The Income Tax Appellate Tribunal, Delhi, has clarified that the failure to file Form 10CCB within the prescribed timeline under Section 80IAC does not automatically disentitle an assessee to the claimed deduction, provided the form is submitted before the completion of assessment. This ruling reinforces the principle that procedural lapses, absent mala fide intent or prejudice to revenue, cannot override substantive entitlements under the Income Tax Act.
Background & Facts
The Dispute
The assessee, Karma Ecotech Pvt. Ltd., claimed a deduction under Section 80IAC of the Income Tax Act, 1961, for Assessment Year 2024-25, based on its status as an eligible startup engaged in innovation-driven business. To claim this deduction, Rule 18BBB of the Income Tax Rules, 1962, mandates the filing of Form 10CCB. The due date for filing the audit report, which includes Form 10CCB, was 30.09.2024, extended from the original due date of 30.06.2024. The assessee filed its income tax return on 28.10.2024, but Form 10CCB was submitted electronically on 25.10.2024 - 18 days after the extended due date for the audit report, yet before the return filing deadline.
Key Facts
- The assessee is a startup incorporated on 15.05.2021, eligible for benefits under Section 80IAC
- The statutory due date for filing the audit report (including Form 10CCB) was extended to 30.09.2024
- Form 10CCB was filed on 25.10.2024, 18 days late
- The income tax return was filed on 28.10.2024
- The Centralized Processing Centre (CPC), Bengaluru, disallowed the deduction under Section 143(1) on grounds of belated Form 10CCB
- The assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], Bengaluru
- The CIT(A) dismissed the appeal on 30.09.2025, directing the assessee to approach the CIT(Exemption) for condonation of delay under Section 119(2)(b)
- The assessee appealed to the Income Tax Appellate Tribunal (ITAT), Delhi
Procedural History
- 30.06.2024: Original due date for filing audit report and Form 10CCB
- 30.09.2024: Extended due date for audit report and Form 10CCB
- 25.10.2024: Form 10CCB filed electronically (18 days late)
- 28.10.2024: Income tax return filed
- 05.11.2024: CPC issued intimation under Section 143(1) disallowing deduction
- 10.11.2025: CIT(A) dismissed appeal, directing application to CIT(Exemption)
- 30.09.2025: CIT(A) order formally issued
- 12.12.2025: Appeal filed before ITAT Delhi
- 10.03.2026: Hearing conducted
- 18.03.2026: ITAT pronounced order
The Parties' Positions
For the Appellant
The assessee contended that:
- The filing of Form 10CCB is a procedural, not substantive, requirement
- The delay of 18 days was minimal and occurred before return filing and before assessment completion
- The deduction under Section 80IAC is a statutory benefit, and denial on technical grounds violates the principle of substantial compliance
- Judicial precedents, including Bhagwan Precision v. CIT, establish that late filing of audit-related forms before assessment completion is permissible
- The CIT(A) erred in directing the assessee to approach CIT(Exemption), as jurisdiction for condonation under Section 119(2)(b) does not lie with the Exemption Circle in this context
For the Respondent
The Department argued that:
- Rule 18BBB mandates timely filing of Form 10CCB
- Non-compliance with mandatory procedural requirements justifies disallowance
- The CPC acted correctly under Section 143(1) in rejecting the claim
- The CIT(A)’s direction to approach CIT(Exemption) was legally sound
- The assessee failed to demonstrate any reasonable cause for delay
Relief Sought
The assessee sought:
- Setting aside of the CIT(A)’s order dated 30.09.2025
- Restoration of the deduction under Section 80IAC
- Direction to the Assessing Officer to verify the claim on merits
- Costs of litigation
The Legal Issue
The central question was whether the disallowance of deduction under Section 80IAC for belated filing of Form 10CCB - submitted before return filing and before completion of assessment - is legally sustainable, or whether such filing is a directory requirement subject to substantial compliance.
Arguments Presented
For the Appellant
The assessee relied on the decision in Bhagwan Precision v. CIT (ITA No. 7431/Del/2025, 2025(8) TMI 1042), where the ITAT Delhi held that the requirement to file audit reports under similar provisions (Section 80IA) is directory, not mandatory. The Court emphasized that if the form is filed before the completion of assessment, the statutory objective of ensuring verification is satisfied. The assessee also cited CIT v. Contimeters Electricals Pvt. Ltd., CIT v. Gujarat Oil & Allied Industries, and CIT v. A.N. Arunachalam, all of which held that the word "shall" in audit-related provisions should be read as "may" where no prejudice to revenue is shown. It was further argued that Section 143(1) permits only mechanical adjustments and cannot be used to disallow deductions on procedural grounds.
For the Respondent
The Department contended that Rule 18BBB is mandatory and non-compliance renders the claim invalid. It relied on the CIT(A)’s view that condonation of delay under Section 119(2)(b) must be sought from the CIT(Exemption), and that the Tribunal lacked jurisdiction to condone the delay. The Department did not dispute the timing of filing (before assessment) but insisted that procedural compliance is a precondition for entitlement.
The Court's Analysis
The Tribunal examined the nature of the requirement under Rule 18BBB and the legislative intent behind Section 80IAC. It noted that the provision aims to incentivize startups by granting tax benefits, and that the filing of Form 10CCB serves as a verification mechanism, not a condition precedent to entitlement.
"We observe that several courts have held that the assessee to file the audit report along with return were only directory in nature and not mandatory."
The Tribunal expressly followed the reasoning in Bhagwan Precision, which held that where the form is filed before the completion of assessment, the statutory purpose is fulfilled. The Tribunal rejected the Department’s argument that jurisdiction for condonation lies with CIT(Exemption), noting that the CIT(A) has the authority to adjudicate appeals on merits, including procedural irregularities, and cannot shift the burden to an unrelated authority.
The Court further observed that Section 143(1) is limited to arithmetical and procedural checks and cannot be used to disallow deductions on grounds of non-filing of supporting documents if those documents are subsequently submitted before assessment. The Tribunal emphasized that the assessee acted in good faith, filed the form before the return, and the delay was minimal and unexplained but not malicious.
The Tribunal concluded that the CIT(A) erred in dismissing the appeal on jurisdictional grounds and in failing to consider the settled principle of substantial compliance. The disallowance under Section 143(1) was therefore unsustainable.
The Verdict
The appeal of the assessee was allowed. The Tribunal set aside the order of the CIT(A) dated 30.09.2025. The matter was restored to the Assessing Officer for the limited purpose of verifying the claim under Section 80IAC on its merits, including eligibility of the assessee as a startup and correctness of the claimed deduction. The Tribunal directed the Assessing Officer to complete the verification within 8 weeks from the date of the order. No costs were awarded.
What This Means For Similar Cases
Procedural Non-Compliance Does Not Automatically Invalidate Statutory Benefits
- Practitioners may now argue that belated filing of Form 10CCB, Form 10-IB, or similar audit-related forms under Sections 80IA, 80IAC, or 80-IB does not disqualify a deduction if filed before assessment completion
- The burden shifts to the Department to prove prejudice or mala fide intent, not mere delay
- Cases where deductions were denied under Section 143(1) on technical grounds may be reopened on appeal
Jurisdictional Errors by CIT(A) Are Correctable by ITAT
- CIT(A) cannot redirect taxpayers to unrelated authorities (e.g., CIT(Exemption)) for condonation when the appeal is on the merits of disallowance
- ITAT retains jurisdiction to adjudicate procedural irregularities in appeals under Section 254
- Practitioners should challenge jurisdictional misdirections as grounds for setting aside orders
Substantial Compliance Prevails Over Strict Formalism
- The ITAT reaffirmed that statutory benefits under Chapter VI-A are not forfeited for minor procedural lapses
- The principle from CIT v. Contimeters Electricals and Gujarat Oil remains binding: "shall" in audit provisions is directory if the objective of verification is met
- Taxpayers should retain proof of filing dates and ensure submissions are made before assessment completion to invoke this protection
