THE COMMISSIONER OF INCOME TAX V. M/S DEEPAK CABLES (INDIA) LTD

ITA/205/2008

AI Insights

The case involves the Revenue's appeal against the ITAT's decision, which had set aside the assessment order on the grounds that it was based on a time-barred revised return. The assessee, M/s. Deepak Cables (India) Ltd., had initially claimed a deduction under Section 80IA of the Income Tax Act, 1961, which was later withdrawn. The ITAT ruled that the revised return was invalid due to being filed beyond the permissible time, leading to the setting aside of the assessment order. The Revenue contested this decision, leading to the current appeal in the High Court.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 729032 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 03-06-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: S R ANURADHA
• Assessee Lawyers: K V ARAVIND
• Keywords: Assessment Order; Deduction; Income Tax; Revised return; Section 80IA; Survey; Time barred
• Section: 271(1)(c); 153; 80IA; 260A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 3RD DAY OF JUNE 2014 PRESENT THE HON'BLE MR.JUSTICE N.KUMAR AND THE HON'BLE MR.JUSTICE B.MANOHAR ITA NO.205/2008 BETWEEN: 1. The Commissioner of Income Tax, Central Circle C R Building, Queens Road, Bangalore. 2. The Deputy Commissioner of Income-Tax, Central Circle -2 (1), C R Building, Queens Road, Bangalore. ….Appellants (By Sri.K.V.Aravind, Advocate) AND: M/s.Deepak Cables (India) Ltd., 313 & 314, Embassy Centre, No.11, Crescent Road, Bangalore – 560 001. …Respondent (By Smt.S.R.Anuradha, Advocate) 2 ITA filed u/S.260A of I.T.Act, 1961 arising out of order dated 21.09.2007 passed in ITA.No.116/Bang/2006 for the Assessment Year 2001- 2002, praying that this Hon’ble Court may be pleased to i. formulate the substantial questions of law stated therein, ii. allow the appeal and set aside the order passed by the ITAT, Bangalore in ITA.116/Bang/2006 dated 21.09.2007 and confirm the order of the Appellate Commissioner confirm the order passed by the Deputy Commissioner of Income Tax Central Circle – 2(1), Bangalore, in the interest of justice and equity. This appeal is coming on for hearing this day, N. KUMAR J., delivered the following: J U D G M E N T The Revenue has preferred this appeal challenging the order dated 21-09-2007 passed in ITA No.116/Bang/2006 by the Income Tax Appellate Tribunal, Bangalore Bench ‘B’ (for short ‘the Tribunal’), setting aside the order of assessment on the ground that if it is to be treated as assessment order on the basis of the original return, it is barred by time and 3 if it is an order of assessment passed on revised return, the order of assessment cannot stand as the revised return was filed beyond time. 2. The assessee is engaged in the business of manufacturing and supplying of ACSR conductors for transmission/distribution of power lines. The Company filed its return of income for the assessment year 2001-02 on 31-10-2001, declaring the total income of Rs.1,41,87,550/-. The assessee claimed deduction Rs.85,25,899/- on its Tumkur Unit, under Section 80IA of the Income Tax Act, 1961 (for short ‘the Act’). A survey was conducted on 09-03-2004 at the Tumkur Unit of the company. Statements of the employees of the assessee were recorded. The departmental officials were convinced that the assessee was not entitled to the benefit of deduction under Section 80IA of the Act. According to the assessee, there was an understanding between the Survey Team and the assessee that if the 4 claim of Section 80IA is withdrawn by the assessee since financial years 1997-98, no penalty would be levied. The assessee on such understanding submitted a letter dated 16-3-2004 before the Assessing Officer. Consequently he filed a revised return on 26-03-2004. The assessee also paid the self assessment tax of Rs.32,73,388/- The assessment was framed by the Assessing Officer on 31-3-2004 and as per the revised return assessed the tax at Rs.2,27,14,450/-. The Assessing Authority directed initiation of proceedings under Section 271(1)(c) of the Act. As the penalty proceedings were initiated, the assessee challenged the assessment order by preferring an appeal before the Commissioner of Income Tax (Appeals), which came to be dismissed. It is against the said order, the assessee preferred an appeal before the Tribunal. 5 3. The Tribunal held that the revised return filed on 26-3-2004 was clearly barred by time. It was not a valid revised return. Therefore, the order of assessment framed by the Assessing Authority on the basis of such invalid revised return is a nullity and the Tribunal also held that even if the order of assessment is held to be passed on the original return, it was barred by limitation as it is hit by Section 153 of the Act. Thus, the appeal was allowed and the order of assessment was set aside. Aggrieved by the said order, the Revenue has preferred this appeal before this Court. 4. The appeal came to admitted on 9-12-2010 to consider the following substantial questions of law: 1. Whether the Tribunal was correct in holding that the assessment order passed based on scrutiny assessment initiated on 9.8.2002 on the original return dated 30.10.2001 cannot be sustained as the belated revised return had been taken into account in the course of assessment? 6 2. Whether the Tribunal was correct in holding that the order of assessment is time barred u/s.153 of the Act, though the assessment order was passed on 31.3.2004, which is last date for completion of the assessment for the assessment year 2001-02 and consequently recorded a perverse finding without taking into account the correct dates? 5. Learned counsel appearing for the Revenue contended that the assessment order passed by the Assessing Authority is not on the basis of the revised return and it is based on the original return filed by the assessee. Merely because in the assessment order he had noticed the filing of the revised return, the conduct of the assessee in giving up his claim for exemption under Section 80IA cannot be construed as the basis for passing the assessment order on the basis of a revised return. Therefore, the Tribunal was in error in setting aside the assessment order on the ground that it is based on the revised return which is filed beyond time. Further, he contended that the finding of the Tribunal 7 that the assessment order is barred by time under Section 153 of the Act, even if it is construed as the assessment order on the basis of the original return as ex-facie illegal as the order is passed within two years as prescribed under Section 153 (1)(a) of the Act. 6. Per contra, learned counsel appearing for the assessee submitted that a reading of the assessment order makes it clear that the assessment is based on the revised return. When the revised return was filed beyond time and it was invalid, the assessment order passed on such invalid return is nullity as rightly held by the Tribunal. Even if it is held to be the assessment order passed on the original return, it would be barred by time and therefore she submits that no case for interference is made out. 7. From the aforesaid facts and rival contentions, the following facts are not in dispute. The assessee filed a return of income on 31-10-2001 for the assessment 8 year 2001-02 showing the income from business as Rs.2,27,14,449/-. The assessee claimed a sum of Rs.85,26,999/- as deduction under Section 80IA of the Act. A notice was issued to the assessee under Section 143(2) of the Act on 9-8-2002. Survey was conducted under Section 133 of the Act on 9-3-2004. In the course of survey, statement of the employees of the assessee were recorded and it was pointed out to them that the deduction claimed under Section 80IA is not permissible in law. The material on record suggests that the officials of the Income Tax department suggested to the assessee that if the deduction under Section 80IA is given up and the tax is paid, there would not be any penalty proceedings. It appears, on such assurance given, a revised return was filed on 26- 3-2004 showing the income as Rs.2,27,14,450/- without claiming deduction. Thereafter, the assessment order was passed on 31-3-2004. A reading of the assessment order makes it clear that what the 9 Assessing Authority had considered was the annual return of income for the assessment year 2001-02 filed on 31-10-2001 declaring an income of Rs.1,41,87,550/- In the said returns, the assessee had claimed deduction under Section 80IA of the Act to the tune of Rs.85,26,899/-. Further it discloses that the return of income was processed and taken up for scrutiny by issuing notice under Sections 143(2) and 142(1) of the Act. Further, the order shows that the assessee had claimed deduction under Section 80IA of the Act on its Tumkur Unit to the tune of Rs.85,26,999/- whereas the income of the assessee from the factory at Pondicherry was totally exempted. The assessee was asked to furnish among other things the basis for making this claim. While furnishing replies and giving other particulars called for by the Assessing Authority, the assessee remained silent on the issue of 80IA deductions. Therefore on 9-3-2004, a survey under Section 133A of the Act was undertaken at Tumkur Unit 10 of the assessee-Company to verify the claims made in the return of income. Statements of the employees of the assessee were recorded. Those statements are also clearly set out in the order of assessment. As the old machinery was sold on 31-3-1998, the alleged new Unit had come into existence in the beginning of the year itself, and it cannot be said that at the time of commencement of new industrial undertaking, the value of old machinery was less than 20% of the total installed plant and machinery. Therefore it was held that the assessee was not liable to deduction under Section 80IA of the Act to begin with in the assessment year 1998-99 itself. Thereafter, the Assessing Authority had observed that when once correct position was explained to the assessee, he came forward and filed a revised return withdrawing the claim made under Section 80IA for all the assessment years beginning from assessment year 1998-99 to 2003-04. He also observed that the assessee has also paid the due taxes 11 on the basis of the revised returns. Therefore, he proceeded to pass an order taking the total income of Rs.2,27,14,450/- as declared in the original return of income as well as in the revised return. Therefore, it is clear from the said order that the assessment order was passed not on the basis of the revised return but on the basis of the original return and therefore the amount claimed as exemption was also liable to be taxed. In the light of the above and on the undisputed facts on record, the Tribunal committed a serious error in holding that the assessment order is passed on the basis of the invalid return filed beyond time. Therefore, it is a clear case of misreading. The order passed by the tribunal is ex-facie illegal and therefore the said order requires to be set aside and accordingly it is set aside. 8. The return was filed for the assessment year 2001-02. The previous year begins from 1-4-2000 to 12 31-3-2001 and end of the assessment year is 31-3-2002. In view of Section 153(1)(a), two years period is prescribed for passing of the assessment order which ends on 31-3-2004. The assessment order was passed on 31-3-2004 and therefore, the order passed by the Assessing Authority on the basis of the original return is in time. Unfortunately, the Tribunal had not applied its mind properly and erroneously came to the conclusion that even if the assessment order is to be held as the assessment order passed on the original return, it is barred by time which again is ex-facie illegal and requires to be set aside. In that view of the matter, we pass the following: ORDER The appeal is allowed. The impugned order passed by the Tribunal is hereby set aside and the order of the Assessing Authority is restored. The substantial 13 questions of law raised in this appeal are answered in favour of the Revenue and against the assessee. Parties to bear their own costs. Sd/- JUDGE Sd/- JUDGE mpk/-* "