Zest Aromas Pvt. Ltd., Baroda V. The CIT-II, Baroda

ITA 1247/AHD/2011

• Counselvise Citation: 124720514 RSA 2011
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 27-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ALOK JOHRI
• Keywords: Procedural lapse
• Section: 143(3); 80IB; 263; 139

Judgement Text

-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' BEFORE SHRI D K TYAGI JM & SHRI A MOHAN ALANKAMONY - AM ITA NO.1247/AHD/2011 (ASSESSMENT YEAR:-2006-07) ZEST AROMAS PVT. LTD., 203, AKASH GANGA, NEAR VANIJYA BHAVAN, RACE COURSE CIRCLE, VADODARA- 390007 V/S THE COMMISSIONER OF INCOME-TAX-II, AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA PAN: AAACZ 0601 M [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI TUSHAR P HEMANI, AR REVENUE BY:- SHRI ALOK JOHRI, CIT - DR DATE OF HEARING:- 02-01-2012 DATE OF PRONOUNCEMENT:- 06-01-2012 O R D E R PER D K TYAGI (JM) :- THIS IS ASSESSEES APPEAL AGAINST AN ORDER OF LEARNED COMMISSIONER OF INCOME-TAX [LEARN ED CIT] PASSED U/S 263 OF THE INCOME-TAX ACT, 1961 [HEREINA FTER REFERRED TO AS THE ACT]. 2 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.1,73,52,646/ - AFTER CLAIMING DEDUCTION U/S 80IB OF THE ACT. ASSESSMENT WAS FINALIZED U/S 143(3) DETERMINING THE TOTAL INCOME A T RS.1,75,94,778/- AFTER GRANTING DEDUCTION OF RS.1,1 9,98,303/-. SUBSEQUENTLY, THE LEARNED CIT CALLED FOR THE RECORD OF THE ASSESSEE AND NOTICED THAT THE ASSESSMENT FRAMED BY THE AO WAS 2 ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE IN TERESTS OF REVENUE. THE FOLLOWING SHOW CAUSE NOTICE WAS ISSUED AS TO WHY THE ORDER PASSED BY THE AO U/S 143(3) NOT BE CANCEL LED:- ON PERUSAL OF THE CASE RECORDS, IT IS NOTICED THA T THE ASSESSEE WAS REQUIRED TO FILE THE AUDIT REPORT IN FORM NO.10 CCB FOR CLAIMING DEDUCTION U/S 80IB OF THE ACT AS PER REQUIREMENT OF SECTION 80IA)7) R.W.S. 80IB(13) AND RULE 18BBB. HOWEVER, THE AUDIT REPORT HAS NOT BEEN FILED BY THE ASSESSEE EITHER WITH THE RETURN O R DURING THE ASSESSMENT STAGE. AS THE ASSESSEE COMPANY FAILED TO FILE THE AUDIT REPORT EVEN DURING THE ASSESSMENT PROCEEDINGS, IT W OULD NOT BE ENTITLED TO CLAIM DEDUCTION U/S 80IB. THE IRREGULAR CLAIM OF DEDUCTION U/S 80IB HAS RESULTED IN UNDERASSESSMENT OF RS.1,19 ,98,303/- WITH SHORT LEVY OF TAX OF RS.40,48,629/-. 3 DURING THE COURSE OF PROCEEDINGS U/S 263, THE FOL LOWING WRITTEN SUBMISSIONS WERE FILED BEFORE THE LEARNED C IT:- '(I) AT THE OUTSET THE REVISION OF THE ORDER CLEARL Y LACKS JURISDICTION NOT ONLY FROM THE POINT OF VIEW OF LAW BUT ALSO FRO M THE POINT OF VIEW OF FACTS AVAILABLE ON RECORDS. SO FAR AS FROM THE P OINT OF LAW IS CONCERNED, WE SUBMIT THAT SUB RULE (3) OF RULE 12 O F THE INCOME TAX RULES, 1962, AS INSERTED BY THE INCOME-TAX (SEVENTH AMENDMENT) RULES, 2006 W.E.F. 24.07.2006 READS AS UNDER. '[(3) THE RETURN OF INCOME OR THE RETURN OF FRINGE BENEFITS TO BE FURNISHED IN FORM NO. 1 OR FORM NO. 2 OR FORM NO. 3 OR FORM NO. 3B SHALL NOT BE ACCOMPANIED BY A STATEMENT SHOWING THE COMPUTATION OF THE TAX PAYABLE ON THE BASIS OF THE RETURN, OR PROO F OF THE TAX, IF ANY, CLAIMED TO HAVE BEEN DEDUCTED AT SOURCE OF THE ADVA NCE TAX OR TAX ON SELF-ASSESSMENT, IF ANY, CLAIMED TO HAVE BEEN PAID OR ANY DOCUMENT OR COPY OF ANY ACCOUNT OR FORM OR REPORT OF AUDIT REQU IRED TO BE ATTACHED WITH THE RETURN OF INCOME OR THE RETURN OF FRINGE B ENEFITS UNDER ANY OF THE PROVISIONS OF THE INCOME-TAX ACT, 1961.]'. THE SAID AMENDMENT UNDER THE INCOME TAX RULES, 1962 CLEARLY SPELLS OUT, BY USING THE WORDS 'SHALL NOT', NOT TO FILE AN Y REPORT OF AUDIT WITH THE RETURN OF INCOME AS REQUIRED UNDER VARIOUS PROV ISIONS OF THE INCOME TAX ACT, 1961 INCLUDING SECTION 80IB OF THE ACT. WE FURTHER 3 SUBMIT THAT THE SAID REPORT WAS DULY OBTAINED BY US BEFORE FILING RETURN OF INCOME, THE COPY OF WHICH IS ATTACHED HEREWITH A S PER ANNEXURE -1. THE ONLY REASON FOR NOT SUBMITTING THE SAID REPORT ALONG WITH RETURN OF INCOME WAS IN VIEW OF THE SAID AMENDMENTS UNDER THE INCOME TAX RULES, 1962. NEEDLESS TO MENTION HERE THAT FROM THE SAID ASSESSMENT YEAR, THE FILING OF INCOME TAX RETURN THROUGH ELECT RONIC MODE WAS MADE COMPULSORY IN CASE OF CORPORATE ASSESSEE AND I N VIEW THEREOF THE REQUIREMENTS OF FURNISHING COMPUTATION OF TOTAL INC OME, PROOF OF TAX PAID CHALLANS, REPORT OF AUDIT ETC. WERE DONE AWAY. (II) NOW COMING TO THE FACTS AVAILABLE ON RECORDS, WE SUBMIT THAT THE CLAIM OF DEDUCTION WAS WELL AND TRULY VERIFIED BY THE ASSESSING OFFICER ('ID. AO' IN SHORT) DURING THE COURSE OF AS SESSMENT PROCEEDINGS. AFTER PROPER VERIFICATION HE ALLOWED T HE CLAIM OF DEDUCTION OF YOUR ASSESSEE AFTER DEDUCTING SCRAP SA LES FROM THE PROFIT ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT IN CASE OF UNIT NO. I & II. WE FURTHER SUBMIT THAT THE ID. AO HAS NEVER ASKED F OR SUCH REPORT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. FOR YO UR HONOUR'S REFERENCE, WE ARE ENCLOSING HEREWITH COPY OF NOTICE S / LETTERS ISSUED BY THE ID. AO FROM TIME TO TIME DURING THE COURSE OF A SSESSMENT PROCEEDINGS AS PER ANNEXURE - 2. THE DETAILS WHICH HE HAS ASKED VIDE POINT NO. 4 AND 5 OF HIS LETTER DATED 12.11.08 RELA TING TO DEDUCTION CLAIMED U/S 80IB OF THE ACT IS REPRODUCED HEREUNDER : '4. YOU HAVE SHOWN INSURANCE INCOME OF RS.10,00,773 /- AND SCRAP SALES OF RS.61,1121-AND CLAIMED DEDUCTION U/S 80IB AT 30%. PLEASE SHOW CAUSE WHY 30% THEREON SHOULD NOT BE DISALLOWED AS THE SAME IS FOUND TO BE INCLUDED IN THE PROFIT ELIGIBLE FOR DED UCTION U/S 80IB OF THE ACT. 5. PLEASE FURNISH DETAILS OF WORKING OF PROFIT CLAI MED AS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. PLEASE STATE WHE THER SEPARATE BOOKS OF ACCOUNTS FOR EACH UNIT HAS BEEN MAINTAINED OR NO T AND BASIS ON WHICH YOU HAVE DISTRIBUTED HEAD OFFICE EXPENSES ON UNITS.' THE REPLY TO ABOVE POINTS WERE SUBMITTED VIDE OUR L ETTER DATED 19.11.2008. AFTER PROPER VERIFICATION AND APPLYING HIS MIND, THE ID. AO HAS ALLOWED THE CLAIM OF DEDUCTION OF YOUR ASSES SEE. WE FURTHER SUBMIT THAT WHEN WE HAVE ALREADY OBTAINED SUCH AUDI T REPORT WELL BEFORE FILING OF RETURN OF INCOME, THERE WAS NO POI NT IN NOT SUBMITTING THE SAME DURING THE COURSE OF ASSESSMENT PROCEEDING S, IF THE SAME HAS 4 BEEN ASKED BY THE ID. AO. WE FURTHER SUBMIT THAT SI NCE THE ID. AO HAS ALLOWED THE CLAIM OF DEDUCTION AFTER APPLYING HIS M IND AND FORMING HIS VIEW, WHY ASSESSES SHOULD BE PENALIZED. WE FURTHER SUBMIT THAT THE REQUIREMENT FOR FILING A UDIT REPORT AS ENVISAGED UNDER SECTION 80IA (7) R.W.S. 80IB (13) O F THE ACT IS WITH THE RETURN OF INCOME. THERE IS NO REQUIREMENT UNDER THE PROVISIONS OF THE ACT TO FILE SUCH REPORT DURING THE COURSE OF AS SESSMENT PROCEEDINGS. SINCE THE SAID REQUIREMENT OF FILING O F AUDIT REPORT ALONG WITH RETURN OF INCOME IS DONE AWAY VIDE AMENDMENT I N SUB RULE (3) OF RULE 12 OF THE INCOME TAX RULES, 1962, AS STATED AB OVE, THERE IS NO INCUMBENT UPON THE ASSESSES TO FILE SUCH AUDIT REPO RT. (III) WE FURTHER SUBMIT THAT THE POWER OFSUO MOTO R EVISION UNDER SUB-S. (1) 263 IS IN THE NATURE OF SUPERVISORY JURI SDICTION AND THE SAME CAN BE EXERCISED ONLY IF THE CIRCUMSTANCES SPECIFIE D THEREIN EXIST. TWO CIRCUMSTANCES MUST EXIST TO ENABLE THE COMMISSIONER TO EXERCISE POWER OF REVISION UNDER THIS SUB-SECTION, VIZ., (I) THE ORDER IS ERRONEOUS; (II) BY VIRTUE OF THE ORDER BEING ERRONE OUS PREJUDICE HAS BEEN CAUSED TO THE INTEREST OF REVENUE. HERE ONE MA Y SAY THAT THERE WAS PROCEDURAL LAPSE ON THE PART OF ID. AO BUT SUCH PROCEDURAL LAPSE, BY ITSELF, DOES NOT MAKE THE ORDER ERRONEOUS WHEN H E HAS FULLY & PROPERLY APPLIED HIS MIND BEFORE ALLOWING THE CLAIM OF DEDUCTION. IT HAS, THEREFORE, TO BE CONSIDERED FIRSTLY AS TO WHEN AN ORDER CAN BE SAID TO BE ERRONEOUS. HERE THE ORDER ITSELF IS NOT ERRON EOUS THEN HOW CAN IT BE PREJUDICIAL TO THE INTEREST OF REVENUE? IT IS BE CAUSE THE ITO HAS EXERCISED THE QUASI-JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT A CONCLUSION AND SUCH A CONCLUSI ON CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIO NER DOES NOT FEEL SATISFIED WITH THE CONCLUSION AS HELD BY THE H ON'BLE BOMBAY HIGH COURT IN CASE OF CIT V. GABRIAL INDIA LTD. 203 ITR 108 (BOM). (IV) FURTHER, THE HON'BLE APEX COURT IN CASE OF CIT V. MAX INDIA LTD. 295 ITR 282 (SC) HELD THAT EVERY LOSS OF REVEN UE AS A CONSEQUENCE OF AN ORDER OF THE AO CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF REVENUE. FOR EXAMPLE, WHEN THE ITO ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN L OSS OF REVENUE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF REVENUE, UNLESS THE VIEW TAKE, BY THE ITO IS UNSUST AINABLE IN LAW. WE FURTHER RELY UPON THE DECISION GIVEN BY HON 'BLE IT AT, AHMEDABAD (THE JURISDICTIONAL AUTHORITY) IN CASE OF KOTHARI O IL PRODUCTS VS. INCOME TAX OFFICER (1985) 23 TTJ 546 WHEREIN THE HO N'BLE ITAT HAS 5 STATED THAT ASSESSMENT WHEN MADE UNDER SECTION 143( 3) R.W.S. 144B, SAME CANNOT BE REVISED BY THE COMMISSIONER U/S 263 OF THE ACT WHERE ALL NECESSARY DETAILS DIRECTED BY COMMISSIONER TO B E VERIFIED WERE CONSIDERED BY THE ITO. WITHOUT PREJUDICE TO ABOVE WE SUBMIT AS UNDER: (V) EVEN IF THE AUDIT REPORT IS NOT FILED ALONG WIT H THE RETURN OF INCOME BUT IT IS MADE AVAILABLE TO THE ASSESSING OF FICER BEFORE COMPLETION OF ASSESSMENT, THE BENEFIT UNDER SECTION 80-IA OR 80-IB CANNOT BE DENIED - CIT V. TREHAN ENTERPRISES [2000] 108 TAXMAN 189 (J&K), CIT V. PANAMA CHEMICAL WORKS [2000] 245ITR 6 84 (MP), AMBER SALES MFG. CORPN. V. ITO [1984] 19 TTJ (CHD.) 177, MAHALAXMI RICE FACTORY V. ITO [1983] 5 ITD 238 (CHD .), GUJARAT OIL & ALLIED INDUSTRIES V. ITO [1982] 2 ITD 454 (AHD.). APPLYING THE SAME ANALOGY, SINCE WE ARE SUBMITTING HEREWITH THE REPORT OF AN AUDIT IN THE PRESCRIBED FORM VIDE ANNEXURE - I BEFORE YOU R HONOUR, WE ARE, IN ANY WAY, COMPLYING WITH THE REQUIREMENTS OF FILI NG OF REPORT DURING REVISIONARY PROCEEDINGS. WE, THEREFORE, REQUEST YOU R HONOUR TO KINDLY CONSIDER THE SAME AND NOT TO DISALLOW OUR CLAIM OF DEDUCTION U/S 80IB OF THE ACT. IN VIEW OF THE ABOVE SUBMISSIONS, WE REQUEST YOUR H ONOUR NOT TO SET ASIDE THE/ ASSESSMENT ORDER PASSED BY THE ID. AO IN THIS REGARD FOR WHICH WE SHALL REMAIN EVER GRATEFUL TO YOUR HONOUR. IF YOUR HONOUR INTENDS TO TAKE ANY CONTRARY VIEW IN THE MATTER THE N WE REQUEST YOUR HONOUR TO JUSTIFY YOUR ACTION TO SET ASIDE THE ORDE R OF ID. AO AFTER R PROVIDING US THE REASONABLE OPPORTUNITY OF BEING HE ARD.' 4 AFTER TAKING INTO CONSIDERATION THE SUBMISSIONS O F THE ASSESSEE, THE LEARNED CIT CANCELLED THE ORDER PASSE D BY THE AO BY OBSERVING AS UNDER:- 5. THE THRUST OF THE ASSESSEE'S CONTENTION IS THAT THE AUDIT REPORT WAS SUBSEQUENTLY OBTAINED, BUT WAS NOT FILED SINCE IT WAS NOT ASKED FOR BY THE ASSESSING OFFICER. THIS ARGUMENT OF THE ASSE SSEE IS NOT ACCEPTABLE. EVEN IF THE A.O. DID NOT CALL FOR SUCH REPORT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS DUTY BOUND TO FILE SUCH REPORT NOT ONLY ALONGWITH THE RETURN OF INCOME BUT AT LEAST DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HOWEVER, THE ASSE SSEE FAILED TO DO 6 SO. THE INTENTION BEHIND THE PROVISION FOR FURNISH ING OF THE AUDIT REPORT ALONGWITH THE RETURN IS THAT THIS WOULD PROV IDE A CHECK AND VERIFICATION OF THE CORRECTNESS OF THE CLAIM. NON-F URNISHING OF THE REPORT WAS THUS CONTRARY TO THE LEGISLATIVE INTENTI ON AS WELL AS CLEAR PROVISIONS OF LAW. ACCORDINGLY, IT IS HELD THAT THE ASSESSMENT ORDER U/S 143(3) DATED 22.12.2008 PASSED BY THE ACIT, CIRCLE 4, BARODA WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. THE SAID ORDER IS CANCELLED AND THE A.O IS DIRECTED TO MAKE A FRES H ASSESSMENT ALONG THE LINES INDICATED ABOVE. 5 AGGRIEVED BY THIS ORDER OF THE LEARNED CIT, NOW T HE ASSESSEE IS IN APPEAL BEFORE US. AT THE TIME OF HEA RING, THE LEARNED COUNSEL OF THE ASSESSEE REITERATED THE SUBM ISSIONS MADE BEFORE THE LEARNED CIT AND FURTHER SUBMITTED THAT T HE ASSESSMENT YEAR 2006-07 WAS THE FIRST ASSESSMENT YEAR FOR THE CORPORATE ASSESSEE TO FILE RETURN OF INCOME IN ELECTRONIC MOD E AND THE CORPORATE ASSESSEES WERE NOT REQUIRED TO ANNEX ANY DOCUMENT LIKE AUDIT REPORT, BALANCE-SHEET, P&L ACCOUNT, CHALLANS, TDS CERTIFICATE, ETC., ALONG WITH THE RETURN OF INCOME AS PER SUB-RULE (3) OF RULE 2 OF INCOME TAX RULES WHICH WAS INSERTE D BY THE INCOME-TAX (SEVENTH AMENDMENT) RULES, 2006 W.E.F. 2 4-07-2006. HE FURTHER SUBMITTED THAT PARAS 5 AND 6 OF CBDT CIR CULAR NO.9 OF 2006, DATED 10-10-2006 PROVIDED THAT THE CORPORA TE ASSESSEE WAS NOT REQUIRED TO ATTACH AUDIT REPORT ALONG WITH THE RETURN OF INCOME FILED IN ELECTRONIC MODE. SECTIONS 139 C AND 139 D WERE INSERTED BY THE FINANCE ACT, 2007, WITH RETROSPECTI VE EFFECT FROM 01-06-2006 WHICH PROVIDED THAT THE CBDT HAS A POWER TO DECLARE THAT AUDIT REPORT IS NOT REQUIRED TO BE FILED ALONG WITH THE RETURN OF INCOME FILED ELECTRONICALLY, HOWEVER, THE SAME W AS REQUIRED TO BE FILED BEFORE THE AO ON HIS DEMAND. HE FURTHER PO INTED OUT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NEVER ASKED 7 THE ASSESSEE TO FURNISH THE AUDIT REPORT AND, THERE FORE, THE SAME WAS NOT FURNISHED THOUGH THE ASSESSEE WAS IN POSSES SION OF THE AUDIT REPORT AND THE SAME WAS FILED BEFORE THE LEAR NED CIT IN REPLY TO HIS SHOW CAUSE NOTICE VIDE ANNEXURE-1. THE LEARNED COUNSEL OF THE ASSESSEE ALSO SUBMITTED THAT DURING THE ASSESSMENT PROCEEDINGS, THE AO CARRIED OUT DETAILED INQUIRIES IN RESPECT OF CLAIM MADE U/S 80IB OF THE ACT BY ISSUING A SHOW CA USE NOTICE DATED 12-11-2008 AND AFTER DUE VERIFICATION OF CLAI M, PASSED THE ASSESSMENT ORDER AFTER REDUCING THE SCRAP SALES FRO M THE ELIGIBLE PROFITS FOR DEDUCTION U/S 80IB OF THE ACT, WHICH SH OWS THAT THE AO APPLIED HIS MIND WHILE PASSING THE ASSESSMENT OR DER PARTLY ALLOWING THE CLAIM MADE BY THE ASSESSEE U/S 80IB OF THE ACT. PLACING RELIANCE ON THE DECISIONS OF THE HONBLE DE LHI HIGH COURT IN THE CASES OF (I) CIT VS. SUNBEAM AUTO LTD. [332 ITR 167; (II) CIT VS. VIKAS POLYMERS [194 TAXMANN 436; AND (III) CIT VS. ANIL KUMAR SHARMA [335 ITR 83], THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT IF THERE WAS ANY INQUIR Y, EVEN INADEQUATE, THAT WOULD NOT BY ITSELF, GIVE OCCASION TO THE CIT TO PASS ORDER U/S 263 OF THE ACT MERELY BECAUSE HE HAS DIFFERENT OPINION IN THE MATTER. IT WAS ONLY IN CASES OF LACK OF INQUIRY THAT SUCH COURSE OF ACTION WOULD BE OPEN. PLACING RELIAN CE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F MALABAR INDUSTRIAL CO. LTD. VS. CIT [243 ITR 83], THE LEARN ED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE LEARNED CIT HAS TO BE SATISFIED WITH THE TWIN CONDITIONS THAT THE ORDER OF THE AO S OUGHT TO BE REVISED, WAS ERRONEOUS IN SO FAR AS IT WAS PREJUDIC IAL TO THE INTERESTS OF REVENUE. IF ONE OF THEM IS ABSENT, THE ORDER OF THE 8 AO CANNOT BE SUBJECT MATTER OF REVISION BY THE LEAR NED CIT U/S 263 OF THE ACT. 6 COMING TO NOT FILING OF AUDIT REPORT IN SUPPORT O F ITS CLAIM U/S 80IB OF THE ACT, THE LEARNED COUNSEL OF THE ASS ESSEE RELIED ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN T HE CASE OF ZENITH PROCESSORS [219 ITR 721], WHEREIN THE AUDIT REPORT FILED DURING THE COURSE OF 263 PROCEEDINGS WAS HELD TO BE VALID AND IN THE CASE OF MAYUR FOUNDATIONS [274 ITR 562] IT WAS HELD THAT EVEN THE PROCEEDINGS BEFORE THE ITAT WERE CONTINUAT ION OF ASSESSMENT PROCEEDINGS AND, THEREFORE, EVEN IF THE AUDIT REPORT WAS FILED AT A LATER STAGE, WOULD NOT DISENTITLE TH E ASSESSEE FROM CLAIMING THE BENEFIT OF DEDUCTION. RELIANCE WAS ALS O PLACED ON THE DECISION OF THE ITAT AHMEDABAD BENCH-D IN THE C ASE OF HANUMAN FILAMENTS PVT. LTD. VS. DCIT [ITA NO.188/AH D/2010, ORDER DATED 31-20-2011], WHEREIN IT WAS HELD THAT M ERE NON- FILING OF AUDIT REPORT ALONG WITH THE RETURN OF INC OME WILL NOT DEPRIVE THE RIGHT OF THE ASSESSEE TO CLAIM DEDUCTIO N ELIGIBLE UNDER THE SCHEME OF THE ACT. THE LEARNED COUNSEL O F THE ASSESSEE ALSO RELIED ON THE DECISION OF THE HONBLE ALLAHABA D HIGH COURT IN THE CASE OF AMIT VEGETABLES LTD. VS. CIT [158 TA XMAN 36] AND THE DECISION OF HONBLE UTTRAKHAND HIGH COURT IN TH E CASE OF CIT VS. CLOUGH ENGINEERING LTD. [300 ITR 435], WHEREIN IT WAS HELD THAT ASSESSMENT ORDER CANNOT BE TREATED AS ERRONEOU S ON THE GROUND THAT THE ASSESSEE HAD NOT FILED AUDIT REPORT ALONG WITH THE RETURN OF INCOME. CONCLUDING HIS ARGUMENTS, THE LE ARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ORDER PASSED BY THE LEARNED CIT U/S 263 OF THE ACT BE QUASHED. 9 7 THE LEARNED DR, ON THE OTHER HAND, RELIED ON THE ORDER OF THE LEARNED CIT AND SUBMITTED THAT SINCE THE CLAIM OF THE ASSESSEE U/S 80IB OF THE ACT WAS ALLOWED BY THE AO IN THE ABSENCE OF AUDIT REPORT WHICH WAS REQUIRED U/S 80IA (7) READ WITH SECTION 80IB(13), THE LEARNED CIT WAS JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 263 IN THIS CASE. HE, THEREFO RE, PRAYED THAT THE ORDER PASSED BY THE LEARNED CIT MAY KINDLY BE U PHELD. 8 HEARD BOTH THE PARTIES AND PERUSED THE RECORD AND WE FIND THAT THERE IS NO DISPUTE ABOUT THE FACT THAT THE AS SESSEE FILED ITS RETURN OF INCOME IN ELECTRONIC MODE WITHOUT ENCLOSI NG THE AUDIT REPORT AS PER SUB-RULE (3) OF RULE 12 OF THE INCOME TAX RULES WHICH WAS INSERTED BY THE INCOME-TAX (SEVENTH AMEND MENT) RULES, 2006, WITH EFFECT FROM 24-07-2006 AND READS AS UNDER:- (3) THE RETURN OF INCOME OR THE RETURN OF FRINGE BENEFITS TO BE FURNISHED IN FORM NO.1 OR FORM NO.2 OF FORM NO.3B S HALL NOT BE ACCOMPANIED BY A STATEMENT SHOWING THE COMPUTATION OF TAX PAYABLE ON THE BASIS OF THE RETURN, OR PROOF OF THE TAX, IF ANY, CLAIMED TO HAVE BEEN PAID OR ANY DOCUMENT OR COPY OF ANY ACCOUNT OR FORM OR REPORT OF AUDIT REQUIRED TO BE ATTACHED WITH THE RETURN OF INCOME OR THE RETURN OF FRINGE BENEFITS UNDER ANY OF THE PROVISIONS OF T HE INCOME-TAX ACT, 1961. 9 IT IS CLEAR FROM THE ABOVE THAT WITH THE RETURN O F INCOME FILED ELECTRONICALLY, THE AUDIT REPORT WAS NOT REQU IRED TO BE FILED. SECTION 139D READS AS UNDER:- 139D. THE BOARD MAY MAKE RULES PROVIDING FOR - (A) THE CLASS OR CLASSES OF PERSONS WHO SHALL BE RE QUIRED TO FU RNISH THE RETURN IN ELECTRONIC FORM; 10 (B) THE FORM AND THE MANNER IN WHICH THE RETURN IN ELECTRONIC FORM MAY BE FURNISHED; (C) THE DOCUMENTS, STATEMENTS, RECEIPTS, CERTIFICAT ES OR AUDITED REPORTS WHICH MAY NOT BE FURNISHED ALONG WITH THE R ETURN IN ELECTRONIC FORM BUT SHALL BE PRODUCED BEFORE THE AS SESSING OFFICER ON DEMAND; (D) THE COMPUTER RESOURCE OR THE ELECTRONIC RECORD TO WHICH THE RETURN IN ELECTRONIC FORM MAY BE TRANSMITTED.] 10 IT IS CLEAR FROM THE ABOVE THAT THE AUDIT REPOR T WAS TO BE FILED BY THE ASSESSEE IN CASE IT IS DEMANDED BY THE AO DURING THE ASSESSMENT PROCEEDINGS. IN THIS CASE, THERE IS NO E VIDENCE TO SHOW THAT THE AO DEMANDED THE AUDIT REPORT BEFORE D ECIDING THE ISSUE OF ALLOWABILITY OF DEDUCTION U/S 80IB OF THE ACT. AS PER THE REQUIREMENTS OF SECTION 80IA(7) READ WITH SECTION 8 0IB(13) AND RULE 18BBB, NO DEDUCTION U/S 80IB WILL BE ADMISSIBL E UNLESS THE AUDIT REPORT OF THE UNDERTAKING FOR THE PREVIOUS YE AR RELEVANT TO THE ASSESSMENT YEAR FOR WHICH THE DEDUCTION IS CLAI MED, HAVE BEEN AUDITED BY AN ACCOUNTANT AND THE REPORT OF SUC H AUDIT IN PRESCRIBED FORM DULY SIGNED AND VERIFIED BY SUCH AC COUNTANT IS FURNISHED. SINCE IN THIS CASE, DEDUCTION U/S 80IB HAS BEEN ALLOWED BY THE AO ADMITTEDLY WITHOUT SUCH REPORT, W E HAVE NO HESITATION IN HOLDING THAT THE LEARNED CIT WAS JUST IFIED IN HOLDING THE ORDER OF THE AO AS ERRONEOUS IN SO FAR AS IT WA S PREJUDICIAL TO THE INTERESTS OF REVENUE. THEREFORE, INVOCATION OF PROVISIONS OF SECTION 263 OF THE ACT BY THE LEARNED CIT, CANCELIN G THE ASSESSMENT ORDER AND DIRECTING THE AO TO MAKE A FRE SH ASSESSMENT IS HEREBY UPHELD. 11 11 BEFORE WE DEPART, IT IS MADE CLEAR THAT SINCE TH E AUDIT REPORT HAS BEEN FILED BY THE ASSESSEE BEFORE THE LEARNED C IT DURING 263 PROCEEDINGS AND HAS ALSO BEEN FILED BEFORE US, WE A RE OF THE VIEW THAT THE AO WHILE FRAMING THE FRESH ASSESSMENT, WIL L EXAMINE THE ADMISSIBILITY OF THE CLAIM OF DEDUCTION U/S 80IB TA KING INTO CONSIDERATION THE AUDIT REPORT FILED BEFORE THE LEA RNED CIT. THIS VIEW OF OURS GET SUPPORT FROM THE DECISION OF THE H ONBLE GUJARAT HIGH COURT IN THE CASE OF ZENITH PROCESSORS (219 IT R 721), WHEREIN THE AUDIT REPORT FILED DURING THE COURSE OF 263 PROCEEDINGS WAS HELD TO BE VALID. 12 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT TODAY ON 06-01-2012 SD/- SD/- (A MOHAN ALANKAMONY) ACCOUNTANT MEMBER (D K TYAGI) JUDICIAL MEMBER DATE : 06-01-2012 COPY OF THE ORDER FORWARDED TO: 1. ZEST AROMAS PVT. LTD., 203, AKASH GANGA, NEAR VA NIJYA BHAVAN, RACE COURSE CIRCLE, VADODARA-390007 2. THE COMMISSIONER OF INCOME-TAX-II, AAYAKAR BHAVA N, RACE COURSE CIRCLE, BARODA 3. CIT CONCERNED 4. CIT(A) 12 5. DR, ITAT, AHMEDABAD BENCH-B, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD