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TMI Blog2013 (11) TMI 1337X X X X Extracts X X X X X X X X Extracts X X X X ..... the various judiciary including the Co-ordinate Bench of this Tribunal in the case of Infosys Technologies Ltd [2012 (1) TMI 76 - KARNATAKA HIGH COURT ], it has been held that CIT was not justified in coming to a conclusion that the order passed by the AO under section 147 r. w. s. 143(3) of the Act was erroneous and prejudicial to the interest of revenue thereby invoking the provisions of section 263 of the Act and directing the AO to withdraw the deduction allowed u/s 80IB (10) of the Act – Invocation of section 263 is not sustainable – Decided in favor of Assessee. - ITA No.536/Bang/2011 - - - Dated:- 12-4-2013 - George George K and Jason Boaz, JJ. For the Appellant : Shri Sachin Kumar, CA For the Respondent : Shri Etwa Munda, CIT-III ORDER:- Per: Jason P Boaz: This appeal of the assessee is directed against the order of the CIT-III, Bangalore passed under section 263 of the Income Tax Act, 1961 (hereinafter referred to as the Act ) dated 31.1.2011 for the Assessment Year 2007-08. 2. Though the assessee has, in its grounds of appeal, raised four grounds, the essence of the appeal is confined to a solitary issue, namely: (i) that the CIT had erred i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich was also beyond the due date specified u/s 139(1) of the Act. 3.2. Accordingly, the assessee was required to show-cause as to why the deduction u/s 80IB (10) allowed by the AO as claimed by the assessee, should not be withdrawn. After due consideration of the assessee s submissions, as recorded in the order, the CIT had modified the assessment order whereby deduction allowed u/s 80 IB (10) of the Act was withdrawn. The reasons recorded for such modification resorted to by the CIT are as under: 4 .As per the provisions of section 80AC of the Income-tax Act, 1961, w. e. f. assessment year 2006-07, no deduction u/s 80IB (10) shall be allowed unless the assessee furnishes the return of income on or before the due date as specified u/s 139(1) of the Income-tax Act, 1961. The assessee has filed return of income belatedly on 16.4.2009 which is beyond the due date specified u/s 139(1) of the Income-tax Act, 1961. Also, the auditor s certificate in Form No.10CCB has not been furnished. The main argument advanced by the assessee is that the assessee company was not under legal obligation to file the return of income u/s 139(1) of the Income-tax Act, 1961 in the absence of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5/- has been wrongly allowed by the ITO, Ward 12(2), Bangalore in the assessment order dated 30.12.2009 passed u/s 147 r. w. s. 143(3) of the Incometax Act, 1961 for the assessment year 2007-08. The assessment order u/s 147 r. w. s. 143(3) of the Incometax Act, 1961 for AY 2007-08 passed by ITO, Ward 12(2), Bangalore, is erroneous and prejudicial to the interests of revenue within the meaning of section 263 of the Income-tax Act, 1961 in so far as deduction u/s 80IB (10) amounting to Rs.1,98,02,225/- has been wrongly allowed resulting in under-assessment of income. The order u/s 147 r.w.s. 143(3) of the Income-tax Act, 1961 for AY 2007-08 passed by the ITO, Ward 12(2), Bangalore, is, therefore, modified to the extent that deduction u/s 80IB (10) of the Income-tax Act, 1961, amounting to Rs.1,98,02,225/- wrongly allowed by the AO stands withdrawn . 4. Aggrieved, the assessee has come up with the present appeal. During the course of hearing, the submissions made by the learned AR are summarized as under: (i) that section 263 of the Act does not permit any inference or conclusion that the order of the assessment passed by the AO is erroneous and prejudicial to the interests o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laws: (a) CIT v. Smt. Minalben S Parikh 215 ITR 81 (Guj); (b) CIT v. Ratlam Coal Ash Co (Cal); (c) CIT v. Arvind Jewellers (Guj) (v) Extensively quoting the provisions of sections 80AC, 80 IB (1), 139 (1), 139(4) and 119 of the Act, it was submitted that the provisions contained in s. 80AC as regards the time limit for filing the return of income is directory but not mandatory in view of the aforesaid provisions of the Act permitting relaxation of the time limit filing the return and that such relaxation is statutory in nature as allowed by the Statute itself and not administrative in character. (vi) In conclusion, it was submitted that (a) the prerequisite to the exercise of jurisdiction by the CIT suo moto u/s 263 is that the order of the AO is erroneous in so far as it is prejudicial to the interest of the revenue. The CIT has to be satisfied of twin conditions, namely (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interest of the revenue. If one of them is absent if the order of the AO is erroneous, but, is not prejudicial to the revenue or if its not erroneous but is prejudicial to the revenue, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii) that in the present case, the assessee had filed its return of income for the Assessment Year 2007-08, under dispute on 16.4.2009 and claimed deduction u/s 80IB (10); that the return was filed belatedly even after the expiry of time specified u/s 139(4) of the Act which clearly attract the provisions of section 80AC of the Act. The learned DR relies on the following case laws: (a) Saffire Garments v. ITO (2013) 151 TTJ (Rajkot) (SB) 114; (b) Bal Kishan Dhawan (HUF) v. ITO (2012) 18 Taxman.com 234 (Asr.) (iv) that as per sub-section (13) of section 80-IB of the Act profits and gains derived from an undertaking shall not be admissible unless the accounts of the undertaking for the relevant period for which deduction is claimed, have been audited by an accountant and audit report in Form No.10CCB to be furnished along with the return. However, in the instant case, neither Form No.10CCB was furnished along with the return nor filed before the completion of the assessment and, thus, the assessee is disentitled from being allowed deduction u/s 80IB (10) of the Act; (v) that there was no discussion whatsoever in the order as to how the AO arrived at a conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the return of income on or before the due date as prescribed u/s 139(1) of the Act. 5.5. To counter the CIT s stand, the learned AR drew our attention to the provisions of section 139(4) of the Act. For appreciation of facts and clarity, the relevant portion of section 139(4) which has been substituted by the Direct Tax Laws (Amendment) Act, 1987 w. e. f. 1.4.1989 is extracted as below: (4) Any person who has not furnished a return within the time allowed to him under section (1), or within the time allowed under a notice issued under sub-section (1) of section 142, may furnish the return for any previous years at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. As per section 139(4) of the Act, it was claimed, it is abundantly implicit that the time limit for filing the return was neither rigid nor inelastic. 5.6.1. The debatable question is as to whether the assessee is entitled to claim deduction u/s 80-IB of the Act, even though it had not filed return of income within the due date of filing of return u/s 139(1) of the Act but the same was filed within the due date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the due date specified in section 139(1) (para 13) It is quite apparent on bare perusal of section 80AC that the provisions contained therein are mandatory. If the assessee wants to avail deduction under section 80-IB, he has to necessarily furnish his return of income containing such claim before the due date specified in section 139(1). The language of section 80AC is negatively worded inasmuch as it provides in clear terms that deduction under section 80-IB shall not be allowed if the return of income containing such claim is not furnished by the due date specified in section 139(1). In the face of such clear language of section 80AC, it is evident that the provisions of section 80AC are mandatory in nature. Therefore, failure to furnish the return of income before the due date specified in section 139(1) would disentitle the assessee for the claim of deduction under section 80-IB (para 14) It is well settled that an act must be done strictly in the manner provided by law. If section 80AC requires that deduction under section 80-IB cannot be available unless the return is furnished before the due date specified in section 139(1), the claim of the assessee for deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... too u/s 147 r. w. s. 143(3) of the Act. Had there been any flaw in the claim of the assessee for deduction u/s 80IB(10) of the Act for the Assessment Year under consideration, we are sure, the AO would not have allowed the claim of the assessee. This fact amply suggests that the view (one of the views) adopted by the AO can neither be termed as erroneous nor prejudicial in the interests of the revenue. Such being the scenario, we decline to agree with the Revenue s perception that the assessment passed by the ITO was erroneous and prejudicial to the interests of revenue. The order passed either u/s 147 r.w.s 143(3) of the Act or u/s 143(3) of the Act can only be revised by invoking the provisions of section 263 of the Act, if the assessment order is found to be both erroneous and prejudicial to the interests of the revenue. However, in the instant case, the AO had, indeed, called for details from the assessee and after examining the same, came to the conclusion that the assessee is entitled to deduction u/s 80IB (10) of the Act. As such, one cannot term the Assessing Officer s action as erroneous. 5.7.4. To strengthen our perception, we recall the ruling of the Hon ble Delhi Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mind, has not been rebutted by the Revenue. No additional facts were necessary before the AO for the purpose of construing the provisions of s. 80-IB (13) r/w s. 80-IA(9). It was only a legal consideration as to whether the deduction under s. 80HHC was to be computed after reducing the amount of deduction under s. 80-IB from the profits and gains. There is no doubt that the AO had allowed the deduction s. 80HHC without reducing the amount of deduction allowed under s. 80IB from the profits and gains. He did not say so in so many words, but that was the end result of his assessment order. Since he was holding in favour of the assessee, it cannot be said that the AO had not applied his mind. It cannot also be said that the AO had failed to make any enquiry because no further enquiry was necessary and all the facts were before the AO. It is also true that the validity of an order under s. 263 has to be tested with regard to the position of law as it exists on the date on which such an order is made by the CIT. From the narration of facts in the Tribunal s order, it is clear that on the date when the CIT passed his orders under s. 263, the view taken by the AO was in consonance wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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