Case Law Details

Case Name : Smt. Revathi Raju Vs The Income Tax Officer (ITAT Bangalore)
Appeal Number : ITA No.1425/Bang/2018
Date of Judgement/Order : 2014-15
Related Assessment Year :
Courts : All ITAT (5510) ITAT Bangalore (268)

Smt. Revathi Raju Vs ITO (ITAT Bangalore)

Issue- The Assessee made claim for deduction u/s.80IA of the Act for a sum of Rs.27,80,819/- being profits derived from the eligible business u/s.80IA of the Act. The AO however noticed that the return of income has been filed by the assessee for A.Y.2014-15 only on 2.12.2014 which was beyond the due date for filing the return u/s 139(1) of the Act for that Assessment Year. The AO was of the view that as per the provision of section 80AC of the Act any deduction under Chapter-VI A of the Act (Sec.80IA of the Act is part of Chapter VIA of the Act) can be claimed only if the return of income for the relevant assessment year is filed on or before the due date prescribed u/s 139(1) of the Act. Since the assessee has not complied with the aforesaid conditions, the AO refused to allow deduction u/s 80IA of the Act.

Held- Special Bench of the Tribunal in the context of deduction u/s.10A of the Act had to consider the effect of the proviso to Sec.10A(1A) of the Act which is similar to the provisions of Sec.80AC of the Act. Sec.10A(1A) held that as per proviso to Sec.10A(1A) of the Act, the assessee was required to file the return of income within the prescribed time as per the provisions of Section 139(1) of the Act and the proviso to sect 10A(1A) was nothing but a consequence of failure of the assessee to file the return of income within the due date prescribed u/s 139(1). For such a failure of the assessee to file his return of income within the due date prescribed u/s 139(1), disallowance of deduction u/s.10A of the Act was not the only consequence. Another consequence of such failure was prescribed in sect 234A also as per which, the assessee was liable to pay interest on the tax payable by him after reducing advance tax and TDS/TCS, if any, paid by him apart from some other reductions. The legal position is by now settled that charging of interest under various sections including u/s 234A was mandatory. When one of the consequences for not filing return of income within the due date prescribed u/s 139(1) was mandatory then, other consequence for the same failure of the assessee could not be directory and the same was also mandatory. The provisions of the proviso to Section 10A(1A) was therefore held to be mandatory and not directory. Filing of return of income within the time allowed u/s 139(4) of the Income tax Act, 1961 cannot dilute the infraction in not furnishing return in due time as prescribed u/s 139(1) of the Income tax Act, 1961.

FULL TEXT OF THE ITAT JUDGMENT

This is an appeal by the Assessee against the order of CIT(Appeals), Bengaluru-6, Bengaluru relating to AY 2014-15.

2. The Assessee is an individual. The Assessee was entitled to claim deduction u/s.80IA of the Income Tax Act, 1961 (Act) on income derived from power generation using wind energy. The Assessee made claim for deduction u/s.80IA of the Act for a sum of Rs.27,80,819/- being profits derived from the eligible business u/s.80IA of the Act. The AO however noticed that the return of income has been filed by the assessee for A.Y.2014-15 only on 2.12.2014 which was beyond the due date for filing the return u/s 139(1) of the Act for that Assessment Year. The AO was of the view that as per the provision of section 80AC of the Act any deduction under Chapter-VI A of the Act (Sec.80IA of the Act is part of Chapter VIA of the Act) can be claimed only if the return of income for the relevant assessment year is filed on or before the due date prescribed u/s 139(1) of the Act. Since the assessee has not complied with the aforesaid conditions, the AO refused to allow deduction u/s 80IA of the Act.

3. On appeal by the Assessee, the CIT(A) confirmed the order of the AO. Aggrieved by the order of the CIT(A), the Assessee has preferred the present appeal before the Tribunal.

4. I have heard the submissions of the ld. Counsel for the assessee, who submitted that the provision of section 80AC of the Act is directory and not mandatory. I have considered the submissions and am of the view that the same cannot be accepted.

5. In Saffire Garments Vs. ITO 140 ITD 0006(SB)(Rajkot), the Special Bench of the Tribunal in the context of deduction u/s.10A of the Act had to consider the effect of the proviso to Sec.10A(1A) of the Act which is similar to the provisions of Sec.80AC of the Act. Sec.10A(1A) and the proviso thereto is as follows:-

“ (1A) Notwithstanding anything contained in sub-section (1), the deduction, in computing the total income of an undertaking, which begins to manufacture or produce articles or things or computer software during the previous year relevant to any assessment year commencing on or after the 1st day of April, 2003, in any special economic zone, shall be,—

(i) hundred per cent of profits and gains derived from the export of such articles or things or computer software for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, and thereafter, fifty per cent of such profits and gains for further two consecutive assessment years, and thereafter;

(ii) for the next three consecutive assessment years, so much of the amount not exceeding fifty per cent of the profit as is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account (to be called the “Special Economic Zone Re-investment Allowance Reserve Account”) to be created and utilised for the purposes of the business of the assessee in the manner laid down in sub-section (1B) :

Provided that no deduction under this section shall be allowed to an assessee who does not furnish a return of his income on or before the due date specified under sub-section (1) of section 139.”

6. The Special Bench held that as per proviso to Sec.10A(1A) of the Act, the assessee was required to file the return of income within the prescribed time as per the provisions of Section 139(1) of the Act and the proviso to sect 10A(1A) was nothing but a consequence of failure of the assessee to file the return of income within the due date prescribed u/s 139(1). For such a failure of the assessee to file his return of income within the due date prescribed u/s 139(1), disallowance of deduction u/s.10A of the Act was not the only consequence. Another consequence of such failure was prescribed in sect 234A also as per which, the assessee was liable to pay interest on the tax payable by him after reducing advance tax and TDS/TCS, if any, paid by him apart from some other reductions. The legal position is by now settled that charging of interest under various sections including u/s 234A was mandatory. When one of the consequences for not filing return of income within the due date prescribed u/s 139(1) was mandatory then, other consequence for the same failure of the assessee could not be directory and the same was also mandatory. The provisions of the proviso to Section 10A(1A) was therefore held to be mandatory and not directory.

7. Another argument put forth before the Special Bench was that 139(4) is a proviso to Sec.139(1) of the Act and therefore return filed before the time limit prescribed in Sec.139(4) should also be considered as a return filed u/s.139(1) of the Act. This argument was also considered and rejected by the Special Bench and the Special Bench held that the Hon’ble Supreme Court in the case of Prakash Nath Khanna vs. CIT as reported in 266 ITR 01 (SC) has held that filing of return of income within the time allowed u/s 139(4) of the Income tax Act, 1961 cannot dilute the infraction in not furnishing return in due time as prescribed u/s 139(1) of the Income tax Act, 1961.

8. I am of the view that the ruling of the Special Bench will equally apply to the provisions of Sec.80AC of the Act which are identical to proviso to Sec.10A(1A) of the Act. The provisions of Sec.80AC of the Act reads thus:-

“ 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 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.”

9. In view of the decision of the Special Bench of the Tribunal in the case of M/s. Saffire Garments (supra), we hold that the provisions under section 80AC requiring the assessee to furnish the return of income before due date specified under section 139(1) is mandatory and not directory. In view of the above discussion and considering the facts and circumstances of the case, we do not find any error or illegality in the orders of authorities Consequently, the appeal by the assessee is dismissed.

10. In the result, appeal by the Assessee is dismissed.

Pronounced in the open court on this 1st day of June, 2018.

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Category : Income Tax (28342)
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Tags : ITAT Judgments (5689) Section 80IA (98)

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