Pradeep Kumar Batra vs. DCIT, CPC: Disallowance Due to Late Filing of Audit Report for AY 2017-18

Case Overview

The case of Pradeep Kumar Batra vs. DCIT, CPC, New Delhi (ITA No. 6384/DEL/2019) concerns an appeal filed by the assessee, Pradeep Kumar Batra, against the order passed by the Commissioner of Income Tax (Appeals)-12, New Delhi, related to the assessment year 2017-18. The case was heard and adjudicated by the Income Tax Appellate Tribunal (ITAT) Delhi Bench “SMC-2” on 23rd October 2020 through video conferencing. The primary issue in this case revolved around the disallowance of a deduction under Section 80IB of the Income Tax Act due to the late filing of the audit report in Form 10CCB.

Background of the Case

Pradeep Kumar Batra, a resident of New Delhi, filed his income tax return for the assessment year 2017-18 on 6th November 2017. The return reported a gross total income of ₹1,086,615 and claimed a deduction of ₹446,654 under Chapter VI-A, leading to a total income of ₹639,960. The Centralized Processing Centre (CPC) in Bangalore processed the return and made adjustments, including disallowing a deduction of ₹271,654 claimed under Section 80IB due to the late filing of the audit report. This adjustment resulted in a demand of ₹74,035.

The assessee challenged this adjustment before the Commissioner of Income Tax (Appeals), who upheld the CPC’s decision. Consequently, Pradeep Kumar Batra filed an appeal with the ITAT, contesting the disallowance and raising multiple grounds for reconsideration.

Why the Case Was Filed

The case was filed by Pradeep Kumar Batra in response to the disallowance of his claim for a deduction under Section 80IB of the Income Tax Act. The disallowance was made on the grounds that the audit report in Form 10CCB was not submitted along with the return of income by the due date. The appellant argued that the audit report was indeed filed before the processing of the return and that the delay in approving the audit report was due to his lack of computer literacy and understanding of the electronic filing process.

The appellant also raised issues regarding the communication of the proposed adjustment by the CPC, claiming that the intimation was sent to an incorrect email address and thus violated the principles of natural justice. Additionally, the appellant contested the CPC’s jurisdiction to make such an adjustment under Section 143(1)(a), arguing that the issue was debatable and should not have been resolved through summary processing.

Tribunal Proceedings

The ITAT Delhi Bench “SMC-2” heard the case on 6th October 2020, with the final order pronounced on 23rd October 2020. The appellant was represented by Shri Tilak Chandra, CA, while the Revenue was represented by Ms. Rakhi Vimal, Senior Departmental Representative.

In his arguments, the appellant reiterated that the audit report in Form 10CCB was filed by the accountant on 6th November 2017, the same day the return of income was submitted. However, the report was not approved by the appellant until 12th December 2017, which was after the due date for filing the return. The appellant argued that the delay was unintentional and caused by his lack of familiarity with the electronic filing process.

The Revenue, on the other hand, contended that the provisions of Section 80IB(11B)(iv) clearly required the audit report to be filed along with the return of income by the due date. The Revenue further argued that the CPC had acted within its powers to disallow the deduction due to the non-compliance with the statutory requirements.

Tribunal’s Decision

After considering the submissions of both parties, the ITAT upheld the decision of the CIT(A) and dismissed the appeal filed by Pradeep Kumar Batra. The tribunal observed that the provisions of Section 80IB(11B)(iv) were clear in requiring the audit report to be submitted by the due date for filing the return of income. The tribunal noted that while the audit report was indeed filed electronically by the accountant on 6th November 2017, it was not approved by the appellant until 12th December 2017, well after the due date of 7th November 2017.

The tribunal emphasized that the electronic filing of returns and associated documents required strict compliance with the prescribed timelines. It rejected the appellant’s argument that the delay in approving the audit report should be excused due to his lack of computer literacy, stating that the legal requirements could not be waived on such grounds. The tribunal also dismissed the appellant’s claim regarding the improper communication of the proposed adjustment, affirming that the CPC had followed the correct procedures in issuing the intimation.

In light of these findings, the tribunal concluded that the disallowance of the deduction under Section 80IB was justified, and there was no infirmity in the CPC’s actions. The appeal was accordingly dismissed.

Significance of the Case

The case of Pradeep Kumar Batra vs. DCIT, CPC, highlights the importance of timely compliance with the statutory requirements for claiming deductions under the Income Tax Act. The decision underscores the strict enforcement of rules regarding the electronic filing of returns and associated documents, particularly in the context of deductions that require the submission of audit reports.

This case serves as a cautionary tale for taxpayers, emphasizing the need for diligence in ensuring that all necessary documents are filed within the prescribed timelines. The tribunal’s decision also reinforces the principle that technical defaults, such as the late approval of electronically filed documents, can lead to significant financial consequences, including the disallowance of legitimate deductions.

Furthermore, the case illustrates the challenges faced by taxpayers in navigating the complexities of the electronic filing system, particularly those who may not be well-versed in the use of digital platforms. While the tribunal acknowledged the appellant’s difficulties, it ultimately held that such challenges could not override the clear legal requirements for compliance.

Conclusion

The case of Pradeep Kumar Batra vs. DCIT, CPC, New Delhi (ITA No. 6384/DEL/2019) was a significant reminder of the importance of adhering to the procedural requirements set forth in the Income Tax Act, especially regarding the timely submission of audit reports. The appeal was dismissed due to the late filing of the audit report, which led to the disallowance of the deduction claimed under Section 80IB for the assessment year 2017-18.

This case serves as an important precedent for taxpayers and tax professionals alike, highlighting the critical role of timely compliance in ensuring the successful processing of tax returns and the acceptance of claimed deductions. It also reflects the judiciary’s commitment to upholding the integrity of the tax filing process, even as it transitions to a more digitally-driven framework.

For taxpayers, the key takeaway from this case is the necessity of understanding and adhering to the specific requirements of the electronic filing system, as well as the potential consequences of any lapses in compliance. As the tax system continues to evolve, staying informed and vigilant about procedural requirements will be crucial in navigating the complexities of tax compliance.

Pradeep Kumar Batra vs. DCIT, CPC: Disallowance Due to Late Filing of Audit Report for AY 2017-18