2016 (3) TMI 175 - AT - Income Tax

Entitlement to claim of deduction u/s 80-HHC - assessment order u/s 143(3) r.w.s. 147 disallowed the claim of the assessee on the ground that the assessee failed to bring export sales realization in convertible foreign exchange within stipulated period - Held that - In the original assessment when this claim was denied by the AO, after noticing that there was a delay in bring sale proceeds and despite that the assessee made a claim u/s 80-HHC. In the remand proceedings, the claim of the assessee was to be considered and decided in the light of the judgment of Azad Tobacco Factory (P) Ltd (1995 (4) TMI 6 - ALLAHABAD High Court ) wherein it has been held that once the assessee has made a claim u/s 80-HHC and there is a delay in bringing sale proceeds within stipulated period, then the assessing authority has neither vested power for allowing the further period nor can he deal with the same. It was held by the Hon ble High Court that the Chief Commissioner or Commissioner, as the case may be, is the competent authority to extend the period on satisfaction that the assessee was unable to do so for the reasons beyond his control. Therefore, once the assessee made a claim, the AO was required to place the same before the CCIT or CIT, as case may be, and the assessee was required to explain the reason for delay. In the case in hand, AO has not followed the procedure as required to place the matter before the CCIT or CIT, as the case may be, but himself has decided to refuse the extension of time claimed by the assessee which is beyond the jurisdiction of the AO. Accordingly, in the facts and circumstances of the case, we do not find any error or illegality in the order of the CIT(A). - DEcided against revenue

Summary

Issues involved:
- Denial of claim of deduction u/s 80-HHC of the IT Act, 1961
- Compliance with procedural formalities for extending time for bringing export sale realization
- AO's jurisdiction in deciding the issue after remand by the Tribunal

Analysis:

1. Denial of deduction u/s 80-HHC:
The appeal pertains to the denial of the deduction u/s 80-HHC by the AO due to the failure of the assessee to bring export sale realization in convertible foreign exchange within the stipulated period. The Tribunal had previously remitted the issue to the AO for proper consideration in accordance with law and the judgment of the Hon'ble Allahabad High Court. The CIT(A) allowed the claim of the assessee, emphasizing that the delay in receiving sale proceeds was beyond the control of the assessee. The AO's denial of the deduction was based on the absence of evidence showing reasons for the delay. The AR of the assessee argued that once a claim is made and reasons for delay are explained, it is the duty of the AO to seek an extension of time from the CIT or CCIT. The Tribunal upheld the CIT(A)'s decision, stating that the AO's refusal to consider the extension of time claimed by the assessee was beyond the AO's jurisdiction.

2. Compliance with procedural formalities:
The CIT(A) highlighted that the AO did not follow the procedure required to seek an extension of time from the CIT or CCIT after the assessee made a claim for deduction u/s 80-HHC. The Tribunal emphasized that the AO lacked the authority to refuse the extension of time claimed by the assessee and that such decisions should be made by the competent authority, i.e., the CCIT or CIT. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO's actions were beyond his jurisdiction.

3. AO's jurisdiction post remand by Tribunal:
The Tribunal reiterated that the AO's jurisdiction post remand was limited to following the directions provided by the Tribunal, which required a decision in accordance with law after considering the judgment of the Hon'ble Allahabad High Court. The AO's decision to deny the deduction without seeking an extension of time from the competent authority was deemed improper. The Tribunal upheld the CIT(A)'s order, stating that the AO's actions were beyond his jurisdiction and that the denial of the deduction was unjustified.

In conclusion, the Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decision to allow the deduction u/s 80-HHC for the assessee. The judgment emphasized the importance of following procedural formalities and the limits of the AO's jurisdiction in such matters.