Filing of ‘Audit Report’ merely a Procedural or a Directory Requirement, Can be filed at Appellate Stage: ITAT

DCIT V. Manilal Dayalji & Co.

(Order pronounced in the open court on 09/06/2022)

The assessee firm which is engaged in the business of manufacturing bidis without the aid of power had e-filed its original return of income for AY 2008-09 on declaring an income of Rs. 4,48,16,560 (after claim of deduction u/s 80IB of Rs. 15,20,513). The original assessment was thereafter framed by the AO vide his order passed u/s 143(3) of the Act, determining the income of the assessee at Rs. 4,52,28,800.

The AO reopened the case u/s 147 of the Act, the assessee had neither filed the audit report in Form No. 10CCB nor a certificate from the competent authority that it was a Small Industrial Undertaking (SSI). The AO vide his order passed u/s 147 r.w.s. 143(3), declined its claim for deduction of 80IB and reassessed its income at Rs. 4,67,49,313.

Appeal before CIT(A): Aggrieved the assessee filed an appeal before the CIT (Appeals). It was observed by the CIT(Appeals) that the filing of an ‘audit report’ was merely in the nature of a procedural and a directory requirement and the same could validly be filed in the course of the appellate proceedings. Hence the appeal was allowed.

Appeal before ITAT: The Revenue being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before the tribunal. ITAT concurred with the view taken by the CIT(Appeals) in the Hon’ble High Court of Madhya Pradesh in the case of CIT Vs. Medicaps Ltd. (2010) 323 ITR 554 (MP) that filing of an ‘audit report’ is merely a procedural or a directory requirement, Form 10CCB is procedural and directory in nature same could validly be filed by the assessee at the appellate stage.

The tribunal held that no adverse inferences qua the entitlement of the assessee for deduction u/s 80IB could have been drawn, for the reason that the assessee had in the course of the assessment proceedings failed to place on record its certificate of registration as an SSI. The tribunal did not find any infirmity in the view taken by the CIT(Appeals) which held the assessee’s claim for deduction u/s 80IB of the Act as being in order. Hence, the appeal filed by the revenue was dismissed and the cross-objection filed by the assessee was dismissed as not pressed.

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