2014 (6) TMI 291 - HC - Income Tax

Entitlement for deduction u/s 10B of the Act Typographical error Section 10B inadvertently types as 80IB of the Act Held that - Following Goetze (India) Limited Versus Commissioner of Income-Tax 2006 (3) TMI 75 - SUPREME Court - the assessee-company was under the bona fide belief that there was no mistake in the return, hence no revised return was filed but after knowing the clerical/computerized mistake that the claim was wrongly mentioned as u/s 80-IB instead of section 10B - since the AY 2004-05, the assessee did not have any taxable income after adjusting the unabsorbed depreciation and the tax was being paid u/s 115J and the deduction u/s 10B was being claimed in computation of income - the mentioning of section 80-IB was only clerical mistake and with all fairness as per the facts and circumstances and as per the previous claims in tax calculation u/s 115J, the assessee was legally entitled for the benefit - the spirit behind this statement must be that the assessee should have claimed the exemption in his return and filed the same within due date and the assessee clearly shows that the claim was duly made but the section was inadvertently wrongly mentioned and the fact came to the notice of the assessee at a later point of time when pointed out by the AO - the purpose of the assessment proceedings before the taxing authorities was to assess the income correctly and the tax liability of an assessee in accordance with law. The CIT(A) had plenary power in disposing of an appeal - The scope of his power was co-terminus with that of the ITO - In the absence of any statutory provision, the appellate authority was vested with all the plenary powers which the subordinate authority might have in the matter - as the assessee has filed a revised computation, it holds good as except the change of section from 80-IB to 10B, all other supporting material remained the same including the audit report claiming exemption Relying upon CIT v. Prabhu Steel Industries P. Ltd. 1987 (1) TMI 17 - BOMBAY High Court - where a claim for special deduction was made by the assessee not in his return but in the course of the assessment proceedings and the AO failed to consider the same, it was open to the appellate authority to entertain the claim. Once the assessee was found eligible for an exemption u/s 10B, it having been allowed such exemption and merely because a typographical error crept in while e-filing the return and it was mentioned as u/s 80-IB instead of section 10B, this being a technical mistake, should not come in the way by disallowing the otherwise allowable/eligible exemption there was no infirmity in the order of the Tribunal no substantial question of law arises for consideration Decided against Revenue.

Issues Involved:
1. Eligibility for deduction under section 10B of the Income-tax Act.
2. Impact of typographical error in the tax return on claiming deductions.
3. Powers of appellate authorities to consider claims not made in the original return.
4. Applicability of section 80A(5) of the Income-tax Act.
5. Relevance of the Goetze (India) Ltd. v. CIT case.

Detailed Analysis:

1. Eligibility for Deduction under Section 10B:
The respondent-assessee, a private limited company engaged in manufacturing and exporting, claimed eligibility for deduction under section 10B of the Income-tax Act as a 100% export-oriented unit. The assessee had consistently received this exemption in previous years and fulfilled all conditions laid down under section 10B. However, due to a clerical error, the exemption was claimed under section 80-IB instead of section 10B in the return filed for the assessment year 2008-09.

2. Impact of Typographical Error:
The assessee argued that the mistake was due to an operator's error in the chartered accountant's office during e-filing. Despite this, all conditions for section 10B were met, and the error was promptly explained to the Assessing Officer (AO). The AO, however, disallowed the claim, stating that strict compliance with the Income-tax Act was required and that the claim should have been made through a revised return. The appellate authorities, including the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal (ITAT), found this to be a technical defect and ruled in favor of the assessee, allowing the deduction under section 10B.

3. Powers of Appellate Authorities:
The judgment emphasized the plenary powers of appellate authorities, which are co-terminus with those of the AO. The appellate authorities can entertain claims not made in the original return if they are bona fide and supported by necessary documentation. This view aligns with various precedents, including the Supreme Court's decision in Jute Corporation of India Ltd. v. CIT and the Bombay High Court's ruling in CIT v. Pruthvi Brokers and Shareholders P. Ltd.

4. Applicability of Section 80A(5):
Section 80A(5) states that if a claim for deduction under specific sections, including 10B, is not made in the return of income, no deduction shall be allowed. The AO relied on this provision to disallow the claim. However, the appellate authorities interpreted this provision in light of the broader objective of tax administration, which is to assess the correct tax liability. They concluded that a typographical error should not lead to the disallowance of an otherwise eligible deduction.

5. Relevance of the Goetze (India) Ltd. v. CIT Case:
The AO cited the Supreme Court's decision in Goetze (India) Ltd. v. CIT to support the disallowance. However, the appellate authorities noted that this case pertained to the powers of the AO and did not restrict the powers of appellate authorities. The Supreme Court had clarified that the decision was limited to the AO's powers and did not impinge on the powers of the ITAT under section 254 of the Income-tax Act.

Conclusion:
The High Court upheld the decisions of the CIT(A) and ITAT, affirming that the assessee was eligible for the deduction under section 10B despite the typographical error. The court emphasized that the primary objective of tax assessment is to determine the correct tax liability, and technical mistakes should not prevent the granting of rightful exemptions. The appeal by the Revenue was dismissed, and no costs were awarded.

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