact that the assessee filed return of income belatedly. As per the provisions of section 80AC of the Act, no claim can be allowed if the return of income is filed belatedly. Therefore, the Assessing Officer has rightly exercised his power and rectified the mistake and no debatable issue is involved. The learned Counsel for the assessee relied upon the following case laws in support of his arguments:-
i) DCIT v/s M/s. Rama Medicare Ltd., ITA no.183/Lkw./2019, order dated 08/11/2019;
ii) CIT v/s Unitech Ltd., [2016] 6 ITR-OL 370 : 2015 scc oNlINE Del. 14712;
iii) ITO v/s S. Venkataiah, ITA no.984/Hyd./2011, order dated 31/05/2012;
iv) Manish Soni v/s ITO, ITA no.230/Gau./2019, order dated 17/06/2020;
v) HIMUDA Nigam Vihar Shimla v/s ACIT, ITA no.480-481 & 972/Chd./2012, order dated 10/05/2019
8. On a perusal of the aforesaid case laws, we find that all of them are distinguishable in nature and the facts and circumstances are different, hence, not applicable to the facts and circumstances of the present case. Consequently, we are decline to accept the same and accordingly in view of our findings as aforesaid, all the grounds raised by the assessee are dismissed.”
5. We further place reliance on the judgment of the Hon’ble Calcutta High Court in CIT v/s Shelcon Propertyies (P) Ltd., vide judgment dated 16/01/2014, wherein the Hon’ble Court has observed as follows:–
“The Court: This appeal is directed against a judgment and order dated 19th April, 2013 passed by the learned Income Tax Appellate Tribunal reversing the order passed by the Commissioner of Income Tax (Appeal) and allowing the claim for deduction under section 80IB(10) of the I.T. Act. The facts and circumstances of the case, briefly stated, are as follows :
The assessee is engaged in the business of construction of housing projects. The assessee filed its return of income for the assessment year 2009-10 on 11th February, 2010 showing gross income of Rs.1,47,06,878.00p. The assessee claimed deduction of Rs.94,67,987.00p under section 80IB(10) of the I.T. Act. The Assessing Officer completed the assessment under Section 143(3) of the I.T. Act without allowing the deduction claimed by the assessee. The assessee preferred an appeal which was dismissed by the Commissioner of Income Tax (Appeal).
Under section 80IB(10) of the I.T. Act, the amount of deduction in the case of an undertaking engaged in developing and building housing projects, approved before 31.3.2008 by a local authority, shall be 100 percent of the profits derived in the previous year. The allowability of the aforesaid deduction is, however, subject to the following important preconditions.
“Where in computing the total income of an assessee of the previous year 2006 or any subsequent assessment year, any deduction is admissible under section 80-IA or section 80-IAB or section 80-IB or section 80-IC (or section 80-ID or section 80-IE), no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139”.
Due date has been specified under section 139(1) Explanation-2 of the I.T. Act which provides that in the case where a company is an assessee, the last date of filing the return is 30th day of September of the assessment year. Admittedly, in this case the return was filed on 11th February, 2010 for the assessment year 2009-10. Therefore, the questions of law which arise in this case are :
a) Whether the deduction under section 80IB(10) of the I.T. Act can be allowed when the return was not filed on or before the due date specified under section 139(1) of the I.T. Act ?
b) Whether section 80AC of the I.T. Act can be said to have left any room for discretion in the case of delayed filing of returns ?
The learned Tribunal in allowing the deduction advanced the following reasons:
“Here the negligence on the part of the assessee has not been established in so far as it was not in the interest of the assessee to be included negligent when he was dependent on the professional services which the professional service is required for documenting the claim or deduction as per law. In this view of the matter, we are of the considered view that there is no merit in the contention of the authorities below when no contrary decision has been pointed out by the ld.DR in so far as on the submission of the ld.Counsel the three decisions of the Tribunal are directly on the issue of upholding the claim of deduction even when the return has been filed belatedly on the basis of the facts and circumstances leading to such delay. In this view of the matter, we have no hesitation to set aside the order of the ld. CIT (A) and direct the AO to accept the return as filed by the assessee and allow the claim of deduction u/s 80IB(10) of the IT Act.”
As regards lack of negligence on the part of the assessee, it appears that an affidavit was filed before the Commissioner of Income Tax (Appeal) wherein it was, inter alia, alleged that :
“The work relating to online submission of the return of the assessee was entrusted to Ms Dipsikha Das, a junior Advocate employed by them. She suddenly resigned her job in the second week of October 2009 and left Siliguri”.
Mrs. Bhargava, learned Advocate appearing in support of the appeal submitted that the learned Tribunal misdirected itself in trying to find out whether the assessee was negligent or there was sufficient reason which prevented the assessee from filing the return in time or within the due date. She submitted that this question can be gone into in those cases where the Statute has left any scope for discretion. Section 80AC of the I.T. Act, she added, is very specific. In case the assessee wanted to avail himself of the benefit of the deduction under section 80IB(10) of the I.T. Act, the return must have been filed on or before the due date. When the return was admittedly not filed on or before the due date, the consequence is that the assessee is no longer entitled to take the advantage of the deduction. She submitted that the learned Tribunal unnecessarily embarked upon an enquiry as to whether there was any negligence. She added that time to file the return expired on 30th September. Even according to the case of the assessee, the lady left the office of the assessee in the second week of October when the time to file return had already expired. Whether she left the office suddenly or otherwise in the second week of October is of no consequence at all. She contended that the learned Tribunal could not have rewritten the law for the purpose of allowing the deduction. She, therefore, submitted that the judgment under challenge is patently wrong and should be set aside.
Mr. Khaitan, learned senior advocate appearing for the assessee submitted very fairly that there is no direct judgment on the point raised in this appeal. There are, however, cases where questions somewhat similar were considered by this Court and the Supreme Court and they were answered in favour of the assessee. He relied on a judgment in the case of CIT, Punjab Vs. Kulu Valley Transport Co. (P) Ltd. reported in 77 ITR 518. The second judgment cited by him was in the case of M/s. Fertilizer Corporation of India Ltd. Vs. State of Bihar, reported in (1988) Supp. SCC 73. The third judgment cited by him is in the case of Bajaj Tempo Ltd. Vs. CIT, reported in 196 ITR 188. The fourth judgment cited by him is a Division Bench judgment of this Court in the case of CIT Vs. Berger Paints (India) Ltd. reported in 254 ITR 503. The fifth and the last judgment cited by Mr. Khaitan is in the case of Commissioner of Central Excise, New Delhi vs. Harichand Srigopal, reported in 260 Excise Law Times 3.
In the case of CIT, Punjab Vs. Kulu Valley Transport Co. (P) Ltd. the question which arose for decision was, whether the benefit of carrying forward the losses under section 24(2) of the I.T. Act, 1922 could be claimed in a case where the return was not filed within the time specified by section 22(1) of the I.T. Act, 1922. In substance, section 22 of the I.T. act, 1922 is in pari material with Section 139 of the I.T. Act, 1961. Their Lordships in the aforesaid judgment held that the time limit provided in sub-section (1) of section 22 has to be read in conjunction with sub-section (3) of section 22. Obviously, in the case before Their Lordships, there was no obstacle as the one before us created by section 80AC of the I.T. Act. Therefore, the first judgment cited by Mr. Khaitan is of no assistance in deciding the issue.
In the case of Fertilizer Corporation of India Ltd. Vs. State of Bihar, the question arose whether the benefit of section 15 of the Bihar Sales Tax Act, 1959 by which rebate of one percent is available to the assessee could be claimed when the return was not filed within the prescribed time frame or within the extended time. Their Lordships answered the question as follows:
“The return was admittedly not filed within the time prescribed under Section 14(1). Has it been filed, then, within the extended period ? In answering this question, certain features of the Act have to be kept in mind. The first is that the Act does not set out any particular procedure for obtaining extension of time. It does not prescribe any form of application. It does not say that such application must be filed before the expiry of the prescribed period. It does not require that the prescribed authority must pass an order recording his satisfaction that the time should be extended and granting time. The second is that, under the provisions of the Act three consequences are envisaged where a return is not filed within the prescribed time or extended time :
i) the assessee will lose the benefit of rebate under section 15;
ii) the assessee will run the risk of a penalty under section 14(4);
iii) the assessee will also run the risk of a best judgment assessment under section 16(4);
In the present case, the Assessing Authority has neither levied a penalty nor made a best judgment assessment. The assessment orders, while adverting to the delay in the filing of the returns, do not record a finding that the delay was without reasonable (sic cause). These are circumstances from which, we think, it is reasonable to infer that the returns, though filed belatedly, have been accepted and acted upon by the prescribed authority. We see no reason why an extension of time cannot be inferred from the attendant circumstances in this case.” Evidently, in the case before us, it cannot be inferred from the attendant circumstances that the authorities treated the return to have been filed within the due date. There is, as such, no reason to think that this judgment in the case of Fertilizer Corporation of India Ltd. Vs. State of Bihar has any manner of application to the facts and circumstances of this case. On the contrary, Their Lordships in paragraph-6 of the judgment recorded the submission of the revenue and in paragraph-7 opined that the submission advanced on behalf of the revenue were correct. The submissions advanced by or on behalf of the revenue included that :
“Settled principles of construction of taxing statutes require that such conditions should be strictly construed.”
We are, for the aforesaid reasons, of the opinion that this judgment has no manner of application.
The third judgment relied upon by Mr Khaitan is in the case of Bajaj Tempo Ltd. Vs. CIT. He relied upon the judgment for the limited purpose of impressing upon us the following views expressed by the Apex Court.
“Since a provision intended for promoting economic growth has to be interpreted liberally, the restriction on it, too, has to be construed so as to advance the objective of the section and not to frustrate it.”
Mr. Khaitan contended that 100% deduction permitted under section 80IB(10) of the I.T. Act is with the laudable object of promoting housing projects which is likely to be frustrated if the deductions are to be denied for lack of a ministerial job in time. We are unable to accept this submission. It is also not possible for us to hold that any liberal construction is appropriate in the facts of this case.
The fourth judgment cited by Mr Khaitan is in the case of CIT Vs. Berger Paints (India) Ltd. The question arose, whether the deductions under section 32AB and under section 80HHC of the I.T. Act not permissible in a case where the audit report in the prescribed form duly signed and verified by the Accountant was not submitted along with the return of income as required by sub-section (5) of section 32AB and sub-section (4) of section 80HHC of the I.T. Act. This question was answered by the Division Bench of this Court in favour of the assessee. The Division Bench was of the opinion that it was not required to interpret the words “‘shall not be permissible’ as mandatory”. It was further observed that the audit report in the prescribed form duly verified and signed had been filed at the time of assessment. The filing of return and the filing of the audit report in the prescribed form duly signed and verified are by no means on the same pedestal. The audit report is the evidence by which the claims made in the return are sought to be proved. When the evidence is adduced at the time of scrutiny assessment, the requirement is sufficiently met. But the same thing cannot be said about the filing of the return itself. In the case before us, the benefits under section 80IB(10) of the I.T. Act can only be availed in those cases where the return has been filed within the prescribed period. In this case, the return itself was not filed within the due date. We are, as such, unable to see how does this judgment help the assessee in this case.
The fifth and last judgment cited by Mr. Khaitan is in the case of Commissioner of Central Excise, New Delhi vs. Harichand Srigopal. Mr. Khaitan drew our attention to paragraph-24 of the judgment, which reads as follows:
“The doctrine of substantial compliance is a judicial invention, equitable in nature, designated to avoid hardship in cases where a party does all that can reasonably expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the “essence” or the “substance” of the requirements. Like the concept of “reasonableness”, the acceptance or otherwise of a plea of “substantial compliance” depends upon the facts and circumstances of each case and the purpose and object to be achieved and the context of the prerequisites which are essential to achieve the object and purpose of the rule or the regulation. Such a defence cannot be pleaded if a clear statutory prerequisite which effectuates the object and the purpose of the statute has not been met. Certainly, it means that the Court should determine whether the statute has been followed sufficiently so as to carry out the intent for which the statute was enacted and not a mirror image type of strict compliance. Substantial compliance means “actual compliance in respect of the substance essential to every reasonable objective of the statute” and the court should determine whether the statute has been followed sufficiently so as to carry out the intent of the statute and accomplish the reasonable objectives for which it was passed. Fiscal statute generally seeks to preserve the need to comply strictly with regulatory requirements that are important, especially when a party seeks the benefits of an exemption clause that are important. Substantial compliance of an enactment is insisted, where mandatory and directory requirements are lumped together, for in such a case, if mandatory requirements are complied with, it will be proper to say that the enactment has been substantially complied with notwithstanding the noncompliance of directory requirements. In cases where substantial compliance has been found, there has been actual compliance with the statute, albeit procedurally faulty. The doctrine of substantial compliance seeks to preserve the need to comply strictly with the conditions or requirements that are important to invoke a tax or duty exemption and to forgive non-compliance for either unimportant and tangential requirements or requirements that are so confusingly or incorrectly written that an earnest effort at compliance should be accepted. The test for determining the applicability of the substantial compliance doctrine has been the subject of a myriad of cases and quite often, the critical question to be examined is whether the requirements relate to the “substance” or “essence” of the statute, if so, strict adherence to those requirements is a precondition to give effect to that doctrine. On the other hand, if the requirements are procedural or directory in that they are not of the “essence” of the thing to be done but are given with a view to the orderly conduct of business, they may be fulfilled by substantial, if not strict compliance. In other words, a mere attempted compliance may not be sufficient, but actual compliance of those factors which are considered as essential”.
Mr. Khaitan submitted that the provision regarding filing of the return on or before the prescribed day is directory in nature. We are unable to concur with him. The benefit in the present case can only be claimed in case of fulfillment of the preconditions laid down under section 80AC of the I.T. Act. When the preconditions have not been fulfilled, the benefit cannot be claimed. There is, as such, no reason to find out whether the direction is directory or mandatory. In any event, when the provision is that the benefit cannot be claimed if the return has not been filed on or before the prescribed day, in our view, it is a mandatory direction which prescribes the consequence of omission to file the return in time. The Courts cannot rewrite the law to do what is just according to them as rightly pointed out by Mrs. Bhargava.
All the judgments cited by Mr. Khaitan have thus been dealt with. It was also the submission of Mr. Khaitan that neither of these judgments is on point which has arisen in this case. We are inclined to think that the benefit can only be availed by the assessee if he has filed his return on time. If he has not filed his return on time, the benefits cannot be claimed.
For the aforesaid reasons, both the questions framed above are answered in favour of the revenue. The appeal thus succeeds and is allowed. The order under challenge is set aside.”
6. Keeping in consonance with the above view of the Hon’ble Calcutta High Court, we hold that once the return of income has been filed belatedly, no benefit under section 80IA of the Act is allowed. The learned CIT(A) had seriously flawed in his conclusions by holding as follows:–
p6.3 Considering the above referred facts, board’s circular, acceptance of return by system under code 11, and the General Clauses Act, 1987, I have no manner to doubt that the original return was a valid return under section 139(1) that was filed within time limit and was according to law. Thus, the original return being a valid retum u/s 139(1) [and accepted online under code 11- i.e., within in due date), the same could be validly revised under section 139(5). In the original return the claim u/s 801A(4) had remained to be made through inadvertence and hence the assessee was rightly entitled to make the said claim by filing a revised return, which the assessee did on 10.09.2015. The assessee had also filed auditor’s report in prescribed form 10CCB physically on 29.11.2016 along with his reply of the said date in response to queries raised by A.O. The A.O.’s claim that since 10CCB report was not filed online along with the return, the assessee is not entitled to claim benefit u/s. 801A(4) claim is untenable.
6.4 It is claimed by the assessee that there is no option in income tax website to upload online Form 10CCB Audit Report for claiming deduction u/s.801A and the same could be filed physically before completion of assessment. Further I find that the requirement of filing Form No.10CCB along with the return is merely directory and not mandatory. If the report of auditor in prescribed Form 10CCB is filed during the assessment proceedings, it is a sufficient compliance of section 801A as held by Hon. Supreme Court in the case of C.I.T. Vs. G.M. Knitting Industries (P) Ltd. and AKS Alloys (P) Ltd. reported in (2015) 376 ITR P.456 (S.C.) and various other decisions of various other High Courts quoted in the said decision. Therefore, I hold that the requirement of section 801A of filing 10CCB was duly complied.
6.5 Another objection of the A.O. regarding section 80AC that since the original return was not filed before due date of filing return u/s.139(1), the assessee is not entitled to claim deduction U/s.801A no longer survives in view of my finding that the original return was U/s.139(1) and was filed before prescribed due date. One more objection was taken that due tax of Rs.47,18,737/- was not paid along with the return and hence the return was defective and hence assessee is not entitled to section 801A(4) deduction. In this regard, the notice u/s 139(9) was received by the assessee to remove the defect on 05.02.2015. However, the assessee before that date had already paid Rs. 10,00,000/- on 15.12.2014 and Rs.37,18,141/- on 22.12.2014. It is thus clear that there was no defect in the return as assumed by the A.O. I hold so accordingly. Hence, the various technical objections raised by the A.O. as referred to in assessment order and discussed above are hereby rejected, as these are found incorrect.”
7. The learned CIT(A) failed to controvert the fact that the return of income was filed on 01/12/2014. By taking assistance from irrelevant materials, he has arrived at a specious conclusion which is ergo jettisoned. The learned A.R. for the assessee failed to bring into our attention any judgment of the High Court or Supreme Court in support of his contentions. The learned Departmental Representative on the other hand bolstered his arguments by referring to the above judicial pronouncements, whose ratio is binding to be followed keeping in tandem with judicial hierarchy. Thus, the grounds of appeal raised by the Revenue are allowed. Since the Revenue has succeeded in ground no.1 and 2, the other issues on merit need not be delved upon.
8. In the result, appeal filed by the Revenue is partly allowed.
Order pronounced in the open Court on 14/08/2024
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