Failure To Electronically Upload Form 10CCB Along With ROI Not A Valid Ground For Income Tax Reassessment: Delhi High Court

The Delhi High Court ruled that failure to electronically upload form 10ccb along with ROI not a valid ground for income tax reassessment.

The court noted that the reasons assigned in the orders nowhere allude to escapement of income which is a pre-condition for the purposes of invoking Section 148. The only allegation levelled against the petitioner is of its failure to digitally upload the Audit Reports.

The bench opined that the same clearly does not qualify or meet the prescription of the First Proviso to Section 147 as it existed at the relevant time.

The court noted that the petitioner had been assessed for AYs 2013-14 and 2014-15 in terms of Section 143(3).

The court said that the proviso clearly required the respondents to establish that income liable to tax had escaped assessment on account of a failure of the petitioner to make a full and true disclosure of all material facts.

It was opined by the court 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 respondents have woefully failed to establish or assert how that folly, if it may be so termed, resulted in escapement of income. The Section 148 action would thus and following the view taken by us in Associated Chambers be liable to be struck down on this short ground alone”, the bench observed.

The court observed that the reassessment actions for AYs 2013- 14 and 2014-15 were commenced with the issuance of notices under Section 148 on 26 March 2019. An action to reopen assessment prior to the amendments introduced by virtue of Finance Act, 2021 could have at best been initiated within a period of four years and subject to a maximum of six years in terms of the provisions of Section 149 as it existed at the relevant time. The reassessment action, insofar as AY 2013-14 is concerned, being beyond the maximum window of six years would thus falter and fail on this score additionally.

It was noted by the court that note 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. Discernibly, Section 80-IA(7) as it stands in its present form uses the expression “…before the specified date referred to in section 44AB and the assessee furnishes by that date…”. Thus, 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.

The court concluded that Audit Report was duly furnished to the AO and was available to be scrutinized and examined by that authority during the assessment proceedings, the provisions of Section 80-IA(7), as it stood prior to the amendments introduced in 2020, would be recognized to have been substantially fulfilled. In any event, a failure to digitally file that report cannot be countenanced to be fatal to the claim that may be laid in terms of Section 80-IA(7).

“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. This is evident from the Supreme Court significantly observing that Section 10B(8) being an exemption provision not being liable to be compared with Section 32(1)(ii-a) and which was concerned with a claim for additional depreciation. Regard must also be had to the fact that Section 10B(1) is essentially concerned with the grant of exemptions to newly established hundred per cent export-oriented undertakings and the deduction of profits and gains derived by such an enterprise. Sub-section (8) thereof enables an assessee to opt out of the exemption provisions contained therein subject to a requisite declaration being submitted. Since such a declaration would have an immediate and indelible bearing on the assessment of the Return of Income itself, it would clearly be liable to be viewed as a mandatory requirement warranting such a declaration being made at the outset itself and the statutory prescriptions made in that regard being liable to be strictly adhered to”, the court observed.

Facts

The two writ petitions pertaining to Assessment Years 2014-15 and 2013-14 respectively the reassessment action initiated in terms of notices issued under Section 148 of the Income Tax Act, 1961. The principal question which stands posited for the consideration was whether a failure on the part of the petitioner to electronically upload Form 10CCB along with its Return of Income and as per the time frames contemplated under Section 139 would constitute a valid ground for the reassessment action being initiated or for the respondents asserting that income liable to tax had escaped assessment.

Submissions

The petitioner contended that a digital filing of the Audit Report along with the Return of Income was merely procedural and directory and that the statutory prescriptions had been substantially complied with.

The respondents urged that the statutory prescriptions comprised in Section 80-IA(7) are mandatory and the actions initiated under Section 148 thus justified.

Case Details

Case Name: Shree Bhavani Power Projects Pvt. Ltd. V/S Income Tax Officer, Ward 23(3), & Anr.