HC Allowed Sec. 80-IB Deduction Despite ITR Being Filed After the Due Date on Account of Delay in Audit

Case Details: Pr. Commissioner of Income Tax vs. M/s H.P. Housing & Urban Development Authority - [2023] 157 taxmann.com 598 (Himachal Pradesh)

Judiciary and Counsel Details

• • M.S. Ramachandra Rao, CJ. & Jyotsna Rewal Dua, J.
  • Ms Vandana Kuthiala for the Appellant.
  • Vishal Mohan, Sr. Adv. Praveen Sharma & Aditya Sood, Advs. for the Respondent.

Facts of the Case

The assessee was engaged in the development of housing facilities. For the relevant assessment year, the assessee furnished its return of income belatedly. Subsequently, the assessee enhanced the declared income and claimed deduction under section 80- IB(10) by furnishing the revised return of income.

During the scrutiny proceedings, the Assessing Officer (AO), after considering section 80AC of the Act, denied the deduction under section 80-IB claimed by the assessee. The AO contended that the assessee failed to furnish its original return of income within the prescribed time limit under section 139(1) of the Act. In response, the assessee explained that the filing of its return was delayed due to a delay by the local Audit Department. Unsatisfied with the explanation, the AO continued to deny the deduction.

The matter then reached the Himachal Pradesh High Court.

High Court Held

The High Court held that a return of income filed under Section 139(4) could not be said to be meeting the requirements of Section 139(1) in the context of Section 80AC of the Act, which specifically insists upon the filing of return by the due date prescribed under Section 139(1) for availing the admissible deductions.

In the instant case, the assessee took up a defence of late audit for belated filing of its return of income. Further, the AO did not dispute the veracity of the grounds so put forth for the late filing of the return. Accordingly, it was construed that the assessee had a reasonable & bonafide cause for not filing the return of income within the time permitted under Section 139(1).

Moreover, the CIT(A) and the Tribunal held that the assessee was actually entitled in law to certain deductions under Section 80IB(10) of the Act. Therefore, if the assessee was otherwise entitled to deduction under Section 80IB(10) but, due to its ignorance or for some other reason, could not claim the same in the return of income, then the Appellate Authority should have looked into the same.

The assessee should not be burdened with taxes which it is otherwise not liable to pay under the law. A duty is cast upon the Income Tax Authorities to charge legitimate taxes from the taxpayers. They are not there to punish the taxpayers for their bonafide mistakes.

Accordingly, the appeal was dismissed.