Deduction u/s 80JJAA allowable as Audit Report available at the time of ITR processing

CPC not justified in disallowing deduction u/s 80JJAA when Audit Report was available on the date of processing the return – ITAT 

In a recent judgment, ITAT Pune has held that CPC was not justified in disallowing deduction u/s 80JJAA when Audit Report though filed belatedly, was available on the date of processing the return

 ABCAUS Case Law Citation:
ABCAUS 4175 (2024) (07) ITAT

In the instant case, the assessee had challenged the order passed by the Commissioner of Income Tax (Appeals)-NFAC affirming the denial of deduction claimed under section 80JJAA of the Income Tax Act, 1961 (the Act).

The assessee was a company engaged in the business of catering, running cafet area, providing food to hospitals, schools/other entities. The Return of Income for the relevant Assessment Year was filed after claiming deduction u/s 80JJAA of the Act in respect of employment of new employees.

Under Section 80JJAA, a deduction is allowed of an amount equal to thirty per cent of additional employee cost incurred in the course of business in the previous year, for three assessment years. One of the conditions to avail the deduction is the assessee has to furnish an audit report in Form 10DA from a chartered accountant on or before the date prescribed under section 44AB of the Act. 

As required, the requisite Audit Report in the prescribed Form No. 10DA certifying the total amount of deduction was required to be filed on or before 30^th September, i.e. due date for submission of the Audit Report u/s 44AB of the Act. However, the assessee filed the Audit Report on 5^th October.

The Centralized Processing Centre (CPC) Income Tax Department, Bengaluru, while processing the said return of income u/s.143(1) denied the amount of deduction u/s 80JJAA of the Act by assigning the reason that the Audit Report in Form No.10DA was not filed within the due date specified under the provisions of the Act.

Being aggrieved by the said intimation u/s.143(1), an appeal was filed before the CIT(A) who vide impugned order confirmed the action of the CPC placing reliance on the provisions of Rule 19AB of the Income-tax Rules, 1962 specifying the due date for furnishing the Audit Report in Form No.10DA for claiming deduction u/s 80JJAA of the Act.

Before the Tribunal, the assessee submitted that time line prescribed under Rule 19AB of the Income-tax Rules, 1962 is merely a directory in nature since the prescribed Audit Report in Form No 10DA was available with the CPC as on the date of processing the return of income. No prejudice is caused to the Revenue on account of delay in submission of the Audit Report in Form No.10DA.

The assessee placed reliance on the decision of the Tribunal and prayed that the CPC be directed to amend the intimation u/s.143(1) of the Act.

The Tribunal observed that the CPC while processing the return of income u/s.143(1) made adjustment by disallowing the claim of deduction u/s 80JJAA of the Act on the ground that the prescribed Audit Report in Form No.10DA was not filed within the specified time under Rule 19AB of the Income-tax Rules, 1962.

The Tribunal further observed that admittedly, the Audit Report in Form No.10DA was filed by the assessee on 25^th October whereas the return of income was processed in January. Therefore, the prescribed Audit Report in Form No.10DA was very much available at the time of processing the return of income by the CPC which should have been taken into consideration by the CPC.

The Tribunal stated that the time line prescribed under Rule 19AB is only directory. If the Audit Report was available at the time of processing the return of income, no prejudice is caused to the Revenue. The CPC should have taken into consideration the Audit Report and processed the return.

Accordingly, the Tribunal remitted the matter back to the CPC to amend the intimation by taking into consideration the Audit Report in Form No.10DA. 

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