2021 (11) TMI 767 - AT - Income Tax

Reopening of assessment u/s 147 - assessee stating per its return of income of it being not liable to get its account audited u/s. 44AB - HELD THAT - Qua the first limb of the reason recorded, when the assessee states in its return of income a duly verified document, that it is not liable to get its accounts audited u/s. 44AB, it only means that, in view of the assessee, the said provision is not applicable thereto for the relevant year. The only inference arising from the said statement by the assessee in its return, which is to be regarded as true and, further, only where the AO has reason/s to believe of the assessee being, on the contrary, liable to get its account audited u/s. 44AB, is that the assessee has not complied with the provisions of the said section. There is no income implication, even as none emanates from the (part of the) said reason, as recorded, as well. The assessee may at best be liable to penalty u/s. 271B. The first limb of the reason recorded, is, thus, clearly not valid. Non-eligibility to deduction u/s. 80IB(11A) - Board has per its Circular 09/2006, relied upon by the ld. Sr. DR, clarified that the returns in old forms would not be valid, and that the assessees shall be required to furnish returns in the new forms. This is only in terms of the law; s. 139(1) providing for furnishing the return of income in the prescribed form. No dispute or objection stands raised by the Revenue in the matter, at any stage, accepting the return furnished as valid. This is particularly relevant in view of s. 80-AC. No issue qua the prescribed form, therefore, obtains. In the instant case, the assessee has acted consistent with law furnishing the return within the prescribed time, in the annexure-less mode; obtained the audit report in the prescribed form (Form 10CCB) in time (on 25/8/2008)(PB-1, pgs. 24-29), and furnished the same before the AO at the earliest possible time, i.e., on 23/2/2010, along with the reply in response to the notice u/s. 148(1) dated 20/1/2010. No reason to believe non-conduct of audit u/s. 80-IB and, thus, non-eligibility to deduction thereunder could have been, in view of the foregoing, formed by the AO, who cannot but be aware of the extant procedure, or is required to be, particularly when the reason formed is based on the provisions of law. As clarified by the Apex Court in Jaganmohan Rao (V.) 1969 (7) TMI 4 - SUPREME COURT , it is only the true and correct state of law that can form a basis for the reason to believe escapement of income from assessment. AO, where he wanted to clear his doubts in the matter, ought to have inquired with the assessee, as u/s. 133(6). No wonder, the law stands amended since (by Finance Act, 2020, w.e.f. 01/4/2020), delinking the furnishing of the audit report from that of the return of income, so that both are independently required to be furnished by the due date/s prescribed in their respect. The second limb of the reason recorded is, thus, also not valid. The assessee, accordingly, succeeds in its legal challenge per Gd.4, so that there is no valid assumption of jurisdiction u/s. 147 in the instant case. - Decided in favour of assessee.

Summary

Issues Involved:
1. Disallowance of deduction under Section 80IB(11A) of the Income Tax Act, 1961.
2. Disallowance of depreciation and imposition of tax.
3. Legality of reopening the case under Section 147 of the Income Tax Act, 1961.
4. Validity of the assessment order dated 06.12.2010.

Issue-wise Detailed Analysis:

1. Disallowance of Deduction under Section 80IB(11A):
The primary issue was the disallowance of ?8,43,219 claimed by the assessee as a deduction under Section 80IB(11A) of the Income Tax Act, 1961. The Assessing Officer (AO) disallowed the deduction on the grounds that the assessee did not furnish the audit report along with the return of income, as required by Section 80IB(13) read with Section 80IA(7). The Tribunal noted that the assessee had filed the return electronically, which did not require the submission of annexures, including the audit report. The Tribunal found that the audit report was obtained in time and furnished during reassessment proceedings. Hence, the Tribunal concluded that the disallowance was not justified.

2. Disallowance of Depreciation and Imposition of Tax:
The second issue involved the disallowance of ?1,01,259 claimed as depreciation. The Tribunal did not delve into the merits of this issue as it became infructuous due to the decision on the legal grounds (Grounds 3 and 4).

3. Legality of Reopening the Case under Section 147:
The assessee challenged the reopening of the case under Section 147 of the Income Tax Act, arguing that it was based on non-existing and irrelevant reasons. The Tribunal examined the reasons recorded for reopening, which were based on the assessee's statement that it was not liable for audit under Section 44AB and the non-furnishing of the audit report required under Section 80IB. The Tribunal found that the first limb of the reason recorded, i.e., the non-liability for audit under Section 44AB, did not have any income implication and was not valid. The second limb, concerning the non-furnishing of the audit report, was also found to be invalid as the audit report was obtained in time and the return was filed in an annexure-less mode, consistent with the law. Therefore, the Tribunal concluded that there was no valid assumption of jurisdiction under Section 147.

4. Validity of the Assessment Order Dated 06.12.2010:
Given the Tribunal's finding that the reopening of the case under Section 147 was invalid, the assessment order dated 06.12.2010 was also rendered void. Consequently, the Tribunal did not need to address the merits of the original grounds of appeal (Grounds 1 and 2).

Conclusion:
The Tribunal allowed the assessee's appeal, holding that the reopening of the assessment under Section 147 was invalid. Consequently, the disallowances made in the assessment order were set aside. The Tribunal emphasized the need for proper representation and accurate legal arguments to assist in arriving at a correct decision. The order was pronounced in the Open Court on September 30, 2021.