A deduction can not be denied for not filing ITR within due date in absence of specific provision

A claim for deduction can not be denied merely for not filing return of income within due date specified u/s 139(1) in absence of any specific provision – ITAT

ABCAUS Case Law Citation:
ABCAUS 3724 (2023) (04) ITAT

Important Case Laws relied upon:
M/s. Saffire Garments Vs. Income Tax Officer
CIT vs. Dilip Kumar & Company
M/s. Opto Circuits (India) Limited vs ACIT
Scott R. Bayman v. Commissioner of Income-tax

In the instant case, the assessee had challenged the order passed by the NFAC/CIT(A) in in denying the deduction claimed under section 10AA of the Income Tax Act, 1961 (the Act). on the ground that the assessee did not file return of income (ITR) within time specified under section 139(1) of the Act.

The assessee filed return of income claiming deduction under section 10AA of the Act. The return was processed by CPC, Bangalore, under section 143(1) of the Act denying the deduction claimed under section 10AA of the Act for not filing return of income within the due date specified under section 139(1) of the Act. 

The assessee preferred appeal before the CIT(Appeals) who relying on the judgment of the coordinate bench of the ITAT and decision of the Hon’ble Supreme Court, sustained the action of the Assessing Officer/CPC in denying the deduction claimed u/s 10AA of the Act.

The Tribunal noted that a specific proviso was introduced in the provisions of section 10A and 10B stating that no deduction under the provisions of section 10A/10B shall be allowed to assessee who does not furnish a return of income on or before the due date specified under sub section (1) of section 139 of the Act.  However, in section 10AA of the Act for the relevant assessment year no such proviso existed making mandatory filing of return within the due date specified under sub section (1) of section 139 of the Act for availing deduction under section 10AA of the Act.

Further, the Tribunal observed that an identical issue came up before the Coordinate Bench of the Tribunal which held that the denial of exemption claimed under section 10AA of the Act on the ground of not filing return of income within the due date specified under section 139(1) of the Act is not legally correct.

The Tribunal also noted that a proviso has been inserted in section 10AA by the Finance Act, 2023 with effect from 1.04.2024 providing for mandatory filing return of income within the due date specified u/s 139(1) of the Act so as to avail exemption under section 10AA of the Act.

In view of the above the Tribunal opined that for the year under consideration there was no mandatory requirement of filing the return of income within the due date specified under section 139(1) of the Act for availing exemption u/s 10AA of the Act.

The Tribunal opined that even applying the ratio of the decision of  the Hon’ble Supreme Court that exemption notification should be interpreted strictly and the provisions of exemptions/deductions shall have to be interpreted strictly, in the absence of any specific provision to deny claim for deduction under section 10AA of the Act for not filing return of income within the due date specified  under section 139(1) of the Act the assessee’s claim for deduction under section 10AA of  the  Act   cannot be denied.   

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• AO not justified in making addition by adopting extrapolation without any material evidence