K.S. Ramakrishna V. Deputy Commissioner of Income Tax, Karnataka - II

ITA/44/2009

AI Insights

The case involves K.S. Ramakrishna, the proprietor of M/s.Kays Roses, who appealed against the orders of the Income Tax Appellate Tribunal (ITAT) which denied him the benefits under Section 10B and Section 80HHC of the Income Tax Act, 1961 for the Assessment Year 2002-03. The ITAT had initially denied the exemption under Section 10B based on the absence of a prescribed Audit Report and later, despite the submission of the report, denied the claim under Section 80HHC citing presumptions and surmises. The High Court of Karnataka found that the ITAT had erred in its decision and remitted the matter back to the Assessing Authority to verify compliance with the legal requirements for claiming benefits under Section 80HHC.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 671596 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 25-11-2014
• Assessment Year: misc
• Other Referred Cases: THE COMMISSIONER OF INCOME-TAX AND ANOTHER VS. M/S.WIPRO LTD., THE COMMISSIONER OF INCOME-TAX AND ANOTHER VS. M/S.AMERICAN DATA SOLUTIONS INDIA PVT. LTD., M/S.NATURAL STONE EXPORTS LTD.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: S R ANURADHA
• Keywords: Assessment Year 2002-03; Audit report; Exemption; Income Tax; Export of Cut Flowers
• Section: 80HHC; 10B; 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 25TH DAY OF NOVEMBER 2014 PRESENT THE HON'BLE MR. JUSTICE N. KUMAR AND THE HON’BLE MR. JUSTICE B. MANOHAR ITA NO.44 OF 2009 C/w ITA NO.45 OF 2009 BETWEEN; K.S.Ramakrishna Prop: Kays Roses Apt No.204, Embassy Centre No.11, Crescent Road Bangalore - 560 001. ...APPELLANT (COMMON) (By Smt.S.R.Anuradha, Advocate) AND: Deputy Commissioner of Income Tax Karnataka - II Central Revenue Building Queens Road Bangalore – 1. ...RESPONDENT (COMMON) (By Shri.K.V.Aravind, Advocate) ITA No.44/2009 is filed under Section 260-A of IT Act, 1961 arising out of order dated 26-09-2008 passed in ITA No.177/Bang/2006 and in ITA No.115/Bang/2006 and orders dated 31.03.2005, for the Assessment Year 2002-03 by the Income Tax Appellate Tribunal and Assessment Order dated 2 29.03.2005 passed by the Income Tax Officer, Central Circle 2(1), praying to formulate the substantial questions of law stated therein and to allow the appeal and set aside the order dated 26.09.2008 passed in MP No.53/Bang/2008 in ITA No.177/Bang/2006 and in ITA No.115/Bang/2006 and orders dated 31.03.2008 for the Assessment years 2002-03 by the ITAT and etc. ITA No.45/2009 is filed under Section 260-A of IT Act, 1961 arising out of order dated 26-9-2008 passed in ITA No.177/Bang/2006 and in ITA No.115/Bang/2006 and orders dated 31.03.2005, for the Assessment Year 2002-03 by the Income Tax Appellate Tribunal and Assessment Order dated 29/03/2005 passed by the Income Tax Officer, Central Circle (2) praying to formulate the substantial questions of law stated therein and allow the appeal and set aside the order dated 26.09.2008 passed in ITA No.177/Bang/2006 and in MP No.115/Bang/2006 and orders dated 31.03.2005 for the Assessment years 2002-03 by the ITAT and etc. These ITAs coming on for Hearing, this day, N. KUMAR, J. delivered the following:- COMMON JUDGMENT The assessee preferred these appeals challenging the orders passed by the Tribunal. These two appeals are taken up for consideration together as one is an appeal against the original order and another is an appeal against the order of dismissing the review petition of the original order. Therefore, both the appeals are disposed of by this common judgment. 3 2. The assessee is a Proprietor of M/s.Kays Roses. He is in the business of export of cut flowers to countries such as the United Kingdom, Australia and Netherlands. The income is exempted under Section 10B of the Income Tax Act, 1961. The Assessing Authority denied the exemption claimed by the assessee holding that the assessee cannot claim any deduction under Section 10B of the Act merely on the basis of a letter of intent received by the Government. Then the assessee in the course of assessment proceedings, orally submitted that the case of the assessee could be considered under Section 80HHC. That was not acceded to on the ground that prescribed Audit Report in Form No.10CCAC was not enclosed to the claim. Further it was held that the assessee had not made any claim under the provision at all in the return filed and therefore, the claim under both grounds was disallowed. Aggrieved by the said order, the assessee preferred an appeal to the Commissioner of Income Tax (Appeals). Before the Appellate Authority, the Audit Report was filed. Taking note of the same, the Appellate Authority held that while the Assessing Officer herself recorded in 4 the body of the order that the appellant has produced evidences of foreign inward remittances, at the same time has used the words like shadow of doubt and rejected the claim under Section 80HHC. When genuine exports have been undertaken and the assessee has furnished the evidences, it is not understood how the Assessing Officer has rejected the claim on presumptions and surmises. Therefore, he allowed the appeal and directed the Assessing Officer to allow the deduction under Section 80HHC. Aggrieved by the said order, the assessee preferred an appeal challenging the denial of a claim under Section 10B whereas the revenue preferred an appeal challenging the order granting relief under Section 80HHC. The Tribunal dismissed the appeal filed by the assessee and allowed the appeal filed by the revenue relying on the judgment of this Court in the case of M/S.NATURAL STONE EXPORTS LTD., where it is held that the audit report even though is not enclosed to the returns filed, the same ought to be produced before the completion of the assessment. Aggrieved by the said orders, the assessee 5 is before this Court. As the review petition is also dismissed, against that order also, appeal is filed. 3. The substantial question of law that arises for consideration in these appeals is as under:- “Whether the assessee is entitled to claim the benefit of Section 80HHC when such a claim is not made in the returns filed and when audit report is filed before the first Appellate Authority?” 4. This Court in the case of THE COMMISSIONER OF INCOME-TAX AND ANOTHER VS. M/S.WIPRO LTD., IN ITA NO.3204/2005, DECIDED ON 28TH FEBRUARY 2012 dealing with the aforesaid question held that if the assessee is entitled to the benefit under Section 80HHC, that cannot be denied on the ground that the benefit had not been claimed or such a claim had not been put forth originally. That is the benefit extended by the Parliament to an assessee. If he satisfies the requirement as contemplated under the provision even without putting forth a claim either by inadvertence, etc and such a claim is made at the time of assessment proceedings or before the assessment order is passed, the Assessing Authority is 6 duty bound to look into the claim and find out as to whether the assessee has complied with the legal requirement so as to claim the said benefit and if he satisfies the requirement of law, to extend the benefit of said provision. On the ground that such a claim is not made in the returns filed, relief cannot be denied. Therefore, the first Appellate Authority was justified in allowing the said claim. 5. In so far as non-production of the auditors report is concerned, this Court had an occasion to consider the said question in the case of THE COMMISSIONER OF INCOME-TAX AND ANOTHER VS. M/S.AMERICAN DATA SOLUTIONS INDIA PVT. LTD., IN ITA NO.587/2007 AND CONNECTED MATTERS, DECIDED ON 18TH DECEMBER 2013, where it was held that the proceedings before the first Appellate Authority is a continuation of the assessment proceedings and if the audit report is produced at that stage, the first Appellate Authority was duty bound to take note of the said audit report and grant benefit, if the assessee is entitled to. 7 6. Therefore, in the instant case, the first Appellate Authority taken note of the audit report and then granted relief to the assessee, which was erroneously interfered with by the Tribunal. Therefore, we do not see any justification in the order passed by the Tribunal. 7. However, the learned Counsel for the revenue submitted that, before the benefit under Section 80HHC could be granted, the assessee has to satisfy the requirement of law. Hence, the very matter requires to be remitted back to the Assessing Authority to find out as to whether all the requirement of law to seek exemption under Section 80HHC has been complied with by the assessee or not and then only the said benefit can be granted. 8. We do find some substance in the said contention. 9. Accordingly, appeals are allowed in part. The substantial question of law is answered in favour of the assessee and against the revenue. The order passed by the authorities are hereby set aside and the matter 8 remitted back to the Assessing Authority with a direction to examine whether the assessee has fulfilled the requirement stipulated in law to be eligible for the benefit under Section 80HHC and thereafter, pass appropriate orders in accordance with law. Sd/- JUDGE Sd/- JUDGE Prs* "