Deduction cannot be denied for delay in filing return due to loss of data on account of virus attack
Case Law Details
Assessee filed the return of income on 23.12.2008. The due date for filing the return of income u/s. 139(1) of the Act for the assessment year under consideration in the case of the assessee is 3 1.10.2008. As such the return filed by the assessee is belated. In this the assessee claimed deduction u/s. 80IC of the Act which was disallowed by the Assessing Officer as the return of the assessee was not filed within the time as prescribed u/s. 139(1) of the Act. The assessee has given reasons for delay in filing the return of income that the assessee was preparing its accounts through computer and the computer got corrupted due to viruses and in spite of continuous efforts by the computer technical personnel to retrieve the data in time for filing the return of income, problem persisted in the system.
By trying to retrieve the data for 4 days the required data could not be retrieved and the backed up data were available only up to 31st January, 2008 in the CD and the entire data for the two months period, February and March, 2008, had to be re-entered into the computer system again. On preparation of the final accounts and finalising of statutory audit it took a little extra time that resulted in belated filing of return of income. Thus there was a delay of 74 days in filing the return of income which is beyond the control of assessee. This was also confirmed by the statutory auditor vide his letter dated 20.3.2011. Being so, in our opinion there is a reasonable cause for filing the return of income belatedly and this is beyond the control of the assessee. When the substantial question of justice involved technicalities should be ignored.
INCOME TAX APPELLATE TRIBUNAL, HYDERABAD
ITA No. 984/Hyd/2011
Assessment year 2008-09
Income Tax Officer Vs. Sri S. Venkataiah
Date of pronouncement: 31.05.2012
ORDER
PER CHANDRA POOJARI, AM:
This appeal by the Revenue is directed against the order of the CIT(A)-VI, Hyderabad dated 7.4.2011 for assessment year 2008-09.
2. The Revenue raised the following grounds of appeal:
1. The order of the CIT(A) is erroneous in law and on facts.
2. The CIT(A) erred in allowing the additional evidence without giving a reasonable opportunity to the AO to examine the evidence which is in contravention to the Rule 46A(3) of IT Rules, 1962.
3. The CIT(A) ought to have appreciated that the AO had rightly disallowed the deduction claimed u/s. 80IC following the provisions of section 80AC.
4. The CIT(A) ought to have held that the explanation offered by the assessee was nothing but an after though and devoid of any merit as no effort was made by him to take recourse u/s. 1 19(2)(b) for extension of time for filing the return of income.
5. The CIT(A) erred in coming to a conclusion that the assessee was prevented by a genuine reason in filing the return belatedly.
6. The CIT(A) ought to have appreciated that the intention of the legislature behind incorporating sec. 80AC was to impose stringent guidelines on the assessees who claim exemption of profits u/s. 801A to 801E.
3. Brief facts of the case are that in this case the assessee filed a return of income on 23.12.2008 admitting an income of Rs. 3,44,153. The assessee is engaged in the business of pharmaceutical products under the name and style of M/s. Noel Pharma and the firm unit is set up in the state of Himachal Pradesh in the year 2005-06 and started claiming deduction u/s. 801C of the Income-tax Act, 1961 from A.Y. 2006-07 onwards.
4. For the A.Y. 2008-09, the assessee had claimed deduction of Rs. 4,55,69,014 u/s. 801C of the Act and during the assessment proceedings the Assessing Officer noticed that the accounts were audited on 11/12/2008 and the return of income was filed belatedly on 23/12/2008.
5. The Assessing Officer had issued a show cause letter dated 29/11/2010 drawing the attention of the assessee that the provisions of Section 80AC provides for disallowance of deductions claimed u/s. 801A to 801E, if the return of income is not filed on or before the due date for filing prescribed u/s. 139(1) of the IT Act and objections for disallowance of the deduction claimed u/s. 801C was called for, for the delay in filing of return of income as the due date for filing the return of income is 30/09/2008 and as per section 80AC ??deduction not to be allowed unless return furnished??:
“Where in computing the total income of an assessee of the previous year relevant to the assessment year commencing on the 1st ” day of April 2006 or any subsequent assessment year, any deduction is admissible under section 801A of section 801AB or section 801B or section 801C (or section 801D or section 801E) 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 subsection of Section 1 39J”
6. In response to the show cause letter dated 29/11/2010 the Assessee has filed the reply vide letter dated 13/12/2010, wherein the assessee has mentioned that due to technical problems in computer system, the return of income was filed on 23/12/2008, with a delay of 74 days. The assessee had submitted before the Assessing Officer that while the assessee was preparing the Balance Sheet and Profit & Loss Account for the relevant financial year, suddenly some data files in the computer got corrupted due to viruses and in spite of continuous efforts by the computer technical persons to retrieve the data in time for filing the income tax return, problems persisted in computer systems. It was further submitted that even after trying for retrieval of the data for four days, the required data could not be retrieved and that the backed-up data were available only up to 31st January 2008 in the C.D. Therefore, the entire data for the two months period, February & March 2008, had to be entered into the computer system again. Subsequently, the data were again audited by the Statutory Auditors for finalizing the accounts. It was submitted that since the assessee has multi location sales points through C&F agents in 12 States in India and data pertaining to transactions with these sales points consist of third party claims for stock returns and expiries/breakages, substantial time was consumed for auditing the re-entered data and preparation of annual accounts. The assessee contended before the Assessing Officer that all these developments were beyond the control of the assessee and hence, there was a delay of 74 days in filing the Income Tax Return.
7. It was further submitted before the Assessing Officer that the delay in filing the Income Tax Returns was not intentional on the part of the assessee but only due to problems which were beyond the control of the assessee. The Assessee in his reply before the Assessing Officer had placed reliance on the under mentioned case laws:-
a) ACIT vs. Dhir Global Industrial (P) Ltd. 45 DTR [DEL-TRIB] 290
b) Bajaj Tempo Ltd vs. CIT 104 CTR 216 [SC]
c) CIT vs. U.P. State Agro Industrial Corporation 56 Taxman 349 [All]
d) CIT vs. Hindustan Antibiotics Ltd 93 ITR 548 [Bom]
e) CIT vs. Satellite Engineering Ltd 113 ITR 208 [GUJ]
f) CIT vs. Gedore Tools India (P) Ltd. 126 ITR 673 [Del]
g) Ashok Motors Ltd Vs. CIT 41 ITR 397, 402,404 [Mad]
h) CHEMBRA PEAK ESTATES Ltd. vs. CIT 85 ITR 401 [Ker]
i) Capsulation Services (P) Ltd. Vs. CIT 91 ITR 566, 570 [Bom]
j) CIT Vs. GAEKWAR FOAM & RUBBER CO., LTD 351 ITR 662 [Bom]
k) Trustees of Tulsidas Gopalji Charitable & Chaleshwar Temple Trust vs. CIT 207 ITR 368 [Bom)
8. It was submitted before the Assessing Officer that in all the above judgments it was categorically stated that the provisions setting out the time limit should not work as punitive ones, so that the purpose behind the relief is not frustrated. The provisions of Section 139(1) & (4) have to be read together and on such a reading the inevitable conclusion is that a return made within the time specified in subsection (4) has to be considered as having been made within the time prescribed in subsection (1) or (2) of the Act, as laid out in the case of CIT vs. Kulu Valley Transport Co. (P) Ltd. (77 ITR 518).
9. Further, the assessee had submitted before the Assessing Officer that the provisions of Section 8OAC of the IT Act 1961, will be applicable only when the assessee submits the Income Tax Return beyond the time allowed u/s. 139(4) of the IT Act 1961, herein in the present case the Return of Income was filed on 23/12/2008 and it was well within the time allowed and as such the provisions of Sec 8OAC are not applicable for the present case.
10. The Assessing Officer had in the assessment order stated that all the decisions relied by the assessee are relatable to the claim of the deduction u/s. 10B, 11, 80P allowance of business loss etc. and further in all the said Judgements, the appellate authorities have taken a lenient view that in case of genuine hardship which prevented the assessee from timely filing the return u/s. 139(1) was only directory and not mandatory. In the present case the reasons stated by the assessee were some technical problems in the computers owing to which the return could not be filed in time, was very vague and devoid of any merit and that the assessee had not produced any documentary evidence to substantiate his claim and in the absence of any corroborative evidence, the reasons cited by the assessee cannot be construed as genuine hardship which prevented him from filing the Return of Income in time. Citing the above reasons the Assessing Officer has rejected the claim of the assessee made u/s. 80IC of Rs. 4,55,69,014/- and completed the assessment on an income of Rs. 4,59,13,167/-. Against this, the assessee went in appeal before the CIT(A) and the CIT(A) decided the issue in favour of the assessee. Against this action of the CIT(A), the Revenue is in appeal before us.
11. The learned DR strongly relied on the order of the Assessing Officer and submitted that it is mandatory on the part of the assessee to file the return of income as per the provisions of section 139(1) of the Act, failing which the assessee would not be entitled to claim deduction u/s. 80IC as envisaged u/s. 80AC of the Act. According to the learned DR with effect from 2006-07 as per provisions of section 80AC if the return is not filed on or before the due date as prescribed u/s. 139(1) of the Act, the assessee is disentitled for deduction u/s. 80IC of the Act.
12. On the other hand, the learned AR reiterated the submissions which were made before the CIT(A).
13. We have heard both the parties and perused the material on record. In this case admittedly, the assessee filed the return of income on 23.12.2008. The due date for filing the return of income u/s. 139(1) of the Act for the assessment year under consideration in the case of the assessee is 3 1.10.2008. As such the return filed by the assessee is belated. In this the assessee claimed deduction u/s. 80IC of the Act which was disallowed by the Assessing Officer as the return of the assessee was not filed within the time as prescribed u/s. 139(1) of the Act. The assessee has given reasons for delay in filing the return of income that the assessee was preparing its accounts through computer and the computer got corrupted due to viruses and in spite of continuous efforts by the computer technical personnel to retrieve the data in time for filing the return of income, problem persisted in the system. By trying to retrieve the data for 4 days the required data could not be retrieved and the backed up data were available only up to 31st January, 2008 in the CD and the entire data for the two months period, February and March, 2008, had to be re-entered into the computer system again. On preparation of the final accounts and finalising of statutory audit it took a little extra time that resulted in belated filing of return of income. Thus there was a delay of 74 days in filing the return of income which is beyond the control of assessee. This was also confirmed by the statutory auditor vide his letter dated 20.3.2011. Being so, in our opinion there is a reasonable cause for filing the return of income belatedly and this is beyond the control of the assessee. When the substantial question of justice involved technicalities should be ignored. Further, we are supported by the order of the Tribunal in ITA Nos. 1231 & 1199/Hyd/2010 in the case of DCIT vs. M/s. Vega Conveyors & Automation Ltd. order dated 31st December, 2010 wherein in para 5 of the order the Tribunal held as follows:
“5. We have considered the rival submissions and perused the orders of the lower authorities, and other material available on record, including the case-law relied upon by the parties. It is an undisputed fact that the assessee in the present case has filed the audit report in Form lOCCB during the course of re¬assessment proceedings. The issue that arises for consideration is whether the Assessing Officer was justified in disallowing the assessee’s claim for deduction under S. 80IB on the ground that the audit report in Form 10CCB was not filed along with the return of income; or whether the CIT(A) was correct in proceeding on the basis of Form 10CCB filed during the course of re-assessment proceedings and directing the Assessing Officer to allow the claim of the assessee for deduction under S. 80IB of the Act. It is settled position of law, as consistently held by various Benches of this Tribunal and as held in various decisions referred to by the CIT(A) in the impugned order, that though filing of audit report in Form 10CCB is mandatory and pre¬requisite for deduction under S. 80IB, non-filing of the same along with the return of income is only a curable defect, and assessee’s claim for deduction has to be considered on its merits as and when the defect is cured by filing Form 10CCB. We are fortified in this behalf by the decision of the jurisdictional High Court in the case of Hemsons Industries (Supra), relied upon by the learned counsel for the assessee. It is contended by the Learned Departmental Representative that the assessee’s claim for deduction under S. 80IB can be entertained and examined on merits, when the audit report is filed before the completion of assessment, which has not been done in the present case, since the audit report was filed only during the course of re¬assessment proceedings initiated by the Assessing Officer, which cannot end up giving additional deductions/benefits to the assessee. We do not find merit even in this contention of the learned Departmental Representative. In the case of Hemsons Industries (Supra), before the jurisdictional High Court, for one of the years under appeal before Hon’ble High Court, viz., assessment year 1979-80, audit report was filed during the course of re-assessment proceedings and in response to the show-cause notice under s. 148 issued by the Assessing Officer. In this view of the matter, respectfully following the decision of the jurisdictional High Court cited above, among others, we find no justification to interfere with the order of the CIT(A). We accordingly uphold the same and reject the grounds of the Revenue in this appeal.”
14. In our opinion, in view of the above discussion, the claim of the assessee cannot be denied on technicalities when the assessee is legally otherwise entitled for deduction. As such we are inclined to dismiss the appeal filed by the Revenue as devoid of merit.
15. In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 31st May, 2012.
I think ITO vs Yash Developers, ITA Nos. 809/Mum/2011 (AY 2007-08) and 3644/Mum/2012 (AY 2008-09), ITAT Mumbai “G” Bench Order dated 23 January 2014 is a good decision wherein claim for deduction under the provisions of the Act denied on technical default:- The relevant para of the order in relation to issue in case before the hon’ble Tribunal in appeal No. 3644/Mum/2012 for the AY 2008-09 is as under:
III. on the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) was right in allowing assessee’s claim of deduction u/s 80IB(10) when the assessee has not filed return of income within the time limit u/s 139(1) and when section 80AC specifically provides that no deduction shall be allowed unless return is furnished within time limit of section 139(1).
6. It is also relevant to state that in respect of delay in filing the return of income on the basis of which the AO also denied deduction u/s 80IB(10) of the Act in respect of assessment year 2008-09, which are Ground Nos.3 and 4 of the appeal taken by department, the ld. CIT(A) has stated that the assessee filed return within extended time prescribed u/s 139(4) of the Act and the said return be treated as the one filed within the time limit prescribed u/s 139(1) of the Act and referred the decision of the Hon’ble Apex Court in the case of Kulu Valley Transport Co. P. Ltd. V/s CIT [1970] 77 ITR 518. Ld. CIT(A) has stated that similar issue in the context of section 54F also came before the Hon’ble Punjab and Haryana High Court in the case of CIT V/s Jagruti Agarwal (339 ITR 610) (P&H) and it was held that sub-section (4) of section 139 has to be read along with sub-section (1) of section 139 and therefore due date for furnishing the return of income according to section 139 was subject to extended period provided u/s 139(4) of the Act. Ld. CIT(A) stated that similar issue was also considered by the Hon’ble Jurisdictional High Court in the case of Trustees of Tulsidas Gopalji Charitable & Chaleshwar Temple Trust V/s CIT [1994] 207 ITR 368 (BOM.) and the jurisdictional High Court held that sub-section (1) and (4) of section 139 have to be read together and in such a reading the return made within the specified time under sub-section (4) has to be considered as having been made within the time prescribed u/s 139(1) or (2) of the Act. The ld. CIT(A) also relied on the decisions of other High Courts, which we do not propose to refer to, particularly when the decision of the Hon’ble Bombay High Court has been considered hereinabove. However, it is relevant to state that the ITAT, Ahmedabad Bench also considered similar issue in the case of Parmeshwar Cold Storage P Ltd V/s ACIT (08 ITR (Trib) 172(Ahmd)) in the context of claim of deduction u/s 80IB wherein also the return was not filed within the time prescribed u/s 80AC of the Act but the Tribunal held that the claim of deduction/s 80IB of the Act should be adjudicated on merits and the matter was restored to CIT(A). The dl. CIT(A) has in para 9 also considered the decision of ITAT, Mumbai Bench in the case of Emerson Network Power India Pvt Ltd V/s ACIT reported in 122 TTJ 67(Mum) wherein it was held that the AO was obliged to give due relief to assessee or entertain its claims if admissible as per law even though the assessee had not filed revised return. Following the said decision, the ld. CIT(A) directed the AO to allow claim of the assessee made u/s 80IB(10) of the Act on merits even though the return of income was not filed within the time prescribed as per section 139(1) of the Act. In view of above, the department is in further appeals before the Tribunal.
9. In respect of grounds No.3 and 4, the relevant facts which we have already discussed hereinabove, we observe that the said issue is covered in favour of assessee by the decision of Hon’ble Bombay High Court in the case of Trustees of Tulsidas Gopalji Charitable & Chaleshwar Temple Trust (supra) which has been considered by the ld. CIT(A) while deciding the same in favour of assessee and respectfully following the same, we hold that there is no reason to interfere with the order of ld. CIT(A). Therefore, the Grounds No.3 and 4 of the appeal taken by department for assessment year 2008-09 are also rejected by confirming the order of ld. CIT(A).
10. In the result, both the appeals filed by the department for assessment years 2007-08 and 2008-09 are dismissed.”