M/s. Ferro Foundries Pvt. Ltd., Mysore V. DCIT, Mysore

ITA 328/BANG/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9489 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-09-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 15-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JASON P BOAZ
• Assessee Lawyers: S RAMASUBRAMANIAN
• Keywords: Difference of opinion; Assessment record; Change of opinion
• Section: 143(3); 80HHC; 80IB; 250; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.328/BANG/2009 ASSESSMENT YEAR : 2004-05 M/S. FERRO FOUNDRIES PVT. LTD., YELWAL ROAD, BELWADI, MYSORE 571 186. : APPELLANT VS. THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE 1(2), MYSORE. : RESPONDENT APPELLANT BY : SHRI S. RAMASUBRAMANIAN RESPONDENT BY : SHRI JASON P. BOAZ O R D E R PER GEORGE GEORGE K. JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE CITS REVISIONARY ORDER PASSED U/S. 263 OF THE ACT. THE ASSESSMENT YEAR CONCERNED IS 2004-05. 2. BRIEFLY STATED, THE FACTS ARE AS FOLLOWS. TH E ASSESSEE IS A COMPANY DOING BUSINESS OF MANUFACTURING MECHANIC HA NDLING AND WOOD WORKING MACHINERIES. FOR THE CONCERNED ASSESSMENT YEAR, THE ASSESSEE ITA NO.328/B/09 PAGE 2 OF 7 FILED RETURN OF INCOME ON 29.12.2004 DECLARING A TO TAL INCOME OF RS.53,46,873. THE ASSESSMENT U/S. 143(3) WAS COMPL ETED ON 18.8.2006 FIXING A TOTAL INCOME OF RS.53,48,233. THE ASSESS EE HAD CLAIMED DEDUCTION U/S. 80IB AMOUNTING TO RS.6,43,024 WHICH WAS ALLOWED IN TOTO IN THE ASSESSMENT. 3. THE COMMISSIONER OF INCOME TAX, WHO EXAMINED THE ASSESSMENT RECORDS WITH REFERENCE TO THE CLAIM OF DEDUCTION U/ S. 80IB , NOTICED THAT THE ASSESSEE HAD NOT FURNISHED ANY AUDIT REPORT IN FORM 10CCB ALONG WITH RETURN OF INCOME AS CONTEMPLATED U/S. 80IA(7) R.W.S. 80IB(13) . HE WAS OF THE VIEW, IN LIGHT OF THE ABOVE DEFECT, DEDUCTION U /S. 80IB OF THE ACT ALLOWED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDIC IAL TO THE INTEREST OF THE REVENUE. THE LD. CIT ISSUED SHOW CAUSE VIDE NO TICE DATED 22.10.08 BY INITIATING REVISIONARY PROCEEDINGS U/S. 263 OF T HE ACT. THE ASSESSEE FILED DETAILED OBJECTIONS, WHICH IS EXTRACTED AT PAGE 2 O F THE IMPUGNED CITS ORDER. THE VARIOUS OBJECTIONS RAISED BY THE ASSESS EE WERE REJECTED BY THE CIT AND HE PASSED AN ORDER U/S. 263 ON 20.2.09. HE WAS OF THE VIEW THAT FILING OF THE AUDIT REPORT DATED 16.10.04 ON 30.9.0 8 WAS NOT SUFFICIENT COMPLIANCE OF THE PROVISIONS OF SECTION 80IA(7) R.W.S. 80IB(13) AND DIRECTED THE AO TO MODIFY THE ASSESSMENT DENYING TH E DEDUCTION U/S. 80IB . THE CIT WHILE PASSING THE ORDER HEAVILY RELIED ON T HE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF CIT V. SHIVANAND ELECTRONICS (1994) 209 ITR 63 (BOM) . 4. AGGRIEVED BY THE ORDER OF THE CIT, THE ASSESSEE IS IN APPEAL RAISING THE FOLLOWING GROUNDS: ITA NO.328/B/09 PAGE 3 OF 7 1. THE APPELLANT SUBMITS THAT THE LEARNED COMMISSIO NER OF INCOME TAX, MYSORE ERRED IN LAW AND ON FACTS TO INV OKE THE POWERS U/S. 263 OF THE ACT WHEN DEDUCTION U/S. 80IB WAS ALLOWED BY THE ASSESSING OFFICER, BY DUE APPLIC ATION OF HIS MIND WHILE PASSING ORDER FOR SCRUTINY ASSESS MENT U/S. 143(3). 2. THE APPELLANT FURTHER SUBMITS THAT THE LEARNED C IT HAS NO JURISDICTION TO INVOKE THE PROVISIONS OF SECTION 26 3 OF THE ACT BY MERE CHANGE OF OPINION WHEN THE ASSESSING OFFICER GRANTED DEDUCTION U/S. 80IB AFTER DUE CONSIDERATION OF ALL THE PARTICULARS AVAILABLE IN T HE ASSESSMENT RECORDS, AFTER DETAILED SCRUTINY. 3. THE APPELLANT ALSO SUBMITS THAT THE NON-AVAILABI LITY OF AUDIT REPORT IN FORM 10CCB, IN THE ASSESSMENT RECOR DS WHILE PASSING THE ORDER U/S. 143(3) CAN NOT BE THE GROUND TO WITHDRAW THE DEDUCTION GRANTED U/S. 80IB, AS THE FILING OF THE SAID AUDIT REPORT WAS PROCEDURAL IN NATURE, PARTICULARLY, WHEN THE INCOME RETURNED WAS ACCEPTED HAVING REGARD TO THE WORKING DETAILS FOR DEDUCTION U/S. 80IB, OTHER AUDIT REPORTS IN FORM 3CA/ FORM 3CD AND IN FORM NO.10CCAC AVAILABLE AND THAT THE ACCOUNTS OF T HE ASSESSEE WERE SUBJECT TO AUDIT UNDER COMPANIES ACT, 1956. 5. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT NON-A VAILABILITY OF AUDIT REPORT IN FORM 10CCB IN THE ASSESSMENT RECORDS WHIL E PASSING THE ORDER U/S. 143(3) CANNOT BE A GROUND TO WITHDRAW THE DEDU CTION GRANTED U/S. 80 IB OF THE ACT. IT WAS SUBMITTED THE FILING OF THE AUD IT REPORT WAS PROCEDURAL IN NATURE, PARTICULARLY WHEN INCOME RETURNED WAS ACCEP TED BASED ON THE WORKING DETAILS OF THE DEDUCTION U/S. 80IB AND THE ENCLOSURES OF OTHER TAX AUDIT REPORTS IN FORM 3CA, 3CD AND 10CCAC. HE ALSO SUBMITTED THAT THE BOMBAY HIGH COURT DECISION RELIED ON BY THE CIT IS DISTINGUISHABLE ON FACTS SINCE THAT WAS A CASE WHERE NO AUDIT REPORT WAS FIL ED AT ANY POINT OF TIME. IN FACT THE ASSESSEE IN THAT CASE NEVER GOT THE ACC OUNTS AUDITED. ITA NO.328/B/09 PAGE 4 OF 7 6. THE LD. AR FOR THE ASSESSEE ALSO RELIED ON THE D ECISION OF THE GUJARAT HIGH COURT IN THE CASE OF ZENITH PROCESSING MILLS V. CIT (219 ITR 721) . HE SUBMITTED THE DECISION OF THE GUJARAT HIGH CO URT IS MORE OR LESS IDENTICAL TO THE FACTS OF THE INSTANT CASE. THE GU JARAT HIGH COURT WAS CONSIDERING A CASE WHERE AUDIT REPORT FOR CLAIMING OF DEDUCTION U/S. 80J WAS NOT FILED BEFORE THE AO. AT THE TIME OF REVISI ONARY PROCEEDINGS BEFORE THE CIT U/S. 263, THE AUDIT REPORT WAS PRODUCED AND THE HONBLE HIGH COURT HELD FURNISHING OF AUDIT REPORT BEFORE THE CIT WAS SUFFICIENT COMPLIANCE AND THE ASSESSEE CANNOT BE DENIED THE BENEFIT OF DEDUCT ION U/S. 80J . THE LD. COUNSEL ALSO RELIED ON THE DECISION OF THE MADRAS H IGH COURT IN THE CASE OF CIT V. JAYANT PATEL (2001) 248 ITR 199 FOR THE PROPOSITION THAT FILING OF AUDIT REPORT FOR CLAIMING DEDUCTION U/S. 80J IS DIRECTORY AND NOT MANDATORY. THE HONBLE HIGH COURT HELD AUDIT REPORT PRODUCED B EFORE THE APPELLATE AUTHORITY IS SUFFICIENT COMPLIANCE WITH SECTION 80J . THE LD. AR FURTHER RELIED ON THE DECISION OF JURISDICTIONAL HIGH COURT IN INCOME-TAX OFFICER V. MANDIRA D. VAKHARIA (2001) 250 ITR 432 (KAR.) AND CONTENDED THAT WHEN DEDUCTION U/S. 80HHC IS DENIED FOR NON-FURNISHING OF THE AUDI T REPORT, THE ASSESSEE ALONG WITH THE RECTIFICATION APPLICATION CAN PRODUC E THE AUDIT REPORT AND REVENUE IS BOUND TO CARRY OUT RECTIFICATION AND GRA NT DEDUCTION. THE LD. AR REFERRING TO EXPLANATION (B) TO SECTION 263(1) CONT ENDED THAT AUDIT REPORT WAS AVAILABLE ON RECORD WHEN THE REVISIONARY PROC EEDINGS U/S. 263 WERE INITIATED ON 22.10.08, HENCE IT WAS SUBMITTED THE O RDER OF THE AO CANNOT BE SAID TO BE ERRONEOUS. 7. THE LD. DR, ON THE OTHER HAND, CONTENDED THAT TH E ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF TH E REVENUE SINCE DEDUCTION ITA NO.328/B/09 PAGE 5 OF 7 U/S. 80IB WAS ALLOWED WITHOUT THE AUDIT REPORT IN FORM 10CCB . THE AUDIT REPORT WAS PRODUCED LONG AFTER THE ASSESSMENT WAS C OMPLETED AND HENCE THE REQUIREMENT OF SECTION 80IA(7) R.W.S. 80IB(13) ARE NOT SATISFIED. IT WAS FURTHER STATED THAT THE AO HAS NOT EXAMINED THE CLA IM OF DEDUCTION U/S. 80IB AND THE SAME IS EVIDENT FROM THE ASSESSMENT ORDER. IT WAS SUBMITTED THAT THE AO MAY BE DIRECTED TO EXAMINE THE CLAIM OF DEDUCTION WITH REFERENCE TO THE AUDIT REPORT PRODUCED ON 30.9.08. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEES AUDITOR HAD PRODUCED THE AU DIT REPORT ON 30.9.08. THE REASON STATED FOR NON-FURNISHING OF THE AUDIT R EPORT WAS THAT THE ASSESSEE HAD FOUR AUDIT REPORTS VIZ., STATUTORY AUD IT REPORT UNDER THE COMPANIES ACT, AUDIT REPORT U/S. 44AB, AUDIT REPORT U/S. 80HHC AND AUDIT REPORT U/S. 80IB . IT WAS STATED THAT AUDIT REPORT FOR THE PURPOSE OF CLAIMING DEDUCTION U/S. 80IB (FORM 10CCB) ALONE WAS OMITTED TO BE ATTACHED ALON G WITH THE RETURN OF INCOME BY OVERSIGHT OR MISPLACED WHILE HANDLING THE RETURN. AS RIGHTLY POINTED OUT BY THE LD. AR FOR T HE ASSESSEE, THE BOMBAY HIGH COURT DECISION RELIED ON BY THE CIT CITED SUPR A TURNS ON ITS OWN FACTS. IT WAS A CASE WHEREIN THE ASSESSEE DID NOT GET HIS ACCOUNTS AUDITED FOR THE PURPOSE OF DEDUCTION U/S. 80J(6A) [WHICH IS PARI MATERIA WITH SECTION 80IB(13) ]. IN THAT CASE THE ASSESSEE DID NOT FURNISH THE A UDIT REPORT AT ANY POINT OF TIME. THE DECISION OF THE GUJARAT HIGH CO URT (SUPRA) IS CLEARLY APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CA SE. THE QUESTION THAT WAS SOUGHT FOR REFERENCE TO THE HONBLE GUJARAT HIG H COURT IS REPRODUCED BELOW: ITA NO.328/B/09 PAGE 6 OF 7 1. WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE WAS NOT ENTITLED TO AN OPPORTUNITY TO FILE THE STATUTORY AU DIT REPORT IN FORM NO.10-D IN REVISIONAL PROCEEDINGS BEFORE THE COMMIS SIONER OF INCOME-TAX.? ON THE ABOVE QUESTION, THE HONBLE HIGH COURT HELD THUS: COMING TO THE FIRST QUESTION, WE ARE OF THE OPINIO N THAT AS THE PROVISION OF FURNISHING OF THE REPORT IN THE PRESCR IBED FORM IS HELD TO BE DIRECTORY, THE ASSESSEE CAN BE PERMITTED TO P RODUCE SUCH REPORT AT A LATER STAGE WHEN THE QUESTION FOR DISAL LOWANCE ARISES DURING THE COURSE OF PROCEEDINGS IN A GIVEN CASE, I T WILL DEPEND UPON THE FACTS AND CIRCUMSTANCES OF EACH CASE AND, THEREFORE, THE ASSESSEE MAY BE PERMITTED TO PRODUCE SUCH REPORT, I F IT HAS NOT BEEN PRODUCED EARLIER. 9. WE FIND THE DECISION OF THE HONBLE GUJARAT HIGH COURT IS MORE SIMILAR TO THE FACTS OF CASE BEFORE US AND WE HOLD THAT FILING OF AUDIT REPORT IN FORM 10CCB ON 30.9.08 IS SUFFICIENT COMPLIANCE W ITH REFERENCE TO SECTION 80IA(7) R.W.S. 80IB(13) . HOWEVER, FROM A PERUSAL OF THE ASSESSMENT ORDER, IT IS EVIDENT THAT THE AO HAS NOT EXAMINED THE CLAIM OF DEDUCTION U/S. 80IB . THE AO NEVER HAD THE BENEFIT OF FORM 10CCB AT TH E TIME OF COMPLETION OF ASSESSMENT. THEREFORE, THE A O IS AT LIBERTY TO EXAMINE THE ALLOWABILITY OF THE CLAIM OF DEDUCTION U/S. 80IB WITH REFERENCE TO AUDIT REPORT IN FORM 10CCB. WE MAKE IT CLEAR TH AT NON-FURNISHING OF AUDIT REPORT IN FORM 10CCB ALONG WITH RETURN OF INC OME CANNOT BE A REASON FOR DENYING DEDUCTION U/S. 80IB . WITH THESE OBSERVATIONS, WE MODIFY THE DIRECTION OF THE LEARNED CIT, PASSED U/S. 263 OF TH E ACT. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TR EATED AS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.328/B/09 PAGE 7 OF 7 PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF SEPTEMBER 2009. SD/- SD/- (A. MOHAN ALANKAMONY ) (GEORGE GEORGE K. ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 18 TH SEPTEMBER, 2009. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.