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TMI Blog2024 (8) TMI 938X X X X Extracts X X X X X X X X Extracts X X X X ..... that income liable to tax had escaped assessment. 2. While the petitioners contend that a digital filing of the Audit Report along with the Return of Income was merely procedural and directory and that the statutory prescriptions had been substantially complied with, the respondents on the other hand would urge us to hold that the statutory prescriptions comprised in Section 80-IA (7) are mandatory and the actions initiated under Section 148 thus justified. 3. Since the reasons which ultimately weighed upon the respondents for invoking Section 148 are common to both the writ petitions, we, for the sake of brevity, take note of the reasons assigned while disposing of the objections preferred and as they stand recorded for AY 2013-14. Those reasons are extracted hereinbelow: "Sub: Assessment proceedings for AY 2013-14 - disposal of objections raised - regarding Please refer to your letter dated 07.05.2019 thereby filing objections to the reopening of assessment proceedings for the above said assessment year. 2. The following objections have been raised :- i) In terms of first proviso to section 147, the assessment u/s 148 call be reopened upto four years relating to cases c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner that a tax audit report in Form 3CA under Section 44AB was filed electronically on 30 September 2013 along with the Return of Income and the Audit Report in Form 10CCB was filed manually before the Assessing Officer [AO] on 12 February 2016. The AO concluded the assessment in terms of Section 143 (3), allowing the deductions claimed by virtue of Section 80-IA and which becomes evident from a perusal of the assessment order dated 29 February 2016. It is thereafter that the impugned notice under Section 148 came to be issued. 5. As is manifest from the reasons assigned for invocation of Section 148, we find that the respondents have taken the stand that Rule 12 of the Income Tax Rules, 1962 [1962 Rules], and which came to be amended by the Income Tax (Seventh Amendment) Rules, 2013 [2013 Amendment] w.e.f. 01 April 2013 introduced the requirement of an online submission of the Audit Report in Form 10CCB. The respondents assert that the petitioner had failed to point out the failure to digitally submit the report and this would constitute a non-disclosure of true and complete particulars. It is on the aforesaid basis that they called upon the petitioner to show cause why actio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the present appeal. The Gujarat High Court took the view that the word "shall" which occurs in section 80J (6A) be read as "may" and that the requirement of filing of an Audit Report along with the return was only to be taken as directory in nature. The Gujarat High Court took the view that in case the Audit Report is submitted at any time before the framing of the assessment, there would be substantial compliance with the provisions of section 80J (6A). 6. The Tribunal also relied on the decision of the Madras High Court in CIT v. A. N. Arunachalam [1994] 208 ITR 481, which, again, while considering the provisions of section 80J (6A), took the same view as that of the Gujarat High s 7. We notice that there are other decisions of other courts taking the same view. The decisions being, CIT v. Shivanand Electronics [1994] 209 ITR 63 (Bom) ; Zenith Processing Mills v. CIT [1996] 219 ITR 721 (Guj) and CIT v. Jayant Patel [2001] 248 ITR 199 (Mad) and CIT v. Mahalaxmi Rice Factory [2007] 294 ITR 631 (P&H). 8. In view of this long line of decisions of various High Courts in considering the provisions of section 80J (6A) which are similar to the provisions of section 80-IA (7), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is manifest from the aforesaid, it was the Proviso inserted in Rule 12(2) which for the first time introduced the requirement of an Audit Report contemplated under Section 80-IA being furnished electronically. We note that although the aforesaid requirement was introduced by virtue of the 2013 Amendment, Section 80-IA (7) as it stood at that time only spoke of the Audit Report being furnished in the prescribed form along with the Return of Income and being duly verified by an accountant of the assessee. 11. By virtue of Finance Act, 2020 sub-section (7), of Section 80-IA came to be amended and now reads as under: "(7) The deduction under sub-section (1) from profits and gains derived from an undertaking shall not be admissible unless the accounts of the undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below sub-section (2) of Section 288, before the specified date referred to in section 44AB and the assessee furnishes by that date the report of such audit in the prescribed form duly signed and verified by such accountant." 12. The rationale underlying the amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an illegality. 15. Questioning the action for reassessment, Mr. Sethi submitted that the reasons assigned in support of the decision to reopen assessment would clearly indicate that the respondents nowhere allege that there was a failure on the part of the petitioner to fully and truly disclose all material particulars. It becomes pertinent to note that the aforesaid submission proceeds on the basis of the First Proviso to Section 147 as it stood prior to the amendments introduced in that provision by virtue of Finance Act, 2021 and which came into effect from 01 April 2021. Mr. Sethi contended that since the original assessment had been made in accordance with Section 143 (3), the respondents would have no authority to reopen an assessment concluded in accordance therewith unless it be found that there was a failure on the part of the assessee to make a complete and candid disclosure of all facts. In any case, according to Mr. Sethi, a failure to electronically submit the Audit Report would not be liable to constitute a justifiable reason for reopening assessment bearing in mind the legal position as enunciated by this Court in The Associated Chambers of Commerce and Industry of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of a form to coincide with the furnishing of a Return of Income, it is liable to be viewed as a mandatory pre-condition for any benefit being claimed by an assessee. According to Mr. Agarwal, the decision of the Supreme Court, though rendered in the context of Section 10B (8) of the Act, would clearly lay to rest the controversy which arises. It was also Mr. Agarwal's submission that the earlier precedents rendered in the context of Section 80-IA, including that of our Court in Contimeters Electricals, rested upon the decision of the Supreme Court in Commissioner of Income Tax vs. G.M. Knitting Industries (P) Ltd. 2015 SCC OnLine SC 1015 and which has been explained by the Supreme Court in its later decision in Wipro Limited. Mr. Agarwal laid stress upon the following passages appearing in Wipro Limited: "38. On a plain reading of Section 10B (8) of the IT Act as it is, i.e., "where the assessee, before the due date for furnishing the return of income under sub-section (1) of section 139, furnishes to the Assessing Officer a declaration in writing that the provisions of Section 10B may not be made applicable to him, the provisions of Section 10B shall not apply to him for any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income which was much after the due date of filing the original return of income under section 139 (1) of the IT Act, cannot mean that the assessee has complied with the condition of furnishing the declaration before the due date of filing the original return of income under section 139 (1) of the Act. As observed hereinabove, for claiming the benefit under section 10B (8), both the conditions of furnishing the declaration and to file the same before the due date of filing the original return of income are mandatory in nature. 40. Even the submission on behalf of the assessee that it was not necessary to exercise the option under section 10B (8) of the IT Act and even without filing the revised return of income, the assessee could have submitted the declaration in writing to the assessing officer during the assessment proceedings has no substance and the same cannot be accepted. Even the submission made on behalf of the assessee that filing of the declaration subsequently and may be during the assessment proceedings would have made no difference also has no substance. The significance of filing a declaration under section 10B (8) can be said to be co-terminus with filing of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary view is concerned, it is to be noted that the special leave petition against the decision of the Delhi High Court in the case of Moser Baer (supra) has been dismissed as withdrawn due to there being low tax effect and the question of law has specifically been kept open. Therefore, withdrawal of the special leave petition against the decision of the Delhi High Court in the case of Moser Baer (supra) cannot be held against the revenue. 44. In view of the above discussion and for the reasons stated above, we are of the opinion that the High Court has committed a grave error in observing and holding that the requirement of furnishing a declaration under Section 10B (8) of the IT Act is mandatory, but the time limit within which the declaration is to be filed is not mandatory but is directory. The same is erroneous and contrary to the unambiguous language contained in Section 10B (8) of the IT Act. We hold that for claiming the benefit under Section 10B (8) of the IT Act, the twin conditions of furnishing a declaration before the assessing officer and that too before the due date of filing the original return of income under section 139 (1) are to be satisfied and both are mandato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21. Undisputedly, the petitioner had been assessed for AYs 2013-14 and 2014-15 in terms of Section 143 (3). The Proviso thus clearly required the respondents to establish that income liable to tax had escaped assessment on account of a failure of the petitioner to make a full and true disclosure of all material facts. In our opinion a failure to digitally upload a Form cannot lead one to conclude that the assessee had failed to make a full and true disclosure. In any event, the respondents have woefully failed to establish or assert how that folly, if it may be so termed, resulted in escapement of income. The Section 148 action would thus and following the view taken by us in Associated Chambers be liable to be struck down on this short ground alone. 22. We also bear in mind that the reassessment actions for AYs 2013-14 and 2014-15 were commenced with the issuance of notices under Section 148 on 26 March 2019. An action to reopen assessment prior to the amendments introduced by virtue of Finance Act, 2021 could have at best been initiated within a period of four years and subject to a maximum of six years in terms of the provisions of Section 149 as it existed at the relevant tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 2020. These writ petitions too are concerned with actions initiated prior to the passing of Finance Act, 2020 and the amendments consequently made in Section 80-IA (7). The present decision is thus not liable to be read as an exposition on the legal position which would prevail post 2020 or the likely impact in light of the inclusion of the phrase "...before the specified date referred to in section 44AB...". We thus leave that question open to be examined in an appropriate case. 28. That only leaves us to evaluate the argument of Mr. Agarwal which rested on the decision of the Supreme Court in Wipro Limited. It must, and at the outset, be noted that Wipro Limited was a decision which was rendered in the context of Section 10B (8) that stands placed in Chapter III of the Act and which makes provisions with respect to exempt income. This is manifest from the Chapter Heading itself and which is titled "Incomes which do not form part of Total Income". Regard must be had to the fact that Section 80-IA on the other hand is placed in Chapter VIA, and which deals with "Deductions in respect of certain payments" that an assessee may factor in while computing total income. Thus, we at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal. The appeal is accordingly dismissed with no order as to costs." 2. We concur with the aforesaid view of the High Court and hold that even if Form 3-AA was not filed along with return of income but the same was filed during the assessment proceedings and before the final order of the assessment was made that would amount to sufficient compliance. These appeals are, accordingly, dismissed." 31. One of the reasons which appears to have weighed upon the Supreme Court while rendering its decision in Wipro Limited was of Section 10B being an exemption provision. This is evident from the Supreme Court significantly observing that Section 10B (8) being an exemption provision not being liable to be compared with Section 32 (1) (ii-a) and which was concerned with a claim for additional depreciation. Regard must also be had to the fact that Section 10B (1) is essentially concerned with the grant of exemptions to newly established hundred per cent export-oriented undertakings and the deduction of profits and gains derived by such an enterprise. Sub-section (8) thereof enables an assessee to opt out of the exemption provisions contained therein subject to a requisite declaration being s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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