Delay In Filing Return Bonafide: Himachal Pradesh High Court Allows Deduction To H.P. Housing & Urban Development Authority

The Himachal Pradesh High Court has allowed the deduction under Section 80IB(10) of the Income Tax Act to the H.P. Housing & Urban Development Authority as the delay in filing the return was bona fide.

The bench of Chief Justice M.S. Ramachandra Rao and Justice Jyotsna Rewal Dua has observed that since the entitlement of the assessee to deduction had not been questioned by the department on merits, there was no justification for not viewing the delay in filing the return as bona fide.

The assessee or respondent develops housing facilities in the state. It filed a return of income on March 31, 2007, for AY 2006–2007, declaring an income of Rs. 2,33,74,215. On March 31, 2008, the assessee filed a revised return, declaring an income of Rs. 11,86,511 and also claiming a deduction of Rs. 2,25,43,724 under Section 80IB(10).

The Assessing Officer, in his assessment order, declined the deduction claimed by the assessee under Section 80 IB(10) in its revised return. This was for the reason that the assessee had not filed the original return within the permissible period under Section 139 (1).

The assessee appealed before the CIT. The CIT held that the assessee could not have filed a revised return since its original return was filed beyond the period prescribed under Section 139(1) of the Act. As per Section 80AC, deduction under Section 80IB cannot be allowed unless the return is filed by the due date specified in Section 139(1). After concurring with the AO regarding the non-entitlement of the assessee to the deduction claimed by it under Section 80 IB(10), the CIT also examined the merits of the assessee's deduction claim projectwise. It held that out of the claimed deduction, only Rs. 2,11,055.58 was taxable and the rest was liable to be deducted under Section 80 IB (10). The finding of the AO that the transfer charges were to be added to the assessee's taxable income was upheld. The assessing officer's order to add administrative charges to the income of the assessee was, however, held wrong. The amount was ordered to be deleted.

The assessee approached the Income Tax Appellate Tribunal (ITAT) by filing three separate appeals for the assessment years 2006–2007, 2007–2008, and 2009–2010. The assessee claimed that filing its return was delayed due to a delay by the local audit department. The deduction admissible to it in law cannot be denied owing to this bona fide reason and the consequent delay in filing the revised return.

The ITAT held that if the assessee is 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 but has raised its claim before the Appellate Authority, then the Appellate Authority should have looked into the same. The assessee cannot be burdened with taxes, which it otherwise is 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 bona fide mistakes. Accordingly, for the assessment year 2006–2007, the deduction computed by the CIT on the merits of the assessee's claim was confirmed, and the appeal was accordingly allowed.

The department contended that the appellant's original return was filed by the assessee beyond the period prescribed under Section 139(1). Hence, deduction under Section 80IB(10) could not be allowed in view of the bar imposed under Section 80 AC. Deduction under Section 80 IB is not to be allowed to an assessee unless he furnishes a return of his income for the concerned assessment year on or before the due date specified under Section 139(1).

The court noted that the assessee deals with public money through the state exchequer. The Commissioner of Income Tax and the Income Tax Appellate Tribunal have concurrently held on facts after undertaking a lengthy and painstaking exercise that the assessee was actually entitled to deductions under Section 80IB(10).

The court held that if the assessee has been held entitled to claim the specifically computed deductions, then it should not be burdened with taxes that it is otherwise not liable to pay under the law.

Counsel For Petitioner: Vandana Kuthiala

Counsel For Respondent: Vishal Mohan

Case Title: PCIT Versus M/s H.P. Housing & Urban Development Authority

Citation: 2024 LiveLaw (HP) 1

Case No.: I.T.A.No.35 of 2019

Click Here To Read The Order