2020 (11) TMI 6 - AT - Income Tax

Deduction u/s 10AA - AO found that the assessee had not fulfil the conditions for claiming the exemption u/s 10 AA and has not furnished any evidence of the full consideration in convertible foreign exchange being the brought to India within a period of 6 months from the end of the previous year and the particulars furnished under column 16 of the report in form No. 56F were said to have been not applicable - HELD THAT - Entire exercise of assessment is to determine the just and correct tax liability of the assessee, refusing to look into the relevant material, though submitted at a belated stage, in the absence of any mandatory provisions of law prohibiting such a course, would run contrary to the object of assessment proceedings. Unless prohibited or provided contrary, all the endeavour in the assessment proceedings should be to give a fair chance to the assessee to justify their claim for any benefit provided by law. Lest, the assessment proceedings would be perfunctory rendering it to be a mechanical exercise. We are of the considered opinion that the provisions of section 10 A (3) of the Act cannot be made applicable to the case of the assessee, if the assessee is covered by the provisions of section 10AA of the Act and even otherwise, the AO is free to verify whether the full consideration of the export activity is brought to India in convertible foreign exchange within 6 months or not. We set aside the impugned order and remand the issue to the file of the AO to verify whether the assessee is otherwise entitled to claim the exemption under section 10AA and if the learned Assessing Officer feels it necessary, he may call for any information required for that purpose. Appeal of the assessee is allowed for statistical purpose.

Summary

Issues:
1. Eligibility for exemption under section 10AA of the Income Tax Act, 1961.
2. Compliance with conditions for claiming exemption under section 10AA.
3. Validity of revised auditor's report submission.
4. Applicability of section 10A conditions to section 10AA.

Issue 1: Eligibility for exemption under section 10AA:
The case involved an appeal by M/s RNB International Private Limited against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2013-14. The assessee, engaged in trading of wool and yarn, claimed exemption under section 10AA of the Act. However, the Assessing Officer disallowed the claim as the conditions for the exemption were not met, specifically regarding bringing the full consideration in convertible foreign exchange to India within the stipulated time frame.

Issue 2: Compliance with conditions for claiming exemption under section 10AA:
The assessee contended that the conditions for section 10A were not applicable to section 10AA, and the auditor's report indicated that certain details were not applicable to the case. The Commissioner of Income Tax (Appeals) held that the prescribed form (56F) must be complied with entirely, and the revised auditor's report could not be considered as it was filed after the assessment order.

Issue 3: Validity of revised auditor's report submission:
The contention arose regarding the permissibility of filing a revised auditor's report. The Tribunal noted that the revised report was clarificatory in nature and aimed to demonstrate compliance with the conditions under section 10A. Refusing to consider such material submitted belatedly, without legal prohibition, would undermine the assessment's fairness.

Issue 4: Applicability of section 10A conditions to section 10AA:
The Tribunal analyzed the legislative intent behind section 10AA, noting that certain conditions of section 10A were made applicable to section 10AA, while others were omitted. It was concluded that the conditions under section 10A, specifically regarding bringing sale proceeds into India in convertible foreign exchange, were not automatically applicable to section 10AA.

In conclusion, the Tribunal set aside the previous order and remanded the issue to the Assessing Officer for verification of the assessee's eligibility for exemption under section 10AA. The decision highlighted the importance of allowing the assessee a fair chance to justify their claims and emphasized the need for a comprehensive assessment process.