KEWAL KIRAN CLOTHING LTD., MUMBAI V. ADDL.C.I.T. RANGE 9(2), MUMBAI

ITA 2173/MUM/2009

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92276 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-04-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 08-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAHANGIR D MISTRY
• Assessee Lawyers: S PADMAJA
• Keywords: Depreciation; Opportunity of being heard; Rule of consistency; Tangible material; Valuation report; Assessment record; Prejudicial to interest
• Section: 143(3); 80IB; 263

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - A BENCH , , BEFORE S/SH. I P BANSAL,JUDICIA L MEMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 2173 /MUM/200 9 , / ASSESSMENT YEAR - 2005 - 06 KE W AL KIRAN CLOTHING P LTD. B 101 SYNTHOFINE INDUSTRIAL ESTATE, BEHIND VIRWANI IND.ESTATE, GOREGAON,MUMBAI - 63 AAACK3402H V S CIT - MUMBAI CITY - 9 AAYAKAR BHAVAN, MUMBAI. ( / ASSESSEE) ( / RESPONDENT) / REVENUE BY :SHRI JAHANGIR D. MISTRY /ASSESSEE BY :MS. S PADMAJA / DATE OF HEARING : 01 - 0 4 - 2015 / DATE OF PRONOUNCEMENT : 10 - 04 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) , PER RAJENDRA,A.M. CHALLENGING THE ORDERS DT.23.02.2009 OF THE CIT - 9 , MUMBAI, ASSESS EE H AS RAISED RAISED FOLLOWING GROUNDS OF APPEAL: 1.ON THE FACT AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX - 9 1 MUMBAI ('THE CIT') ERRED IN EXERCISING THE POWERS U/S 263 OF THE INCOME TAX ACT AND DIRECTED THE AO TO WITHDRAW DEDUCTI ON ALLOWED U/S 80IB WITHOUT HAVING ANY JURISDICTION TO DO SO. 2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT: THE DEDUCTION WAS ALLOWED BY THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE 9 (2), MUMBAI ('THE AO ') AFTER CERTAIN ADJUSTMENTS WHILE PASSI NG ORDER U/S 143 (3) WHICH WAS CONFIRMED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - IX, MUMBAI ('THE CIT (A); THE ORDER OF THE AO WAS SUBJECT MATTER OF THE CIT (A)'S ORDER AND IT GOT MERGED WITH THE ORDER OF THE CIT (A) AND HENCE THE CIT CANNOT REVISE THE ORDER OF THE AO. 3.THE APPELLANT,THEREFORE, PRAYS THAT THE REVISION PROCEEDINGS U/S 263 BE ANNULLED AS BEING AB - INITIO AND/OR OTHERWISE VOID AND BAD - IN - LAW. WITHOUT PREJUDICE TO GROUND I: GROUND II ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, TH E CIT ERRED IN OBSERVING THAT THE AUDIT REPORT IN FORM 10CCB WAS NOT SUBMITTED BEFORE HIM. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT THE AUDIT REPORT WAS SUBMITTED ALONG WITH THE WRITTEN SUBMISSION FILED ON 16.2.2009. THE APPELLANT THEREFORE PRAY S THAT THE ORDER PASSED U/S 263 BASED ON ERRONEOUS OBSERVATION BE CANCELLED AND ORDER OF T HE AO ALLOWING DEDUCTION U/S.80IB BE RESTORED. THE APPELLANT CRAVES LEAVES TO ADD TO, ALTER, AND / OR AMEND ALL OR ANY OF THE ABOVE GROUND OF APPEAL. BRIEF FACTS: 2. EFFECTIVE GROUND OF APPEAL IS ABOUT VALIDITY OF PROCEEDINGS INITIATED U/S.263 OF THE ACT. ASSESSEE COMPANY , ENGAGED IN BUSINESS OF MANUFACTURING AND EXPORT OF READYMADE GARMENTS, FILED ITS RETURN OF INCOME ON 12.10.2005, DECLARING INCOME OF RS. 3.02 CRORES, AFTER CLAIMING DEDUCTION U/S. 80IB OF THE ACT,AT RS. 150,38,960/ - BEING 30% OF THE PROFITS OF ITS DAMAN UNIT. LATER ON THE COMMISSIONER OF INCOME - TAX(CIT),ISSUED A NOTICE U/S.263 OF THE ACT TO THE ASSESSEE ON THE GROUND THAT THE OR DER PASSED BY THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE . HE OBSERVED THAT EXAMINATION OF RECORDS REVEALED THAT THE ASSESSEE DID NOT FURNISH THE AUDIT REPORT IN PRESCRIBED FORM NO.10CCB DULY SIGNED AND VERIFIED BY AN ACCOUNTANT AS 2 ITA NOS. 2173 /M/200 9 KEWAL KIRAN CLOTHING LTD. 2 DEFI NED IN EXPLANATION PER SUB - SECTION (2) OF SECTION 288 OF THE ACT, WHICH WAS MANDATORY REQUIREMENT AS PRESCRIBED BY SECTION 80IB(13)& 80IA(7) OF THE ACT. ASSESSING OFFICER(AO) COMPLETED T HE ASSESSMENT U/S.143(3) OF THE ACT, ON 10. 10.2007, AT TOTAL INCOME OF RS . 3,80,42,930/ - AFTER ALLOWING DEDUCTION U/S. 80IB AT RS. 1, 20,89,435/ - (A SUM OF RS, 29,49,162/ - HAD BEEN DISALLOWED OUT OF THE TOTAL CLAIM OF RS. 1, 50,38,960/ - ).THE ASSESSEE DID NOT FURNISH THE AUDIT REPORT IN PRESCRIBED FORM NO. 10CCB EITHER ALONG WITH THE RETURN OR BEFORE THE COMPLETION OF THE ASSESSMENT PROCEEDINGS. IN VIEW OF THE ABOVE FACTS,A NOTICE U/S.263 OF THE ACT,DATED 23.12.2008 WAS ISSUED TO THE ASSESSEE . VIDE THE SAID NOTICE, THE ASSESSEE WAS GIVEN AN OPPORTUNITY OF BEING HEARD TO EXPLAIN AS TO WHY NECESSARY ORDER INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT SHOULD NOT BE PASSED . VIDE ITS WRITTEN SUBMISSION,DATED 21.01.2009,THE ASSESSEE CONTENDED THAT T HE AUDIT REPORT IN THE PRESCRIB ED FORM NO.100CB WAS FILED DURING APPELLATE PROCEEDINGS AS THE SAME WAS NOT FILED ALONG WITH THE RETURN OF INCOME,THAT THE DEDUCTION U/S. 80IB COULD BE ALLOWED EVEN IF THE REPORT WAS FILED BEFORE THE COMPLETION OF ASSESSMENT. RELIANCE WAS PLACE D ON DECISIONS DELIVERED IN THE CASES OF SHIVAM ELECTRONICS(209 ITR 6 3 )AND PUNJA B FINANCIAL CORPORATION(254ITR 6 )DELIVERED BY THE BOMBAY AND PUNJAB AND HARYANA HIGH COURTS RESPECTIVELY. REFERRING TO THE JUDGMENT OF THE HONBLE SUPREME COURT DELIVERED IN THE CASE OF MALABA R INDUSTRIAL CO.LTD.(243ITR83),THE CIT INITIAT ED REVISIONARY PROCEEDI NGS. V IDE ORDER SHEET ENTRY,DATED.21.01.2009,HE REQUIRED THE ASSESSEE TO FILE EVIDENCE BY 2.2.2009,IF ANY, IN SUPPORT OF FILING OF AUDIT REPORT IN FORM NO. 10CCB DURING THE C O URSE OF ASSESSMENT PROCEEDING. HOWEVER, NO SUCH EVIDENCE WAS FURNISHED BY THE ASSESSEE,AS PER THE CIT.H E RECHECKED THE ASSESSMENT RECORD AND FOUND THAT NO AUDIT REPORT IN FORM NO.10CCB WAS FILED DURING THE C OURSE OF ASSESSMENT PROCEEDINGS . VIDE ITS SUBMISSIO NS,DATED.16.2,2009, IT FURTHER RELIED UPON THE GUJARAT HIGH COURT DECISION IN THE CASE OF ZENITH PROCESSING MILLS(219 ITR 721) IN SUPPORT OF ITS CONTEN - TION THAT THE AUDIT REPORT IN PRESCRIBED FORM NO. 10 CCB COULD BE FILED EVEN IF REVISIONAL JURISDICTION IS EXERCISED BY THE CIT U/S.263 OF THE ACT.IT ALSO RELIED UPON THE MATTER OF SHRI MANJUNATHESHWARA PACKING PRODUCTS & CAMPHOR WORKS(231 ITR 53)OF THE APEX COURT. AS PER THE CIT IN ITS WRITTEN SUBMISSION THE ASSESSEE HAD CLAIMED TO HAVE SUBMITTED A COPY OF THE A UDIT REPORT DATED 1.8.2005 IN PRESCRIBED FORM NO.10CCB BEFORE HIM.BUT,AS PER THE CIT,NO SUCH AUDIT REPORT WAS FILED ALONG WITH THE WRITTEN SUBMISSION DURING THE COURSE OF PROCEEDING U/S.263 OF THE ACT.THE CIT HELD THAT THE CASE OF SHRI MANJUNATHESHWARA PAC KING PRODUCTS & CAMPHOR WORKS(SUPRA)WAS NOT RELEVANT TO THE ISSUE UNDER CONSIDERATION AS THE SAID DECISION PERTAINED TO THE VALUATION REPORT SUBMITTED BY THE DEPARTMENTAL VALUATION CELL ON THE REFERENCE MADE BY THE AO AFTER PASSING THE ASSESSMENT ORDER,THA T THE OTHER DECISIONS RELIED UPON BY THE ASSESSEE WERE NOT RELEVANT TO THE ISSUE UNDER CONSIDERA - TION.HE FURTHER HELD THAT IT HAD NOT FILE D ANY EVIDENCE IN SUPPORT OF FILING OF THE AUDIT REPORT IN PRESCRIBED FORM NO.10CCB EITHER ALONG WITH THE RETURN OR D URING THE ASSESSMENT PRODCEEDINGS, THAT THE CASE LAWS RELIED UPON BY THE ASSESSEE PERTAINED TO THE FILING OF AUDIT REPORT BEFORE TH E COMPLETION OF THE ASSESSMENT, THAT THE REPORT WAS NOT FILED BEFORE THE COMPLETION OF ASSESSMENT,THAT THOSE CASE LAWS WERE IR RELE V ANT. HE AGAIN RELIED UPON THE CASE OF MALABAR INDUSTRIAL CO. LTD.(SUPRA).HE ALSO MADE A REFERENCE TO THE MATTER OF SECHENECTADY BECK INDIA LTD. (272 ITR - AT - 103)OF MUM BAI ITAT. HE HELD THAT IN THE CASE UNDER CONSIDERATION THE MANDATORY REQUIREMENTS OF SECTI ON 80IB(13)/80IA (7) OF THE ACT HAD NOT BEEN FULFILLED,THAT AS PER SECTION 80IA(7) DEDUCTION U/S. 80IA(7)/ 80IB (13) WOULD NOT BE ADMISSIBLE UNLESS THE TWO MANDATORY REQUIRE MEN TS WERE FULFIL ED , THAT THE ASSESSMENT ORDER PASSED BY THE AO IN ABSENCE OF THE AUDIT RE PORT IN PRESCRIBED FORM NO. 10CCB WAS ERRONEOUS AS WELL AS PREJUDIC IAL TO THE INTEREST OF REVENUE, AS THERE WAS INCORRECT APPLICATION OF LAW WHICH SATISFIED THE REQUIREMENT OF THE ORDER BEING ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE.HE AN ALYSED THE JUDGMENTS RELIED 3 ITA NOS. 2173 /M/200 9 KEWAL KIRAN CLOTHING LTD. 3 UPON BY THE ASSESSEE AND HELD THAT SAME WERE NOT APPLICABLE TO THE FACTS OF THE CASE.FINALLY, INVO - KING THE PROVISIONS OF SECTION 263 OF THE ACT,HE DIRECTED THE AO TO WITHDRAW THE DEDUCTION . 3. BEFORE US,AUTHORISED REPRESENTATIVE (AR)SUBMITTED THAT THE ORDER OF THE AO WAS NOT ERRONEOUS NOR PREJUDICIAL TO REVENUE,THAT THE AO HAD DEALT WITH THE ISSUE OF 80IB DEDUCTION AND DISALLOWED CERTAIN ITEMS,THAT THE FIRST APPELLATE AUTHORITY HAD ADJUDICATED THE ISSUE,THAT THE ORDER OF THE AO MA DE MERGED WITH THE ORDER OF THE FAA,THAT CIT WAS BARRED FROM INTERFERING AN ORDER THAT WAS SUBJECT MATTER OF APPEAL, THAT THE CIT IN HIS ORDER PASSED U/S.154 OF THE ACT HAD ADMITTED THAT THE AUDIT REPORT WAS SUBMITTED BEFORE HIM DURING 263 PROCEEDINGS,THAT FURNISHING OF AUDIT REPORT BEFORE HIM WAS SUFFICIENT TO MAKE THE CLAIM, THAT NON FILING OF REPORT SHOULD NOT RESULT IN DENYING BENEFIT OF SECTION 80IB OF THE ACT ,THAT THE AO HAD ALLOWED DEDUCTION U/S.80IB TO THE ASSESSEE IN EARLIER NINE YEARS .HE RELIED UP ON THE CASES OF OIL INDIA LTD.(138ITR836) ,MEDICAPS LTD. (323ITR554),MAGNUM EXPORT PVT.LTD.(262ITR10). DEPARTMENTAL REPRESENTATIVE(DR) SUPPORTED THE ORDER OF THE CIT AND ARGUED THAT THE ORDER OF THE AO WAS ERRONEOUS AND PREJUDICIAL TO INTEREST OF REVENUE,THAT NON FILING OF AUDIT REPORT DISENTITLED THE ASSESSEE FORM CLAIMING DEDUCTION .SHE RELIED UPON THE CASES OF PUNJAB FINANCIAL CORP . (121TAXMAN 656),MAHALAXMI RICE FACTORY (163 TAXMAN565),SIVANAND ELECTRONICS,(75TAXMAN93), SECHENECTADY BECK INDIA LTD.(SUPRA). 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE HAD NOT FILED AUDIT REPORT IN FORM NO.10CCB AT THE TIME OF FILING OF RETURN, THAT THE ASSESSEE HAD MADE CLAIM U/S.80I B OF THE ACT,THAT THE AO DID NOT ALLOW THE CLAIM OF THE ASSESSEE FULLY,THAT IT CONTESTED THE ISSUE OF 80IB DEDUCTION BEFORE THE FAA, ,THAT THE YEAR UNDER APPEAL WAS THE TENTH YEAR OF DEDUCTION CLAIMED,THAT IN EARLIER YEAR THE AO HAD NEVER DENIED THE ASSESSE E THE BENEFITS OF DEDUCTION, THAT THE CIT IN ITIATED REVISIONARY PROCEEDINGS U/S.263 OF THE ACT,THAT THE ASSESSEE FILED A COPY OF THE AUDIT REPORT BEFORE HIM,THAT THE CIT HELD THAT BECAUSE OF NON FILING OF AUDIT REPORT THE ASSESSEE WAS NOT ENTITLED TO CLAIM THE DEDUCTION,THAT THE AO HAD NOT CONSIDERED THE ISSUE OF NON FILING OF REPORT,THAT THE CIT WAS OF THE OPINION THAT THE ORDER OF THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE . IN OUR OPINION,THE BASIC QUESTION TO BE DECIDED IS AS TO WHETH ER THE CIT WAS JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT. COURTS ARE OF THE VIEW THAT T HE REVISIONAL JURISDICTION AVAILABLE TO A CIT U/S.263 OF THE ACT IS ESSENTIALLY CIRCUMSCRIBED BY THE DETERMINANT THAT THE ORDER OF THE AO IS ERRONEOU S,SO MUCH SO THAT IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE.THIS STATUTORY ENJOINMENT CARVES OUT AN EXTREMELY CONSTRICTED AMBIT OF SUCH DISCRETIONARY JURISDICTION. THE WORD CONSIDERS APPLIED IN THE STATUTORY PROVISION INVOLVED, SIGNIFIES A GENUIN E SATISFACTION OF THAT AUTHORITY THAT THE ORDER OF THE AO IS ERRONEOUS AND THAT THE INTERESTS OF THE REVENUE ARE PREJUDICED THEREBY.ANY EXERCISE OF THE REVISIONAL JURISDICTION, BEREFT OF SUCH SATISFACTION OR FINDING THAT THE ORDER OF THE AO IS ERRONEOUS AN D THAT IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND THAT TOO,BASED ON TANGIBLE MATERIALS ON RECORD, IS IMPERMISSIBLE RENDERING THE RESULTANT ORDER VOID. 'ERRONEOUS ASSESSMENT' REFERS TO AN ASSESSMENT THAT DEVIATES FROM THE LAW AND IS,THEREFORE, IN VALID,AND IS A DEFECT THAT IS JURISDICTIONAL IN ITS NATURE.AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW.THIS SECTION DOES NOT VISUALISE A CASE OF SUBSTITUTION OF JUDGMENT OF THE CIT FOR THAT OF AN OFFICER,WHO PASSED THE OR DER,UNLESS THE DECISION OF THE SUBORDINATE OFFICER IS HELD TO BE ERRONEOUS.THE EXPRESSION PREJUDICIAL TO THE INTERESTS OF THE REVENUEIS OF WIDE IMPORT AND IS NOT CONFINED TO LOSS OF TAX.BUT,IT MEANS THAT DUE TO AN ERRONEOUS ORDER OF THE AO,THE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON,IT WOULD BE CERTAINLY PREJUDICIAL TO THE INTERESTS OF THE REVENUE. ONE OF THE PRINCIPLES ,GOVERNING 263 POWERS OF THE CIT, STIPULATE THAT W HERE THE AO HAS EXERCISED THE QUASI - JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT A CONCLUSION SUCH A CONCLUSION CANNOT BE FOUND TO BE ERRONEOUS SIMPLY BECAUSE THE CIT DOES NOT FEEL SATISFIED WITH THE CONCLUSION. THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE HAS N OT BEEN IMPOSED OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTERPRETATION A LESSER TAX THAN 4 ITA NOS. 2173 /M/200 9 KEWAL KIRAN CLOTHING LTD. 4 WHAT WAS JUST HAS BEEN IMPOSED. IT IS ALSO ACCEPTED PRINCIPLE ABOUT REVISIONARY JURISDICTION THAT T HERE IS DIFFERENCE BETWEEN I NCOMPLETE OR INADEQUATE VERIFICATION AND NO VERIFICATION WHATSOEVER BY THE AO.ORDERS WHICH ARE PASSED WITHOUT INQUIRY OR INVESTIGATION ARE TREATED AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE,BUT ORDERS WHICH ARE PASSED AFTER INQUIRY/ INVES TIGATION ON THE QUESTION/ISSUE ARE NOT PER SE OR NORMALLY TREATED AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE BECAUSE THE REVISIONARY AUTHORITY FEELS AND OPINES THAT FURTHER INQUIRY/INVESTIGATION WAS REQUIRED OR DEEPER OR FURTHER SCRUTINY SHOULD BE UNDERTAKEN.IN CASES WHERE THERE IS INADEQUATE ENQUIRY BUT NOT LACK OF ENQUIRY,THE CIT MUST RECORD A FINDING THAT THE ORDER/INQUIRY MADE IS ERRONEOUS.THIS CAN HAPPEN IF AN ENQUIRY AND VERIFICATION IS CONDUCTED BY THE CIT AND HE IS ABLE TO ESTABL ISH AND SHOW THE ERROR OR MISTAKE MADE BY THE AO,MAKING THE ORDER UNSUSTAINABLE IN LAW. ONE MORE PRINCIPLE STIPULATES THAT WHERE A PARTICULAR ISSUE IS BEFORE THE FAA IN APPELLATE PROCEEDINGS,THE CIT SHOULD NOT INVOKE HIS REVISIONARY JURISDICTION WITH REGARD TO THAT ISSUE. IF THE FACTS OF THE CASE AND THE PRINCIPLES ENUMERATED ABOVE ARE CONSIDERED IT BECOMES CLEAR THAT HAD THE ASSESSEE FILED AUDIT REPORT ALONG WITH THE RETU RN OR AT THE TIME OF ASSESSMENT, THE CIT WOULD NOT HAVE INVOKED HIS REVISIONARY POWERS. THE ISSUE AS TO WHETHER THE FILING OF AUDIT REPORT IN PRESCRIBE FORM IS SO FATAL THAT IT WOULD DISENTITLE THE ASSESSEE FROM AVAILING DEDUCTION OF CHAPTER VIA OF THE ACT WAS DECIDED BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF ZENITH PROCESSING MILLS(SU PRA) . FACTS OF THE CASE WERE THAT W HILE FRAMING THE ASSESSMENT FOR THE AY.1976 - 77 OF THE ASSESSEE - FIRM, THE AO ALLOWED THE CLAIM FOR DEDUCTION U/S. 80J OF THE ACT, IN RESPECT OF PROFIT AND LOSS ARISING FROM ITS NEWLY ESTABLISHED UNDERTAKING .WITH EFFECT FROM 0 1 .04. 1976, SUB - SECTION (6A) WAS INSERTED IN SECTION 80J, VIDE THE FINANCE ACT, 1975, WHICH REQUIRED THE ASSESSEE TO FILE AUDITED REPORT OF AN ACCOUNTANT,AS DEFINED BY THE EXPLANATION BELOW SUB SECTION 2 OF THE SECTION 288 OF THE ACT,ALONG WITH THE RETURN OF INCOME. THE C I, EXERCISING HIS POWERS U /S. 263 , CONSIDERED THE ALLOWANCE OF DEDUCTION UNDER SECTION 80J, INTER ALIA, ALONG WITH THE ALLOWANCE OF INITIAL DEPRECIATION IN SO FAR AS IT IS AGAINST THE INTERESTS OF THE REVENUE AND ISSUED NOTICE TO THE ASSESSEE. WHILE THE ASSESSEE DID NOT CONTEST THE NOTICE UNDER SECTION 263 WITH RESPECT TO INITIAL DEPRECIATION THE ASSESSEE CONTESTED THE WITHDRAWAL OF RELIEF UNDER SECTION 80J. ACCORDING TO THE CIT , SUB - SECTION (6A) OF SECTION 80J LAID DOWN THE MANDATORY REQUIREME NT THAT BE FORE A CLAIM UNDER SECTION 80J WA S ADMISSIBLE FOR ANY ASSESSMENT YEAR, THE ASSESSEE MUST HAVE HIS ACCOUNTS OF THE RELEVANT PREVIOUS YEAR AUDITED BY AN ACCOUNTANT AND IT MUST FURNISH ALONG WITH HIS RETURN OF INCOME THE REPORT OF SUCH AUDIT IN THE PRESCRIBED FORM DULY SIGNED AND VERIFIED BY SUCH ACCOUNTANT. ACCORDING TO THE C IT, THE ASSESSEE HAD NOT FURNISHED THE REPORT OF SUCH AUDIT IN THE PRESCRIBED FORM DULY SIGNED AND VERIFIED BY THE ACCOUNTANT, THE ASSESSEE WAS NOT ENTITLED TO RELIEF UNDER SECTI ON 80J ( EMPHASIS SUPPLIED ).T HE ASSESSEE CLAIMED THAT FURNISHING THE REPORT OF SUCH AUDIT IN THE PRESCRIBED FORM WHICH IS FORM NO. 10D UNDER THE RULES READ WITH RULE 18C, WA S NOT MANDATORY BUT A DIRECTORY PROVISION AND, THEREFORE, WHEN THE QUESTION OF DISALL OWANCE ON THAT GROUND IS CONSIDERED, THE ASSESSEE COULD BE PERMITTED TO FURNISH THEM.THIS CONTENTION DID NOT FIND FAVOUR WITH THE C IT AND HE DIRECTED THAT THE AO SHOULD MAKE THE NECESSARY AMENDMENT IN THE ASSESSMENT ORDER FOR THE YEAR 1976 - 77. WHEN THE MATT ER TRAVELLED TO THE HONBLE COURT,IT HELD AS UNDER: FROM A PERUSAL OF SUB - SECTION (6A), IT IS APPARENT THAT COMPLIANCE WITH TWO THINGS IS NECESSARY . THE FIRST REQUIREMENT IS THAT THE STATEMENT OF ACCOUNTS FOR THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR FOR WHICH DEDUCTION IS CLAIMED MUST HAVE BEEN AUDITED BY AN ACCOUNTANT AND THE SECOND PART IS THAT THE ASSESSEE MUST FURNISH ALONG WITH HIS RETURN OF INCOME THE REPORT OF SUCH AUDIT IN THE PRESCRIBED FORM DULY SIGNED AND VERIFIED BY SUCH ACCOUNTANT. I T CAN BE STATED WITHOUT FEAR OF CONTRADICTION THAT THE FORMER IS THE REQUIREMENT WHICH FURNISHES SUBSTANTIAL FOUNDATION FOR CLAIMING ALLOWANCE AND THE LATTER IS THE REQUIREMENT OF FURNISHING PROOF THAT FOUNDATION FOR CLAIMING SUCH DEDUCTION HAS BEEN LAID. IN OUR OPINION, WHILE COMPLIANCE WITH THE FORMER BEFORE THE DEDUCTION IS CLAIMED IS MANDATORY AND SO FAR AS MANNER OF SUBMITTING PROOF OF SUCH COMPLIANCE OF FILING ALONG WITH THE RETURN IS CONCERNED, IS DIRECTORY BECAUSE SUCH REQUIREMENT 5 ITA NOS. 2173 /M/200 9 KEWAL KIRAN CLOTHING LTD. 5 FALLS IN THE REALM OF PROCEDURE FOR FURNISHING EVIDENCE IN SUPPORT OF THE CLAIM AND WHICH CAN BE FURNISHED AT THE TIME WHILE ALLOWANCE OR DISALLOWANCE UNDER SECTION 80J IS BEING CONSIDERED BY THE CONCERNED AUTHORITY. X X X X X X X IN VIEW OF THE AFORESAID D ISCUSSION, QUESTION NO. 2 REFERRED TO ABOVE IS TO BE ANSWERED IN THE NEGATIVE BY HOLDING THAT THE PROVISION OF SECTION 80J(6A) TO THE EXTENT IT REQUIRES FURNISHING OF THE AUDITOR'S REPORT IN THE PRESCRIBED FORM ALONG WITH THE RETURN IS DIRECTORY IN NATURE AND NOT MANDATORY. COMING TO THE FIRST QUESTION, WE ARE OF THE OPINION THAT AS THE PROVISION OF FURNISHING OF THE REPORT IN THE PRESCRIBED FORM IS HELD TO BE DIRECTORY, THE ASSESSEE CAN BE PERMITTED TO PRODUCE SUCH REPORT AT A LATER STAGE WHEN THE QUESTIO N FOR DISALLOWANCE ARISES DURING THE COURSE OF T HE PROCEEDINGS IN A GIVEN CASE, IT WILL DEPEND UPON THE FACTS AND CIRCUMSTANCES OF EACH CASE AND, THEREFORE, THE ASSESSEE MAY BE PERMITTED TO PRODUCE SUCH REPORT, IF IT HAS NOT BEEN PRODUCED EARLIER ( EMPHASIS S UPPLIED ) .THE LEARNED ADVOCATE FOR THE REVENUE VEHEMENTLY CONTENDED ON THE BASIS OF THE OBSERVATIONS MADE IN GUJARAT OIL AND ALLIED INDUSTRIES' CASE [1993] 201 ITR 325 (GUJ) THAT THE REQUIREMENT OF FURNISHING OF AUDITORS' REPORT IN THE PRESCRIBED FORM HAS TO BE COMPLIED WITH BEFORE THE ASSESSMENT IS COMPLETED AND THE ASSESSEE CANNOT CLAIM DEDUCTION UNDER SECTION 80J BY PRODUCING THE REPORT LATER ON (EMPHASIS SUPPLIED) . WE ARE UNABLE TO SUSTAIN HIS CONTENTION. IN GUJ ARAT OIL AND ALLIED INDUSTRIES' CASE [1993] 201 ITR 325 (GUJ), THE 'PROOF OF THE ACCOUNTS BEING AUDITED' WAS NOT FURNISHED ALONG WITH THE RETURN IN SUPPORT OF THE CLAIM. HOWEVER, DURING THE COURSE OF THE PROCEEDI NGS WHEN THE INCOME TAX OFFICER WAS CONSIDERING THE CLAIM, HE DISALLOWED THE ASSESSEE'S REQUEST FOR FURNISHING THE AUDITORS' REPORT IN THE PRESCRIBED FORM AT THAT STAGE AND THE CLAIM WAS DISALLOWED. IT WAS IN THESE CIRCUMSTANCES, THE CLAIM FOR DISALLOWANCE WAS BEING CONSIDERED BY THE INCOME TAX OFFICER . THE INCOME TAX OFFICER HAD MADE IT KNOWN, THAT HE IS NOT TO ALLOW DEDUCTION UNDER SECTION 80J UNLESS A CERTIFICATE IS ACCOMPANIED WITH THE FORM AND THE ASSESSEE HAVING KNOWN FOR NO REASONS FOR THE SAID DISALL OWANCE HAS PROMPTLY SUBMITTED REPORT WHICH WAS NOT SUBMITTED EARLIER. IT IS IN THESE CIRCUMSTANCES, THAT OBSERVATIONS WERE MADE THAT A REPORT SHOULD BE MADE AVAILABLE TO THE INCOME TAX OFFICER . WE MAY NOTICE THAT IT HAS BEEN HELD BY THIS COURT WITH WHICH W E AGREE THAT THE REQUIREMENT OF FURNISHING THE AUDITORS' REPORT IS IN THE REALM OF FURNISHING PROOF ABOUT THE FACT THAT ACCOUNTS HAVE BEEN AUDITED AND SUBSTANTIAL COMPLIANCE WITH THIS PROVISION HAS BEEN HELD TO BE SUFFICIENT COMPLIANCE. DURING THE COURSE O F ASSESSMENT, THE ASSESSEE HAS FURNISHED ACCOUNTS STAMPED WITH THE AUDITOR'S SEAL AS NOTICED ABOVE WHICH WERE TREATED BY THE ASSESSEE AS WELL AS THE ASSESSING OFFICER TO BE SUFFICIENT COMPLIANCE OF GIVING PROOF OF THE FACT THAT ACCOUNTS HAVE IN FACT BEEN A UDITED AND ON THAT BASIS THE ASSESSMENT WAS FRAMED. IT WAS ONLY DURING THE COURSE OF PROCEEDINGS BEFORE THE COMMISSIONER OF INCOME - TAX UNDER SECTION 263 THAT THE QUESTION WAS CONSIDERED WHETHER THE DOCUMENT FURNISHED BY THE ASSESSEE AMOUNTED TO SUFFICIENT COMPLIANCE OF FURNISHING SUCH PROOF OR NOT AND THAT HAVING BEEN NEGATIVED THE OCCASION AROSE TO FURNISH THE PROOF WHICH ACCORDING TO THE COMMISSIONER OF INCOME - TAX WAS WANTING IN DECLARATION THAT THE ACCOUNTS HAVE BEEN DULY AUDITED WHICH IS REQUIRED BY SUB - SECTION (6A) OF SECTION 80J AND IF THE ASSESSEE REQUIRES PRODUCTION OF EVIDENCE BEFORE THE ALLOWANCE MADE BY THE INCOME TAX OFFICER UNDER SECTION 80J WAS WITHDRAWN. IN OUR OPINION, THAT WOULD HAVE BEEN SUFFICIENT COMPLIANCE WITH THE REQUIREMENT AND THE AS SESSEE OUGHT NOT TO HAVE BEEN VISITED WITH THE DISALLOWANCE OR WITHDRAWAL OF THE ALLOWANCE ALREADY MADE WITHOUT AFFORDING OPPORTUNITY TO DO SO. IT MAY BE NOTED THAT IN A GIVEN CASE, THE ASSESSEE'S RETURN HAVING A CLAIM OF DEDUCTION UNDER SECTION 80J MAY BE ACCEPTED BY THE INCOME TAX OFFICER WITHOUT HOLDING AN INQUIRY, THOUGH IT MAY NOT HAVE BEEN ACCOMPANIED WITH PROOF OF ACCOUNTS BEING AUDITED IN THE MANNER PRESCRIBED. THE QUESTION OF FURNISHING PROOF OF SUCH AUDITED ACCOUNTS IN THE PRESCRIBED FORM AT A LAT ER STAGE ARISES ONLY WHEN THE MATTER IS BEING ACTIVELY CONSIDERED FOR DISALLOWANCE BY THE CONCERNED AUTHORITY. IF THE ASSESSEE DOES NOT OFFER TO FURNISH PROOF EVEN AT THE STAGE WHEN IT IS POINTED OUT TO HIM THAT REQUIREMENTS OF LAW ARE NOT FULFILLED TO SUS TAIN THE CLAIM MADE BY HIM AND HE FAILS TO FULFIL THE REQUIREMENTS OF LAW AT THAT STAGE, IT CAN BE SAID THAT THE ASSESSEE HAD FAILED TO RECTIFY THE DEFECT AT THE EARLIEST OPPORTUNITY OFFERED TO HIM. IT IS AN INHERENT PART OF SECTION 143(3) THAT WHERE THE ASSESSING OFFICER IS NOT INCLINED TO ACCEPT THE RETURN SUBMITTED BY THE ASSESSEE AND IF HE WANTS TO MODIFY THE ASSESSMENT FROM THE RETURN A SHOW - CAUSE NOTICE IS REQUIR ED TO BE GIVEN TO THE ASSESSEE. GIVING OF THIS OPPORTUNITY WILL INCLUDE 6 ITA NOS. 2173 /M/200 9 KEWAL KIRAN CLOTHING LTD. 6 OPPORTUNITY TO ERA SE PROCEDURAL DEFECT, IF ANY, WHICH IS DIRECTORY IN NATURE. IF WE EXAMINE THE MATTER FROM THAT POINT OF VIEW WE ARE SATISFIED THAT IN THE PRESENT CASE, THE CLAIM MADE BY THE ASSESSEE THOUGH NOT ADMISSIBLE FOR WANT OF THE AUDITOR'S REPORT ON RECORD, YET THE SAME WAS ALLOWED UNDER A MISTAKE BY THE ASSESSING OFFICER LEAVING NO OPPORTUNITY TO THE ASSESSEE TO COMPLETE THE REQUIREMENTS. THE CONDITION OF NON - FULFILMENT OF THE REQ UIREMENT UNDER SUB - SECTION(6A) WAS MADE KNOWN TO THE ASSESSEE DURING THE PROCEEDINGS UND ER SECTION 263 ALTHOUGH THE ASSESSEE ASKED FOR AN OPPORTUNITY TO PRODUCE THE AUDITOR'S REPORT TO FULFIL THE REQUIREMENTS UNDER SECTION 80J(6A), THE COMMISSIONER OF INCOME - TAX OUGHT TO HAVE AFFORDED AN OPPORTUNITY TO THE ASSESSEE TO FURNISH THAT PROOF AND T HEN EXAMINED THE ADMISSIBILITY OF THE CLAIM IN THE LIGHT OF THE PROOF FURNISHED. (EMPHASIS SUPPLIED). WE ALSO FIND THAT T HE BASIC ISSUE AS TO HOW THE ORDER OF THE AO WAS ERRONEOUS AND PREJUDICIAL TO REVENUE HAS NOT BEEN DISCUSSED BY THE CIT.IT IS ALSO A F ACT,AS STATED EARLIER,THAT THE ISSUE OF 80IB DEDUCTION WAS AGITATED BY THE ASSESSEE BEFORE THE FAA.IN THESE CIRCUMSTANCES THE CIT SHOULD NOT HAVE ISSUED NOTICE 263 OF THE ACT. SECONDLY,THE CIT HAD TOTALLY IGNORED THE FACT THAT THE AO HAD IN EARLIER NINE YEA RS ALLOWED THE CLAIM MADE BY THE ASSESSEE .IT IS TRUE THAT THE RULE OF RES JUDICATA IS NOT APPLICABLE TO THE INCOME TAX PROCEEDINGS.BUT,THE RULE OF CONSISTENCY DEMANDS THAT WITHOUT BRINGING DISTINGUISHING FACT OF THE YEAR UNDER APPEAL WITH THE FACTS OF EAR LIER YEARS AN OPPOSITE STAND TO THE STAND OF EARLIER YEARS SHOULD NOT BE TAKEN.THE ONLY DIFFERENCE NOTED IS THAT IN THE YEAR UNDER APPEAL THE ASSESSEE HAD NOT FILED AUDIT REPORT BEFORE THE A)O.BUT,THE REPORT WAS MADE AVAILABLE TO THE CIT AND FOR DISALLOWIN G THE CLAIM ALLOWED IN THE EARLIER YEARS HE SHOULD HAVE PIN POINTED THE REASONS FOR REFUSING IT AS TO HOW SAME WAS DIFFERENT FROM THE REPORTS OF EARLIER YEARS. WE HAVE PERUSED THE CASES RELIED UPON BY THE DR.WE FIND THAT THOSE CASES LAY DOWN CERTAIN PRINC IPLES ABOUT REVISIONARY PROCEEDINGS.BUT,THOSE PRINCIPLES ARE NOT APPLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERATION.HERE , THE BASIC ISSUE IS VALIDITY OF 263 PROCEEDING. AN ISSUE DELIBERATED UPON BY THE FAA,PARTIALLY OR FULLY,IS OUT OF PREVIEW OF PROCEE DINGS TO BE INITIATED U/S.263 OF THE ACT. IN OUR OPINION,THE ORDER OF THE CIT FAILS ON TOUCHSTONE OF THE MERGER DOCTRINE AND THEREFORE IS NOT VALID.WE HOLD THAT THE ASSESSEE S ARE REQUIRED TO FILE AUDIT REPORTS,BUT FILING IT BEFORE THE CIT WOULD NOT DISENTI TLE IT FROM CLAIMING THE DEDUCTION.THE PURPOSE BEHIND FILING THE REPORT IS THAT NO FICTITIOUS CLAIM IS MADE AND THE ACTIVITIES OF THE ASSESSEE S ARE CERTIFIED BY A PROFESSIONAL. DEDUCTIONS, INCLUDING 80I B OF THE ACT ARE CONSIDERED TO BE BENEVOLENT PROVISONS .IT IS A FACT THAT NO FAULT HAS BEEN POINTED OUT BY THE CIT ABOUT CORRECT NESS OF THE REPORT, WHILE PASSING THE REVISIONARY ORDER. HIS WHOLE EMPHASIS IS ON NOT FILING IT BEFORE THE AO. CONSIDERING THE PURPOSE BEHIND THE LEGISLATION THE HONBLE COURTS HAVE H ELD THAT IF THE REPORT IS SUBMITTED AT THE TIME OF ACTIVE CONSIDERATION OF THE CLAIM IT HAS TO BE TAKEN AS SUFFICIENT COMPLIANCE OF THE PROVISIONS OF THE ACT . RESPECTFULLY FOLLOWING THE JUDGMENTS OF ZENITH PROCESSING MILLS(SUPRA) ,WE DECIDE THE EFFECTIVE G ROUND OF APPEAL IN FAVOUR OF THE ASSESSEE . AS A RESULT,APPEAL FILED BY THE ASSESSEE STAND S ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH APRIL ,2015. 10 TH , 2015 , SD/ - SD/ - ( /I P BANSAL) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 10 . 04 .2015 SK / JV/SR.PS. / COPY OF THE ORDER FORWARDED TO : 7 ITA NOS. 2173 /M/200 9 KEWAL KIRAN CLOTHING LTD. 7 1.APPELLANT / 2. RESPONDENT / 3.THE CONCERNED CIT(A)/ , 4.THE CONCERNED CIT / 5.DR A BENCH, ITAT, MUMBAI / , , . . . 6.GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.