Facts of the Case

The Revenue filed appeals before the Income Tax Appellate Tribunal against the order passed by the Addl./JCIT (Appeals) – NFAC allowing deduction claimed by the assessee under Section 10AA of the Income Tax Act, 1961.

The assessee, Dailmaz Exports, had been claiming deduction under section 10AA since Assessment Year 2011-12. For the assessment years 2014-15 and 2018-19, the deduction claim was denied by CPC Bengaluru while processing the return under Section 143(1).

The denial occurred due to a technical error during e-filing, where the deduction under section 10AA was not captured in the appropriate column of the computation of income while generating the XML file. However, the assessee had computed the total income after considering the deduction, and the same was reflected in the return schedules and AMT computation.

The assessee had also filed Form 56F and Form 29C within the prescribed time, supporting the claim for deduction under section 10AA.

Issues Involved

  1. Whether deduction under Section 10AA of the Income Tax Act, 1961 can be denied merely due to a technical glitch in e-filing of the income tax return.
  2. Whether a bona fide claim supported by audit report and statutory forms should be disallowed due to incorrect reporting in a specific column of the return.

Petitioner’s Arguments (Revenue)

The Departmental Representative supported the orders of the lower authorities that had disallowed the deduction while processing the return under Section 143(1).

The Revenue contended that the deduction was not properly reflected in the relevant column of the return and therefore the disallowance was justified during processing.

Respondent’s Arguments (Assessee)

  • The deduction under Section 10AA had been consistently claimed and allowed in earlier assessment years as well as in subsequent assessments completed under Section 143(3).
  • While preparing the XML file for e-filing, a technical glitch in the software resulted in the deduction not appearing in the specific column of the computation.
  • Despite the technical issue, the total income was correctly computed after considering the deduction.
  • The deduction was reflected in Schedule AMT and Form 29C while computing Alternate Minimum Tax under Section 115JC.
  • The assessee had duly filed Form 56F, which is the mandatory audit report for claiming deduction under Section 10AA.
  • The error was purely technical and inadvertent, and a legitimate claim cannot be denied on such grounds.

Court Order / Findings

  • The deduction under Section 10AA was denied by CPC due to an inadvertent mistake in e-filing the return.
  • The assessee had submitted adequate evidence showing that the deduction had been claimed and supported by statutory filings.
  • The appellate authority had examined the submissions and found the claim to be valid.
  • The assessee had consistently claimed the deduction in earlier years and the eligibility was not disputed

Important Clarification

  • Technical errors in the e-filing process cannot defeat a bona fide claim.
  • Where the deduction is otherwise supported by statutory forms, audit reports, and consistent past assessments, the claim should not be rejected merely due to a reporting error in the return.
  • Tax administration must recognize that technical glitches can occur in electronic filing systems, and genuine claims should not be denied solely on that basis.

Sections Involved

  • Section 10AA – Deduction for units in Special Economic Zones (SEZ)
  • Section 143(1) – Processing of return of income
  • Section 115JC – Alternate Minimum Tax (AMT)
  • Section 44AB – Tax audit provisions


    Link to download the order -  https://itat.gov.in/public/files/upload/1735637127-4SnhYy-1-TO.pdf

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