Income Tax Act, 1961 – Sections 80IA, 80AC, 115JB, 2(24)(x), 36(1)(va), 119(2)(b) and 143(1) - The assessee, engaged in hydroelectric power generation, claimed a deduction of Rs. 7,54,56,766/- under Section 80IA for the Assessment Year 2019-20. The return was filed on 20.11.2019, delayed by 20 days beyond the due date under Section 139(1), due to a lack of liquidity for self-assessment tax payment. The Central Processing Centre (CPC) disallowed the deduction under Section 143(1), citing non-compliance with Section 80AC, which mandates timely return filing for claiming deductions. The CIT(A) upheld the disallowance. The assessee sought condonation of delay under Section 119(2)(b) from the CBDT, which was denied as the appeal was pending before ITAT. Additionally, adjustments were made for deferred tax provisions under Section 115JB and employees' contribution to PF/ESI under Section 36(1)(va) - Whether the delay in filing the return due to financial constraints constituted a reasonable cause for condonation under Section 119(2)(b) - Whether the disallowance of the deduction under Section 80IA was justified solely on procedural grounds under Section 80AC - Whether the deferred tax provision was wrongly added back while computing book profits under Section 115JB - Whether the employees’ PF/ESI contribution disallowance under Section 36(1)(va) was justified – HELD - The assessee had a bona fide and reasonable cause for the delay in filing the return, as it was dependent on receivables from a power distribution company for liquidity. The delay was minor (20 days), and all required documents, including audited accounts and tax computation, were submitted within the due date. Therefore, the delay warranted condonation - ITAT ruled that denying a legitimate deduction under Section 80IA merely on procedural grounds was unjustified. The Tribunal relied on the Himachal Pradesh High Court ruling in PCIT vs. HP Housing and Urban Development Authority to conclude that such disallowance was not tenable - Regarding book profits under Section 115JB, ITAT found that the assessee had not claimed any deduction towards deferred tax, and the lower authorities had misunderstood the computation. The addition was deleted - ITAT upheld the disallowance under Section 36(1)(va) for delayed remittance of employees' PF/ESI, following the Supreme Court ruling in Checkmate Services Pvt Ltd vs. CIT - The ITAT allowed the appeal in part. The delay in return filing was condoned, and the deduction under Section 80IA was restored for examination on merits. The disallowance under Section 115JB was deleted, but the addition under Section 36(1)(va) was upheld. The case was remanded to the AO to verify and allow the deduction under Section 80IA

 

2025-VIL-214-ITAT-DEL

 

INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH “B” NEW DELHI

 

ITA No. 3105/Del/2023

Assessment Year: 2019-20

 

Date of Hearing: 13.01.2025

Date of Pronouncement: 29.01.2025

 

M/s HIM URJA PVT LTD

 

Vs

 

ASST. DIRECTOR OF INCOME

 

Assessee by: Shri Gautam Jain, Adv, Shri Parth Singhal, Adv, Shri Lalit Mohan, CA

Revenue by: Shri Rajesh Kumar Dhanesta, Sr.DR

 

BEFORE

SHRI M. BALAGANESH, ACCOUNTANT MEMBER

SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER

 

ORDER

 

PER M. BALAGANESH, A. M.:

 

1. The appeal in ITA No.3105/Del/2023 for AY 2019-20, arises out of the order of the Commissioner of Income Tax (Appeals)-2, Mumbai [hereinafter referred to as ‘ld. CIT(A)’, in short] in Appeal No. ITBA/APL/S/250/2023-24/1056841020(1) dated 06.10.2023 against the order of assessment passed u/s 143(1) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 18.05.2020 by the ADIT, CPC, Bengaluru (hereinafter referred to as ‘ld. AO’).

 

2. The assessee has raised the following grounds of appeal before us: -

 

“1. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that intimation dated 18.05.2020 was made without granting opportunity much less fair meaningful and effective opportunity and therefore such an intimation is otherwise vitiated.

 

2. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that intimation dated 18.05.2020 is without reasons and therefore unreasonable is otherwise a nullity.

 

3. That even otherwise the following adjustment so made in intimation u/s 143(1) of the Act are debatable and contentious issues and thus untenable:

 

Sr. No.	Adjustment made	Amount (Rs.)
i.	Disallowance of provisions for deferred tax while computing book profits u/s 115JB of the Act	(1,32,34,691/-)
ii	Disallowance of claim of deduction u/s 801A of the Act	7,54,56,766/-
iii	Disallowance by invoking provision of section 2(24)(x) read with section 36(1)(va) of the Act	1,43,692/-
	Total	6,23,65,767

 

4. That the learned Commissioner of Income Tax (Appeals) National Faceless Appeal Centre has erred both in law and on facts in upholding disallowance of Rs. 1,43,692/- by invoking provision of section 2(24)(x) read with section 36(1)(va) of the Act in an intimation dated 18.05.2020 u/s 143(1) of the Act.

 

5. That the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) has erred both in law and on facts in upholding the disallowance of provisions for deferred tax of (Rs. 1,32,34,691/-) while computing book profits u/s 115JB of the Act which is exfacie, illegal, invalid and untenable.

 

6. That the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) has erred both in law and on facts in upholding a disallowance of claim of deduction of Rs. 7,54,56,766/- u/s 801A of the Act.

 

6.1 That the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) has failed to appreciate that return of income has been furnished by the appellant within the due date in terms of section 139(1) read with section 139(4) of the Act and therefore disallowance is patently misconceived, misplaced and untenable.

 

6.2 That various findings and observations recorded by the learned Commissioner of Income Tax (Appeals) are based on surmises, conjectures and suspicion; and factually incorrect, legally misconceived and, infact in disregard of binding judgment of jurisdictional High Court and, thus untenable.”

 

3. We have heard the rival submissions and perused the materials available on record. The assessee is engaged in the business of generation of hydro-electricity. The power project owned by the assessee is situated at village Vanala in Chamoli district of Uttrakhand. The entire power generated from the said project is sold to Uttrakhand Power Corporation Limited (UPCL). For the purpose of better understanding of the issues in dispute raised by the assessee, the following list of gists and events would be relevant: -

 

 

4. From the above table, it is evident that the assessee had claimed deduction under section 80IA of the Act for the profits derived from the eligible undertaking in the return of income. But the return of income has been filed on 20-11-2019, which is delayed by 20 days from the due date prescribed thereon. It is not in dispute that the assessee however had furnished the audited accounts before the Income Tax Department on 31- 10-2019 together with the computation of total income on 31-10-2019. The computation of book profits under section 115JB of the Act supported by audit report in Form No. 29B thereon was filed on 05-10-2019. The audit report in Form No. 10CCB for claiming deduction under section 80IA of the Act was filed by the assessee on 9-10-2019. The due date of filing the return of income under section 139(1) of the Act was 31-10-2019. The only reason for delayed filing of income tax return was that assessee did not have sufficient liquid funds to make payment of self-assessment tax. The finance department of the assessee was of the opinion that without payment of self assessment tax, the income tax return could not be uploaded. Hence, the assessee bonafidely believed the version of the finance department and waited for the availability of liquidity in its kitty to make payment of self assessment tax. Since the assessee was heavily dependent on receivables from UPCL for the power supplied to them which is normally received after inordinate delay, the assessee could not manage the payment of taxes within the due date under section 139(1) of the Act. Later the assessee was able to realize part of the dues from UPCL on 7-11-2019 and first repaid its term loan EMI commitments to the bank and immediately thereafter made the payment of self-assessment tax on 19-11-2019. These facts are staring on us on perusal of the bank statements placed on record. After payment of self-assessment tax on 19-11-2019, the assessee had immediately uploaded the income tax return on 20-11-2019. An affidavit from the in-house chartered accountant Mr. Naresh Mahawar was also placed on record by the Learned AR affirming the aforesaid facts.

 

5. Since the return was filed belatedly by the assessee, the ld CPC disallowed the claim of deduction u/s 80IA of the Act in respect of profits derived from the eligible undertaking. The ld CPC had indeed intimated the assessee about the proposed adjustment sought to be made. The assessee gave a reply dated 18.03.2020 before the ld CPC explaining the reasons for belated filing of return. The ld CPC did not take cognizance of the same and proceeded to make an adjustment to the total income of the assessee by denying the claim of deduction u/s 80IA of the Act. The ld CIT(A) upheld the action of the ld CPC in this regard. Order of the ld CIT(A) was passed on 17.06.2020. Subsequent to this order, the assessee preferred an application before CBDT in terms of Section 119(2)(b) of the Act seeking condonation of delay in filing of return and consequentially seeking relief of deduction u/s 80IA of the Act. This application was preferred by the assessee on 10.11.2023. The CBDT passed an order u/s 119(2)(b) of the Act on 17.12.2024 stating that against the order of the ld CIT(A), the assessee has preferred an appeal before this Tribunal and the same is pending. Since, the matter is sub-judice before the Tribunal, the CBDT has no power u/s 119 of the Act to interfere with the discretion of the appellate authority in exercise of its appellate functions. Accordingly, the application preferred by the assessee was dismissed by CBDT.

 

6. From the above narration of facts, in our considered opinion, we find that the assessee was having sufficient and reasonable cause for not able to file the return of income in time. In fact, the assessee had merely waited for payment of self assessment tax for want of funds. The assessee not having sufficient liquidity for effecting the payment of tax is evidenced from the bank statement for the period of 09.10.2019 to 20.11.2019 which was placed on record before the lower authorities. It is a fact that assessee could realize its sale proceeds for supply of electricity from UPCL only by 07.11.2019 and assessee had duly honoured the EMI commitments to the bank in respect of term loan and soon after that, on 19.11.2019, the assessee had made payment of self assessment tax of Rs. 1,30,79,854/-. Immediately after payment of self assessment on 19.11.2019, the assessee has filed its return of income on 20.11.2019. As stated in the above mentioned table other then the income tax return, the assessee had duly filed the audited accounts, computation of total income, audit report in Form 56G of the Act for claiming deduction u/s 80IA of the Act well within the due time prescribed u/s 139(1) of the Act. Hence, all the relevant documents that are required for determination of total income of the assessee qua the claim of deduction u/s 80IA of the Act are very much available before the lower authorities and the assessee’s bonafide behaviour cannot be doubted at all, as it was prevented from sufficient and reasonable cause from not filing the return in time. The bonafide belief entertained by the assessee on the version of in-house Chartered Accountant Shri Naresh Mahawar who had advised the assessee that return cannot be filed without payment of self assessment tax, is also not doubted by the lower authorities including CBDT. An affidavit from the concerned in-house Chartered Accountant and the Director of the assessee company is also on record. Hence, we have no hesitation to conclude that the assessee was having reasonable cause and accordingly the ratio laid down by the Hon’ble Himachal Pradesh High Court in the case of PCIT Vs. HP Housing and Urban Development Authority reported in 279 taxman 208 (HP) would certainly come to the rescue of the assessee in the facts and circumstances of the instant case, wherein, it was held that where assessee, a State organization, filed return claiming deduction under section 80-IB(10) beyond period of limitation as per Section 139(1) on account of delay in audit, since assessee had a reasonable and bona fide cause for not filing return of income within time permitted under section 139(1) and Tribunal had concurrently held that assessee was entitled to claim specifically computed deduction, assessee was not to be burdened with taxes which it was otherwise not liable to pay under law.

 

7. We find that the Hon’ble Himachal Pradesh High Court had duly considered the provisions of section 80AC of the Act which was vehemently relied upon by the ld DR before us while making his arguments in the instant appeal before us. Moreover, the CBDT had given full liberty to this Tribunal to decide the condonation petition filed under section 119(2)(b) of the Act with regard to the issue of claim of deduction under section 80IA of the Act. We are convinced that this is a fit case for condonation of delay in filing of return as assessee was having sufficient and reasonable cause in not filing the return within the due date prescribed under section 139(1) of the Act. However, the claim of deduction under section 80IA of the Act has not been examined by the ld AO on merits as it was summarily rejected on technical reason. Accordingly, in order to keep the interest of both the parties alive, we deem it fit and appropriate to restore this issue to the file of ld AO to examine the claim of deduction under section 80IA of the Act without applying the provisions of section 80AC of the Act and decide on merits. Accordingly, the ground Nos. 1,2, 3(i) and 6 raised by the assessee are allowed for statistical purposes.

 

8. The Ground No. 4 raised by the assessee is challenging the addition made under section 2(24)(x) read with 36(1)(va) of the Act in respect of delayed remittance of employees contribution to PF and ESI. This issue is no longer res integra in view of the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt Ltd Vs CIT reported in 448 ITR 518(SC). Respectfully following the same, the Ground No. 4 raised by the assessee is hereby dismissed.

 

9. The Ground No. 5 raised by the assessee is challenging the disallowance made on account of provision for deferred tax of Rs 1,32,34,691/- while computing book profits under section 115JB of the Act.

 

10. We have heard the rival submissions and perused the materials available on record. It is a fact that assessee had made reversal of provision for deferred tax in the sum of Rs 1,32,34,691/- in its books and had debited the same in the profit and loss account as below the line item. In other words, from the net profit before tax as per profit and loss account, the assessee had added the reversal of provision for deferred tax and reduced the provision for income tax and had arrived at the net profit after tax as per profit and loss account. But for the purpose of computation of book profits under section 115JB of the Act, the assessee had started the computation from Net profit before tax as per profit and loss account only. This is evident from Page 2 read with Page 14 of the Paper Book. Hence it could be safely concluded that assessee had not claimed any deduction towards provision for deferred tax at all while computing book profits under section 115JB of the Act. Both the lower authorities had not understood this fact and had made disallowance, which in our considered opinion, deserves to be deleted. Accordingly, the Ground No. 5 raised by the assessee is allowed.

 

11. In the result, the appeal of the assessee is partly allowed for statistical purposes.

 

Order pronounced in the open court on 29/01/2025.

 

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