M/s Saffire Garments, GANDHIDHAM V. The Income Tax Officer, Ward-2, GANDHIDHAM

ITA 397/RJT/2009

• Counselvise Citation: [2012] 120 COUNSELVISE.COM (IT) 0125 (ITAT-RAJKOT)
• Duration Of Justice: 3 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 10-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 04-05-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANKUR GARG
• Assessee Lawyers: VIMAL DESAI CA S; SANJAY P SHAH
• Section: 143(3); 234B; 80G; 10B; 263; 144; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SPECIAL BENCH, RAJKOT BEFORE SHRI G. C. GUPTA, HONBLE VICE PRESIDENT, SHRI D K TYAGI, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO. 397/ RJT/2009 (ASSESSMENT YEAR 2006-07) M/S. SAFFIRE GARMENTS, PLOT NO.434, SECTOR 3, KSEZ, GANDHIDHAM VS. ITO, WARD 2, GANDHIDHAM PAN/GIR NO. : AAVFS9521R (APPELLANT) .. (RESPONDENT) APPELLANT BY: S/SHRI SANJAY P. SHAH & VIMAL DESAI, CAS RESPONDENT BY: SHRI ANKUR GARG, DR DATE OF HEARING: 10.09.2012 DATE OF PRONOUNCEMENT: 30.11.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THIS SPECIAL BENCH HAS BEEN CONSTITUTED BY HONBLE PRESIDENT, ITAT U/S 255(3) OF THE INCOME TAX ACT, 1961 TO CONSIDER AND DECIDE THE FOLLOWING QUESTIONS, WHICH RELATE TO THE SOLITARY ISSUE ARISI NG OUT OF THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2006-07 BEING I.T. A.NO. 397/RJT/2009:- A) WHETHER THE PROVISO TO SEC.L0A(LA) OF THE INCOM E TAX ACT, WHICH SAYS THAT NO DEDUCTION UNDER SEC.10A SHALL BE ALLOW ED TO AN ASSESSEE WHO DOES NOT FURNISH A RETURN OF HIS INCOME ON OR B EFORE THE DUE DATE SPECIFIED UNDER SEC.139(L), IS MANDATORY OR MERELY DIRECTORY? B) WHETHER, ON A PROPER INTERPRETATION OF THE SAID PROVISO, IT IS PERMISSIBLE FOR THE TRIBUNAL TO HOLD IT TO BE MEREL Y DIRECTORY AND ON THAT BASIS TO HOLD THAT EVEN IF THE RETURN OF INCOME IS NOT FILED WITHIN THE TIME- LIMIT SET BY SEC.139(L) THE ASSESSEE CANNOT BE DENI ED THE DEDUCTION U/S.L0A? I.T.A.NO.397 /RJT/2009 2 C) IF THE ANSWER TO QUESTION (B) IS IN THE AFFIRMA TIVE, WOULD IT NOT AMOUNT TO CONFERRING A POWER ON THE TRIBUNAL TO EXTEND THE TIME-LIMIT FOR FILING THE RETURN U/S.139(1) OR TO CONDONE THE DELAY IN FI LING THE SAME, WHEN NO SUCH POWER IS EXPRESSLY CONFERRED UPON IT BY THE AC T? 2. THE ASSESSEE IS A PARTNERSHIP FIRM. THE ASSESSE E FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.2,72,730/- ON 31.01.20 07 WHICH WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961. THEREAFTER, TH E CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) OF THE INCOME TAX AC T, 1961 WAS ISSUED AND SERVED ON 23.01.2008. THE ASSESSEE HAD CLAIMED DED UCTION U/S 10A OF THE INCOME TAX ACT, 1961. WHEN ASKED TO EXPLAIN THIS C LAIM, THE ASSESSEE SUBMITTED BEFORE THE A.O. THAT IT DERIVED PROFIT FROM EXPORT OF ARTICLES PRODUCED IN SEZ AND THE SALE PROCEEDS WERE BROUGHT IN INDIA IN CONV ERTIBLE FOREIGN EXCHANGE AND, THEREFORE, DEDUCTION U/S 10A OF THE INCOME TAX ACT, 1961 IS ALLOWABLE TO IT. THEREAFTER, IT IS NOTED BY THE A.O. IN THE ASSESSME NT ORDER THAT THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 31.01.2007 AND THE EX TENDED DUE DATE FOR FILING RETURN OF INCOME FOR THE ASSESSEES, BEING A FIRM, AS PER THE PROVISIONS OF SECTION 139(1) OF THE ACT WAS 31.12.2006. THE A.O. ALSO OBSERVED THAT THE ASSESSEE FAILED TO FILE ITS RETURN OF INCOME ON OR BEFORE THE DUE DATE SPECIFIED UNDER SUB-SECTION (1) OF SECTION 139 OF THE INCOME TAX ACT, 1961. HE FURTHER NOTED THAT AS PER THE NEWLY INSERTED PROVISO APPEND ED TO SECTION 10A OF THE INCOME TAX ACT, 1961, NO DEDUCTION SHOULD BE ALLOWE D TO AN ASSESSEE WHO DOES NOT FURNISH RETURN OF INCOME ON OR BEFORE THE DUE D ATE SPECIFIED UNDER SUB SECTION (1) OF SECTION 139 OF THE INCOME TAX ACT, 1 961. HE ALSO NOTED THAT THE PROVISO WAS INTRODUCED BY THE FINANCE ACT 2005 WHIC H CAME INTO EFFECT FROM 01.04.2006. THE A.O. HELD THAT THIS PROVISO IS APP LICABLE TO THE CASE OF THE ASSESSEE AND HENCE, THE ASSESSEES CLAIM FOR DEDUCT ION U/S 10A OF THE INCOME TAX ACT, 1961 IS TO BE DISALLOWED. IN THIS MANNER, THE A.O. DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 10A OF THE INCOME TAX ACT, 1961. BEING I.T.A.NO.397 /RJT/2009 3 AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE LD. CIT(A) BUT WITHOUT SUCCESS AND HENCE, THE ASSESSEE IS IN FURTH ER APPEAL BEFORE THE TRIBUNAL. 3. THE QUESTIONS REFERRED TO THE SPECIAL BENCH ARE ALREADY REPRODUCED ABOVE. THE FIRST QUESTION IS THAT THE PROVISO TO SECTION 1 0A(1A) IS MANDATORY OR MERELY DIRECTORY. FURTHER TWO QUESTIONS ARE INTERRELATED TO QUESTION NO.1. 4. IN THE COURSE OF HEARING BEFORE US, BOTH THE SID ES AGREED THAT THERE IS NO DISPUTE ABOUT THE FACTS BECAUSE, ADMITTEDLY, DUE DA TE FOR FILING THE RETURN OF INCOME IN THE PRESENT CASE WAS 31.12.2006 AND THE R ETURN OF INCOME WAS FILED BY THE ASSESSEE ON 31.01.2007. IT WAS SUBMITTED BY THE LD. A.R. BEFORE US THAT THE AUDIT REPORT WAS FILED WITHIN THE DUE DATE ALLO WED U/S 139(1) OF THE INCOME TAX ACT, 1961. HE PLACED RELIANCE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS, COPIES OF WHICH ARE GIVEN IN PAPER BOOK III:- A) CIT VS HARDEODAS AGARWALA TRUST 198 ITR 511 B) CHURCHS AUXILIARY FOR SOCIAL ACTION AND ANR VS DGIT(EXEMPTION) & ORS 325 ITR 362 C) CIT VS GUJARAT OIL & ALLIED INDUSTRIES 201 ITR 3 25 D) CIT VS. SHIVANAND ELECTRONICS (SUPRA) 209 ITR 63 E) ITO VS VXL INDIA LTD. 312 ITR 187 F) BAJAJ TEMPO LTD. 196 ITR 188 4.1 SYNOPSIS OF CONTENTIONS OF THE ASSESSEE WAS ALS O FILED AND THE SAME WAS ALSO DULY CONSIDERED. 5. AS AGAINST THIS, IT WAS SUBMITTED BY THE LD. D.R . THAT THE FOURTH PROVISO TO SECTION 139(1) IS SPECIFIC WHICH SHALL PREVAIL ON G ENERAL PROVISIONS. HE ALSO PLACED RELIANCE ON THE JUDGEMENT OF HONBLE APEX CO URT RENDERED IN THE CASE OF PRAKASH NATH KHANNA VS CIT AS REPORTED IN 266 ITR 0 1 (S.C.). RELIANCE WAS ALSO PLACED ON THE TRIBUNAL DECISION RENDERED IN TH E CASE OF BALKISHAN DHAWAN HUF VS ITO AS REPORTED IN 50 SOT 49 (ASR)(URO)/18 T AXMAN.COM 234 (ASR). HE ALSO SUBMITTED THAT REMEDY LIES WITH THE BOARD AND NOT BEFORE THE APPELLATE AUTHORITIES. HE ALSO SUBMITTED THAT THER E IS DIFFERENCE BETWEEN THE PROVISIONS OF SECTION 139(1) AND SECTION 139(4) AND , THEREFORE, THE PROVISO TO SECTION 139(1) SHOULD PREVAIL. I.T.A.NO.397 /RJT/2009 4 5.1 WRITTEN SUBMISSIONS WERE FILED BY THE LD. D.R. AND THE SAME WERE ALSO DULY CONSIDERED. 6. IN THE REJOINDER, IT WAS SUBMITTED BY THE LD. A. R. THAT THE JUDGEMENT CITED BY THE LD. D.R. ARE NOT APPLICABLE IN THE PRESENT C ASE BECAUSE IN THOSE CASES, THE DISPUTE WAS REGARDING SUBSTANTIAL ASPECT AND NOT TO THE PROCEDURAL ASPECT. HE ALSO PLACED RELIANCE ON THE JUDGEMENT OF HONBLE BO MBAY HIGH COURT RENDERED IN THE CASE OF CIT VS SHIVANAND ELECTRONICS AS REPO RTED IN 209 ITR 63 AND SUBMITTED THAT THIS JUDGEMENT SUPPORTS THE CASE OF THE ASSESSEE. HE ALSO SUBMITTED THAT RELEVANT EXPLANATORY NOTE ON THE PRO VISIONS OF FINANCE ACT 2005 CIRCULAR NO.3/2006 DATED 27.02.2006 IS AVAILABLE ON PAGE 47A OF THE PAPER BOOK III FILED BY THE ASSESSEE AND AS PER THE SAME, THIS PROVISION WAS INSERTED WITH A VIEW TO WIDEN THE TAX BASE AND HENCE, IT IS A PROCEDURAL PROVISION AND NOT SUBSTANTIVE PROVISION. 7. REGARDING THE RELIANCE PLACED BY THE LD. D.R. ON THE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF PRAKASH NATH KHANNA (SUPRA), IT WAS SUBMITTED THAT THIS JUDGEMENT IS NOT APPLICABLE IN THE PRESENT CASE BECAUSE IN THAT CASE, THE ISSUE INVOLVED WAS WITH REGARD TO OFFENCES AND PROSECUTION U/S 276CC AND, THEREFORE, THE FACTS ARE DIFFERENT IN TH E PRESENT CASE. REGARDING THE TRIBUNAL DECISION RENDERED IN THE CASE OF BALKISHAN DHAWAN HUF VS ITO (SUPRA), IT WAS SUBMITTED THAT THIS IS A DIVISION B ENCH DECISION AND, THEREFORE, NOT BINDING ON THE SPECIAL BENCH. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E GONE THROUGH THE JUDGEMENTS CITED BY BOTH THE SIDES. IN OUR CONSIDE RED OPINION, WE HAVE TO DECIDE REGARDING PROVISO TO SECTION 10A (1A) AND HE NCE, IT SHOULD BE REPRODUCED. THE PROVISO TO SECTION 10A(1A) IS REPR ODUCED BELOW: [(1A) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SE CTION (1), THE DEDUCTION, IN COMPUTING THE TOTAL INCOME OF AN UNDE RTAKING, WHICH BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR COM PUTER SOFTWARE DURING THE PREVIOUS YEAR RELEVANT TO ANY ASSESSMENT YEAR C OMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 2003, IN ANY SPECIAL ECONOMIC ZONE, SHALL BE, I.T.A.NO.397 /RJT/2009 5 (I) HUNDRED PER CENT OF PROFITS AND GAINS DERIVED FROM THE EXPORT OF SUCH ARTICLES OR THINGS OR COMPUTER SOFTWARE FOR A PERIO D OF FIVE CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING BEGINS TO MA NUFACTURE OR PRODUCE SUCH ARTICLES OR THINGS OR COMPUTER SOFTWARE, AS TH E CASE MAY BE, AND THEREAFTER, FIFTY PER CENT OF SUCH PROFITS AND GAIN S FOR FURTHER TWO CONSECUTIVE ASSESSMENT YEARS, AND THEREAFTER; (II) FOR THE NEXT THREE CONSECUTIVE ASSESSMENT YEA RS, SO MUCH OF THE AMOUNT NOT EXCEEDING FIFTY PER CENT OF THE PROFIT A S IS DEBITED TO THE PROFIT AND LOSS ACCOUNT OF THE PREVIOUS YEAR IN RESPECT OF WHICH THE DEDUCTION IS TO BE ALLOWED AND CREDITED TO A RESERVE ACCOUNT (TO BE CALLED THE 'SPECIAL ECONOMIC ZONE RE-INVESTMENT ALLOWANCE RESERVE ACCOU NT') TO BE CREATED AND UTILISED FOR THE PURPOSES OF THE BUSINE SS OF THE ASSESSEE IN THE MANNER LAID DOWN IN SUB-SECTION (1B) : PROVIDED THAT NO DEDUCTION UNDER THIS SECTION SHALL BE ALLOWED TO AN ASSESSEE WHO DOES NOT FURNISH A RETURN OF HIS INCOM E ON OR BEFORE THE DUE DATE SPECIFIED UNDER SUB-SECTION (1) OF SECTION 139 . 9. WE ARE ALSO REQUIRED TO CONSIDER SECTION 139(1) AND THE 4 TH PROVISO TO SECTION 139(1) OF THE INCOME TAX ACT, 1961 WHICH RE AD AS UNDER:- SECTION 139(1) EVERY PERSON (A) BEING A COMPANY OR A FIRM OR B) BEING A PERSON OTHER THAN A COMPANY OR A FIRM, IF HIS TOTAL INCOME OR THE TOTAL INCOME OF ANY OTHER PERSO N IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DURING THE PR EVIOUS YEAR EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME TAX, SHALL, ON OR BEFORE THE DUE DATE, FURNISH A RETURN OF HIS INCOME O THE INCOME OF SUCH OTHER PERSON DURING THE PREVIOUS YEA R, IN THE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER AND SETT ING FORTH SUCH OTHER PARTICULARS AS MAY BE PRESCRIBED. 4 TH PROVISO; PROVIDED ALSO THAT EVERY PERSON, BEING AN INDIVIDUA L OR A HINDU UNDIVIDED FAMILY OR AN ASSOCIATION OF PERSONS OR A BODY OF IN DIVIDUALS, WHETHER INCORPORATED OR NOT, OR AN ARTIFICIAL JURIDICAL PER SON, IF HIS TOTAL INCOME OR THE TOTAL INCOME OF ANY OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DURING THE PREVIOUS YEAR, WITHOUT GI VING EFFECT TO THE PROVISIONS OF SECTION 10A OR SECTION 10B OR SECTION 10BA OR CHAPTER VI- I.T.A.NO.397 /RJT/2009 6 A EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARGEAB LE TO INCOME-TAX, SHALL, ON OR BEFORE THE DUE DATE, FURNISH A RETURN OF HIS INCOME OR THE INCOME OF SUCH OTHER PERSON DURING THE PREVIOUS YEA R, IN THE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER AND SETT ING FORTH SUCH OTHER PARTICULARS AS MAY BE PRESCRIBED. 10. WHEN, WE GO THROUGH THE PROVISIONS OF SECTION 1 0A(1A) AND ITS PROVISO ALONG WITH THE PROVISIONS OF SECTION 139(1) AND ITS 4 TH PROVISO, WE FIND THAT THE CASE OF THE REVENUE IS THIS THAT AS A CONSEQUENCE O F ASSESSEES FAILURE TO FILE THE RETURN OF INCOME WITHIN THE TIME PRESCRIBED U/S 139 (1), DEDUCTION IS NOT ALLOWABLE TO THE ASSESSEE U/S 10A OF THE ACT. 11. THE 1 ST QUESTION RAISED BEFORE US IS THIS AS TO WHETHER TH IS PROVISO TO SECTION 10A(1A) OF THE INCOME TAX ACT, 1961, IS MAN DATORY OR MERELY DIRECTORY. IN ORDER TO DECIDE THIS ISSUE, WE FEEL THAT WE HAVE TO CONSIDER THE WHOLE SCHEME OF THE ACT. THE ASSESSEE IS REQUIRED TO FILE THE R ETURN OF INCOME WITHIN THE PRESCRIBED TIME AS PER THE PROVISIONS OF SECTION 13 9(1). THIS PROVISION OF SECTION 139(1) IS APPLICABLE TO ALL COMPANIES AND F IRMS IRRESPECTIVE OF THE FACT AS TO WHETHER THEY ARE EARNING TAXABLE INCOME OR NO T FOR THE CURRENT YEAR I.E. FROM 01.04.2006. IN RESPECT OF OTHER PERSONS SUCH AS INDIVIDUAL, HUF, AOP OR BOI AND ARTIFICIAL JUDICIAL PERSON, THE REQUIREMENT IS THIS THAT IF SUCH A PERSON IS HAVING TAXABLE INCOME BEFORE GIVING EFFECT TO TH E PROVISIONS OF SECTION 10A, THEN ALSO, HE IS REQUIRED TO FILE RETURN OF INCOME BEFORE THE DUE DATE EVEN IF THIS PERSON IS NOT HAVING TAXABLE INCOME AFTER GIVING EF FECT TO THE PROVISIONS OF SECTION 10A. WE FIND THAT THE PROVISIONS OF THE PR OVISO TO SECTION 10A(1A) IS NOTHING BUT A CONSEQUENCE OF FAILURE OF THE ASSESSE E TO FILE THE RETURN OF INCOME WITHIN THE DUE DATE PRESCRIBED U/S 139(1) OF THE IN COME TAX ACT, 1961. FOR SUCH A FAILURE OF THE ASSESSEE TO FILE HIS RETURN OF INC OME WITHIN THE DUE DATE PRESCRIBED U/S 139(1) OF THE INCOME TAX ACT, 1961, THIS IS NOT THE ONLY CONSEQUENCE. ONE CONSEQUENCE OF SUCH FAILURE IS P RESCRIBED IN SECTION 234A OF THE INCOME TAX ACT, 1961 ALSO AS PER WHICH, THE ASSESSEE IS LIABLE TO PAY INTEREST ON THE TAX PAYABLE BY HIM AFTER REDUCING A DVANCE TAX AND TDS/TCS IF I.T.A.NO.397 /RJT/2009 7 ANY PAID BY HIM APART FROM SOME OTHER REDUCTIONS. SUCH INTEREST IS PAYABLE FROM THE DATE IMMEDIATELY FOLLOWING THE DUE DATE FO R FILING RETURN OF INCOME AND IS PAYABLE UP TO THE DATE ON WHICH SUCH RETURN OF I NCOME WAS FURNISHED BY THE ASSESSEE AND IF THE ASSESSEE HAS NOT FURNISHED ANY RETURN OF INCOME THEN THE INTEREST IS PAYABLE TILL THE DATE OF COMPLETION OF THE ASSESSMENT U/S 144. IN OUR CONSIDERED OPINION, THIS IS ALSO ONE OF THE CONSEQU ENCES OF NOT FILING RETURN OF INCOME BY THE ASSESSEE WITHIN THE DUE DATE. ONE M AY RAISE THIS ARGUMENT THAT INTEREST U/S 234A IS PAYABLE ONLY IF THE ASSESSEE H AS NOT PAID HIS ADVANCE TAX AND, THEREFORE, THIS IS INTEREST FOR THE FAILURE OF THE ASSESSEE TO PAY ADVANCE TAX AS PER THE REQUIREMENT OF THE ACT AND NOT FOR THE D ELAY IN FILING RETURN OF INCOME. BUT IN OUR CONSIDERED OPINION, THIS IS NOT SO. FOR THE FAILURE OF THE ASSESSEE TO PAY ADVANCE TAX AS PER THE REQUIREMENT O THE ACT, INTEREST IS CHARGEABLE U/S 234B OF THE INCOME TAX ACT, 1961 IF SUCH ADVANCE TAX PAID BY THE ASSESSEE IS LESS THAN 90% OF THE ASSESSED TAX. SUCH INTEREST U/S 234B IS PAYABLE FROM THE FIRST DAY OF APRIL OF THE RELEVANT ASSESSMENT YEAR TILL THE DATE OF DETERMINATION OF THE TOTAL INCOME EITHER U/S 143 (1) OR U/S 143(3) OF THE ACT. THE INTEREST U/S 234A IS PAYABLE FROM A DATE AFTER THE DUE DATE FOR FILING THE RETURN OF INCOME AND IS PAYABLE UP TO THE DATE ON W HICH THE RETURN OF INCOME IS FURNISHED BY THE ASSESSEE AND IF NO RETURN IS FURNI SHED BY THE ASSESSEE AT ALL THEN ONLY, THE INTEREST IS PAYABLE TILL THE DATE OF COMP LETION OF THE ASSESSMENT U/S 144 OF THE ACT. UNDER THIS FACTUAL AND LEGAL POSITION, WE HAVE NO HESITATION IN HOLDING THAT THE INTEREST PAYABLE BY THE ASSESSEE U /S 234A IS FOR HIS FAILURE TO FILE THE RETURN OF INCOME WITHIN THE DUE DATE PRESCRIBED U/S 139(1) OF THE INCOME TAX ACT, 1961. THIS IS BY NOW A SETTLED POSITION OF L AW THAT CHARGING OF INTEREST UNDER VARIOUS SECTIONS INCLUDING U/S 234A OF THE IN COME TAX ACT, 1961, IS MANDATORY. WHEN ONE OF THE CONSEQUENCES FOR NOT FI LING RETURN OF INCOME WITHIN THE DUE DATE PRESCRIBED U/S 139(1) OF THE IN COME TAX ACT, 1961 IS MANDATORY THEN, OTHER CONSEQUENCE OF THE SAME FAILU RE OF THE ASSESSEE CANNOT BE DIRECTORY AND THE SAME IS ALSO MANDATORY. IN OUR C ONSIDERED OPINION AND IN I.T.A.NO.397 /RJT/2009 8 VIEW OF OUR ABOVE DISCUSSION, THE PROVISIONS OF THE PROVISO TO SECTION 10A(1A) IS MANDATORY AND NOT DIRECTORY AND, THEREFORE, QUES TION (A) REFERRED TO US IS ANSWERED IN NEGATIVE AND IT IS HELD THAT THIS PROVI SO TO SECTION 10A(1A) OF THE INCOME TAX ACT, 1961 IS MANDATORY. 12. WE NOW EXAMINE AND DISCUSS OTHER CONSEQUENCES A LSO FOR THE FAILURE OF THE ASSESSEE TO FILE THE RETURN OF INCOME WITHIN TH E DUE DATE AS REQUIRED U/S 139(1) OF THE INCOME TAX ACT, 1961. ONE OF SUCH CO NSEQUENCE IS THE PROVISIONS OF SECTION 276CC AS PER WHICH IF THE ASSESSEE FAILS TO FILE THE RETURN OF INCOME WITHIN THE DUE DATE PRESCRIBED UNDER SUB-SECTION (1 ) OF SECTION 139 OF THE ACT THEN HE SHALL BE PUNISHABLE FOR RIGOROUS IMPRISONME NT ALONG WITH FINE AND THE QUANTUM OF SUCH IMPRISONMENT AND FINE IS DEPENDENT ON THE AMOUNT OF TAX WHICH WOULD HAVE BEEN EVADED IF THE FAILURE HAD NOT BEEN DETECTED. THIS ISSUE WAS EXAMINED BY HONBLE APEX COURT IN THE CASE OF P RAKASH NATH KHANNA (SUPRA) AS CITED BY THE LEARNED DR AND IT WAS HELD BY THE HONBLE APEX COURT IN THAT CASE THAT EVEN IF THE RETURN OF INCOME IS FILE D IN TERMS OF SUB-SECTION (4) OF SECTION 139 AND IT DOES NOT DILUTE INFRACTION IN NO T FURNISHING RETURN IN DUE TIME AS PRESCRIBED U/S 139(1) OF THE ACT. THIS JUDGEMEN T ALSO SUPPORTS THE VIEW TAKEN BY US WHILE ANSWERING QUESTION NO.1 AS PER AB OVE PARAS. WHEN EVEN FOR THE PURPOSE OF PROSECUTION ALSO, IT WAS HELD BY THE HONBLE APEX COURT THAT EVEN IF THE RETURN OF INCOME FURNISHED BY THE ASSES SEE WITHIN THE TIME ALLOWED U/S 139(4), IT DOES NOT DILUTE INFRACTION IN NOT FU RNISHING THE RETURN IN DUE TIME AS PRESCRIBED UNDER SUB-SECTION(1) OF SECTION 139, THEN IT CANNOT BE ACCEPTED THAT SUCH FURNISHING OF RETURN OF INCOME WITHIN TIM E ALLOWED U/S 139(4) WILL DILUTE THE PROVISIONS CONTAINED IN THE PROVISO TO S ECTION 10A(1A) OF THE INCOME TAX ACT, 1961. 13. REGARDING VARIOUS SUBMISSIONS OF THE LD. A.R. A ND VARIOUS JUDGEMENTS ON WHICH RELIANCE HAS BEEN PLACED BY THE LD. A.R., WE WOULD LIKE TO OBSERVE THAT THESE SUBMISSIONS DO NOT HAVE MERIT IN VIEW OF OUR ABOVE DISCUSSION. THE FIRST SUBMISSION IS THIS THAT THE PROVISION OF SECT ION 139(4) ARE CONSIDERED AS I.T.A.NO.397 /RJT/2009 9 PROVISO TO SECTION 139(1) AND IF THE ASSESSEE HAS F ILED RETURN OF INCOME U/S 139(4), THE SAME SHOULD BE CONSIDERED AS RETURN FIL ED U/S 139(1) OF THE INCOME TAX ACT, 1961. ON THIS ASPECT, WE HAVE ALREADY SEE N THE JUDGEMENT OF HONBLE APEX COURT CITED BY THE LD. D.R. HAVING BEEN RENDER ED IN THE CASE OF PRAKASH NATH KHANNA (SUPRA), WHERE IT WAS HELD BY HONBLE A PEX COURT THAT THE FILING OF RETURN OF INCOME WITHIN THE TIME ALLOWED U/S 139 (4) OF THE INCOME TAX ACT, 1961 CANNOT DILUTE THE INFRACTION IN NOT FURNISHING RETURN IN DUE TIME AS PRESCRIBED U/S 139(1) OF THE INCOME TAX ACT, 1961. IN VIEW OF THIS JUDGEMENT OF HONBLE APEX COURT IN THIS REGARD, THE JUDGMENTS CI TED BY THE LD. A.R. I.E. CIT VS JAGARITI AGRAWAL (SUPRA) AND TRUSTEES OF TULSIDA S GOPALJI CHARITABLE & CHALESHWAR TEMPLE TRUST (SUPRA) ARE OF NO RELEVANCE BECAUSE THESE JUDGEMENTS ARE OF TWO DIFFERENT HIGH COURTS BUT THIS ASPECT OF THE MATTER IS COVERED AGAINST THE ASSESSEE BY THE JUDGEMENT OF HONBLE APEX COURT CITED BY THE LD. D.R. 14. THE 2 ND SUBMISSION OF THE LD. A.R. IN THE WRITTEN SUBMISSI ON IS THIS THAT REQUIREMENT OF FILING OF RETURN OF INCOME IS PROCED URAL ASPECT AND, THEREFORE, IT SHOULD BE CONSIDERED AS DIRECTORY AND NOT MANDATORY . IN SUPPORT OF THIS CONTENTION ALSO, RELIANCE HAS BEEN PLACED ON VARIOU S DECISIONS SUBMITTED BY THE ASSESSEE IN THE PAPER BOOK II AND III. WE DO NOT F IND ANY MERIT IN THESE SUBMISSIONS OF THE ASSESSEE ALSO BECAUSE WHEN CONSE QUENCES OF NOT FILING THE RETURN OF INCOME WITHIN THE DUE DATE PRESCRIBED U/S 139(1) OF THE INCOME TAX ACT, 1961 ARE SO GRAVE I.E. CHARGING OF INTEREST U/ S 234A, POSSIBILITY OF PROSECUTION U/S 276CC AND DENIAL OF VARIOUS DEDUCTI ONS U/S 10A, 10B, 10BA AND VARIOUS SECTIONS UNDER CHAPTER VIA, IT CANNOT B E SAID THAT THIS REQUIREMENT OF FILING RETURN OF INCOME IS A PROCEDURAL ASPECT. 15. REGARDING VARIOUS JUDGMENTS CITED BY THE LD. A. R. IN THIS REGARD, WE FIND THAT SOME OF THESE JUDGMENTS ARE RENDERED BY THE DI VISION BENCH OF THE TRIBUNAL AND HENCE NOT BINDING ON US. REGARDING OTHER JUDGE MENTS OF VARIOUS HIGH COURTS AND HONBLE APEX COURT, WE FIND THAT THE SAM E ARE NOT IN RESPECT OF I.T.A.NO.397 /RJT/2009 10 FAILURE OF THE ASSESSEE FOR FILING THE RETURN OF IN COME WITHIN THE DUE DATE PRESCRIBED U/S 139(1) OF THE INCOME TAX ACT, 1961 A ND HENCE NOT APPLICABLE. STILL, WE DISCUSS, EACH OF THOSE JUDGMENTS CITED BE FORE US AS UNDER : - THE FIRST JUDGEMENT SUBMITTED IN PAPER BOOK II IS THE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF DIRECTOR OF INSPECTION OF INCOME TAX VS POORAN MALL & SONS (96 ITR 390). IN THAT CA SE, THE ISSUE INVOLVED WAS REGARDING THE VALIDITY OF THE ORDER PASSED BY THE A .O. U/S 132(5) FOR RETAINING THE SEIZED ASSETS AND HENCE, THIS JUDGEMENT IS NOT RELEVANT IN THE PRESENT CASE. - THE 2 ND JUDGEMENT CITED IS THE JUDGEMENT OF HONBLE MADHYA PRADESH HIGH COURT RENDERED IN THE CASE OF CIT VS PANAMA CH EMICAL WORKS (113 TAXMAN 717). IN THAT CASE, THE ISSUE INVOLVED WAS REGARDING FILING OF AUDIT REPORT IN FORM 10CCB. THE SAME WAS REQUIRED TO BE FILED ALONG WITH THE RETURN OF INCOME FILED BY THE ASSESSEE BUT IN THAT CASE, T HE SAME WAS FILED DURING ASSESSMENT PROCEEDINGS. UNDER THESE FACTS, IT WAS HELD THAT THE CLAIM OF THE ASSESSEE REGARDING DEDUCTION U/S 80-I CANNOT BE REJ ECTED IF THE REQUIRED REPORT IN FORM 10CCB WAS FILED IN THE COURSE OF ASSESSMENT PR OCEEDINGS. IN THE PRESENT CASE, THE DISPUTE IS NOT REGARDING FILING OF SOME R EPORT ALONG WITH RETURN OF INCOME BUT THE DISPUTE IS REGARDING FILING OF RETUR N OF INCOME ITSELF WITHIN DUE DATE AND HENCE, THIS JUDGMENT IS ALSO NOT RELEVANT IN THE PRESENT CASE. - THE 3 RD JUDGEMENT CITED IS THE JUDGEMENT OF HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF CIT VS AXIS COMPUTERS (INDI A) (P) LTD. (178 TAXMAN 143). IN THAT CASE ALSO, THE DISPUTE WAS REGARDING THE REQUIREMENT OF FILING OF AUDIT REPORT ALONG WITH RETURN OF INCOME AND NOT RE GARDING FILING OF RETURN OF INCOME WITHIN THE DUE DATE AND HENCE, THIS JUDGEMEN T OF HONBLE DELHI HIGH COURT IS ALSO NOT APPLICABLE IN THE PRESENT CASE. - THE NEXT JUDGEMENT CITED IS THE JUDGEMENT OF HON BLE APEX COURT RENDERED IN THE CASE OF CIT VS NATIONAL TAJ TRADERS (2 TAXMAN 546). IN THAT CASE, THE DISPUTE WAS REGARDING PASSING OF ORDER BY CIT U/S33B OF 1922 ACT I.T.A.NO.397 /RJT/2009 11 CORRESPONDING TO SECTION 263 OF THE PRESENT ACT AND HENCE, THIS JUDGEMENT IS ALSO NOT RELEVANT IN THE PRESENT CASE. - THE NEXT JUDGEMENT CITED BEFORE US IS THE JUDGEME NT OF HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF CIT VS WEB COMME RCE (INDIA) (P) LTD. (178 TAXMAN 310). THE DISPUTE IN THAT CASE IS ALSO SIMI LAR TO THE DISPUTE IN THE EARLIER DECISION OF HONBLE DELHI HIGH COURT RENDER ED IN THE CASE OF AXIS COMPUTERS (INDIA) (P) LTD. (SUPRA) AND FOR THE SAME REASONS, THIS JUDGEMENT IS ALSO NOT APPLICABLE IN THE PRESENT CASE. - THE NEXT JUDGEMENT CITED BEFORE US IS THE JUDGMEN T OF HONBLE APEX COURT RENDERED IN THE CASE OF BAJAJ TEMPO LTD. VS C IT (62 TAXMAN 480). IN THAT CASE, THE DISPUTE BEFORE THE HONBLE APEX COUR T WAS REGARDING ALLOWABILITY OF DEDUCTION U/S 15C OF 1922 ACT CORRESPONDING TO S ECTION 80J OF INCOME TAX ACT, 1961 AND THE FACTS WERE THAT THE INDUSTRIAL UN DERTAKING WAS ESTABLISHED IN A BUILDING TAKEN ON LESE, WHICH WAS USED PREVIOUSLY F OR OTHER BUSINESS. UNDER THESE FACTS, IT WAS HELD THAT THE ASSESSEE WAS ENTI TLED TO DEDUCTION. SINCE THE FACTS ARE DIFFERENT, THIS JUDGEMENT OF HONBLE APEX COURT IS ALSO NOT RELEVANT IN THE PRESENT CASE. - THE NEXT JUDGEMENT CITED BEFORE US IS THE JUDGEME NT OF HONBLE CALCUTTA HIGH COURT RENDERED IN THE CASE OF CIT VS HARDEODAS AGARWALA TRUST (198 ITR 511). IN THAT CASE, THE ISSUE IN DISPUTE WAS REGAR DING FURNISHING OF AUDIT REPORT ALONG WITH RETURN OF INCOME FOR THE PURPOSE OF CLAI MING EXEMPTION U/S 11 OF THE INCOME TAX ACT, 1961 AND NOT THE DISPUTE WAS NOT RE GARDING FILING OF RETURN OF INCOME U/S 139(1) OF THE ACT AND HENCE, THIS JUDGEM ENT OF HONBLE CALCUTTA HIGH COURT IS ALSO NOT APPLICABLE IN THE PRESENT CA SE. - THE NEXT JUDGEMENT CITED BEFORE US IS THE JUDGEME NT OF HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF CHURCHS AUXILIA RY FOR SOCIAL ACTON AND ANR VS DIRECTOR GENERAL OF INCOME TAX (EXEMPTION) & OTH ERS (325 ITR 362). IN THAT CASE, THE DISPUTE WAS REGARDING DEDUCTION U/S 80G OF THE INCOME TAX ACT, 1961 AND AS PER THE FACTS OF THAT CASE, THE OBJECTI ON WAS REGARDING FAILURE OF I.T.A.NO.397 /RJT/2009 12 ASSESSEE IN RENDERING ACCOUNTS TO THE COMPETENT AUT HORITY WITHIN THE PRESCRIBED PERIOD AND IT WAS HELD THAT SUCH A REQUIREMENT IS D IRECTORY AND NOT MANDATORY. IN THE PRESENT CASE, THE DISPUTE IS REGARDING FILIN G OF RETURN OF INCOME ITSELF WITHIN THE DUE DATE AND HENCE, THIS JUDGEMENT OF HO NBLE DELHI HIGH COURT IS ALSO NOT RELEVANT IN THE PRESENT CASE. - THE NEXT JUDGEMENT CITED BEFORE US IS THE JUDGMEN T OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE O CIT VS GUJARAT OI L AND ALLIED INDUSTRIES (201 ITR 325). IN THAT CASE ALSO, THE DISPUTE WAS REGAR DING THE REQUIREMENT OF FILING OF AUDIT REPORT AS TO WHETHER THE SAME IS MANDATORY OR DIRECTORY AND AS DISCUSSED IN ABOVE PARAS, THIS JUDGMENT IS ALSO NOT RELEVANT IN THE PRESENT CASE. - THE NEXT JUDGEMENT CITED BEFORE US IS THE JUDGEME NT OF HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF CONTINENTAL CONT RACTION LTD. VS UNION OF INDIA AND OTHERS (185 ITR 230). THIS JUDGEMENT IS ALSO NOT APPLICABLE IN THE PRESENT CASE BECAUSE IN THAT CASE, THE ISSUE WAS TH IS AS TO WHEN CBDT HAD APPROVED AGREEMENT FOR SUCH A PROJECT FOR THE PURPO SE OF SECTION 80 - O WHILE IN FACT SECTION 80HHB WAS FOUND APPLICABLE AND IT W AS HELD THAT ASSESSEE HAS TO BE GIVEN AN OPPORTUNITY FOR COMPLYING WITH THE PROV ISIONS OF SUB-SECTION (3) OF SECTION 80HHB. SINCE THE FACTS ARE DIFFERENT, THIS JUDGEMENT IS ALSO NOT RELEVANT IN THE PRESENT CASE. - THE NEXT JUDGEMENT CITED BEFORE US IS THE JUDGEME NT OF HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF CIT VS. SHIVANAN D ELECTRONICS (209 ITR 63). VERY STRONG RELIANCE WAS PLACED BY THE LEARNED AR O N THIS JUDGMENT BUT WE FIND THAT FOR THE SAME REASONS AS DISCUSSED ABOVE IN RES PECT OF VARIOUS JUDGEMENTS, THIS JUDGEMENT IS ALSO NOT APPLICABLE IN THE PRESEN T CASE BECAUSE IN THAT CASE ALSO, THE ISSUE IN DISPUTE WAS REGARDING REQUIREMEN T OF FILING OF AUDIT REPORT ALONG WITH RETURN OF INCOME FOR DEDUCTION U/S 80J(V IA) AND IT WAS HELD THAT IT IS NOT MANDATORY IN STRICT SENSE. IN THE PRESENT CASE , THE DISPUTE IS REGARDING FILING OF RETURN OF INCOME WITHIN DUE DATE PRESCRIBED U/S 139(1) OF THE INCOME TAX ACT, 1961 AND HENCE, THIS JUDGEMENT IS ALSO NOT RELEVANT IN THE PRESENT CASE. I.T.A.NO.397 /RJT/2009 13 - THE NEXT JUDGMENT IS THE JUDGEMENT OF HONBLE GUJ ARAT HIGH COURT RENDERED IN THE CASE OF ITO VS VXL INDIA LTD. (312 ITR 187). IN THAT CASE ALSO, DISPUTE WAS REGARDING FILING OF AUDIT REPORT AND HENCE, THIS JUDGEMENT IS ALSO NOT RELEVANT. - THE NEXT JUDGEMENT CITED BEFORE US IS THE JUDGEME NT OF HONBLE CALCUTTA HIGH COURT RENDERED IN THE CASE OF PRESIDENCY MEDIC AL CENTRE (P) LTD. VS CIT (108 ITR 838). THE CONCLUSION AS PER THIS JUDGMENT IS REPRODUCED BELOW FROM THE HEAD NOTES: LOSS RETURN CAN BE FILED WITHIN TIME SPECIFIED BY S.139(4) AND ONCE THAT RETURN IS FILED WITHIN TIME IT WOULD BE DEEMED TO B E IN ACCORDANCE WITH LAW AND LOSS HAD TO BE DETERMINED AND CARRIED FORWA RD. IN VIEW OF THIS CONCLUSION IN THIS JUDGMENT THAT LO SS RETURN CAN BE FILED WITHIN TIME SPECIFIED U/139(4), THIS JUDGEMENT IS ALSO NOT APPLICABLE IN THE PRESENT CASE BECAUSE IN THE PRESENT CASE, THE DISPUTE IS REGARDI NG FILING OF RETURN OF INCOME WITHIN TIME ALLOWED U/S 139(1) OF THE INCOME TAX AC T, 1961 AND NOT U/S 139(4) OF THE INCOME TAX ACT, 1961 AND HENCE, THIS JUDGEME NT IS ALSO NOT APPLICABLE IN THE PRESENT CASE. 16. WE HAVE DISCUSSED ALL THE JUDGMENTS WHICH WERE CITED BY THE LD. A.R. IN THE SYNOPSIS AS WELL AS COPIES OF WHICH ARE SUBMITT ED IN THE PAPER BOOK II AND III AND WE HAVE SEEN THAT NONE OF THESE JUDGMENTS I S RELEVANT IN THE PRESENT CASE. 17. IN VIEW OF OUR ABOVE DISCUSSION, WE HAVE NO HES ITATION IN HOLDING THAT THE PROVISIONS OF PROVISO TO SECTION 10A(1A) IS MANDATO RY AND NOT MERELY DIRECTORY. 18. NOW, WE EXAMINE THE 2 ND QUESTION (B). IN OUR CONSIDERED OPINION, SINCE WE HAVE ANSWERED THE 1ST QUESTION (A) AGAINST THE A SSESSEE AND HELD THAT THE PROVISIONS OF THE PROVISO TO SECTION 10A(1A) IS MAN DATORY AND NOT MERELY DIRECTORY, THE 2 ND QUESTION (B) IS NOT REQUIRED TO BE ANSWERED BECAUS E THE SAME WOULD HAVE BEEN REQUIRED TO BE ANSWERED IF WE WOULD HAVE FOUND THAT THOSE I.T.A.NO.397 /RJT/2009 14 PROVISIONS ARE NOT MANDATORY BUT MERELY DIRECTORY. HENCE, WE DO NOT ANSWER THE 2 ND QUESTION. 19. THE 3 RD (C) QUESTION IS ALSO NOT REQUIRED TO BE ANSWERED BY US BECAUSE THE SAME IS TO BE REQUIRED TO BE ANSWERED ONLY IF OUR R EPLY TO 2 ND QUESTION WOULD HAVE BEEN IN AFFIRMATIVE. SINCE WE HAVE FOUND THAT THIS QUESTION IS NOT REQUIRED TO BE ANSWERED IN THE FACTS OF THE PRESENT CASE AS PER WHICH WE HAVE DECIDED THE FIRST QUESTION AGAINST THE ASSESSEE BY HOLDING THAT THE PROVISIONS OF THE PROVISO TO SECTION 10A(1A) IS MANDATORY AND NOT MERELY DIRE CTORY, THE 3 RD QUESTION IS ALSO NOT REQUIRED TO BE ANSWERED BY US. 20. THE ONLY ISSUE RAISED IN THIS APPEAL IS THE ONE WHICH WE HAVE CONSIDERED IN THE QUESTION NO.(A). WE HAVE HELD THAT THE PROV ISIONS OF THE PROVISO TO SECTION 10A(1A) ARE MANDATORY AND NOT DIRECTORY I.E . IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. THEREFORE, WE FIND THAT THE ORDER OF LD. CIT(A) IS JUST AND IN ACCORDANCE WITH LAW AND THE GROUND RAISED BY THE ASSESSEE IS LIABLE TO BE DISMISSED. 21. AS NO OTHER ISSUE IS INVOLVED, IT IS NOT NECESS ARY FOR US TO SEND BACK THE CASE TO THE DIVISION BENCH. WE DISPOSE OF THE APPE AL AS SUCH. 22. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. 23. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD./- SD./- SD./- (D.K.TYAGI) G.C.GUPTA) (A. K. GARODIA) JUDICIAL MEMBER VICE PRESIDENT ACCOUNTA NT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, RAJKOT BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD