Failure to file Form 10CCB with return do not constitute escapement of income – High Court
In a recent judgment, the Hon’ble High Court has held that failure to electronically upload Form 10CCB along with its Return of Income within due date u/s 139 would not constitute a valid ground for the reassessment action being initiated or assertion that income liable to tax had escaped assessment. However, post Finance Act 2020, the question if e-filing of report within due date prescribed directory and procedural has been kept open.
ABCAUS Case Law Citation:
4213 (2024) (08) abcaus.in HC
The case of the Writ Petitioner(s) was that a digital filing of the Audit Report in Form 10CCB along with the Return of Income was merely procedural and directory and that the statutory prescriptions had been substantially complied with, the Income Tax Department on the other hand argued that the statutory prescriptions comprised in Section 80-IA(7) are mandatory and the re-assessment initiated under Section 148 was justified.
In the instant case, the petitioner had submitted a Return of Income claiming deductions under Section 80-IA(4)(iv)(a) of the Act. The tax audit report in Form 3CA under Section 44AB was also filed electronically within due date along with the Return of Income and the Audit Report in Form 10CCB was filed manually before the Assessing Officer during the scrutiny proceedings prior to the finalization of the assessment.
The Assessing Officer (AO) concluded the assessment in terms of Section 143(3), allowing the deductions claimed by virtue of Section 80-IA. However, later the impugned notice under Section 148 was issued.
It was the case of the Department that Rule 12 of the Income Tax Rules, 1962 (the Rules) which was amended w.e.f. 01 April 2013 introduced the requirement of an online submission of the Audit Report in Form 10CCB. That the petitioner had failed to digitally submit the report and this would constitute a non-disclosure of true and complete particulars.
Placing reliance on the several judgments, the Petitioner contended that High Courts across the country have taken the consistent position that the filing of an audit report is a procedural requirement and would not detract from the right of an assessee to claim deductions which are otherwise permissible in terms of Section 80-IA.
It was contended that the amendment to sub section (7) of Section 80-IA is liable to be viewed as being merely directory and the requirements of Section 80-IA(7) would be deemed to have been fulfilled as long as the Audit Report is submitted before the AO prior to conclusion of assessment proceedings.
The Department heavily relied upon the judgment of the Hon’ble Supreme Court rendered in the context of Section 10B(8) which held that where the statute requires the filing of a form to coincide with the furnishing of a Return of Income, it is liable to be viewed as a mandatory pre-condition for any benefit being claimed by an assessee.
The Hon’ble High Court observed that the impugned orders nowhere stated escapement of income which is a pre-condition for the purposes of invoking Section 148. As per the reasons recorded, the only allegation levelled against the petitioner was of its failure to digitally upload the Audit Reports. This clearly did not qualify or meet the prescription of the First Proviso to Section 147 as it existed at the relevant time.
The Hon’ble High Court opined that a failure to digitally upload a Form cannot lead one to conclude that the assessee had failed to make a full and true disclosure. In any event, the Department failed to establish or assert how that folly, if it may be so termed, resulted in escapement of income and liable to be struck down on this short ground alone.
Further, the Hon’ble High Court noted that Section 80-IA(7) as it existed prior to its amendment in terms of Finance Act, 2020, only placed a requirement of the assessee furnishing the Audit Report along with his Return of Income in the prescribed form. it is only by virtue of Finance Act, 2020 that Section 80-IA(7) now embodies a stipulation for the Audit Report being furnished before the specified date referred to in Section 44AB Accordingly, the writ petition was allowed.
The Hon’ble High Court further observed that the various decisions which speak of the electronic submission of the Audit Report being directory and procedural were all rendered prior to the amendments introduced by Finance Act, 2020. The instant writ petitions too were concerned with actions initiated prior to the passing of Finance Act, 2020 and the amendments consequently made in Section 80-IA (7). The present decision is thus not liable to be read as an exposition on the legal position which would prevail post 2020 or the likely impact in light of the inclusion of the phrase “…before the specified date referred to in section 44AB…”. The question was left open for examination in an appropriate case.
With respect to the judgment of the Hon’ble Supreme Court relied upon by the Department, the Hon’ble High Court stated that One of the reasons which appears to have weighed upon the Supreme Court while rendering its decision in Wipro Limited was of Section 10B being an exemption provision. Whereas, in contrast, Section 80-IA(7) is principally concerned with deductions that may be claimed and the Audit Report being made available for examination by the AO.
Accordingly, the writ petition was allowed and the impugned notices were quashed.
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