M/s E-Mug Technologies Private Limited, Hyderabad V. CIT-II, Hyderabad

ITA 1026/HYD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2392 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 02-11-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 23-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P CHANDRA SEKHAR RAO CIR
• Assessee Lawyers: T CHAITANYA KUMAR
• Section: 143(3); 263; 139

Judgement Text

ITA NO 1026 OF 2014 E MUG TECHNOLOGIES P LTD HYDE RABAD PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.1026/HYD/2014 (ASSESSMENT YEAR: 2009-10) M/S. E MUG TECHNOLOGIES PRIVATE LIMITED HYDERABAD PAN: AABCE 0739 N VS INCOME TAX OFFICER, WARD 2 (1) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI T. CHAITANYA KUMAR FOR REVENUE : SHRI P. CHANDRA SEKHAR RAO, CIR (DR) O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2009-10 AGAIN ST THE ORDER U/S 263 OF THE I.T. ACT OF THE CIT-II HYD ERABAD, DATED 14.03.2014. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOP MENT. IT FILED ITS RETURN OF INCOME FOR THE A.Y 2009-10 ON 31.10.20 09 DECLARING INCOME OF RS.23,13,158. THE CASE WAS SELECTED FOR S CRUTINY UNDER CASS AND A NOTICE U/S 143(2) OF THE ACT WAS ISSUED AND SERVED ON THE ASSESSEE. THE ASSESSEE APPEARED THROUGH ITS REP RESENTATIVE AND PRODUCED THE BOOKS OF ACCOUNT AND OTHER INFORMA TION CALLED FOR FROM TIME TO TIME. AFTER EXAMINATION OF THE BOO KS OF ACCOUNT DATE OF HEARING : 25.04.2017 DATE OF PRONOUNCEMENT : 14.06.2017 ITA NO 1026 OF 2014 E MUG TECHNOLOGIES P LTD HYDE RABAD PAGE 2 OF 7 AND THE INFORMATION SO FURNISHED, THE AO OBSERVED T HAT THE TOTAL TURNOVER OF THE ASSESSEE WAS RS.13,05,54,401 WHICH INCLUDES EXPORT INCOME AS WELL AS DOMESTIC TURNOVER AND FORE X GAIN. HE OBSERVED THAT AN AMOUNT OF RS.55,67,637 WAS DEBITED TO THE P&L A/C ON ACCOUNT OF DATA LINE CHARGES. THE ASSESSEE W AS ASKED TO EXPLAIN THE DETAILS OF NATURE OF THE PARTICULAR EXP ENDITURE. THE ASSESSEE SUBMITTED THAT THESE CHARGES RELATE TO THE DATA LINE CHARGES WHICH ARE COMMUNICATION EXPENSES. THEREFORE , ON THE AGREEMENT OF THE ASSESSEE, THE AO REDUCED A SUM OF RS.65,69,836 ON ACCOUNT OF DATA LINE CHARGES FROM THE EXPORT TUR NOVER FOR COMPUTATION OF THE DEDUCTION U/S 10A OF THE ACT. 3. SUBSEQUENTLY, THE CIT EXERCISING HIS JURISDICTIO N U/S 263 OF THE ACT, OBSERVED THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. HE FORMED THIS OPINION, BECAUSE HE OBSERVED THAT THE ASSESSEE WAS SUPPOSED TO FILE THE RETURN OF INCOME FOR THE A.Y 2009-10 ON OR BEFORE 30.09.2009, BUT THE ASSESSEE HAS FILED THE RETURN O F INCOME ON 31.10.2010 AND THEREFORE, THE ASSESSEE WAS NOT ELIG IBLE FOR CLAIMING EXEMPTION U/S 10A BY VIRTUE OF THE PROVISO TO SUB- SECTION (1A) OF SECTION 10A OF THE ACT. THE ASSESSE ES EXPLANATION WAS CALLED FOR AND THE ASSESSEE FILED ITS SUBMISSIO NS IN DETAIL. AFTER CONSIDERING THE ASSESSEES CONTENTIONS, THE C IT WAS OF THE OPINION THAT THE COURSE ADOPTED BY THE AO IN ALLOWI NG DEDUCTION U/S 10A INSPITE OF THE PROVISO TO SECTION 10A(1A) O F THE ACT, MADE THE ASSESSMENT ORDER BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN VIEW OF THE SAME, HE DI RECTED THE AO TO RE-DO THE ASSESSMENT AS PER LAW, KEEPING IN MIND TH E PROVISIONS ITA NO 1026 OF 2014 E MUG TECHNOLOGIES P LTD HYDE RABAD PAGE 3 OF 7 OF SECTION 10A OF THE I.T. ACT. AGGRIEVED, THE ASSE SSEE IS IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS OF A PPEAL: 1. THAT ORDER MADE U/S 263 OF THE ACT DATED 14.04.2014 IS WITHOUT SATISFYING THE STATUTORY PRECONDITIONS PROVIDED UNDER SECTION 263 OF THE ACT I.E. ORDER OF ASSESSMENT UNDER SECTION 143(3) OF THE ACT DATED 30.12.2011 WAS NEITHER ERRONEOUS AND, NOR PREJUDICIAL TO THE INTEREST OF REVENUE, THUS THE SAME WAS WITHOUT JURISDICTION AND, DESERVES TO BE QUASHED AS SUCH. 2. THAT LEARNED COMMISSIONER OF INCOME TAX HAS FAILED TO APPRECIATE THAT SINCE THE LEARNED ASSESSING OFFICER HAD FOUND THAT SECTION 10A(LA) OF THE ACT HAD NO APPLICATION TO THE FACTS OF THE APPELLANT COMPANY, THEREFORE THE MERE FACT THAT THE LEARNED COMMISSIONER OF INCOME TAX HELD AN OPINION DIFFERENT FROM THE OPINION OF ASSESSING OFFICER COULD NOT RENDER THE ORDER OF ASSESSMENT TO BE ERRONEOUS, SO AS TO WARRANT INVOCATION OF THE ACT. 3. THAT WHILE MAKING THE AFORESAID DISALLOWANCE, THE LEARNED COMMISSIONER OF INCOME TAX HAS FAILED TO APPRECIATE THAT SECTION 10A(LA) OF THE ACT COULD NOT BE APPLIED ON THE FACTS OF APPELLANT COMPANY AND AS SUCH, DISALLOWANCE MADE IS NOT IN ACCORDANCE WITH LAW. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX HAS FURTHER ERRED BOTH IN LAW AND ON FACTS IN HOLDING THAT, REQUIREMENT TO FURNISH RETURN OF INCOME WITHIN THE DUE DATE U/S 10A(LA) OF THE ACT IS MANDATORY AND, NOT DIRECTORY AND AS SUCH, DISALLOWANCE MADE IS UNJUSTIFIED. 5. THAT LEARNED COMMISSIONER OF INCOME TAX HAS FAILED TO APPRECIATE THAT CLAIM OF DEDUCTION U/S L0A WAS SPECIFICALLY EXAMINED IN THE COURSE OF ASSESSMENT PROCEEDINGS AND ITA NO 1026 OF 2014 E MUG TECHNOLOGIES P LTD HYDE RABAD PAGE 4 OF 7 SPECIFICALLY ALLOWED IN THE ORDER OF ASSESSMENT AND AS SUCH, THERE WAS NO BASIS MUCH LESS VALID BASIS TO CONCLUDE THAT, THE LEARNED ASSESSING OFFICER DID NOT MAKE NECESSARY ENQUIRIES, REGARDING CLAIM OF DEDUCTION AND HENCE, IMPUGNED ORDER MADE BY OVERLOOKING FACTS IS NOT SUSTAINABLE. 6. WITHOUT PREJUDICE THAT THE AFORESAID PROVISIONS OF SECTION 10A(LA) WERE INAPPLICABLE IN THE CASE OF A COMPANY AND THAT THE ASSESSING OFFICER WAS SATISFIED THAT THE ASSESSEE COULD NOT FURNISH THE RETURN OF INCOME ON OR BEFORE 30.09.2009 ON ACCOUNT OF GENUINE DIFFICULTY UNDER THIS CIRCUMSTANCES IT HAD FURNISHED RETURN OF INCOME ON 31.10.2009 AND NOT ON OR BEFORE 30.09.2009. 7. THAT THE LEARNED COMMISSIONER OF INCOME TAX ALSO FAILED TO APPRECIATE THAT IT IS NOT THE CASE WHERE THE RETURN OF INCOME WAS NOT FILED BUT WAS A CASE WHERE RETURN OF INCOME WAS BELATEDLY FILED. THE DEDUCTION CLAIMED OF RS.3,32,43,584 COULD NOT HAVE BEEN FORGONE AS NO RETURN COULD HAVE BEEN FILED AND COULD NOT HAVE BEEN ACCEPTED WITHOUT PAYING SELF ASSESSMENT TAX. 8. THE LEARNED COMMISSIONER OF INCOME TAX GROSSLY ERRED IN NOT CONSIDERING JURISDICTIONAL BENCH DECISIONS. 9. FOR THE ABOVE GROUNDS AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE APPELLANT PRAYS THAT THE APPEAL BE ALLOWED. THE APPELLANT CRAVES LEAVE TO AD TO, AMEND OR MODIFY THE ABOVE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF THE APPEAL, IF IT IS CONSIDERED NECESSARY. 4. THE LEARNED COUNSEL FOR THE ASSESSEE, SHRI T. CHAITANYA KUMAR, WHILE REITERATING THE SUBMISSIONS MADE BY THE ITA NO 1026 OF 2014 E MUG TECHNOLOGIES P LTD HYDE RABAD PAGE 5 OF 7 ASSESSEE BEFORE THE CIT, SUBMITTED THAT THE CIT HAS ISSUED NOTICE U/S 263 OF THE ACT ON A MISTAKEN ASSUMPTION THAT TH E RETURN WAS FILED ON 31.10.2010 WHEREAS THE RETURN WAS ACTUALLY FILED ON 31.09.2009. HE FURTHER SUBMITTED THAT THE ASSESSEE, DUE TO THE FINANCIAL DIFFICULTIES, COULD NOT PAY SELF ASSESSME NT TAX DUE TO WHICH THE ASSESSEE COULD NOT FILE THE RETURN OF INC OME WITHIN THE TIME U/S 139(1) OF THE ACT, BUT HAS FILED IT IMMEDI ATELY WITHIN A MONTH THEREAFTER. HE SUBMITTED THAT THE DELAY IN FI LING OF THE RETURN SHOULD HAVE BEEN CONDONED BY THE CIT. HE FUR THER SUBMITTED THAT THE AO WAS WELL AWARE OF THE DATE OF RETURN OF INCOME BEING FILED U/S 139(4) OF THE ACT AS IS EVID ENT FROM THE MENTION OF THE DATE OF FILING OF THE RETURN IN THE ASSESSMENT ORDER AND THAT THE AO HAS ADOPTED ONE OF THE POSSIBLE VIE WS AT THE RELEVANT POINT OF TIME IN GRANTING RELIEF TO THE AS SESSEE. THEREFORE, HE SUBMITTED THAT THE ASSESSMENT ORDER COULD NOT BE TERMED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. HE FURTHER BROUGHT TO OUR NOTICE THE DECISION OF SPECI AL BENCH OF THE INCOME TAX APPELLATE TRIBUNAL AT RAJKOT IN THE CASE OF M/S. SAFFIRE GARMENTS V. ITO REPORTED IN 20 ITR (TRIB.) 623, IN SUPPORT OF HIS CONTENTION THAT THE ISSUE WAS DEBATABLE AT T HAT POINT OF TIME AND THE AO HAS ADOPTED ONE OF THE POSSIBLE VIE WS. HE SUBMITTED THAT THE ASSESSEE WAS OTHERWISE ELIGIBLE FOR DEDUCTION U/S 10A OF THE ACT AS IT FULFILLS ALL THE REQUISITE CONDITIONS. HE THEREFORE, PRAYED THAT THE ORDER U/S 263 BE SET ASI DE. 5. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE AO. HE DREW OUR ATTENTION TO THE PROVI SO TO SUB SECTION (1A) TO SECTION 10A OF THE ACT WHEREIN IT I S CLEARLY MENTIONED THAT NO DEDUCTION U/S 10A SHALL BE ALLOWE D, IF THE ITA NO 1026 OF 2014 E MUG TECHNOLOGIES P LTD HYDE RABAD PAGE 6 OF 7 ASSESSEE DOES NOT FILE THE RETURN OF INCOME WITHIN THE DUE DATE MENTIONED UNDER SUB-SECTION (1) OF 139 OF THE ACT. THE LEARNED DR HAS ALSO PLACED RELIANCE UPON THE VARIOUS DECISI ONS INCLUDING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL A T RAJKOT IN THE CASE OF M/S. SAFFIRE GARMENTS V. ITO (CITED SUPRA) TO SUBMIT THAT THE PROVISO TO SECTION 10A(1A) IS MANDATORY AND NOT DIRECTORY. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD AS WELL AS THE JUDICIAL PRECEDENTS RELIED UPON BY BOTH THE PARTIES, WE FIND THAT IT IS NOW A SETTLED POSIT ION OF LAW THAT TO CLAIM A DEDUCTION U/S 10A OF THE ACT, THE ASSESSEE HAS TO FILE A RETURN OF INCOME WITHIN THE DUE DATE U/S 139(1) OF THE I.T. ACT. THEREFORE, THE ASSESSMENT ORDER ALLOWING EXEMPTION/ DEDUCTION U/S 10A OF THE ACT, INSPITE OF THE ASSESSEE NOT FIL ING THE RETURN OF INCOME WITHIN THE DUE DATE U/S 139(1) OF THE ACT IS NOW CLEARLY ERRONEOUS AND ALSO PREJUDICIAL TO THE INTEREST OF T HE REVENUE. BUT WHETHER THE ASSESSMENT ORDER WAS ERRONEOUS AND PREJ UDICIAL AT THE TIME WHEN IT WAS PASSED?. THE AO HAS MENTIONED THE DATE OF FILING OF THE RETURN OF INCOME IN THE ASSESSMENT OR DER. THEREFORE, HE WAS OBVIOUS OF THE BELATED RETURN, BUT HAS ALLOW ED THE DEDUCTION INSPITE OF SUCH A RETURN. THUS, HE HAS OB VIOUSLY TAKEN A CONSCIOUS DECISION OF ALLOWING THE DEDUCTION AND HAS TO BE PRESUMED TO HAVE TAKEN ONE OF THE POSSIBLE VIEWS BE CAUSE AT THE TIME WHEN THE ASSESSMENT ORDER WAS PASSED I.E. DATE D 30.12.2011, THE ISSUE AS TO WHETHER DEDUCTION/EXEMP TION CAN BE ALLOWED WHEN THE RETURN OF INCOME IS NOT FILED WITH IN THE TIME ALLOWED U/S 139(1), WAS CLEARLY DEBATABLE AND THERE WERE CONFLICTING OPINIONS EXPRESSED BY VARIOUS BENCHES O F THE TRIBUNAL NECESSITATING THE CONSTITUTION OF THE SPECIAL BENCH . THE SPECIAL ITA NO 1026 OF 2014 E MUG TECHNOLOGIES P LTD HYDE RABAD PAGE 7 OF 7 BENCH HAS DELIVERED ITS DECISION ON 30.11.2012. THE REFORE, IT CANNOT BE SAID THAT THE AO, HAVING ACCEPTED ONE OF THE POSSIBLE VIEWS AT THE TIME HE WAS COMPLETING THE ASSESSMENT, HAS COMMITTED AN ERROR IN GRANTING DEDUCTION U/S 10A(1A ) OF THE ACT EVEN THOUGH THE ASSESSEE HAS NOT FILED THE RETURN W ITHIN THE TIME SPECIFIED U/S 139(1) OF THE ACT. THE ORDER OF THE C IT U/S 263 IS DATED 14.03.2014 I.E. AFTER THE DECISION OF THE SPE CIAL BENCH. THEREFORE, WE ARE OF THE OPINION THAT THE ASSESSMEN T ORDER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST O F THE REVENUE AND THEREFORE, CANNOT BE REVISED U/S 263 OF THE ACT . IN VIEW OF THE SAME, THE ASSESSEES APPEAL IS ALLOWED. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH JUNE, 2017. SD/- SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED14TH JUNE, 2017. VINODAN/SPS COPY TO: 1 SHRI T. CHAITANYA KUMAR, FLAT NO.102, GOURI APARTM ENT, H.NO.3- 6-195/B URDULANE, HIMAYATHNAGAR, HYDERABAD 500029 2 INCOME TAX OFFICER WARD -2(1) HYDERABAD 3 CIT II HYDERABAD 4 ADD.CIT RANGE-2 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER