2019 (11) TMI 584 - AT - Income Tax

Denial of deduction u/s.10B - belated filing of the return of income - reasonable cause in respect of the delay in filing of the returns - HELD THAT - The facts remain that there was a survey on the premises of the assessee on 23.03.2010. For the assessment years 2008-09 and 2009-10, there was a delay in filing of the return on account of the Accountant of the company turning against the company and thereby causing loss of data, which had to be sorted out by sending the main server of the assessee to software engineers for retrieval of the original data. Though the reasons had been mentioned for the delay, and though such reasons do at the outset, seem to be reasonable, no evidence with supporting evidence has been placed before the Tribunal. The matter of the reasonable cause in respect of the delay in filing of the returns is before the Hon ble Jurisdictional High Court for assessment years 2008-09 2009-10 respectively. The issue is sub judice before the Hon ble Jurisdictional High Court and it is not appropriate for this Tribunal to decide on the said issue. However, considering the fact that, these are old appeals, and they need to dispose off the issues in the quantum appeals by the Revenue for assessment year 2008-09 and 2009-10 are restore to the file of Assessing Officer for denovo re-adjudication after granting the assessee adequate opportunity of being heard and after receipt of the decision of the Hon ble Jurisdictional High Court in Writ Petition in respect of condonation of delay in filing the return referred to supra for assessment years 2008-09 and 2009-10. Exclusion of freight, insurance from the export turnover as well as total turnover while computing deduction u/s.10B - CIT(A) has followed the judicial discipline and has followed the decision of the Special Bench of Chennai Tribunal in the case of ITO Vs. Sak Soft Ltd 2009 (3) TMI 243 - ITAT MADRAS-D we find no reason to interfere in the order of the ld. CIT(A) on this issue CIT(A) directing the AO to alter the nomenclature of the addition from suppression in export turnover to increase in value of Closing Stock - As the issue of deduction u/s.10B itself is pending before the Hon ble Jurisdictional High Court and as the said issue has been restored to the file of Assessing Officer for re-adjudication after the decision of the Hon ble Jurisdictional High Court in W.Ps filed by the assessee referred to supra, this issue is also restored to the file of Assessing Officer for re-adjudication after considering the directions issued by the Hon ble Jurisdictional High Court in the W.P.s filed by the assessee. The Assessing Officer shall also verify as to whether the alleged suppressed turnover has been included in the turnover of the subsequent assessment years. Disallowance u/s.14A - HELD THAT - Assessing Officer is to verify as to whether the assessee has earned any exempt income from the said investments. If no exempt income is earned, then in view of the decision of the Hon ble Delhi High Court in the case of Joint Investment Pvt. Ltd., Vs. C.I.T 2015 (3) TMI 155 - DELHI HIGH COURT no disallowance is called for. Computation of book profit u/s.115JB - same is restored to the file of Assessing Officer for re-adjudication after deciding on the issue of deduction u/s.10B of the Act. Penalty levied u/s.271(1)(c) - HELD THAT - As the issue of deduction u/s/10B of the Act and various other deductions and additions have been restored to the file of Assessing Officer for re-adjudication denovo, the very foundation of levy of penalty u/s.271(1)(c) of the Act would no more survive, consequently penalty imposed u/s.271(1)(c) of the Act stands deleted as the same has become infructuous.

Summary

Issues Involved:
1. Denial of exemption under Section 10B of the Income Tax Act due to belated filing of returns.
2. Alteration of nomenclature from suppression in export turnover to increase in value of closing stock.
3. Exclusion of freight, insurance, etc., from export turnover and total turnover while computing deduction under Section 10B.
4. Disallowance under Section 14A of the Act.
5. Computation of book profit under Section 115JB of the Act.
6. Levy of penalty under Section 271(1)(c) of the Act.

Detailed Analysis:

1. Denial of Exemption under Section 10B:
The primary issue in the appeals for the assessment years 2008-09 and 2009-10 was the denial of exemption under Section 10B due to the belated filing of returns. The returns were filed late by 4 months and 50 days, respectively. The denial was based on the 4th proviso to Section 10B, which mandates filing within the time prescribed under Section 139(1). The assessee had sought condonation of delay from the CBDT, which was rejected, and the matter was pending before the High Court. The Tribunal decided to restore the issue to the Assessing Officer for re-adjudication after the High Court's decision.

2. Alteration of Nomenclature:
The Revenue's appeal also contested the CIT(A)'s direction to alter the nomenclature from suppression in export turnover to an increase in the value of closing stock. The Tribunal restored this issue to the Assessing Officer for re-adjudication, contingent on the High Court's decision regarding Section 10B.

3. Exclusion of Freight, Insurance, etc.:
The CIT(A) had directed the exclusion of freight, insurance, etc., from both export turnover and total turnover while computing the deduction under Section 10B. This was in line with the Supreme Court's decision in CIT vs. HCL Technologies Ltd. and the Special Bench of Chennai Tribunal in ITO vs. Sak Soft Ltd. The Tribunal found no reason to interfere with the CIT(A)'s order on this issue, dismissing the Revenue's grounds.

4. Disallowance under Section 14A:
For assessment year 2009-10, the issue of disallowance under Section 14A was raised. The Tribunal directed the Assessing Officer to verify whether the assessee had earned any exempt income. If no exempt income was earned, no disallowance under Section 14A was warranted, following the Delhi High Court's decision in Joint Investment Pvt. Ltd. vs. CIT.

5. Computation of Book Profit under Section 115JB:
The computation of book profit under Section 115JB was also restored to the Assessing Officer for re-adjudication after deciding on the issue of deduction under Section 10B.

6. Levy of Penalty under Section 271(1)(c):
The appeals also involved the levy of penalty under Section 271(1)(c) for concealment of income. The Tribunal noted that the foundation of the penalty was the denial of deduction under Section 10B and other related issues, which were restored to the Assessing Officer. Consequently, the penalties were deemed infructuous and were deleted.

Conclusion:
The appeals of the Revenue and the assessee were partly allowed for statistical purposes, with directions for re-adjudication by the Assessing Officer after the High Court's decision. The penalties under Section 271(1)(c) were deleted as they became infructuous. The Tribunal upheld the CIT(A)'s order regarding the exclusion of freight and insurance from turnover calculations and directed verification for disallowance under Section 14A.

Order Pronounced on 07th November, 2019, at Chennai.