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TMI Blog2009 (1) TMI 860X X X X Extracts X X X X X X X X Extracts X X X X ..... of the revenue within the meaning of the provisions of section 263 to the extent of granting deduction u/s. 80RR on the ground or grounds as stated in the impugned order or otherwise. 4. The CIT erred in holding that the appellant was not entitled to the deduction u/s. 80RR of the Act on the ground or grounds as stated in the impugned order or otherwise." 3. The assessee has challenged the order passed under Section 263 of the IT Act. The assessee has also raised the issue against the merits of the case i.e. in respect of the deduction claimed under Section 80-RR of the Act. 4. The assessment in both the cases was completed under Section 143(3) of the Act. The CIT noted that the order passed by the Assessing Officer was erroneous and prejudicial to the interest of the Revenue and issued the show cause notice dated 20.03.2006 to the assessee for the following reasons: "(i) Please refer to para 5 and 6 of the assessment order whereby AO has mentioned that certificates in form No.1011 regarding deduction u/s. 80RR were filed and he had allowed deduction u/s. 80-RR amounting to ₹ 56,69,142/-. I have gone through the records and have noted that only remittance cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes indicate that receipts from foreign sources was for acting as Brand Ambassador, and Service Charges. The AO has not considered the deduction u/s. 80RR was allowable only when a person was exercising profession as an 'Artist or Actor. It appears to me that Brand Ambassador, and Service Charges are not covered by the term Artist or Actor and therefore, deduction u/s. 80RR should not have been allowed. iii) AO failed to examine whether foreign exchange earnings kept in EEPC a/c were at all eligible for deduction. iv) Even otherwise total of all foreign exchange remittance including EEPC as per the remittance certificates u/s. ₹ 2,42,53,550,43. Deduction u/s. 80RR has been claimed in respect of ₹ 2,97,72,600/-. Assessing Officer failed to examine and appears to have allowed excessive deduction." 6. After considering the reply of the learned AR for the assessee the CIT observed that proviso to Section 80RR provides that no deduction under this Section shall be allowed unless the assessee furnishes a certificate in the prescribed form along with the Return of Income, certifying that deduction has been correctly claimed in accordance with the provisions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sement, stage shows were held to be outside the purview of deduction claimed under Section 80RR of the Act and the Assessing Officer was directed to withdraw the claim for Assessment Years 2001-02 and 2002-03. Assessee is aggrieved and hence the present appeals. 7. The learned AR for the assessee submitted that the two issues arise in the present appeal i.e. (i) challenging the jurisdiction of CIT in passing the said order under Section 263 of the IT Act and ii) challenging the directions issued by the CIT in denying the deduction claimed under section 80RR of the IT Act. The learned AR submitted that as per the proviso to Section 80RR of the IT Act Form No.10H is to be filed along with the return of Income and according to CIT the said form has not been filed properly by the assessee. The learned AR further submitted that the income was arising to the assessee because of foreign stage shows and the same was held by CIT to be not eligible for deduction under Section 80RR of the Act. The said income was part of the total income of the assessee and the income was received from acting as brand ambassador and the said was the second part of the income of the assessee on which the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of assessment proceedings had furnished the foreign inward remittance certificate in respect of payments totaling ₹ 42,49,974/- as mentioned at page 2 of the assessment order. Thereafter, the claim of the assessee under Section 80RR of the Act was considered by the Assessing Officer. The learned AR drew our attention to the observation of CIT at page 13, wherein the certificates being not signed by the assessee were held to be invalid and non-est. It is pointed out by the learned AR that the Certificates were defective but not non-est in law. The learned AR further pointed out that the CIT himself has referred to the decision in the case of N Krishnan Navabharath Cashew Traders vs ITO (44 ITD 618) (Cochin) for the proposition that unless there is a specific provision of law requiring the signature and verification of the assessee himself, the signature may be validly affixed by the concerned attorney. The learned AR further submitted that in any case an opportunity should have been given to correct the mistake, if any, made by the assessee. The learned AR assailing the powers of CIT stated that the provisions of Section 263 can be invoked only if the order of Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC), CIT vs Emery Stone Mfg. Co. [1995] 213 ITR 843 (Raj) and Gee Vee Enterprises vs Addl CIT and Others [1975] 99 ITR 375 (Del.). The learned DR further pointed out that the assessee has failed to point out the reasonable cause for not signing the Certificate issued by the Bank. In any case, the said certificate was signed by the Power of Attorney holder and the proviso to Section 140 of the Act provides that the person should be duly authorized by the assessee and the power of Attorney should be Registered and filed along with Return of Income. With regard to the merits of the disallowance made under Section 80RR of the Act, the learned DR placed reliance on the order of CIT and also the case of Harsha Bhogle (supra). 10. We have heard the rival submissions and perused the records. We have also considered various judicial pronouncements cited before us. The legal position regarding powers of Commissioner under Section 263 of the IT Act was considered by Apex Court in Malabar Industries Co. Ltd. (supra), which held as under: "A bare reading of this provision makes it clear that the prerequisite to the exercise of jurisdiction by the Commissioner suo motu under it, is tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income-tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer to unsustainable in law." 11. In CIT vs Gabriel India Ltd (supra) the Hon'ble Bombay High Court held as under: "An order cannot be termed as erroneous unless it is not in accordance with law". 12. The Mumbai Bench of Tribunal in Mrs Khat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the Assessing Officer cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard." 13. Section 80RR of the Act provides as under: "Deduction in respect of professional income from foreign sources in certain cases. 80RR. Where the gross total income of an individual resident in India, being an author, playwright, artist, musician actor or sportsman (including an athlete) includes any income derived by him in the exercise of his profession from the Government of a foreign State or any person not resident in India [there shall be allowed in computing the total income of the individual] deduction from such income of an amount equal to:- (i) sixty per cent of such income for an assessment year beginning on the Ist day of April, 2001; (ii) forty-five per cent of such income for an assessment year beginning on the Ist day of April, 2002; (iii) thirty per cent of such income for an assessment year beginning on the Ist day of April, 2003. (iv) fifteen per cent of such income for an assessment year beginning on the Ist day of April, 2004. as is brought into India by, or on behalf of, the assessee in con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the facts of the present case, the assessee had claimed deduction under Section 80RR of the IT Act in Assessment Year 2001-02 totaling ₹ 97,02,491/-. The assessee had furnished Form No.10H though without a Certificate of the assessee in respect of total foreign inward remittance totaling ₹ 54,52,516/-. During the course of assessment proceedings the assessee has further filed foreign inward remittance Certificates totaling ₹ 42,49,974/- relating to A.Y. 2001-02. In respect of A Y 2002-03, the assessee has filed copy of foreign inward remittances which were claimed to have been filed before the Assessing Officer at pages 3 to 12 of the paper book. The foreign inward remittance Certificates at pages 3 to 5 and 7 to 11A are dated October/November, 2002. However, the Certificate at pages 6 and 12 are dated 13.02.2004. The value reflected in the said Certificates filed at pages 6 and 12 are equivalent to ₹ 70,62,500/- + ₹ 40,00 Lakhs respectively. The Return of Income was filed on 31.10.2002 and all the Certificates are dated 31.10.2002 and one Certificate at page 3 is dated 31.11.2002. It is not clear as to how many Certificates of foreign inward remitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other than the individual himself can sign the Return of Income and for the purpose the person is to hold a valid power of attorney from the individual to do the act and the said power of attorney is to be annexed with the Return of Income. From the perusal of the record before us, it is apparent that though the person is holding power of attorney but the said power of attorney do not authorize the person to sign the Return of Income or the Certificate of foreign inward remittance. It is also not clear whether the second limb of the proviso to Section 140 for furnishing the power of attorney along with Return of Income has been complied with. We find no merit in the claim of the assessee that a valid Form No.10H was furnished along with the Return of Income. The said Form No.10H attached with the Return of Income though was issued by the concerned authority but was not accompanied by a Certificate to be issued by the assessee certifying that the deduction has been correctly claimed in accordance with the provisions of the relevant Section. The said Certificate has to be issued by the assessee and is to be part of Form No. 10H in order to claim the deduction under Section 80RR of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f gift or loans, the basic requirement is to look into the capacity and credit worthiness of the person who is making the gifts or advancing the loan. The Assessing Officer has failed to make any enquiries into the nature of transactions and merely accepted the same as genuine on the basis of gift letter of donor and the deposit of cheques in the account of assessee donee. In the facts of the present case there is non-application of mind on the part of Assessing Officer in not looking into the genuineness of the transactions and the Assessing Officer has committed glaring mistake of both fact and law in not looking into the capacity of donor and merely accepting the gift as genuine as it was completed through Bank channels, without enquiring into the financial capacity of the donor and genuineness of gift. The order has been passed by the Assessing Officer without application of mind. Such order is erroneous and as the Assessing Officer failed to make proper enquiries the order is prejudicial to the interest of Revenue. 19. In Rishi Gagan Trust vs ITO (supra), the Mumbai Bench of Tribunal had held as under: "We have gone through the order of the ITO as well as the CIT and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Thalilbar F Jain vs ITO [1975] 101 ITR 1 held that assessments made in undue haste and without an enquiry whether the income offered was that of the assessee or some one else are prejudicial to the interest of the Revenue and what is prejudicial to the interest of Revenue must be held to be erroneous though the converse may not always be true. On the other hand Andhra Pradesh High Court in the case of CIT vs G K Kabra [1995] 211 ITR 336 held that it is necessary for the Commissioner to point out the exact error in the order which he proposes to revise so that the assessee would have an adequate opportunity of meeting that error before the final order is made. In the case of Smt Tara Devi Aggarwal vs CIT [1973] 88 ITR 323 (SC) the Hon'ble Supreme Court laid down that "Where a stereotype order is passed which simply accepts what the assessee has said in the return and fails to make enquiries which are called for in the circumstances of the case, the Commissioner is justified in holding that the order is erroneous and prejudicial to the interest of the Revenue." "The Hon'ble Supreme Court in the case of Ram Pvary Devi Saraogi [1968] 67 ITR 84 also held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication of mind or without making requisite inquiries will satisfy the requirement of the order being erroneous and prejudicial to the interest of the Revenue within the meaning of Section 263 of the Act. We confirm the order of CIT under Section 263 of the IT Act in setting aside the assessment to be made denovo by the Assessing Officer." 21. Applying the ratio laid down by the several benches of the Mumbai Tribunal to the facts of the present case before us, we find that the order of the Assessing Officer was both erroneous and prejudicial to the interest of justice in so far as the Assessing Officer had failed to note that requisitioned Certificate of assessee to accompany form No. 10H was missing and deduction under Section 80RR of the Act could not be allowed on the basis of such incomplete Form No. 10H. The CIT had correctly invoked the powers under Section 263 of the IT Act in revising the order passed under Section 143 (3) of the Act. 22. The second aspect to be considered is whether the assessee is entitled to the claim of deduction under Section 80RR of the Act or not. The said issue is to be looked into an account of two-folds i.e. a) whether the assessee is enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrectly claimed in accordance with the provisions of this Section. The assessee had enclosed certain certificates issued by the concerned authorities in Form No. 10-H along with the Return of Income, which were not accompanied by the requisite Certificate to be issued by the assessee. Such a certificate filed along with the Return of Income is a defective certificate but cannot be called as non-est in law. The requirements of principles of natural justice demands that the Assessing Officer should have afforded an opportunity to the assessee to file a complete Form No.10-H accompanied by the requisite Certificate of the assessee. 25. The Learned AR for the assessee during the course of assessment proceedings before us has pointed out that the assessee has obtained fresh Certificate from the concerned authorities i.e. the Banks in question and the same are accompanied by the requisite Certificate signed by the assessee herself. However, no such certificate i.e. the complete Form No.10-H was filed either before the Assessing Officer or before the CIT during the course of revision proceedings. In the interest of justice, we are of the view that the assessee should have been allowed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be explained in appropriate cases. Where an application for registration presented by a firm is found defective, the officer should point out the defect to it and give it an opportunity to present a proper application." 28. The Hon'ble Bombay High Court in CIT vs Shivanand Electronics (supra) had held that while claiming special deduction on account of new industrial undertaking the pre-requisite condition to be fulfilled for claiming deduction was that the Audit Report was to be furnished along with the Return of Income. It was held by the Hon'ble Bombay High Court that the Audit of the accounts was mandatory but the requirement of the Audit Report to be filed along with the Return of Income was directive. It was further held that in case the assessee complied the conditions of furnishing the audit report before the completion of the assessment and offers satisfactory explanation for failure to submit Report in time, the same should be taken on record. But, no duty was cast on the Assessing Officer to inform the assessee who had failed to file the same along with Return of Income, to file the same before rejecting claim of relief. 29. The Hon'ble J and K High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the Act. The Assessing Officer shall afford a reasonable opportunity of hearing to the assessee. The assessee is also to explain the reasons for the failure to file the form No.10-H along with the Return of Income i.e. in respect of such Certificates which were filed during the course of assessment proceedings. The assessee shall also justify her failure to furnish the certificate along with the Form No.10-H, which is a mandatory requirement of the Section before allowing the relief under Section 80-RR of the Act. 31. The assessee has claimed deduction in respect of receipts on account of modeling, brand ambassador services (Assessment Year 2002-03), stage shows and product endorsement. We are not addressing the issue of allowability of deduction under Section 80-RR of the Act on the merits of the case. We direct the Assessing Officer to allow the claim of the assessee in accordance with the law and after taking into consideration the relevant legal propositions decided on the issue. The assessee before us had relied on the decisions in the case of Amitabh Bachchan vs DCIT (supra) and Shri Shahrukh Khan vs DCIT (supra) for allowing the claim of the assessee, which shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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