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TMI Blog2010 (6) TMI 629X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 lump sum on various expenses claimed on vehicles - similar disallowance is merited out of the depreciation claimed on the vehicles – Held that:- once the AO on consideration of the facts had made an addition of Rs. 40,000 out of various expenses claimed on vehicle and there is no merit in invoking the jurisdiction under s. 263 of the Act for making further disallowance on account of depreciation on such vehicles, addition deleted, ground of appeal raised by the assessee are allowed, appeal of the assessee is partly allowed - IT APPEAL NO. 1258 (CHD) OF 2009 - - - Dated:- 21-6-2010 - G.S. PANNU, MS. SUSHMA CHOWLA, JJ. Sudhir Sehgal for the Appellant. N.K. Saini for the Respondent. ORDER Ms. Sushma Chowla, Judicial Member The appeal by the assessee is against the order of CIT-III, Ludhiana, dt. 19th Oct., 2009 relating to asst. yr. 2005-06 against the order passed under s. 143(3) of the IT Act. 2. The only issue arising in the present appeal is against the action of CIT in exercising the reversionary powers under s. 263 of the Act. The brief facts of the case are that the assessment in the case was completed under s. 143(3) of the IT Act vide order dt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and audit report. The certificate from the chartered accountant regarding claim of deduction under s. 80-IC was also filed with the return of income based on which deduction was claimed. The above documents were also verified by the earlier AO while framing the assessment under s. 143(3) and after considering all the facts had allowed the deduction under s. 80-IC to the assessee. Further, for the sake of argument and without predjudice to above submissions, even if it is assumed that the assessee has not filed the audit report for the claim of deduction under s. 80-IC, even then the AO has rightly allowed the deduction to the assessee, since he was aware that the assessee has unit in Parwanoo which is entitled to deduction under s. 80-IC and, therefore, he was duty bound to give deduction to the assessee in view of Circular No. 14(XL-35) of 1955, dt. 11th April, 1955 issued by CBDT by which the AOs and tax official are directed not to take the benefit of ignorance of the taxpayer and it is their duty to assist a taxpayer in every reasonable way ...." 4. The assessee further stated as under : Thus, it is clear from the foregoing factual position that the AO examined the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee from the point of allowability. The assessee did not claim before the AO that it was entitled for deduction under s. 80-IC of the Act. The AO also did not verify whether the assessee was entitled to deduction under s. 80-IC. Above all, the mandatory requirement of filing the audit report in Form No. 10CCB was not filed along with the return of income. It was not filed even during the course of assessment proceedings. Filing of audit report in Form No. 10CCB is a condition precedent for grant of special deduction under s. 80-IC/80-IB. The assessment record shows that it was not even filed during the course of assessment proceedings so as to take a plea that there was substantial compliance of the mandatory requirement. The AO has allowed deduction under s. 80-IB which the assessee was not entitled and that too without having the audit report in Form No.10CCB. The copy of the first page of the Saral return for asst. yr. 2004-05 (Form No. 2D) is enclosed as Annex.-A to this order as evidence to show that report in Form No. 10CCB was not filed along with the return. Thus the order of the AO was erroneous as well as prejudicial to the interest of the Revenue." 7. The CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... audit report along with the return of income. He further pointed out that the AO had allowed the deduction under s. 80-IB of the Act and later on a query was raised by the AO in respect of the claim of deduction under s. 80-IC of the Act. The learned Authorised Representative further pointed out that while exercising the power under s. 263 of the Act, the CIT is to consider the records and the expression 'record' means documents available on record, till date of show-cause notice issued. Reliance was placed on the ratio laid down in South India Steel Rolling Mills v. CIT [1997] 224 ITR 654/91 Taxman 196 (SC) and in CIT v. Shree Manjunathesware Packing Products Camphor Works [1998] 231 ITR 53/96 Taxman 1 (SC). With regard to the disallowance out of vehicle expenses, it was pointed out that an estimated disallowance was made which included the disallowance out of depreciation on vehicles and no further disallowance is merited. 10. The learned Departmental Representative for Revenue pointed out that the AO has failed to look into the claim of deduction under s. 80-IC of the Act. He further pointed out that the assessee claims that the details and the reports were filed d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egarding the claim of deduction under s. 80-IC of the Act was filed with the return of income. In the alternative, without prejudice to the submissions made, it was pointed out that even if it is assumed that the assessee had not filed the audit report for the claim of deduction under s. 80-IC of the Act, the AO had rightly allowed the deduction as he was aware that the unit in Parwanoo was entitled to deduction under s. 80-IC of the Act, as it is duty of the tax official to assist a tax payer in every reasonable rate. The assessee also drew support from the letter dt. 6th Nov., 2007. issued by the AO, in reply to which the assessee vide letter 15th Nov., 2007 had annexed the report under s. 80-IC of the Act and the audit report of the Parwanoo unit. The argument of the assessee in this regard is that the documents being available on record, copies of which were again filed before the CIT during the proceeding under s. 263 of the Act, the same may be considered in the interest of justice. 12. The CIT had perused the assessment records and had noted the following facts emerging from the record : A. The return of income from asst. yr. 2005-06 was filed on 31st Oct., 2005 decl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits of such unit, and the same being allowed by the AO without considering the aspect of the unit being not eligible to claim of deduction under s. 80-IB of the Act, which in turn was to be available to all such units, which had started its production/manufacture by 31st March, 2004, the action of CIT is valid. The order passed by the AO in the facts and circumstances of the case is without application of mind, wherein a claim made by the assessee for deduction under s. 80-IB of the Act had been allowed against the provisions of the Act and without verification. The said order passed by the AO is also erroneous as in allowing the said claim of deduction under s. 80-IB of the Act in the absence of the necessary audit report/certificate from the chartered accountant being filed either with the return of income or during the course of assessment proceedings. In allowing the said claim, the order was caused prejudice to the interest of Revenue. We confirm the order of CIT in holding that the assessee is not entitled to the claim of deduction under s. 80-IB of the Act. 15. The assessee had raised a second plea with regard to the claim of deduction under s. 80-IC of the Act whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in para 15 of its reply to the show-cause notice issued under s. 263 of the Act has not been addressed by the CIT. The CIT has failed to address the issue of documents being available on 'record'. In the circumstances, we deem it fit to restore the issue back to the file of CIT. The second limb of argument of assessee before CIT in the proceedings under s. 263 of the Act was that the relevant documents being report of chartered accountant for claim of deduction under s. 80-IC and audit report of Parwanoo unit is being filed before the CIT and in the interest of justice and equity and for the sake of argument can be considered now. The CIT has failed to address and adjudicate the plea of the assessee regarding allowability of deduction under s. 80-IC of the Act in view of the relevant documents being filed. We uphold the order of CIT in holding that the assessee is not entitled to the claim of deduction under s. 80-IB of the Act. However, the alternate plea of the assessee in respect of claim of deduction under s. 80-IC of the Act needs to be examined and decided by the CIT in accordance with law. The matter is remitted back to the file of CIT to decide and examine the alternativ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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