IT : Where assessment proceedings allowing deduction under section 80-IB(10) were concluded after thorough scrutiny of details furnished by assessee that too under section 147, read with section 143(3), Assessing Officer's order could not be termed as erroneous
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[2013] 40 taxmann.com 75 (Bangalore - Trib.)
IN THE ITAT BANGALORE BENCH 'C'
Vanshree Builders & Developers (P.) Ltd.
v.
Commissioner of Income-tax*
GEORGE GEORGE K., JUDICIAL MEMBER
AND Jason P. Boaz, ACCOUNTANT MEMBER
AND Jason P. Boaz, ACCOUNTANT MEMBER
IT Appeal No. 536 (Bang.) of 2011
[ASSESSMENT YEAR 2007-08]
[ASSESSMENT YEAR 2007-08]
APRIL 12, 2013
Section 80-IB, read with sections 80AC and 263 of the Income-tax Act, 1961 - Deductions - Profits and gains from industrial undertakings other than infrastructure development undertakings [Housing project/Revision] - Assessment year 2007-08 - Assessee-company was engaged in construction and real estate business - Assessee's premises was subjected to survey under section 133A - Since assessee had not filed return for relevant year, a notice under section 148 was issued to assessee - Thereafter, Assessing Officer having scrutinized details furnished by assessee concluded assessment allowing deduction under section 80-IB - Subsequently, Commissioner invoked provisions of section 263 on premise that since assesse had filed return beyond period specified in section 139(1), in terms of section 80AC, deduction under section 80-IB was not allowable to assessee - Whether since return of income furnished by assessee was, admittedly, belated; being filed after expiry of time specified under section 139(4) and, thus, provisions of section 80AC was attracted - Held, yes - Whether, however, since assessment proceedings allowing deduction under section 80-IB(10) were concluded after thorough scrutiny of details furnished by assessee that too under section 147, read with section 143(3), one could not term Assessing Officer's action as erroneous - Held, yes - Whether, therefore, Commissioner was not justified in directing Assessing Officer to withdraw deduction allowed under section 80-IB(10) - Held, yes [Paras 18, 21 & 25] [In favour of assessee]
CASE REVIEW
Saffire Garments v. ITO [2013] 140 ITD 6 [2012] 28 taxmann.com 27 (Rajkot) (SB) (para 18); Bal Kishan Dhawan (HUF) v. ITO [2012] 18 taxmann.com 234/50 SOT 49 (Asr.) (para 18); CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1/123 Taxman 433 (Delhi) (FB) (para 25); CIT v. Honda Siel Power Products Ltd. [2011] 333 ITR 547/[2010] 194 Taxman 175 (Delhi) (para 25) and CIT v. Infosys Technologies Ltd. (No.2) [2012] 341 ITR 293/205 Taxman 98/17 taxmann.com 203 (Kar.) (para 25) followed.
CASE REFERRED TO
Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83/109 Taxman 66 (SC) (para 6), ITO v. Venkataiah [2012] 52 SOT 437/22 taxmann.com 2 (Hyd.) (para 6), CIT v. Smt. Minalben S. Parikh [1995] 215 ITR 81/79 Taxman 184 (Guj.) (para 6), CIT v. Ratlam Cool Ash Co. [1988] 171 ITR 141/[1987] 34 Taxman 443 (MP.) (para 6), CIT v. Arvind Jewellers [2003] 159 ITR 502/[2002] 124 Taxman 615 (Guj.) (para 6), CIT v. Infosys Technologies Ltd. (No. 2) [2012] 341 ITR 293/205 Taxman 98/17 taxmann.com 203 (Kar.) (para 7), CIT v. Namdhari Seeds (P.) Ltd. [2012] 341 ITR 342/203 Taxman 565/16 taxmann.com 83 (kar.) (para 7), Saffire Garments v. ITO [2013] 140 ITO 6/[2012] 28 taxmann.com 27 (Rajkot) (SB) (para 7), Bal Kishan Dhawan HUF v. ITO [2012] 18 taxmann.com 234/50 SOT 49 (Asr.) (URO) (para 7), CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1/123 Taxman 433 (Delhi) (FB) (para 22) and CIT v. Honda Seal Power Products Ltd. [2011] 333 ITR 547/[2010] 194 Taxman 175 (Delhi) (para 23).
Sachin Kumar for the Appellant. Etwa Munda for the Respondent.
ORDER
Jason P. Boaz, Accountant Member - This appeal of the assessee is directed against the order of the Commissioner of Income-tax-III, Bangalore, passed under section 263 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), dated January 31, 2011 for the assessment year 2007-08.
2. Though the assessee has, in its grounds of appeal, raised four grounds, the essence of the appeal is confined to a solitary issue, namely :
| (i) | that the Commissioner of Income-tax had erred in holding that the order under section 147 read with section 143(3) of the Act dated December 30, 2009 was erroneous and prejudicial to the interests of the Revenue, i.e., in regard to the allowance of deduction under section 80-IB of the Act ; | |
| (ii) | that the Commissioner of Income-tax had, further, erred in holding that the compliance provisions under section 80AC of the Act were mandatory and not directory in nature. |
3. The facts of the case, in brief, are discussed as under :
4. The assessee is engaged in the construction and real estate business. The assessee's premise was subjected to a survey under section 133A of the Act on January 4, 2008. For the assessment year under consideration, according to the Assessing Officer, the assessee had not filed its return of income as on the date of survey. Accordingly, a notice under section 148 of the Act was served on the assessee on February 17, 2009, requiring the assessee to furnish its return of income. In compliance thereto, the assessee had furnished its return of income for the assessment year 2007-08 on April 16, 2009, admitting "nil" income after claiming deduction of Rs. 1,98,02,225 under section 80-IB of the Act. According to the Assessing Officer, during the period under consideration, the assessee had offered income only from a residential project, styled, "Solitaire" at Marthahalli, for which, deduction under section 80-IB(10) of the Act was claimed. There was also another project called "Vanshree Towers", at Marthahalli, for which, no income was, however, offered. After having verified the submission made by the assessee during the course of assessment proceedings, the Assessing Officer had concluded the assessment, determining the assessee's income at nil as admitted by the assessee in its return of income thereby allowing the assessee's claim for deduction under section 80-IB of the Act. The Commissioner of Income-tax, Bangalore-III, on perusal of the records was, however, of the view that the assessment concluded by the Assessing Officer was erroneous and prejudicial to the interests of the Revenue for the following reasons :
| (i) | deduction under section 80-IB(10) was wrongly allowed, resulting in, under-assessment of income ; | |
| (ii) | as per the provisions of section 80AC of the Act, with effect from the assessment year 2006-07, no deduction under section 80-IB shall be allowable unless the assessee furnishes the return of income for any assessment year on or before the due date as specified under section 139(1) of the Act ; and | |
| (iii) | that in the assessee's case, the return of income filed for the assessment year 2007-08 was belated, viz., filed on April 16, 2009 which was also beyond the due date specified under section 139(1) of the Act. |
5. Accordingly, the assessee was required to show cause as to why the deduction under section 80-IB(10) allowed by the Assessing Officer as claimed by the assessee, should not be withdrawn. After due consideration of the assessee's submissions, as recorded in the order, the Commissioner of Income-tax had modified the assessment order whereby deduction allowed under section 80-IB(10) of the Act was withdrawn. The reasons recorded for such modification resorted to by the Commissioner of Income-tax are as under :
"4. As per the provisions of section 80AC of the Income-tax Act, 1961, with effect from the assessment year 2006-07, no deduction under section 80-IB(10) shall be allowed unless the assessee furnishes the return of income on or before the due date as specified under section 139(1) of the Income-tax Act, 1961. The assessee has filed return of income belatedly on April 16, 2009 which is beyond the due date specified under section 139(1) of the Income-tax Act, 1961. Also, the auditor's certificate in Form No. 10CCB has not been furnished. The main argument advanced by the assessee is that the assessee-company was not under legal obligation to file the return of income under section 139(1) of the Income-tax Act, 1961 in the absence of income chargeable to income-tax and, therefore, the provisions of section 80AC are not applicable in the case of the assessee. It is, further, submitted that the assessee-company has complied with all the conditions laid down under section 80-IB of the Income-tax Act, 1961 and, therefore, the company is qualified for deduction under section 80-IB(10) of the Income-tax Act, 1961. According to the assessee, the alleged non-filing of return under section 139(1) of the Income-tax Act, 1961 is only technical flaw which does not debar the assessee-company from claiming deduction under section 80-IB(10) of the Income-tax Act, 1961. I am not inclined to accept the submission of the assessee-company that it is eligible for deduction under section 80-IB(10) of the Income-tax Act, 1961 because the condition as stipulated in section 80AC of the Income-tax Act, 1961, namely, filing of returns on or before due date as specified under section 139(1) of the Income-tax Act, 1961 has not been complied with in the case of the assessee. Section 80AC of the Income-tax Act, 1961 stipulates that the assessee must file the return of income on or before the due date specified under section 139(1) of the Income-tax Act, 1961 in order to claim deduction under section 80-IB(10) of the Income-tax Act, 1961. It does not say that this condition can be waived in a case where the assessee is not under legal obligation to file the return of income under section 139(1) of the Income-tax Act, 1961. In other words, in order to claim deduction under section 80-IB(10) of the Income-tax Act, 1961 an assessee is obliged to file the return on or before the due date specified under section 139(1) of the Income-tax Act, 1961. I am not inclined to accept the arguments of the assessee that the non-filing of return on or before the due date as specified under section 139(1) of the Income-tax Act, 1961 is only a technical flaw which does not bar the assessee-company from claiming deduction under section 80-IB of the Income-tax Act, 1961. A deduction under the Income-tax Act, 1961 can be granted only when all the condition is specified in the Act pertaining to eligibility for claiming of the deduction are satisfied by the assessee. In the present case, one of the conditions for grant of deduction under section 80-IB of the Income-tax Act, 1961, namely, the condition specified under section 80AC of the Income-tax Act, 1961 has not been satisfied by the assessee. I, therefore, hold that deduction under section 80-IB of the Income-tax Act, 1961 amounting to Rs. 1,98,02,225 has been wrongly allowed by the Income-tax Officer, Ward 12(2), Bangalore, in the assessment order dated December 30, 2009 passed under section 147 read with section 143(3) of the Income-tax Act, 1961 for the assessment year 2007-08. The assessment order under section 147 read with section 143(3) of the Income-tax Act, 1961 for the assessment year 2007-08 passed by Income-tax Officer, Ward 12(2), Bangalore, is erroneous and prejudicial to the interests of the Revenue within the meaning of section 263 of the Income-tax Act, 1961 in so far as deduction under section 80-IB(10) amounting to Rs. 1,98,02,225 has been wrongly allowed resulting in under-assessment of income. The order under section 147 read with section 143(3) of the Income-tax Act, 1961 for the assessment year 2007-08 passed by the Income-tax Officer, Ward 12(2), Bangalore, is, therefore, modified to the extent that deduction under section 80-IB(10) of the Income-tax Act, 1961, amounting to Rs. 1,98,02,225 wrongly allowed by the Assessing Officer stands withdrawn."
6. Aggrieved, the assessee has come up with the present appeal. During the course of hearing, the submissions made by the learned authorised representative are summarised as under :
| (i) | that section 263 of the Act does not permit any inference or conclusion that the order of the assessment passed by the Assessing Officer is erroneous and prejudicial to the interests of the Revenue within the meaning of the said section ; and that the finding of the Commissioner of Income-tax is contrary to the clear language of section 263 of the Act. | |
| (ii) | that the jurisdiction under section 263 can be invoked only if any order passed by the Assessing Officer was erroneous in so far as it was prejudicial to the interests of the Revenue ; that the jurisdiction cannot be invoked if the order passed by the Assessing Officer was erroneous for any other reason or on any other ground ; and | |
| (iii) | that the jurisdiction cannot be invoked even if the order of the Assessing Officer was erroneous but not prejudicial to the interests of the Revenue ; | |
| (iv) | that actual prejudice or likelihood of prejudice to the Revenue must be clearly established ; that there was no question of any prejudice or likelihood of prejudice to the Revenue in carrying out the provisions of the Act. The Revenue is a creature of the statute and a statutory body or authority has to act within the four corners of the statute creating it, otherwise, any of its acts would be ultra virus. In the present case, the assessee had claimed the benefit of deduction legitimately available to it under section 80-IB of the Act and, therefore, no prejudice was caused to the Revenue ; | |
| (v) | As ruled by the hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83/109 Taxman 66, the Commissioner of Income-tax has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous ; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent-if the order of the Assessing Officer is erroneous, but, is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-recourse cannot be had to section 263(1) of the Act ; |
| ♦ | that the hon'ble court further held that when the Assessing Officer adopted one of the course permissible under the law and it has resulted in loss of revenue, or where two views are possible and where the Assessing Officer had taken one of the views with which the Commissioner of Income-tax does not agree, it cannot be treated as the erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Assessing Officer is unsustainable in law ; | |
| ♦ | that the hon'ble Hyderabad Tribunal in the case of ITO v. S. Venkataiah [2012]52 50T 437/22 taxman.com 2 had recorded its findings that the claim of the assessee cannot be denied on technicalities when the assessee is legally otherwise entitled to the deduction relies on the following case laws : |
| (a) | CIT v. Smt. Minalben S. Parikh [1995] 215 ITR 81/79 Taxman 184 (Guj) ; | |
| (b) | CIT v. Ratlam Coal Ash Co. [1988] 171 ITR 141/[1987] 34 Taxman 443 (MP) ; and | |
| (c) | CIT v. Arvind Jewellers [2003] 259 ITR 502/[2002] 124 Taxman 615 (Guj). |
| (vi) | Extensively quoting the provisions of sections 80AC, 80-IB(1), 139(1), 139(4) and 119 of the Act, it was submitted that the provisions contained in section 80AC as regards the time limit for filing the return of income is directory but not mandatory in view of the aforesaid provisions of the Act permitting relaxation of the time limit filing the return and that such relaxation is statutory in nature as allowed by the statute itself and not administrative in character. | |
| (vii) | In conclusion, it was submitted that— |
| (a) | the prerequisite to the exercise of jurisdiction by the Commissioner of Income-tax suo motu under section 263 is that the order of the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner of Income-tax has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous ; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent-if the order of the Assessing Officer is erroneous, but, is not prejudicial to the Revenue or if it's not erroneous but is prejudicial to the Revenue, recourse cannot be had to section 263(1) of the Act ; | |
| (b) | the Assessing Officer adopted one of the courses permissible under law and it had resulted in loss of revenue or where two views are possible and where the Assessing Officer has taken one of the views with which the Commissioner of Income-tax does not agree, it cannot be treated as the erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Assessing Officer is unsustainable in law ; | |
| (c) | the provisions of the Act relating to exemption, allowance and deduction, rebate or relief should be interpreted liberally and broadly. Moreover, the provision contained in section 80AC as regards the time limit for filing the return of income is directory but not mandatory in view of the aforesaid provisions of the Act permitting relaxation of time limit for filing the return ; | |
| (d) | the time limit for filing the return of income is neither inflexible nor inelastic. The question that arises, therefore, for consideration as regards the allowance of deduction under section 80-IB of the Act is whether the provisions of section 80-IB are applicable to the assessee or whether the assessee falls within the ambit of the deduction under section 80-IB but not the time limit for filing the return of income as mentioned in section 80AC of the Act. |
7. On the other hand, the learned Departmental representative justified the stand of the Commissioner of Income-tax in invoking the provisions of section 263 of the Act. The sum and substance of the submission made by the learned departmental representative are as under :
| (i) | with regard to the scope of revisional jurisdiction of the Commissioner under section 263 of the Act, reliance is placed on the ruling of the hon'ble jurisdictional High Court in the case of CIT v. Infosys Technologies Ltd. (No. 2) [2012] 341 ITR 293/205 Taxman 98/17 taxmann.com 203 (Kar.) ; | |
| (ii) | that since the Commissioner of Income-tax had only directed the assessing authority to recompute it and make it explicit as to the entitlement of the assessee, it was always open to the assessee to justify the claim in terms of the agreement ; and that it could not be accepted that the materials had been placed before the assessing authority and, therefore, there should be a conclusion that the authority had applied his mind to the same and there was no question of the Commissioner of Income-tax interfering by taking a different view. Relies on the ruling of the hon'ble jurisdictional High Court on the case of CIT v. Namdhari Seeds (P.) Ltd. [2012] 341 ITR 342/203 Taxman 565/16 taxmann.com 83 (Kar.). | |
| (iii) | that in the present case, the assessee had filed its return of income for the assessment year 2007-08, under dispute on April 16, 2009 and claimed deduction under section 80-IB(10) ; that the return was filed belatedly even after the expiry of time specified under section 139(4) of the Act which clearly attract the provisions of section 80AC of the Act. | |
| The learned Departmental representative relies on the following case laws : |
| (a) | Saffire Garments v. ITO [2013] 140 ITD 6/[2012] 28 taxmann.com 27 (Raj.) (SB) and | |
| (b) | Bal Kishan Dhawan HUF v. ITO [2012] 18 Taxmann.com 234/50 SOT 49 (Asr.) (URO). |
| (iv) | that as per sub-section (13) of section 80-IB of the Act profits and gains derived from an undertaking shall not be admissible unless the accounts of the undertaking for the relevant period for which deduction is claimed, have been audited by an accountant and audit report in Form No.10CCB to be furnished along with the return. However, in the instant case, neither Form No. 10CCB was furnished along with the return nor filed before the completion of the assessment and, thus, the assessee is disentitled from being allowed deduction under section 80-IB(10) of the Act ; | |
| (v) | that there was no discussion whatsoever in the order as to how the Assessing Officer arrived at a conclusion that the assessee was eligible for deduction under section 80-IB despite the fact that the return was belated. There was thus incorrect assumption of facts and application of law which would satisfy the requirement of the order being erroneous. There was also no mention of as to what were those two views and as to how the Assessing Officer intends to adopt one of the views. Thus, the Commissioner of Income-tax was right in passing the revisional order under section 263 of the Act ; |
8. In conclusion, it was reiterated that the case laws relied on by the assessee are clearly distinguishable from the facts of the present case under consideration. It was, therefore, pleaded that the stand of the Commissioner of Income-tax in invoking the provisions of section 263 of the Act requires to be sustained.
9. We have heard both the parties and carefully analysed the submissions of the rival parties, perused the relevant case records, as well as the judicial decisions on which both the parties have placed their strong reliance.
10. Admittedly, the assessee's premise was subjected to a survey operation under section 133A of the Act on January 4, 2008. According to the Assessing Officer, during the course of survey, the assessee was found to have failed to meet the criteria for qualifying for the claim of deduction under section 80-IB of the Act in respect of one of the projects and, accordingly, the same was denied for the assessment years 2005-06 and 2006-07.
11. For the assessment year under dispute, the assessee had not filed its return of income as on the date of survey. In compliance to a notice under section 148 of the Act dated February 16, 2009, the assessee had furnished a return on April 16, 2009, declaring nil income after claiming deduction of Rs. 1,98,02,225 under section 80-IB of the Act. During the course of assessment proceedings, the Assessing Officer had scrutinised the details furnished by the assessee and, accordingly, concluded the assessment after disallowing certain claims of the assessee.
12. Subsequently, the Commissioner of Income-tax-III, Bangalore, had invoked the provisions of section 263 of the Act on the premise that the assessment order passed by the Assessing Officer was erroneous and prejudicial to the interests of the Revenue in the sense that deduction under section 80-IB(10) amounting to Rs. 1.98 crores was wrongly allowed, resulting in, underassessment of income. The Commissioner of Income-tax, to justify his stand, placed reliance on the provisions of section 80AC of the Act, which stated that no deduction under section 80-IB shall be allowable unless the assessee furnishes the return of income on or before the due date as prescribed under section 139(1) of the Act.
13. To counter the Commissioner of Income-tax's stand, the learned authorised representative drew our attention to the provisions of section 139(4) of the Act. For appreciation of facts and clarity, the relevant portion of section 139(4) which has been substituted by the Direct Tax Laws (Amendment) Act, 1987 with effect from April 1, 1989 is extracted as below:
"(4) Any person who has not furnished a return within the time allowed to him under sub-section (1), or within the time allowed under a notice issued under sub-section (1) of section 142, may furnish the return for any previous years at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier."
14. As per section 139(4) of the Act, it was claimed, it is abundantly implicit that the time limit for filing the return was neither rigid nor inelastic.
15. The debatable question is as to whether the assessee is entitled to claim deduction under section 80-IB of the Act, even though it had not filed return of income within the due date of filing of return under section 139(1) of the Act but the same was filed within the due date mentioned under section 139(4) of the Act?
16. At the outset, we would like to point out the return of income furnished by the assessee was, admittedly, belated ; being filed after the expiry of time specified under section 139(4) of the Act and, thus, attract the provisions of section 80AC of the Act. At this juncture, we would like to recall that a similar issue to that of the present one came up for consideration before the hon'ble Tribunal of Rajkot Special Bench in the case of Saffire Garments Sapra. After analysing the issue in depth and also extensively quoting various provisions of sections of the Income-tax Act and judicial view on the issue, the Special Bench had observed that (page 631) :
"16. The second submission of the learned authorised representative in the written submission is that the requirement of filing of return of income is procedural aspect and, therefore, it should be considered as directory and not mandatory. In support of this contention also, reliance has been placed on various decisions submitted by the assessee in the paper books II and III. We do not find any merit in these submissions of the assessee also because when consequences of not filing the return of income within the due date prescribed under section 139(1) of the Income-tax Act, 1961 are so grave, i.e., charging of interest 234A, possibility of prosecution under section 276CC and denial of various deductions under sections 10A, 10B, 10BA and various sections under Chapter VI-A, it cannot be said that this requirement of filing return of income is a procedural aspect . . .
23. The only issue raised in this appeal is the one which we have considered in the question No. (a). We have held that the provisions of the proviso to section 10A(1A) are mandatory and not directory i.e., in favour of the Revenue and against the assessee."
17. Further, an identical issue was also considered by the hon'ble Amritsar Bench of the Tribunal in the case of Bal Kishan Dhawan Supra wherein it has been held as under:
"Bare perusal of section 80AC reveals that it had not only contained the time limit for preferring the claim of deduction under section 80-IB, but it also provides for the consequences that would follow if the return of income containing claim for deduction under section 80-IB is not furnished before the due date specified in section 139(1) (para 13).
It is quite apparent on bare perusal of section 80AC that the provisions contained therein are mandatory. If the assessee wants to avail deduction under section 80-IB, he has to necessarily furnish his return of income containing such claim before the due date specified in section 139(1). The language of section 80AC is negatively worded inasmuch as it provides in clear terms that deduction under section 80-IB shall not be allowed if the return of income containing such claim is not furnished by the due date specified in section 139(1). In the face of such clear language of section 80AC, it is evident that the provisions of section 80AC are mandatory in nature. Therefore, failure to furnish the return of income before the due date specified in section 139(1) would disentitle the assessee for the claim of deduction under section 80-IB (para 14).
It is well settled that an act must be done strictly in the manner provided by law. If section 80AC requires that deduction under section 80-IB cannot be available unless the return is furnished before the due date specified in section 139(1), the claim of the assessee for deduction cannot be entertained in contravention of the provisions of section 80AC. (para 15)."
18. Considering the facts and circumstances of the issue as deliberated upon in the fore-going paragraphs and also in conformity with the rulings of the hon'ble Benches of the Tribunals cited supra, we are in agreement that section 80AC of the Act prohibits deduction under section 80-IB of the Act if the return is not furnished on or before the due date as specified under section 139(1) of the Act. It is ordered accordingly.
19. However, the assessee had, during the course of hearing, sought the permission of this Bench to raise the following additional grounds for the consideration of this Bench, namely :
| (i) | that the Commissioner of Income-tax was not justified in holding that the order of the Assessing Officer was erroneous and prejudicial to the interests of the Revenue ; | |
| (ii) | that the Commissioner of Income-tax had failed to appreciate that the view taken by the Assessing Officer was sustainable in law ; and | |
| (ii) | that the Assessing Officer had adopted one of the plausible views under the law ; and, thus, the order cannot be treated as erroneous and prejudicial. |
20. After due consideration of the rival submissions on the issue of the additional grounds sought to be raised by the assessee are admitted for consideration.
21. In the present case, on a close scrutiny of the assessment order, it is observed that during the course of survey under section 133A of the Act, the Assessing Officer noticed that since the assessee had not met the criteria for claiming deduction under section 80-IB in respect of one of the projects and presumably after due consideration of the facts of the case in detail by the Assessing Officer, deduction under section 80-IB of the Act for the assessment years 2005-06 and 2006-07 was denied. The above facts also find place in the assessment order for the assessment year under dispute. Further, during the course of assessment proceedings for the assessment year under consideration, it becomes visible that the Assessing Officer had taken into cognizance of the details furnished by the assessee which included the claim of deduction under section 80-IB(10) of the Act and also keeping in view the judicial pronouncements on a similar situation at that relevant period, concluded the assessment thereby allowing the assessee's claim. Another salient feature which we would like to highlight that the assessment proceedings were concluded after thorough scrutiny of the details furnished by the assessee that too under section 147 read with section 143(3) of the Act. Had there been any flaw in the claim of the assessee for deduction under section 80-IB(10) of the Act for the assessment year under consideration, we are sure, the Assessing Officer would not have allowed the claim of the assessee. This fact amply suggests that the view (one of the views) adopted by the Assessing Officer can neither be termed as erroneous nor prejudicial in the interests of the Revenue. Such being the scenario, we decline to agree with the Revenue's perception that the assessment passed by the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue. The order passed either under section 147 read with section 143(3) of the Act or under section 143(3) of the Act can only be revised by invoking the provisions of section 263 of the Act, if the assessment order is found to be both erroneous and prejudicial to the interests of the Revenue. However, in the instant case, the Assessing Officer had, indeed, called for details from the assessee and after examining the same, came to the conclusion that the assessee is entitled to deduction under section 80-IB(10) of the Act. As such, one cannot term the Assessing Officer's action as erroneous.
22. To strengthen our perception, we recall the ruling of the hon'ble Delhi High Court (Full Bench) in the case of CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1/123 Taxman 433 wherein it has been observed that (page 19) :
"The submission . . . An order of assessment can be passed either in terms of sub-section (1) of section 143 or sub-section (3) of section 143. When a regular order of assessment is passed in terms of said sub-section (3) of section 143, a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of clause (e) of section 114 of the Indian Evidence Act, the judicial and official acts have been regularly performed."
23. Further, the hon'ble Delhi High Court has, in its judgment in the case of CIT v. Honda Siel Power Products Ltd. [2011] 333 ITR 547[2010]194 Taxman 175 ruled as under (page 558) :
"The expression prejudicial to the interests of the Revenue, appearing in section 263 has to be read in conjunction with the expression erroneous and that every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. In cases where the Assessing Officer adopts one of the courses permissible in law or where two views are possible and the Assessing Officer has taken one view, the Commissioner of Income-tax cannot exercise his powers under section 263 to differ with the view of the Assessing Officer even if there has been as loss of revenue. Of course, if the Assessing Officer takes a view which is patently unsustainable in law, the Commissioner of Income-tax can exercise his powers under section 263 where a loss of revenue results as a consequence of the view adopted by the Assessing Officer . . . . While passing an order under section 263, the Commissioner of Income-tax has to examine not only the assessment order, but the entire record of the profits. Since the assessee no control over the way an assessment order is drafted and since, generally, the issues which are accepted by the Assessing Officer do not find mention in the assessment order and only those points are taken note of on which the asseessee's explanations are rejected and additions/disallowances are made, the mere absence of the discussion of the provisions of section 80-IB(13) read with section 80-IA(9) would not mean that the Assessing Officer had not applied his mind to the said provisions . . . There is no material to indicate that the Assessing Officer had not applied his mind to the provisions of section 80-IB(13) read with section 80-IA(9). The presumption that the assessment orders passed under section 143(3) passed by the Assessing Officer had been passed upon an application of mind, has not been rebutted by the Revenue. No additional facts were necessary before the Assessing Officer for the purpose of construing the provisions of section 80-IB(13) read with section 80-IA(9). It was only a legal consideration as to whether the deduction under section 80HHC was to be computed after reducing the amount of deduction under section 80-IB from the profits and gains. There is no doubt that the Assessing Officer had allowed the deduction section 80HHC without reducing the amount of deduction allowed under section 80-IB from the profits and gains. He did not say so in so many words, but that was the end result of his assessment order. Since he was holding in favour of the assessee, . . . it cannot be said that the Assessing Officer had not applied his mind. It cannot also be said that the Assessing Officer had failed to make any enquiry because no further enquiry was necessary and all the facts were before the Assessing Officer . . . .
It is also true that the validity of an order under section 263 has to be tested with regard to the position of law as it exists on the date on which such an order is made by the Commissioner of Income-tax. From the narration of facts in the Tribunal's order, it is clear that on the date when the Commissioner of Income-tax passed his orders under section 263, the view taken by the Assessing Officer was in consonance with the views taken by several Benches of the Income-tax Appellate Tribunal. Therefore, the conclusion of the Tribunal that the Commissioner of Income-tax could not have invoked his jurisdiction under section 263 of the said Act was correct . . . The Income-tax Appellate Tribunal was correct in law in cancelling the order passed by the Commissioner of Income-tax under section 263 and in restoring the order of the Assessing Officer by holding that the Assessing Officer had taken a possible view at the relevant point of time."
24. Incidentally, a similar issue to that of the present one came up for consideration before the earlier Bench of this Tribunal in the case of Infosys BPO Ltd. v. CIT [2013] 33 taxmann.com 649 (Bag-Trib.) the assessment year 2005-06. After analysing the rival submissions and also extensively quoting the ruling of the hon'ble jurisdictional High Court in the case of CIT v. Infosys Technologies Ltd. (No. 2) supra the hon'ble Bench had observed thus :
"7. . . . we find that the basic grievance before us is with regard to the validity of the proceedings under section 263 of the Income-tax Act. As held by the hon'ble High Court of Karnataka in the case of Infosys Technologies Ltd.,(No. 2) [2012] 205 Taxman 98/17 taxmann.com 203 where the assessing authority has considered the issue at length and has taken a possible view, then merely because the said order does not meet the approval of the Commissioner of Income-tax, it would not become an erroneous order to be revised under section 263 of the Income-tax Act. In the case before us, the assessing authority has considered the issue at length at pages 2 and 3 of his order, has held as under . . . :
8. The above order of the assessing authority clearly shows that he has applied his mind to the facts of the case before him and as to whether the unabsorbed business loss and depreciation are to be reduced from the total turnover before allowing claim of deduction under section 10A of the Income-tax Act. Therefore, in our opinion, the decision of the hon'ble High Court of Karnataka in the case of Infosys Technologies Ltd.(No. 2) supra is clearly applicable to the facts of the case before us and, therefore, the order of the Commissioner of Income-tax (Appeals) under section 263 has to be quashed."
25. In an overall consideration of the facts and circumstances of issue as deliberated upon in the foregoing paragraphs and in conformity with the ratio laid down by the various judiciary including the co-ordinate Bench of this Tribunal in the case of CIT v. Infosys Technologies Ltd. (No. 2) supra we are of the considered view that the Commissioner of Income-tax was not justified in coming to a conclusion that the order passed by the Assessing Officer under section 147 read with section 143(3) of the Act was erroneous and prejudicial to the interests of the Revenue thereby invoking the provisions of section 263 of the Act and directing the Assessing Officer to withdraw the deduction allowed under section 80-IB(10) of the Act. In essence, the stand of the Commissioner of Income-tax in invoking the provisions of section 263 of the Act is not sustainable. It is ordered accordingly.
26. In the result, the assessee's appeal is allowed.
USP Regards
Prarthana Jalan
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