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TMI Blog2013 (9) TMI 400X X X X Extracts X X X X X X X X Extracts X X X X ..... .N.Devadoss(HUF) are directed against the common order passed by the Commissioner of Income-tax(Appeals)-I at Chennai, dated 26-3-2012. In these cases the appeals for the assessment years 2008-09 and 2008-09 arise out of the assessments completed under section 153A, read with section 143(3) of the Income-tax Act, 1961. The appeal for the assessment year 2010-11 arises out of the regular assessment completed under section 143(3) of the Act. 4. The assessees herein are engaged in the business of developing and building of housing projects approved by local authorities. The assessees have not filed their returns of income for the impugned assessment years within the due dates prescribed under section 139(1) of the Income-tax Act, 1961. Meanwhile, there was a search action under section 132 conducted on the business premises of the assessees on 6-8-2009 and 17-8-2009. In pursuance of the said search carried out under section 132, the Assessing Officer issued notices under section 153A, requiring the assessees to file their returns of income for the period relevant to six assessment years. The notices under section 153A were issued on 26-7-2011. As the assessment in the case of HUF for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on made by the assessees under section 80IB(10) of the Act. 9. In first appeals, when this issue was agitated, the Commissioner of Income-tax(Appeals) recorded the following findings of fact: 1. The appellants had undertaken housing projects which are eligible for deduction under section 80IB(10). 2. All the mandatory conditions specified under section 80IB have been complied with. 3. There has been a delay in filing of returns within the time limit specified under section 139(1) of the Act. 4. As per section 80AC to be eligible for deduction under section 80IB, the returns should have been filed within the time stipulated under section 139(1). 10. In the light of the above findings of fact, the Commissioner of Income-tax(Appeals) framed two questions to be decided on the issue of deduction under section 80-IB(10): (i) Whether section 80AC is directory or mandatory, and (ii) Whether the returns filed in response to notices issued under section 153A can be taken as returns filed within the time limit stipulated under section 139(1) of the Act. 11. While adjudicating the issue as to whether section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal, Delhi, in the case of ACIT vs. Dhir Global Industries Pvt. Ltd., 133-TTJ-Del- 580 and also on the decision of the jurisdictional Tribunal in the case of ACIT vs. Polyhose India Pvt. Ltd. in ITA No.122(Mds)/2011 dated 30-6-2011. The Commissioner of Income-tax(Appeals) also relied on the judgment of the Hon'ble Delhi High Court in the case of CIT vs. Web Commerce(India) P. Ltd., 318 ITR 135 (Del.). 14. In the light of the above, the Commissioner of Income-tax(Appeals) held that section 80-AC is directory and, therefore, the assessing authority was not justified in denying the assessees' claim for exemption under section 80IB(10) of the Act. 15. The Commissioner of Income-tax(Appeals) has also examined the issue whether the returns filed by the assessees in response to the notice issued under section 153A can be taken as returns filed within the time stipulated under section 139. He found that section 139 provides for filing of returns in different situations. Return of income has to be filed within the due date prescribed under section 139(1). Belated return is to be filed within the time allowed under section 139(4). Any return filed beyond the time limit prescribed either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... light of the detailed discussion made by him, the Commissioner of Income-tax(Appeals) accepted the alternate contention of the assessees that the returns filed under section 153A should be treated as returns filed under section 139(1) and, therefore, the assessees are entitled for the deduction available under section 80IB(10) of the Act. 19. Thus the Commissioner of Income-tax(Appeals) held that the assessee is entitled for the deduction under section 80IB(10) on both the grounds examined and adjudicated by him. 20. This is one of the common grounds raised by the Revenue in all these appeals before us. As the issue is common, the grounds raised by the Revenue in all the five appeals are also common as far as this issue of deduction under section 80IB(10) is concerned. It is the case of the Revenue that the Commissioner of Income-tax(Appeals) has erred in allowing the deduction under section 80IB(10) by accepting the main as well as the alternate grounds raised by the assessees. The Commissioner of Income-tax(Appeals) has failed to note that section 80AC was inserted by the Finance Act, 2006 to ensure compliance in furnishing the return of income by the due date under section 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 10A(1A) provides that no deduction under section 10A shall be allowed to an assessee who does not furnish a return of his income on or before the due date specified under sub-section(1) of section 139. The Income-tax Appellate Tribunal, Rajkot Special Bench has examined the question whether the said stipulation in the proviso to section 10A(1A) is mandatory or directory. The Special Bench in the case of Saffire Garments vs. ITO, 20 ITR (Trib) 623 (Rajkot) (SB) has held that the provisions of the proviso to section 10A(1A), which say that no deduction under section 10A shall be allowed to an assessee who does not furnish a return of his income on or before the due date specified under section 139(1), are mandatory and not directory. The requirement of filing the return of income is not a procedural aspect. The Special Bench held that when the consequences of not filing the return of income within the due date prescribed under section 139(1) of the Income-tax Act, 1961 are so grave, i.e., charging of interest under section 234A, the possibility of prosecution under section 276CC and denial of various deductions under sections 10A, 10B, 10BA and various sections under Chapter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26. In the facts and circumstances of the case and in the light of the decision rendered by the Special Bench of the Income-tax Appellate Tribunal, Rajkot in the case Saffire Garments vs. ITO, 20 ITR (Trib) 623, we hold that filing of return under section 139(1) within the due date prescribed under law is a mandatory provision. If the assessees want to claim deduction under section 80IB(10), it is necessary that the assessees must file their returns of income before the due date prescribed under section 139(1) of the Income-tax Act, 1961. 27. Accordingly, this issue is decided in favour of the Revenue and the finding of the Commissioner of Incometax(Appeals) on this point is set aside. 28. Next we have to examine the decision of the Commissioner of Income-tax(Appeals) rendered on the alternate ground raised by the assessees before him. The alternate ground was whether the returns filed in response to notices issued under section 153A can be taken as returns filed within the time limit stipulated under section 139(1). The Commissioner of Income-tax(Appeals) has decided in favour of the assessees holding that the returns filed under section 153A are to be treated as returns filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction153A. As such, those returns filed before the issue of notices under section 153A are non est. The assessees have filed returns in pursuance of the notices issued by the Assessing Officer under section 153A. It is to be seen that the returns filed by the assessees in response to the notices issued under section153A alone are valid returns sustainable in law. 31. The issue is to be examined in the above background. Valid returns sustainable in law are the returns filed by the assessees in response to notices issued by the Assessing Officer under section 153A of the Act, consequent to the search action carried out under section 132 of the Income-tax Act, 1961. 32. How the requirement of section 139(1) is satisfied by filing a return under section 153A? This is assumed in the light of section 153A(1)(a), where it is stated that where a search is initiated under section 132, the Assessing Officer shall issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years in the prescribed form and verified in the prescribed manner and the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, had the option to recognize their income either on percentage completion method or on project completion method. Therefore, it was not certain to hold that the assessees were liable at all to file returns under section 139(1). Whether the assessees had recognized their income for the impugned assessment years is also not clear. The returns were filed after search made under section 132 but before the issue of notice under section 153A. Those returns were belated returns. Therefore, those returns are non est in law. The emerging picture is that the assessees had filed returns for the first time only in response to notices issued under section 153A. They were filed within the time. Law has not prescribed any time limit for issue of notice under section 153A or for filing of the return in response to notice issued under section 153A. Law provides that an assessee shall file his return in pursuance of the notice issued under section 153A within the time stipulated in the notice. But it is also available in the hands of the Assessing Officer to extend the period of time to file the return. In these cases the assessees have filed returns within the extended time. Therefore, it is to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn within the due date prescribed under section 139(1). It is exactly like the provisions of law stated in section 80AC. Inspite of that, the Tribunal in the above stated case of Mr.Faisal Abbas has held that the assessee is still entitled for carry forward and set off of business loss as the return filed by the assessee under section153A has to be treated as a return filed under section 139(1). The same principle has been followed by the Income-tax Appellate Tribunal, Mumbai G-Bench in the case of DCIT vs. M/s.Eversmile Construction Co. Pvt. Ltd.in ITA No.4238/Mum/2010 dated 30-8-2011. 42. In view of the above discussion and relying on the above mentioned decisions of the Income-tax Appellate Tribunal, Mumbai Benches, we hold that the returns filed by the assessees under section 153A are to be treated as returns filed under section 139(1) by virtue of the law stated in section 153A(1)(a). As such, the assessees are entitled for the deduction available under section 80IB(1). The rider provided in section 80AC does not apply to the present cases, as the returns filed by the assesees under section 153A have been considered as returns filed under section 139(1) within time. 43. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Dr.V.Jayakumar vs ACIT has held that interest is chargeable under section 234A from the date of expiry of the notice period given to the assessee under section 153A. It is because the return filed under section 153A would be deemed to be a return of income under section 139 as per the express language of the provisions of section 153A(1)(a) and therefore the return of income filed under section 153A also is to be processed under section 143(1) and the income determined thereof. These are all consequences of search conducted under section 132 and the issuance of notice under section 153A. Once a recomputation in the assessment order under section 153A is done, the interest chargeable under section 234A would have to be reckoned from the date of determination of income under section 143(1), read with section 153A to the date of the recomputation of income under section 153A, read with section 143(3). This position is in tune with the law stated in section 234A(3). Therefore we find that the Commissioner of Incometax(Appeals) is justified in holding that the interest under section 234A is chargeable from the date of expiry of the notice period given under section 153A to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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