ITAT, HYDERABAD “B” BENCH

Member(s) : B. Ramakotaiah, A.M. & V. Durga Rao, J.M.

ITA Nos. 1732/Hyd/2012, 383/Hyd/2015 and 520 & 521/Hyd/2016; Asst. yrs. 2008-09 to 2011-12

Date of Decision 4th May, 2018

Source (2018) 32 NYPTTJ 622 (Hyd)

Statutes referred to :

Statutes referred to :

Income-tax Act, 1961, s. 10B

Case decided in favour of :

In favour of : Assessee

Exemption under s. 10B—Allowability—Delay in filing return—Assessee’s audit was completed in time but the return was uploaded belatedly for the reason that the computer got infected and it took some time to set it right—This reasoning is supported by a certificate from a computer specialist, who attended to the problem—Once the audit was completed on 2nd Sept., 2008 which was not doubted by the Revenue, there is no reason why assessee should postpone the uploading of the return, when all the information was ready—Therefore, the explanation given that the computers got infected is a reasonable explanation—Delay in filing the return was for reason beyond the control of the assessee—Since there is a reasonable cause, the return filed by assessee is to be considered as return filed under s. 139(1)—That apart, assessee was also claiming deduction in earlier years—Deduction under s. 10B cannot be denied without a valid reason—Hence, assessee is entitled for deduction under s. 10B

Held :

Assessee completed audit as on 2nd Sept., 2008, but the return was uploaded belatedly. The reason given is that the computer got infected and it took some time to set it right so that assessee could upload the entire data. This reasoning is supported by a certificate from a computer specialist, who attended to the problem. Once the audit was completed on 2nd Sept., 2008 which was not doubted by the Revenue, there is no reason why assessee should postpone the uploading of the return, when all the information was ready. Therefore, the explanation given that the computers got infected is a reasonable explanation given in the circumstances. The delay in filing the return is not an intentional delay but beyond the reasonable control of assessee. Not only that, assessee was also claiming deduction in earlier years. The deduction under s. 10B cannot be denied in the subsequent year without a valid reason. Since there is a reasonable cause, the return filed by assessee is to be considered as return filed under s. 139(1). Accordingly, assessee is entitled to deduction under s. 10B. AO is directed to allow the same.—CIT vs. Abhinitha Foundation (P) Ltd. (2017) 154 DTR (Mad) 57, ITO vs. S. Venkataiah (2012) 22 taxmann.com 2 (Hyd) and Asstt. CIT vs. Dhir Global Industrial (P) Ltd. (2010) 133 TTJ (Del) 580 : (2010) 45 DTR (Del)(Trib) 290 : (2011) 43 SOT 640 (Del) followed; Visu International Ltd. vs. Dy. CIT ITA No. 696/Hyd/2011 applied.

(Paras 11.4 & 11.8)

Conclusion :

Explanation given by the assessee for filing the return belatedly that its computer got infected which could be set right by a specialist only after some time is a reasonable explanation and, therefore, the belated return filed by the assessee is to be considered as return under s. 139(1) and consequently, deduction under s. 10B could not be denied on the ground of late filing of return, more so as the assessee was also claiming deduction in earlier years.

10. Coming to ‘delay’ part in filing of ‘return’ by the assessee, we find that per AO’s order, the return was filed on 31st Dec., 2008 whereas the IT(A) in para No. 5.2 takes the date of filing return as 30th Oct., 2008. In the absence of any error pointed in CIT(A)’s order, wealso take the date of filing return as 30th Oct., 2008 ITA 74/Mds/12 i.e. after one month of due date i.e. 30th Sept., 2008. The assessee’s explanation in support is that there was system’s failure in uploading its electronic ‘return’. We find from case law of Dhir Global (supra) that the provision of ‘due date’ under s. 139(1) has itself been held to be a directory provision instead of mandatory. The other decisions of Chennai and Hyderabad Tribunal benches also follow the same legal ten. Therefore, by placing reliance in the same, we also hold that since the operation of s. 139(1) of the Act is directory in nature, therefore, the assessee’s plea of system failure explaining delay of one month in filing return deserves to be accepted. At the same time, we have perused Hon’ble apex Court judgement cited by Departmental Representative (supra). We find that in the said case, the issue was entirely different i.e., allowability of ‘exemption’ in case under s. 10(29) of the IT Act in principle and not alike the instant case where the assessee has been successfully getting deduction under s. 10B of the Act for the last nine consecutive assessment years (supra).

11. After giving our thoughtful consideration to the case and more particularly, in view of the fact that the substantive ground for rejecting assessee’s deduction claim is only that of delay of 9 ITA 774/Mds/12 one month filing ‘return’ we are of the opinion that the assessee has successfully explained the delay. Accordingly we hold that the assessee has filed a valid return under s. 139(1) of the ‘Act’. Accordingly, the assessee is also held entitled for getting the deduction under s. 10B of the Act.”

11.5 Hon’ble Madras High Court ruling in case of CIT vs. Abhinitha Foundation (P) Ltd. (2017) 154 DTR (Mad) 57 : (2017) 183 taxmann.com 100 (Mad) is as under :

“12.5 The failure to advert to the claim in the original return or the revised return cannot denude the appellate authorities of their power to consider the claim, if, the relevant material is available on record and is otherwise tenable in law. Any ‘other view will set at naught the plenary powers of appellate authorities.”

11.6 Further relied in the case of ITO vs. S. Venkataiah in ITA No. 984/Hyd/2011, (2012) 22 taxmann.com 2 (Hyd) it was held :

“14. In our opinion, in view of the above discussion, the claim of the assessee cannot be denied on technicalities when the assessee is legally otherwise entitled for deduction. As such we are inclined to dismiss the appeal filed by the Revenue as devoid of merit”.

11.7 In the case of Asstt. CIT vs. Dhir Global Industrial (P) Ltd. (2010) 133 TTJ (Del) 580 : (2010) 45 DTR (Del)(Trib) 290 : (2011) 43 SOT 640 (Del) it was held;

Sec. 10B of the IT Act, 1961 – Export—oriented undertaking—asst. yr. 2006-07—Whether proviso to s. 10B(1) is directory and not mandatory—Held, yes—Whether, therefore, in case of genuine hardship, relief can be granted to assessee under s. 10B even if return is not furnished on or before due date specified under sub-s. (1) of s. 139—Held, yes.

11.8 Not only that, assessee was also claiming deduction in earlier years and following the principles laid down in the case of Visu International Ltd. vs. Dy. CIT in ITA No. 696/Hyd/2011, the deduction under s. 10B cannot be denied in the subsequent year without a valid reason.. Since there is a reasonable cause, the return filed by assessee is to be considered as return filed under s. 139(1). Accordingly, assessee is entitled to deduction under s. 10B. AO is directed to allow the same. The ground is allowed.