Filing of Return before Due Date u/s 80AC is Mandatory, not Directory: ITAT [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Bengaluru Bench in Revathi Raju v. I.T.O held that, filing of Return before due date under Section 80AC of the Income Tax Act is a mandatory provision.

The Appellant Revathy Raju, was entitled to claim deduction under Section 80IA of the Income Tax Act 1961 on income derived from power generation using wind energy. The appellants had claimed a deduction of Rs 27,80,819 as profits from this business u/s 80IA. The Assessing Officer (A.O), noticed that the return of income was filed by the Assessee after the due date for filing the returns u/s 139(1) for the assessment year 2014-15. According to AO any deduction under chapter VI-A (which includes section 80 IA) can be claimed only if the return of income for the relevant assessment year is filed on or before the due date prescribed u/s 139 (1) of the Act. Therefore the AO refused to allow the deduction u/s 80IA.On appeal, the CIT (A) confirmed the order of the AO. Aggrieved by this, the appellants preferred an appeal before the ITAT.

The ITAT rejected the contentions of the appellant that the provisions u/s 80AC is directory and not mandatory. The ITAT relied upon the decision of a special bench of the Tribunal in the case Saffire Garments Vs. ITO [140 ITD 0006(SB)(Rajkot)], in which the proviso to section 10A(1A) was held to be mandatory and not the directory. The special bench had observed that the other consequences of the delayed filing of returns, such as interest on tax payable by Assessee u/s 234A and charging of interest under various other sections was already held mandatory. Therefore the provisions regarding the denial of deductions are also mandatory and not directive. The Special Bench had also held that the Hon’ble Supreme Court in the case of Prakash Nath Khanna vs. CIT as reported in 266 ITR 01 (SC) has held that filing of return of income within the time allowed under Section 139(4) of the Income Tax Act, 1961 cannot dilute the infraction in not furnishing return in due time as prescribed u/s 139(1) of the Income Tax Act, 1961.

Dismissing the appeal, Judicial Member N.V Vasudevam held that the above decision of the special bench will equally apply to the provisions of Section 80AC of the Income Tax Act which is identical to the proviso to section 10A(1A). Both the provisions states that no deductions shall be allowed if the return of income was not filed on or before the due date specified u/s 139(1). Therefore filing of returns on or before the due date is mandatory and not the directory.

“The proviso to section 10A(1A) states that no deduction shall be allowed in computing the total income of an undertaking, which begins to manufacture or produce articles or things or computer software during the previous year relevant to any assessment year commencing on or after the 1st day of April, 2003, in any special economic zone, if the Assessee does not furnish the return of his income on or before the due date mentioned u/s 139(1). Section 80AC provides that no deduction is admissible under section 80-IA or section 80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80-IE, unless the Assessee furnishes a return of his income for such assessment year on or before the due date specified u/s section 139(1)”, the Tribunal said.