Mercedes-Benz India Private Limited, Pune V. Deputy Commissioner of Income-tax,

ITA 1781/PUN/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1686 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 30-03-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 27-09-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K RASTOGI
• Keywords: Additional evidence; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 80HHC; 115JB; 147; 148

Judgement Text

] IQ.KS ] IQ.KS ] IQ.KS ] IQ.KS IQ.KS IQ.KSIQ.KS IQ.KS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . . , , ! ' BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1781/PN/2013 !$ $ / ASSESSMENT YEAR : 2004-05 MERCEDES - BENZ INDIA PVT. LTD., (FORMERLY KNOWN AS DAIMLER CHRYSLER INDIA PVT. LTD. E-3, MIDC, CHAKAN, PHASE-III, CHAKAN INDUSTRIAL AREA, KURULI & NIGHOJE, TAL KHED, PUNE 410 501 PAN NO.AABCM1789L . / APPELLANT V/S DY. CIT , CIRCLE - 9 , PUNE . / RESPONDENT / ASSESSEE BY : SHRI PRAMOD ACHUTHAN / RESPONDENT BY : SHRI S.K. RASTOGI, CIT / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE IMPUGNING THE ORDER OF COMMISSIONER OF INCOME TAX(A)-V, PUNE FOR THE ASSESSME NT YEAR 2004-05. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM THE REC ORDS ARE : THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR THE IMP UGNED ASSESSMENT YEAR ON 29-10-2004 DECLARING GROSS TOTAL INC OME AS NIL UNDER THE REGULAR PROVISIONS OF THE INCOME TAX ACT, 196 1 AND DECLARING TAXABLE INCOME OF RS.41,83,90,100/- UNDER SECTION 115JB OF / DATE OF HEARING :30.03.2016 / DATE OF PRONOUNCEMENT:28.06.2016 2 ITA NO.1781/PN/2013 THE ACT. THE ASSESSEE WAS ELIGIBLE TO CLAIM DEDUCTION U/S.8 0IB OF THE ACT, BUT THE SAME WAS NOT CLAIMED IN THE RETURN OF INCOME ON ACCOUNT OF GROSS TOTAL INCOME BEING DECLARED AS NIL UNDER THE NO RMAL PROVISIONS OF THE ACT. THE CASE OF THE ASSESSEE WAS SE LECTED FOR SCRUTINY AND ACCORDINGLY NOTICE U/S.143(2) WAS ISSUED TO T HE ASSESSEE ON 31-05-2005. DURING THE COURSE OF SCRUTINY ASSESSME NT PROCEEDINGS THE AO CONSIDERED THE NOTE FILED BY THE ASSESSEE ALONG W ITH THE COMPUTATION OF INCOME WITH RESPECT TO DEDUCTION U/S.80IB . THE AO DID NOT CONCUR WITH THE ASSESSEES COMPUTATION OF DEDUC TION U/S.80IB AND REWORKED THE DEDUCTION U/S.80IB OF THE ACT AS RS.8,5 2,97,935/-. THE ASSESSMENT ORDER U/S.143(3)(II) WAS PASSED ON 29-12-20 06. THEREAFTER, NOTICE U/S.148 OF THE ACT WAS ISSUED TO THE A SSESSEE ON 31-03-2009. THE REASSESSMENT PROCEEDINGS WERE INITIATED FOR THE REASONS THAT THE ASSESSEE HAD NOT SUBMITTED AUDIT REP ORT IN THE PRESCRIBED FORM. FILING OF AUDIT REPORT IS MANDATORY FOR CLA IMING DEDUCTION, THEREFORE, THE DEDUCTION ALLOWED U/S.80IB HAD E SCAPED ASSESSMENT. THE AO VIDE ASSESSMENT ORDER DATED 31-12 -2009 PASSED U/S.143(3) R.W.S.147 OF THE I.T. ACT DISALLOWED THE CLAIM OF DEDUCTION U/S.80IB EARLIER GRANTED TO THE ASSESSEE. 3. AGGRIEVED BY THE SAID ASSESSMENT ORDER, THE ASSES SEE PREFERRED AN APPEAL BEFORE THE CIT(A) CHALLENGING THE REASSESSMENT P ROCEEDINGS, AS WELL AS DISALLOWANCE OF DEDUCTION U/S.80IB ON MERITS. THE CIT(A) VIDE IMPUGNED ORDER DISMISSED THE APPEAL OF ASSESSEE. NOW THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL ASSAILING T HE FINDINGS OF CIT(A). 4. SHRI PRAMOD ACHUTHAN, APPEARING ON BEHALF OF THE ASSES SEE SUBMITTED THAT THE AO HAS ERRED IN INVOKING THE PROVISION S OF SECTION 148 R.W.S. 147. DURING THE SCRUTINY ASSESSMENT PROCEEDIN GS, THE AO 3 ITA NO.1781/PN/2013 HAD APPLIED HIS MIND ON THE ASSESSEES ELIGIBILITY TO CLAIM DE DUCTION U/S.80IB. THE AO IN THE ASSESSMENT ORDER HAS REPRODUC ED THE RELEVANT EXTRACT OF THE NOTE FILED ALONG WITH THE COMPUTAT ION OF INCOME BY THE ASSESSEE WHEREIN IT HAS BEEN MENTIONED THAT THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION U/S.80IB FOR THE PERIOD OF 10 YEA RS BEGINNING FROM A.Y. 1995-96. SINCE, THERE IS NO TAXABLE INCOME DURING THE PREVIOUS YEAR ENDED 31-03-2004, THE DEDUCTION U/S.8 0IB IS NIL. IT WAS FURTHER STATED IN THE NOTE THAT IF DURING THE ASSESS MENT PROCEEDINGS POSITIVE INCOME IS DETERMINED IN THE HANDS OF T HE ASSESSEE, THE ASSESSEE WOULD SUBMIT ITS CLAIM FOR DEDUCTION U/S.80IB. THE LD. AUTHORISED REPRESENTATIVE CONTENDED THAT WHEN ORIGINAL ASSESSMENT ORDER WAS PASSED, THE ASSESSEE HAD NO OCC ASION TO FILE AUDIT REPORT AS THE AO HAD ALLOWED THE DEDUCTION U/S.80I B TO THE ASSESSEE. IN THE MEANTIME, ON 29-01-2009 THE TRIBUNAL IN ASSESSEES CASE FOR EARLIER ASSESSMENT YEAR PASSED ORDER GRANTING RELIEF TO THE ASSESSEE FOR CARRY FORWARD OF THE LOSSES, THEREFORE, THE AUDIT REPORT IN THE PRESCRIBED FORM 10CCB WAS NOT FILED BEFORE THE CIT(A). THE ASSESSEE DURING THE COURSE OF FIRST APPELLATE PROCEEDINGS OFFERED TO FILE THE AUDIT REPORT IF THE CIT(A) SO DIRECTS. HOWEVER, THIS G ROUND RAISED BY THE ASSESSEE WAS REJECTED BY THE CIT(A). 5. THE LD. AUTHORISED REPRESENTATIVE FILED AN APPLICATION FOR ADMITTING AUDIT REPORT DATED 24-07-2015 AS ADDITIONAL EVID ENCE. THE LD. AUTHORISED REPRESENTATIVE CONTENDED THAT NON FILING OF AUDIT REPORT IS A CURABLE DEFECT AND CAN BE RECTIFIED BY FILING THE SAME AT THE SUBSEQUENT STAGE. IN SUPPORT OF HIS SUBMISSIONS THE LD. AUTHORISED REPRESENTATIVE PLACED RELIANCE ON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. MAGNUM EXPORT PVT. LTD . REPORTED AS 262 ITR 10 (CALCUTTA) AND THE DECISION OF THE COORDINATE B ENCH OF THE 4 ITA NO.1781/PN/2013 TRIBUNAL IN THE CASE OF SONHIRA FOUNDATION FOR RURAL DEVELOP MENT VS. DCIT IN ITA NO.538/PN/2014 FOR A.Y. 1999-2000 DECIDED ON 26-10- 2015. 6. IN RESPECT OF REOPENING, THE LD. AUTHORISED REPRESENT ATIVE SUBMITTED THAT THE REASSESSMENT PROCEEDINGS HAVE BEEN INITIATED MERELY ON THE BASIS OF CHANGE OF OPINION. DURING THE C OURSE OF SCRUTINY ASSESSMENT PROCEEDINGS THE AO HAD APPLIED HIS M IND, CONSIDERED THE NOTE ATTACHED WITH THE COMPUTATION OF INC OME WITH RESPECT TO THE CLAIM OF DEDUCTION U/S.80IB. AT NO POINT OF TIME DURING SCRUTINY ASSESSMENT PROCEEDINGS, THE AO RAISED ANY OBJE CTION FOR NON FILING OF AUDIT REPORT IN THE PRESCRIBED FORM. THERE WAS NO INCRIMINATING MATERIAL AVAILABLE BEFORE THE AO FOR INITIATING THE REASSESSMENT PROCEEDINGS. THE LD. AUTHORISED REPRESENT ATIVE POINTED OUT THAT A PERUSAL OF THE REASONS RECORDED FOR INITIATING REASSESSMENT PROCEEDINGS AT PAGES 38 AND 39 OF THE PAPER BOOK WOULD CLEARLY SHOW THAT THE AO HAD NO FRESH MATERIAL AVAILABLE WITH HIM FOR INITIA TING REASSESSMENT PROCEEDINGS. IT WAS MERELY FOR NON FILING OF THE AUDIT REPORT THAT REASSESSMENT PROCEEDINGS WERE INITIATED BY THE AO. IT IS NOTHING BUT CHANGE OF OPINION. IT IS A WELL SETTLED LAW THAT REASSESSMENT PROCEEDINGS U/S.147 R.W.S. 148 CANNOT BE INVOKED ON CHANGE OF OPINION. IN SUPPORT OF HIS SUBMISSION, THE LD. AUT HORISED REPRESENTATIVE PLACED RELIANCE ON THE DECISION OF HONBLE S UPREME COURT OF INDIA IN THE CASE OF CIT VS. KELVINATOR INDIA LTD. REPORTED AS 320 ITR 561 (SC) AND THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ASIAN PAINTS LTD. VS. DCIT AND ANOTHER REPORT ED AS 308 ITR 195. 5 ITA NO.1781/PN/2013 7. ON THE OTHER HAND SHRI S.K. RASTOGI REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE IMPUGNED ORDER. THE LD. DEPARTMENTAL REPRESENTATIVE CONTENDED THAT IT IS NOT A CASE OF CHANGE OF OPINION. THE DEDUCTION U/S.80IB HAS BEEN DISALLOWED TO T HE ASSESSEE AS THE ASSESSEE HAD NOT FILED AUDIT REPORT WHIC H IS MANDATORY FOR CLAIMING DEDUCTION U/S.80IB. THE LD. DEPARTMENTAL REPRESENTATIVE CONTENDED THAT EVEN AFTER INITIATION OF RE ASSESSMENT PROCEEDINGS THE ASSESSEE DID NOT BOTHER TO FILE AUDIT REP ORT. THE LD. DEPARTMENTAL REPRESENTATIVE PRAYED FOR UPHOLDING THE ORD ER OF THE CIT(A) AND DISMISSING THE APPEAL OF THE ASSESSEE. 8. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVE OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. THE ASSESSEE HAS ASSAILED THE FINDINGS OF CIT(A) BY RAISING FOLLOW ING GROUNDS OF APPEAL : 1. THE LD.CIT(A) ERRED IN UPHOLDING THE ACTION OF THE THEN ASSESSING OFFICER OF ISSUING A NOTICE U/S.148 READ WITH SECTION 1 47 OF THE ACT WITHOUT CONSIDERING THE PROVISIONS OF THE SECOND PROVISO TO SECT ION 147 OF THE ACT UNDER WHICH THE REASSESSMENT NOTICE ISSUED IS INVALID IN L AW. 2. THE LD.CIT(A) ERRED IN LAW BY UPHOLDING THE ACTI ON OF THE THEN ASSESSING OFFICER OF INITIATING REASSESSMENT PROCEEDINGS U/S. 147 OF THE ACT ON ACCOUNT OF A CHANGE OF OPINION. 3. THE LD.CIT(A) ERRED BY UPHOLDING THE ACTION OF T HE THEN ASSESSING OFFICER WHILE PASSING THE REASSESSMENT ORDER IN WITHDRAWI NG THE DEDUCTION U/S.80IB OF THE ACT WHICH WAS GRANTED TO TH E APPELLANT EARLIER. 4. THE LD.CIT(A) IN NOT ADJUDICATING ON ISSUE RELATIN G TO DENIAL OF DEDUCTION U/S.80IB OF THE ACT BY THE THEN ASSESSING OFF ICER IN RELATION TO CERTAIN ITEMS OF INCOME. 8.1 THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE S TATED AT THE BAR THAT HE IS NOT PRESSING GROUND NO.1 AND GROUND NO.4 RAISED IN THE APPEAL. ACCORDINGLY, GROUND NOS. 1 AND 4 OF THE GROUNDS OF APPEAL ARE DISMISSED AS NOT PRESSED. 6 ITA NO.1781/PN/2013 9. IN GROUND NO.2 THE ASSESSEE HAS IMPUGNED THE REASS ESSMENT PROCEEDINGS U/S.147 ON ACCOUNT OF CHANGE OF OPINION. TH E LD. AUTHORISED REPRESENTATIVE HAS DRAWN OUR ATTENTION TO T HE ASSESSMENT ORDER PASSED U/S.143(3) WHICH IS PLACED AT PAGES 19 TO 37 OF THE PAPER BOOK. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT IN PARA 11 AT PAGE 14 OF THE ASSESSMENT ORDER, THE AO HAS DEALT WITH THE ISSUE RELATING TO THE CLAIM OF DEDUCTION U/S.80IB. THE AO AFTER D ELIBERATING ON THE ISSUE HAS RECOMPUTED THE DEDUCTION U/S.80IB AS RS.8,52,97,935/-, THUS IT IS EVIDENT FROM THE RECORD THAT T HE AO HAS APPLIED HIS MIND ON THE CLAIM OF DEDUCTION U/S.80IB. A FURTHER PERUSAL OF THE REASONS FOR REOPENING AT PAGE S 38 AND 39 OF THE PAPER BOOK REVEAL THAT THE REASSESSMENT PRO CEEDINGS HAVE BEEN INITIATED ONLY ON THE GROUND THAT THE ASSESSEE HA S NOT SUBMITTED AUDIT REPORT IN THE PRESCRIBED FORM 10CCB WHICH IS MANDA TORY W.E.F, A.Y. 2003-04 ONWARDS. 10. THE AO AFTER DELIBERATING ON THE ISSUE AND GIVING A SP ECIFIC FINDING ON THE CLAIM OF THE ASSESSEE CANNOT INVOKE THE PR OVISIONS OF SECTION 148 R.W.S.147 MERELY ON THE GROUND THAT HE FAILED TO CONSIDER THE AUDIT REPORT WHILE ALLOWING THE CLAIM OF DEDUCTION U/S.8 0IB. THIS IS CLEARLY A CHANGE OF OPINION. THE HONBLE APEX COURT HA S HELD TIME AND AGAIN THAT THE REASSESSMENT PROCEEDINGS CANNOT BE ALLOWED ON CHANGE OF OPINION. THE HONBLE SUPREME COURT OF INDIA IN T HE CASE OF CIT VS. KELVINATOR OF INDIA LTD. (SUPRA) HAS HELD THAT MERE CHANGE OF OPINION CANNOT PER SE BE THE REASON TO REOPEN THE ASS ESSMENT. THE RELEVANT EXTRACT OF THE JUDGMENT OF THE HONBLE APEX C OURT IS REPRODUCED HEREINBELOW : 7 ITA NO.1781/PN/2013 4. ON GOING THROUGH THE CHANGES, QUOTED ABOVE, MADE TO S. 147 OF THE ACT, WE FIND THAT, PRIOR TO DIRECT TAX LAWS (AMENDME NT) ACT, 1987, REOPENING COULD BE DONE UNDER ABOVE TWO CONDITIONS A ND FULFILLMENT OF THE SAID CONDITIONS ALONE CONFERRED JURISDICTION ON TH E AO TO MAKE A BACK ASSESSMENT, BUT IN S. 147 OF THE ACT (W.E . F . 1ST APRIL, 1989), THEY ARE GIVEN A GO BY AND ONLY ONE CONDITION HAS REMAINED, VIZ., THA T WHERE THE AO HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, CON FERS JURISDICTION TO REOPEN THE ASSESSMENT. THEREFORE, POST 1ST APRI L , 1989, POWE R TO REOPEN IS MUCH W I DER . HOWEVER; ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS 'REASON TO BELIEVE' FAILI NG WH I CH, WE ARE AF R AID, S.147WOU L D GIVE ARBITRARY POWERS TO THE AO TO REOPEN ASSESSMENTS ON THE BASIS OF 'MERE CHANGE OF OPINION' , WHICH CANN OT BE PER SE REASON TO REOPEN ; WE MUST ALSO KEEP IN M I ND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND POWER TO REASSESS. THE AO HAS NO POW ER TO REVIEW; HE HAS THE POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASE D ON FULFILLMENT OF CERTAIN PRE-COND I TION AND IF THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVED, AS CONTENDED ON BEHALF OF THE D EPARTMENT, THEN, IN THE GARB OF REOPENING THE ASSESSMENT, REVIEW WOULD TAKE P L ACE. ONE MUST TREAT THE CONCEPT OF ' CHANGE OF OPINION ' AS AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE AO . HENCE, AFTER 1ST APRIL, 1989, AO HAS POWER TO REOPEN, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT . REASONS MUST HAVE A LIVE LINK WITH THE FORMAT I ON OF THE BELIEF. OUR VIEW GETS SUPPORT FROM THE CHAN GES MADE TO S. 147 OF THE A C T, AS QUOTED HEREINABOV E . UNDER THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, PARLIAMENT NOT ONLY DELE TED THE WORDS 'REASON TO BELIEVE' BUT ALSO INSERTED THE WORD 'OPINIO N' IN S. 147 OF THE ACT. HOWEVER, ON RECEIPT OF REPRESENTATIONS FROM T HE COMPANIES AGAINST OMISSION OF THE WORDS 'REASON TO BELIEVE', PARLIAMENT RE-INTRODUCED THE SAID EXPRESSION AND DELETED THE WORD ' OP I NION' ON THE GROUND THAT IT WOULD VEST ARBITRARY POWERS IN THE AO. WE QUOTE HEREI NBELOW THE RELEVANT PORTION OF CIRCULAR NO . 549, DT. 31ST OCT., 1989 [(1990) 82 CTR (ST) 1], WHICH READS AS FOLLOWS : 7.2 AMENDMENT MADE BY THE AMENDING ACT, 1989, TO R E- INTRODUCE THE EXPRESSION REASON TO BELIEVE IN S. 147 A NUMBER OF REPRESENTATIONS WERE RECEIVED AGAINST THE OMISSION OF TH E WORDS REASON TO BELIEVE FROM S.147 AND THEIR SUBSTITUTION B Y THE OPINION OF THE AO. IT WAS POINTED OUT THAT THE ME ANING OF THE EXPRESSION, REASON TO BELIEVE HAD BEEN EXPLAINED IN A NUMBER OF COURT RULINGS IN THE PAST AND WAS WELL SETTLED AND ITS OMISSION FROM S.147 WOULD GIVE ARBITRARY POWERS TO THE AO TO REOPE N PAST ASSESSMENTS ON MERE CHANGE OF OPINION. TO ALLAY THESE FE ARS, THE AMENDING ACT, 1989, HAS AGAIN AMENDED S.147 TO REINTR ODUCE THE EXPRESSION HAS REASON TO BELIEVE IN PLACE OF THE WOR DS FOR REASON TO BE RECORDED BY HIM IN WRITING, IS OF THE OPINION . OTHER PROVISIONS OF THE NEW S. 147, HOWEVER, REMAIN THE SAME . 11. IN THE CASE OF ASIAN PAINTS LTD. VS. DCIT (SUPRA) THE HONBLE JURISDICTIONAL HIGH COURT HAS OBSERVED THAT REASSESSMENT PROCEEDINGS CANNOT BE INVOKED IN THE ABSENCE OF ANY NEW MATERIAL/INFO RMATION ON RECORD. THE AO CANNOT REOPEN THE ASSESSMENT ON THE GROUND THAT 8 ITA NO.1781/PN/2013 SOME MATERIAL AVAILABLE ON RECORD WHILE THE ASSESSMENT W AS MADE INADVERTENTLY EXCLUDED FROM THE CONSIDERATION. THE AO CANNOT TAKE ADVANTAGE OF HIS OWN WRONG AND REO PEN THE ASSESSMENT BY TAKING RECOURSE TO THE PROVISIONS OF SECT ION 147 TO PLUG THE LOOPHOLES IN ASSESSMENT ORDER. THUS, IN VIEW OF THE FA CTS OF THE PRESENT CASE AND THE WELL SETTLED LAW LAID DOWN BY THE HO NBLE APEX COURT AND THE JURISDICTIONAL HIGH COURT, WE ARE OF THE CON SIDERED VIEW THAT THE AO HAS EXCEEDED HIS JURISDICTION IN INVOKING THE PROVISIONS OF SECTION 148 R.W.S. 147 OF THE ACT FOR REOPENING THE ASSES SMENT. THE AO HAS INVOKED THE PROVISIONS OF SECTION 147 MERELY ON C HANGE OF OPINION. THERE WAS NO FRESH MATERIAL/INFORMATION AVAILABLE BEFO RE THE AO FOR REOPENING THE ASSESSMENT. ACCORDINGLY, GROUND NO .2 RAISED IN THE GROUNDS OF APPEAL OF THE ASSESSEE IS ALLOWED. 12. IN GROUND NO.3 THE ASSESSEE HAS ASSAILED THE IMPUGNE D ORDER IN UPHOLDING THE ACTION OF THE AO IN ALLOWING THE DEDUCTION U/S .80IB IN THE REASSESSMENT PROCEEDINGS FOR NON-FILING OF AUDIT REPORT IN THE PRESCRIBED FORM. 13. THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE HA S FILED AUDIT REPORT AS AN ADDITIONAL EVIDENCE BEFORE THE TRIBUNAL. IT HAS BEEN CONTENDED THAT SINCE THE AO HAD ACCEPTED THE CLA IM OF THE ASSESSEE IN ASSESSMENT PROCEEDINGS, NO OBJECTION WHATSO EVER WAS RAISED ON ACCOUNT OF NON-FILING OF AUDIT REPORT DURING ASSE SSMENT. THE ASSESSEE DID NOT FILE THE SAME. THE ASSESSEE DURING FIRST APPELLATE PROCEEDINGS IN REASSESSMENT PROCEEDINGS OFFERED TO FILE THE AUDIT REPORT ON THE DIRECTIONS OF THE CIT(A), BUT NO SUCH DIREC TION WAS GIVEN AND THE ASSESSEE HAD NO OCCASION TO FILE THE AUDIT REPORT. 9 ITA NO.1781/PN/2013 14. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS . MAGNUM EXPORT PVT. LTD. (SUPRA) HAS HELD THAT REFUSAL TO GRANT DE DUCTION MERELY ON THE GROUND THAT AUDIT REPORT HAS NOT BEEN FILED ALONG WITH THE RETURN OF INCOME IS NOT JUSTIFIED. FILING OF AUDIT REPORT FOR CLAIMING DEDUCTION IS MANDATORY, HOWEVER, FILING OF AUDIT REPORT IS PUR ELY A MATTER OR PROCEDURE. THE DEDUCTION CANNOT BE DISALLOWED SIMPLY BECAUSE THE AUDIT REPORT WAS NOT FURNISHED WITH THE RET URN OF INCOME. THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION EVEN IF THE REP ORT IS FILED AT AN APPELLATE STAGE. THE RELEVANT EXTRACT OF THE JUDGMEN T OF HONBLE CALCUTTA HIGH COURT IS REPRODUCED HEREUNDER : 23. THUS, IT IS CLEAR FROM THE VARIOUS DECISIONS OF DIF FERENT HIGH COURTS INCLUDING THOSE OF THIS HIGH COURT, PARTICULARLY, THE LEARNED SINGLE JUDGE OF THIS COURT. WE DO NOT FIND ANY REASON TO DIFFER WITH THE SAME. SUB-SECTION (4) OF SECTION 80HHC CONSISTS OF TWO PARTS. THE FIRST PAR T REQUIRES FILING OF THE SPECIAL AUDIT REPORT FOR CLAIMING DEDUCTION WITH OUT WHICH THE DEDUCTION CANNOT BE ADMISSIBLE. THIS PART IS MANDATORY AND NO DEDUCTION CAN BE CLAIMED WITHOUT SUCH CERTIFICATE. THE SECOND P ART CONSISTS OF THE REQUIREMENT THAT SUCH AUDIT REPORT IS TO BE FILED ALO NG WITH THE RETURN. FILING OF THE REPORT IS A CONDITION PRECEDENT FOR CL AIMING DEDUCTION. WITHOUT SUCH AUDIT REPORT, THE DEDUCTION CANNOT BE C LAIMED. BUT WHEN THIS IS TO BE FILED IS PURELY A MATTER OF PROCEDURE. THIS HAS NOTHING TO DO WITH ANY CONDITION. THEREFORE, SUB-SECTION (4) IS MANDATORY IN ITS FIRST PART, BUT DIRECTORY IN ITS SECOND PART. THE DEDUCTION CANNOT BE DISALLOWED SIMPLY BECAUSE THE AUDIT REPORT WAS NOT FURNISHED ALONG WITH THE RETURN. 24. NOW, THE QUESTION COMES WHETHER IT HAS TO BE FI LED BEFORE THE ASSESSMENT IS OVER OR IT CAN BE FILED EVEN AT THE STAGE O F THE TRIBUNAL. THIS IS DEPENDENT ON THE INTENT OF THE LEGISLATURE TO BE A SCERTAINED FROM THE PHRASEOLOGY OF THE PROVISION HAVING REGARD TO THE SCHE ME OF THE PROVISION, ITS CONTEXT, ITS NATURE, ITS DESIGN AND THE CONSEQUENCE S THAT WOULD FOLLOW AND THE EXTENT TO WHICH IT COULD BE TREATED TO BE D IRECTORY. THE MADRAS HIGH COURT HAS TAKEN THE VIEW THAT IT CAN BE FILED E VEN AT THE APPELLATE STAGE. BUT IT IS NOT NECESSARY FOR US TO DECIDE THE SAID QUESTION HAVING REGARD TO THE PECULIAR FACTS INVOLVED IN THIS CASE. IF IT WAS RELATED TO THE CERTIFICATION OF THE EXPORT OF THE GOODS AND MERCHAN DISE IN ITS ACTUALITY WHICH IS MUCH DEPENDENT ON SUCH CERTIFICATION, THEN I T MAY BE HELD TO BE SO MANDATORY AS TO CONFINE THE SAME WITHIN THE TIME LI MIT BEFORE THE ASSESSMENT IS COMPLETE OR WITHIN THE TIME LIMIT PROVIDED IN SECTION 139(1). INASMUCH AS, THE NECESSITY OF AUDIT REPORT IS RE LATED TO THE ASCERTAINMENT OF THE VERACITY OF THE CLAIM AGAINST TH E ACTUALITY OF THE EXPORT HAVING BEEN MADE. IT MAY BE A LITTLE DIFFERE NT WHEN THE VERACITY OF THE CLAIM IS NOT MUCH DEPENDENT ON AUTHENTICATION, A SITUATION, WHICH IS NOT SO DIFFICULT TO ASCERTAIN OR PROVE. WHEN BY LEGAL FICTION THE RECEIPT AGAINST SALE OF IMPORT LICENCE IS INCLUDED IN EXPORT T URNOVER, THEN IT IS THE RECEIPT AGAINST THE TRANSFER OF THE IMPORT LICENCE T O BE AUTHENTICATED IN THE AUDIT REPORT. THIS SEEMS TO BE MORE A FORMALITY IN THA T SENSE. HAVING 10 ITA NO.1781/PN/2013 REGARD TO SUCH A SITUATION, IT MAY, THEREFORE, NOT BE INTERPRETED SO STRICTLY. THEREFORE, IN SUCH A CASE FILING OF THE AUDIT REPORT AT THE TRIBUNAL STAGE WOULD NOT BE FATAL TO DISENTITLE THE CLAIMANT. BUT T HEN THE TRIBUNAL HAS ACCEPTED THE SAME AND REMITTED THE MATTER TO THE ASSESSI NG OFFICER FOR MAKING THE ASSESSMENT. AS SUCH IT CANNOT BE OVERLOOKED TH AT THE ENTITLEMENT CAN STILL BE PURSUED ON THE BASIS OF THE A UDIT REPORT SINCE THE ASSESSMENT IS YET TO BE MADE AND THERE IS A SCOPE FOR MAK ING SUCH ASSESSMENT RELATING TO THE ENTITLEMENT TO THE CLAIM. 15. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE MADRAS HIG H COURT IN THE CASE OF CIT VS. VALLI COTTON TRADERS PVT. LTD. REPOR TED AS 288 ITR 400 (MAD.). THE HONBLE HIGH COURT HAS HELD THAT WHER E THE ASSESSEE HAS NOT FILED THE AUDIT REPORT IN THE PRESCRIBED FORM ALONG WITH THE RETURN OF INCOME FOR THE REASONS THAT IT HAD SH OWN LOSS IN THE RETURN, IT COULD NOT BE DENIED OPPORTUNITY TO FILE SUCH AU DIT REPORT FOR CLAIMING DEDUCTION AFTER THE AO COMPLETED THE ASSESSMENT ON POSITIVE INCOME. 16. THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF T HE SONHIRA FOUNDATION FOR RURAL DEVELOPMENT VS. DCIT (SUPRA) WHILE DEALIN G WITH A SIMILAR ISSUE HELD THAT THE AUDIT REPORT IN THE PRESCRIBE D FORM CAN BE FILED DURING APPEAL PROCEEDINGS AS THE SAME ARE CONTINUATIO N OF THE ASSESSMENT PROCEEDINGS. THE TRIBUNAL SET ASIDE THE ORDER OF THE CIT(A) AND DIRECTED THE AO TO ALLOW BENEFIT OF DEDUCTION/S.11 AS P ER LAW ONCE THE ASSESSEE HAD FILED THE AUDIT REPORT IN THE PRESCRIBED FORM. 17. THUS, IN VIEW OF THE FACTS OF THE CASE AND THE VARIOUS DECISIONS DISCUSSED ABOVE, WE HOLD THAT NON-FILING OF AUDIT REPORT IS N OT FATAL DEFECT FOR CLAIMING DEDUCTION. IT IS MERELY A PROCEDURAL D EFECT WHICH CAN BE RECTIFIED BY FILING AUDIT REPORT SUBSEQUENTLY. ACCOR DINGLY, GROUND NO.3 RAISED IN THE GROUNDS OF APPEAL IS ALLOWED. 11 ITA NO.1781/PN/2013 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY A LLOWED IN THE AFORESAID TERMS. ORDER PRONOUNCED ON TUESDAY, 28 TH DAY OF JUNE, 2016. SD/- SD/- ( R.K.PANDA ) ( VIKAS AWASTHY ) ACCOUNTANT MEMBER JUDICIAL MEMBER IQ.KS PUNE ; # DATED : 28 TH JUNE, 2016. LRH'K ' (!* + / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5. 6. CIT (A) - V , PUNE CIT-V, PUNE ' *, *, IQ.KS / DR, ITAT, A PUNE; / GUARD FILE. / BY ORDER , ' //TRUE COPY// / * / SR. PRIVATE SECRETARY *, IQ.KS / ITAT, PUNE