Income Tax Appellate Tribunal - Bangalore
M/S Vanshee Builders & Developers P. ... vs Assessee on 14 November, 2012
Page 1 of 30 1 ITA No.386/Bang/2012
IN THE INCOME TAX APPELLATE TRIBUNAL,
BANGALORE BENCH 'A'
BEFORE SHRI N BARATHVAJA SANKAR, VICE PRESIDENT
AND SHRI GEORGE GEORGE K, J.M
ITA No.386/Bang/2012
(Assessment year 2008-09)
M/s Vanshee Builders & The Income Tax
Developers P. Ltd., No.684, Officer, Ward-12(2),
9th Main, 1st Stage, vs Bangalore-1.
Indiranagar, Bangalore-38.
PA No.AABCV 3394 G
(Appellant) (Respondent)
Date of Hearing : 14.11.2012
Date of Pronouncement : 07.12.2012
Appellant by : Shri B P Sachin Kumar, C.A.
Respondent by : Shri Bijoy Kumar Panda, ACIT
ORDER
PER GEORGE GEORGE K :
This appeal filed by the assessee company is directed against the order of the learned CIT (A)-III, Bangalore dated 12.01.2012. The relevant assessment year is 2008-09.
2. The assessee company has, in its grounds of appeal, raised ten grounds, in which, ground Nos. 1 and 3 are general in nature and, therefore, they do not survive for adjudication. Ground No.9 relates to the payment of cash of Rs.4 lakhs for electrification work which did not attract TDS provisions of the Act. However, during the course of hearing, the Page 2 of 30 2 ITA No.386/Bang/2012 learned A R submitted that this ground is not pressed. Accordingly, ground No.9 is dismissed as 'not pressed'. Ground No.10 is not maintainable as levy of interest u/s 234B of the Act is mandatory and consequential in nature. The remaining grounds relate to the following issues, namely:
(1) (Gr.No.2) that the order was passed without providing reasonable opportunity to the assessee;
(2) (Gr.Nos.4 & 5) that the CIT (A) ought to have held that the assessee being a company need not file a return of income u/s 139(1)(b) of the Act;
(3) (Gr.No.6, 7 & 8) that the CIT (A) erred in invoking the provisions of s. 80AC of the Act;
- that the CIT (A) also erred in confirming the disallowance of deduction made u/s 80IB of the Act.
3. The issues, in brief, are discussed as under:
The assessee company ['the assessee' hence-forth] is engaged in the construction and real estate business. The assessee's premise was subjected to a survey u/s 133A of the Act on 4.1.2008. For the assessment year under consideration, the assessee had filed its return of income on 25.4.2009, admitting an income of Rs.1,05,58,731/- and claimed deduction of Rs.1,18,65,656/- under s. 80-IB of the Act. The return was initially processed u/s 143(1) of the Act and, subsequently, took up for scrutiny.
According to the AO, notices were issued posting the case for hearing on a number of occasions. There was no compliance except on one occasion i.e., in response to a notice dated 9.9.2010, one of the directors had approached the AO with a request for a week's time to produce the relevant details, among others, the claim of deduction u/s 80IB, project completion, TDS Page 3 of 30 3 ITA No.386/Bang/2012 details, cash payments etc. However, there was no further compliance. According to the AO, as the case was getting barred by limitation by 31.12.2010, the assessment was concluded u/s 144 of the Act based on the materials available on record. While doing so, the AO made the following addition, among others, namely:
(i) Disallowance of deduction of Rs.1,18,65,656/- u/s 80IB of the Act on the premise that the assessee had furnished its return of income only on 25.4.2009 which was belated and, thus, the assessee was disentitled for such a deduction.
4. Aggrieved, the issue was taken up before the first appellate authority for relief. Before the CIT (A), it was contended by the assessee that for the claim of deduction u/s 80IB (10) of the Act, the assessee was not liable to file a return since it had 'nil' income. 4.1. After due consideration of the assessee's submission, the CIT(A) had rejected the issue raised by the assessee for the reasons that as per the provisions of s. 80AC of the Act, return has to be filed within due date of filing return under section 139(1) and the case laws relied on by the assessee were found to be on general normative premises rather than in any interfering with the clarity of the legal requirement as per s. 80AC. As there was no infirmity with the order of the AO on this account, the denial of deduction u/s 80IB (10) of the Act was upheld.
5. 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:
Page 4 of 30 4 ITA No.386/Bang/2012
(i) that the provision under s.80AC of the Act as regards the time limit for filing the return of income is neither an inexorable rule of prescription nor an inviolable rule of restriction for allowance of deduction u/s 80IB of the Act;
- that as per s. 80-IB, the deduction provided for therein shall be allowed in computing the total income of the assessee from the profits and gains derived from the business subject to certain conditions contained therein;
- that the entire thrust of the tax concession u/s 80IB (10) is aimed at providing more dwelling units and providing tax incentives; that in every budget speech, the Finance Ministers have made every endeavour to address the problem of acute shortage of dwelling units - primarily for less privileged sections of the society. The predominant objective of this incentive provision is, therefore, to encourage better availability of the dwelling units at affordable rates for low and middle class segments of the society and, thus it is a beneficial provision for the assessees;
- that s. 80AC of the Act provides that deduction u/s 80 IB shall be allowed to assessee only if the assessee furnishes a return of his income on or before the due date specified under sub-section 139(1);
- that s.139(1) of the Act provides for due dates for filing the return of income. Accordingly, the due date for filing the return of income of any corporate entity is Sep. 30 of the relevant AY. However, s. 139(4) of the Act carves out an exception (extension) to the time limit under section 139(1) for filing the return of income;
- that as per the provisions of s. 139(4), it is clear, that the time limit for filing the return of income is neither inflexible nor inelastic. The question that arises, Page 5 of 30 5 ITA No.386/Bang/2012 therefore, for consideration as regards the allowance of deduction under section 80-IB of the Act is whether the provisions of s. 80IB are applicable to the assessee or whether the assessee falls within the ambit of the deduction u/s 80IB but not the time limit for filing the return of income by him mentioned in s. 80AC of the Act. This view is further reinforced by the provisions of s. 119 of the Act;
(ii) As per the provisions of s. 119 of the Act, the Board may for avoiding genuine hardship to the assessees relax any requirement contained in any of the provisions of Ch. IV or Ch. VI-A, where the assessee has failed to comply with any requirement specified in such provision for claiming deduction there-under, subject to the conditions that the default in complying with such requirement was due to circumstances beyond the control of the assessee; and the assessee has complied with such requirement before the completion of assessment in relation to the previous year in which such deduction is claimed;
- that it is clear, therefore, that the provision 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 for filing the return. It is to be distinctly understood that such relaxation is statutory in nature (as it is allowed by the Statute itself) and not administrative in character;
(iii) that the provisions of the Act relating to exemption, allowance and deduction, rebate or relief should be interpreted liberally and broadly.
Relies on case laws:
o Union of India v. Wood Papers Ltd (1991) 83 STC 251; o CIT v. Gwalior Rayon Silk Mfg. Co Ltd AIR 1992 SC 1782;Page 6 of 30 6 ITA No.386/Bang/2012
o Controller of Estate Duty v. R. Kanakasabai (1973) 89 ITR 251 (SC);
o Bajaj Tempo Ltd v. CIT (1992) 196 ITR 188 (SC); o ACIT v. Dhir Global Industrial (P) Ltd 133 TTJ (Del) 580; & o ITO v. Sri S Venkataiah - ITA NO.984/Hyd/2011 dt..31.5.2012 of the Hyderabad Bench 'B'.
(iv) that the section 80AC of the Act restricts deduction available u/s 80IB of the Act where the return of income is not filed within the due dates provided u/s 139(1) of the Act; that the s. 139(1) of the Act provides for due dates for filing the return of income. Accordingly, due date for filing the return of income for the AY 2008-09 was 31.10.2008;
- that the assessee had filed its return of income electronically u/s 139(1B) of the Act. S. 139(1B) provides that a corporate entity may furnish the return of income u/s 139(1), at its option, on or before the due date electronically in accordance with the Electronic Furnishing of return of income Scheme, 2007 [EFRIS 2007] - Notification No.SO1281(E) dated 27.7.2007;
- that the EFRIS 2007 provides that eligible person may at its option furnish his return of income which he is required to furnish u/s 139.....' of the Act for AY 2007-- 08 or any subsequent AY to an e-return intermediary who shall digitize the data of such return and transmit the same electronically to a server designated for this purpose by the e-return Administrator on or before the due date;
- that the time limit provided under EFRIS 2007 [Notification No. SO1281(E) dated 27.07.2007) is not restricted to time limit provided u/s 139(1), but, it extends to the time limit allowed u/s 139(4) (belated return).
Page 7 of 30 7 ITA No.386/Bang/2012Relies on case laws:
• Fathima Bai v. ITO (2009) 32 DTR (Kar);
• CIT v. Tarnetar Corporation (Tax Appeal No.1241 of 2011 - Gujarat High court;
• ITO v. Mahaveer Calyx (IT Appeal Nos.153 & 998(Bang) of 2011 dated 31.8.2012;
• Sri Sambandam Udaykumar v. CIT (IT Appeal No.175 of 2012 dt.15.2.2012 of Hon'ble Karanataka High Court;
(v) Thus, the time limit prescribed u/s 139(1) is not mandatory but directory in nature; that this argument can be strengthened by the following example. In the instant case, the deduction u/s 80-IB was denied by the AO by the AO on the ground that the return of income was not filed within the due date. If a hypothetical situation is taken up wherein the time limit for filing return u/s 139(1) was not over and a search u/s 132 took place. The assessee filed return of income in response to notice u/s 153A after claiming deduction u/s 80IB. The return of income is filed beyond time limit specified u/s 139(1) time, but it is well within the time limit specified u/s 153A. in this situation, deduction could not be denied just because return was filed beyond the due date specified u/s 139(1) since the return is well within the time limit of s. 153A. Thus, it was clear that various judiciaries have taken a liberal view while interpreting the beneficial provisions of the Act.
5.1. In furtherance, the learned AR sought the permission of this Bench vide the assessee's petition 31.10.2012, for admission of the additional evidences. The contents of the petition for admission of additional evidences read as follows:-
Page 8 of 30 8 ITA No.386/Bang/2012
"1. the petitioner, a company, engaged in the business of real estate has submitted its return of income for the assessment year under consideration declaring 'Nil' income after claiming the deduction u/s 80-IB of the Income-tax Act. Return of income was filed belatedly on 25.4.2009, after a delay of 207 days;
2. The assessment was completed under section 144 of the Act, determining the income of the appellant at Rs.1,09,58,731/-. A sum of Rs.1,18,65,656/- being deduction claimed u/s 80IB of the Act was disallowed by the AO on the ground that the return of income was submitted beyond the due date specified u/s 139(1) of the Act as stipulated u/s 80AC of the Act.
3. In this connection, it is humbly submitted that there was sufficient reason for filing the return belatedly and in support of the same, we wish to submit an affidavit of Mr. Prabhu, Director and CBDT Circular No.4 of 2009 dated 30th June, 2009 as additional evidences.
4. The additional evidences sought to be filed now could not be filed before the AO and CIT (A) due to following reasons:
(i) We were not properly advised in the proceedings before the lower authorities and it did not have the services of an Advocate at our command;
(ii) During the relevant AY, there was confusion prevalent with regard to claim of deduction under sec. 80 IB of the Act. Assessee's, professionals and even for that matter the Income-tax Department was not very clear as to deduction u/s 80IB (10) would be available on a year to year basis where an assessee is showing profit on partial completion or if it would be available only in the year of completion of the project. It was subsequently clarified by the Page 9 of 30 9 ITA No.386/Bang/2012 Board (by) way of Instruction No.4 of 2009 dated 30th June, 2009.
5. Under these circumstances, it is requested that the Hon'ble Tribunal be pleased to:
(i) admit the additional evidences;
(ii) hear and dispose of the appeal in accordance
with law; and
(iii) pass such other order as the Hon'ble
Tribunal deems fit and proper and thus
render justice.
5.1.1. In addition, the assessee furnished an affidavit dated 31.10.2012 wherein, the director of the assessee's had solemnly affirmed on oath as under:
"1. Return of income of the appellant company for the AY 2008-09 was filed belatedly on 25.04.2009. The delay was due to the following reasons:
a) Mr. Lokesh, Accountant who was working with us for quite long quit abruptly without providing prior intimation while finalizing the accounts for the financial year 2007-08;
b) We could not trace the password of the system despite our best efforts;
c) We tried to retrieve the data from the system with the help of Hardware Engineers, in the process lost couple of important data. Financial information of the company was one such data that was lost;
d) We tried to reconstruct the data with available information on hand. We could not succeed in reconstructing the data as the Income-tax Department had impounded many of the vital documents in pursuance to survey carried on in the business premises of the appellant on 04.01.2008;Page 10 of 30 10 ITA No.386/Bang/2012
e) Therefore, it took quite some time for us to reconstruct the financial statements and submit it to the Income-tax Department. Thus, there was delay in 207 days for filing the return of income for the AY 2008-09;
2. During the relevant AY, there was confusion prevalent with regard to claim of deduction under sec. 80 IB of the Act. Assessees, professionals and even for that matter the Income-tax Department was not very clear as to whether deduction u/s 80IB (10) would be available on a year to year basis where an assessee admits profit on partial completion or it would be available only in the year of completion of the project. It was subsequently clarified by the Board by way of Instruction No.4 of 2009 dated 30th June 2009.
3. Due to this confusion, assessee company had to file the return of income admitting 'Nil' income and submissions were made to this effect before the learned Commissions of Income-tax (Appeals).
5.2. Yet again, in the subsequent hearing, the assessee through its petition dated 13.11.2012 sought the permission of this Bench to place further additional evidences. The contents of petition dated 13.11.2012 read as follows:-
"1. The Statutory audit of accounts of the appellant for the previous year 2007-08 relevant to the AY 2008-09 are completed on 12.09.2008. However, tax audit u/s 44AB of the Act was completed on 22.4.2009;
2. Audit report under Sec. 80 IB of the Act in Form 10CCB was obtained on 22.09.2008;Page 11 of 30 11 ITA No.386/Bang/2012
3. The appellant has filed the return of income on 25.04.2010 (sic) 25.04.2009 through electronic filing mechanism. As no enclosures to be given while e-filing of the returns, the same has been not filed along with the return of income;
4. During the course of the hearing before the AO and the Ld. CIT (A), sufficient opportunity was not provide to the appellant to furnish the Form 10CCB. Ld. AO completed the assessment under sec. 144 of the Act where as Ld. CIT (A) dismissed the appeal only on the ground that the return of income was filed belatedly. Therefore, there was no occasion for the appellant to file Form 10 CCB before the lower authorities.
5. under these circumstances, it is requested that the Hon'ble Tribunal be pleased to -
(i) admit the additional evidences;
(ii) hear and dispose of the appeal in accordance with
law; and
(iii) pass such other order as the Hon'ble Tribunal deems fit and proper and thus render justice.
In conclusion, the learned A R submitted that since the impugned order of the learned CIT (A) is suffering from infirmity which requires to be cured by rescinding the same. To substantiate his claim, the learned A R came up with a paper book containing 1 - 41 pages which, inter alia, consist of various case laws.
5.3. On the other hand, the learned D R came up with a strong defense to the findings of the CIT (A). The submissions of the learned D R are, for appreciation of facts, summarized hereunder: Page 12 of 30 12 ITA No.386/Bang/2012
- that the factual position was that the assessee had not filed the audit report u/s 44AB of the Act along with the return of income or in subsequent proceedings either before the AO or the CIT (A); and that the Certificate from the Auditor in Form No.10CCB as required under rule 18BBB of the I.T. Rules on the eligibility for deduction u/s 80-IB has also not been furnished to the Department;
- that the assessee has come up with the fresh theory that the delay in filing the return of income as a result of its missing Accountant and consequential delay to reconstruct the financial statements, however, the following questions remain unanswered, namely:
(i) Whether the accounts of the assessee got completed, if yes, when?
(ii) Whether the accounts of the assessee got audited u/s 44AB, if yes, when?
(iii) If audit of the accounts were completed then why the auditor's report in Form 10CCB could not be obtained?
(iv) If both the audit report and report in Form 10CCB were obtained, then, what prevented the assessee to submit the same before the AO or before the CIT (A)? &
(v) Whether and when the audit report is filed with the ROC which is a statutory requirement under the Companies Act?
- that the assesee has filed a petition on 1.11.2012 before the Hon'ble Bench for admission of additional evidence which is not acceptable and may not be admitted.
- extensively quoting the Rule 29 of Appellate Tribunal Rules 1963, it was contended that the assessee was disentitled to file the additional evidence before the Hon'ble Tribunal unless the Tribunal requires the assessee to do so; and that the mere fact that the evidence sought to be produced was vital and important did not provide a substantial reason to allow its admission at the appellate stage, especially, when the evidence Page 13 of 30 13 ITA No.386/Bang/2012 was available to the party at the initial stage and had not been produced by it, without any reason.
Relies on the following case laws:
o CIT v. Jaipur Udyog Ltd. - 227 ITR 345 (Raj); o Velji Deoraj & Co., v. CIT - 68 ITR 708 (Bom);
o A.K. Babu Khan v. CIT - 102 ITR 757 (AP); &
o Ram Prasad Sharma v. CIT - 119 ITR 867 (All)
It was, therefore, urged not to admit the additional evidence and to reject the same.
- that from the petition, there does not appear to be existence of any reasonable cause for filing the return of income belatedly; and that the reasons advanced in the affidavit are not acceptable for the following:
(i) that the assessee was not properly advised in the proceedings before the AO / CIT (A) was too simplistic to be accepted/believed; and similarly the contention that the assessee did not have the services of an Advocate was not acceptable and cannot be belied and that the assessee was represented before the CIT(A) by a qualified CA;
(ii) that the plea of its Accountant left the work abruptly and the Computer system could not be operated was a very vague explanation as proof of its Accountant having employed with it was not forth-coming. If it were to be so in filing the return belatedly, the same should have been submitted before the authorities below. As the explanation submitted was very vague and devoid of any merit, the same cannot be construed as a genuine hardship which prevented the assessee from filing its return of income in time.
- that the case law cited by the assessee [ITO v. S. Venkataiah
- ITA No.984/Hyd/2011] is not applicable to the assessee's case for the following reasons:
Page 14 of 30 14 ITA No.386/Bang/2012
In the case of Sri Venkataiah In the case of the assessee
i)Deduction was claimed u/s 80IC; i)Deduction was claimed u/s 80IB;
ii) delay of 74 days - explained before ii) delay of 207 days - no explanation was the AO that there was technical furnished before the AO for such a delay;
problem in computer system;
(iii) it was explained that due to (iii) no audit report was filed either with the reasonable cause of problem in return of income or during the assessment computer and re-entry of data, multi- proceedings. No Form 10CCB which was location of business activity, time mandatory and a pre-requisite for deduction u/s consumed for auditing by the statutory 80IB was filed with the return or in the auditors; subsequent proceedings;
(iv) delay of 74 days as genuine and (iv) reason advanced was vague , unsubstantiated
beyond the control of the assessee but an after thought which was supported by the
which was duly supported by the fact that the assessee had brought no reason for
confirmation from the statutory the delay either before the AO or before the
auditor; CIT (A);
(v) the computer got corrupted and the (v)there was no such problem which was beyond
data lost for two months which was the control of the assessee;
retrieved. He had multi locations of
sales pointes in 12 States and collecting
data and subsequent audit by the
auditors took time which had resulted
in delay of 74 days;
(vi) the Hon'ble Tribunal had held that (vi) it appears the assessee was in the habit of
the claim of the assessee cannot be filing its returns belatedly. For the AY 2007-08,
denied on technicalities when the the return was filed after issuance of a notice
assessee was legally otherwise entitled u/s 148 and, hence, the delay for filing the
for deduction. return be construed as intentional and not a mere
technical flaw.
- that in the case of ACIT v. Dhir Global Industrial Pvt. Ltd [133 TTJ (Del) 580 relied on by the assessee, in fact, this case deals with s. 10B (1) of the Act, that the assessee could not pay self-assessment tax on time due to some financial problems; that the new provision regarding e-filing of return was introduced in this first year, the software did not accept the return, if self assessment was not paid and thus, there was a delay of nearly 45 days for filing the return and the Hon'ble Tribunal after due consideration of the same as genuine and Page 15 of 30 15 ITA No.386/Bang/2012 valid reason for the delay in filing the return. However, in the case of the present assessee, the claim for deduction was u/s 80IB and the application of provisions of s. 80AC. 5.4. In conclusion, the learned D R submitted that there was no reasonable cause for the assessee to file the return belated, the case laws relied on by the assessee are distinguishable and cannot be applied to the case on hand. It was, therefore, pleaded that there was no any infirmity in the findings of the CIT (A) which requires the intervention of this Bench.
6. We have carefully considered the rival submissions, diligently perused the relevant case records and also various case laws on which both the parties have placed strong reliance.
6.1. The multiplicity of the issues raised by the assessee are dealt with one by one as under:
I. Asst. order was passed without providing sufficient opportunity:
(i) On a perusal of the assessment order, it is observed that notice u/s 143(2) dated 21.8.2009, posting the case for hearing on 4.9.2009, was issued which was followed by notices u/s 142(1) of the Act on 24.5.2010 and on 30.8.2010 posting the case for hearing on 24.7.2010 and 6.9.2010 respectively. There was no compliance. In compliance to subsequent notice u/s 142(1) of the Act dated 9.9.2010, according to the AO, one of the directors appeared before him and sought for a week's time to produce all the details as called for. According to the AO, as the assessee was required to substantiate the claims of deduction u/s 80-IB of the Act, project completion details, TDS, cash payment exceeding Rs.20,000/- etc., the Page 16 of 30 16 ITA No.386/Bang/2012 hearing of the case was rescheduled to 5.10.2010. However, there was no compliance. There was no response to subsequent notice u/s 131 of the Act dated 9.11.2010 which was followed by a letter dt.22.11.2010 and a final notice dated 24.11.2010.
(ii) In view of non-compliance to the notices mentioned supra and the case was getting barred by limitation by 31.12.2010, the AO was left with no alternative other than to conclude the assessment u/s 144 of the Act on the basis of materials available on record.
(iii) Considering the scenario as detailed, we are of the considered view that there was no substance in the allegation of the assessee that the assessment was concluded without affording adequate opportunity of being heard. Accordingly, this ground is decided against the assessee.
II. CIT (A) erred in invoking the provisions of s. 80AC of the Act and also confirmation of the disallowance of deduction u/s 80IB of the Act:
(i) The assessee furnished its return of income for the assessment year under dispute on 25.4.2009, admitting a total income of Rs.1.05 crores and also claiming of deduction of Rs.1.18 crores under section 80IB of the Act. Admittedly, the return of income was belated. As there was no proper compliance to the notices as detailed above, the assessment was concluded by the AO u/s 144 of the Act on the basis of details/materials on record. While doing so, the assessee's claim, among others, for deduction u/s 80-IB of the Act was turned down on the premise Page 17 of 30 17 ITA No.386/Bang/2012 that the return of income of the assessee was belated and, thus, the assessee was disentitled for such a claim.
(ii) When the issue was taken up before the first appellate authority for relief, the CIT (A), placing reliance on the provisions of section 80AC of the Act, confirmed the stand of the AO with an observation that there was no any infirmity with the order of the AO on this account and the denial of deduction u/s 80IB (10) of the Act was, accordingly, sustained.
(iii) The stand of the CIT (A) was challenged by the assessee in this appeal. During the course of hearing, the learned AR conceded that s.
80AC of the Act provides that deduction u/s 80IB shall be allowed to the assessee only if the assessee furnishes a return of its income on or before the due date as specified under sub-section 139(1) of the Act. However, the learned AR had pointed out that the CIT (A) had failed to take recourse to s. 139(4) of the Act. For appreciation of facts and clarity, the relevant portion of s. 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."
(iv) As per s. 139(4) of the Act, it is abundantly implicit that the time limit for filing the return was neither rigid nor inelastic. Page 18 of 30 18 ITA No.386/Bang/2012
(v) Now the moot question is whether the assessee is entitled to deduction u/s 80IB of the Act, even though it has not filed return of income within the due date of filing of return under section 139(1) of the Act but the same was filed within the due date mentioned under section 139(4) of the Act?
(vi) At this point of time, let us analyse the judicial precedent on the subject.
(1) In the case of Bajaj Tempo Limited v. CIT reported in (1992) 104 CTR (SC) 116: (1992) 196 ITR 0188 (SC), the Hon'ble Supreme Court had held that 'A provision in the taxing statute granting incentives for promoting growth and development should be construed liberally. Since a provision intended for promoting economic growth has to be interpreted liberally, the restriction on it too has to be construed so as to advance the objective of the provision and not to frustrate it.' (2) The Hon'ble jurisdictional High Court in the case of Uddeereswara Mining Industries v. CIT reported in (1993) 204 ITR 550 (Kar) had ruled that -
"5. There can be no dispute about the proposition that the term used in a fiscal legislation describing the subjects of taxation are to be normally understood in their popular sense unless the law itself indicates a different approach. Scientific and technical meanings are to be attributed to those words only when the context requires such meanings to be given. The normal rule is to give that meaning which to persons engaged in dealing with that subject matter attribute to that term, Page 19 of 30 19 ITA No.386/Bang/2012 describing the subject. It is also true that a beneficial provision in a fiscal stature should be liberally construed to advance the purpose behind the Legislation........."
(3) The Hon'ble 'B' Bench of the Delhi Tribunal in the case of ACIT v. Dhir Global Industrial (P) Ltd reported in (2011) 43 SOT 640 recorded its finding which is extracted as below:
"A proviso has been inserted during the current year in s. 10B(1) which provides that no deduction under this section shall be allowed to an assessee if the return of income is not furnished on or before the due date specified under sub-section (1) of s. 139. This proviso in s. 10B(1) is directory and not mandatory. In the present case, there was only a marginal delay of 1 ½ month infilling the return of income. The return filed was valid one. The same has also been accepted as a valid return by the AO. The reasonable cause attributed by the assessee for the delay is that new provision of e-filing of the return was introduced from the current assessment year. There was some problem under the new provisions due to which the date of filing the return had been extended by the CBDT from time to time and from 31st October 2006, the same was extended to 30th November, 2006. The new provision regarding e-filing of return was introduced in this first year; the software did not accept the return, if self-assessment tax was not paid. Assessee's case is that due to some financial problems it could not pay the self-assessment tax on time, as a result of which there was a delay in the payment of tax and consequent filing of return by about 1 ½ months. It was further claimed that subsequently the software has been modified and now returns are being accepted, even when self-assessment tax is not paid. These factual factors have not been disputed by the Revenue. In these circumstances, there was genuine and Page 20 of 30 20 ITA No.386/Bang/2012 valid reason for the delay in filing of return and moreover these provisions are directory and not mandatory. Once the validity of the return has not been questioned by the Revenue, the rejection of the assessee's claim under s. 10B(1) at the threshold by the AO was not justified. The Act does not prohibit that relief in this regard when genuine hardship is faced cannot be granted by appellate authority. Further, the very fact that the Act envisages that relief regarding exemption should be considered and granted when application is made after the specified period in cases of genuine hardship clearly indicates that provision in this regard is directory and not mandatory. Hence, in case of genuine hardship the relief can be granted by the appellate authority...................................
In its conclusion, the Hon'ble Bench had observed thus -
"Proviso fourth to s. 10B(1) which prohibits deduction under this section if the return is not furnished on or before the due date specified under s. 139(1) is directory and not mandatory and, therefore, relief can be granted by the appellate authority in case, there was genuine and valid reason for the marginal delay in filing of return"
(4) An identical issue to that of the present one was considered by the Hon'ble 'B' Bench of Hyderabad Tribunal in the case of ITO v. Shri S Venkataiah in ITA No.984/Hyd/2011 dated 31.5.2012 for the assessment year 2008-09. The Revenue had, among others, approached the Hon'ble Tribunal with the following relevant grounds:
"1.The order of the CIT(A)...............................................................
2. The CIT (A) erred in allowing the additional evidence without giving a reasonable opportunity to the AO to Page 21 of 30 21 ITA No.386/Bang/2012 examine the evidence which is in contravention to the rule 46A(3) of IT Rules 1962;
3. The CIT (A) ought to have appreciated that the AO had rightly disallowed the deduction claimed u/s 80IC following the provisions of section 80AC;
4. The CIT (A) ought to have held that the explanation offered by the assessee was nothing but an after thought and devoid of any merit as no effort was made by him to take recourse u/s 119(2)(b) for extension of time for filing the return of income;
5. The CIT (A) erred in coming to a conclusion that the assessee was prevented by a genuine reason in filing the return belatedly; &
6. The CIT (A) ought to have appreciated that the intention of the Legislature behind incorporating s. 80AC was to impose stringent guidelines on the assessee who claim exemption of profits u/s 80IA to 80IE."
(i) Taking into account the submission of the assessee and the rebuttal of the learned D R as recorded in its findings, the Hon'ble Tribunal had decided the issues against the Revenue. The relevant portions of findings of the Hon'ble Bench, for appreciation of facts, are extracted as under:
"13..........................In this case, admittedly, the assessee filed the return of income on 23.12.2008. The due date for filing the return of income u/s 139(1) of the Act for the assessment year under consideration in the case of the assessee is 31.10.2008. As such, the return filed by the assessee is belated. In this, the assessee claimed deduction u/s 80IC of the Act which was disallowed by Page 22 of 30 22 ITA No.386/Bang/2012 the assessing officer as the return of the assessee was not filed within the time as prescribed u/s 139(1) of the Act. The assessee has given reasons for delay in filing the return of income that the assessee was preparing its accounts through computer and the computer got corrupted due to viruses and in spite of continuous efforts by the computer technical personnel to retrieve the data in time for filing the return of income, problem persisted in the system. By trying to retrieve the data for 4 days the required data could not be retrieved and the backed up data were available up-to 31st January 2008 in the CD and the entire data for the two months period, February and March, 2008, had to be re-entered into the computer system again. On preparation of the final accounts and finalizing of statutory audit it took a little extra time that resulted in belated filing of return of income. Thus, there was a delay of 74 days in filing the return of income which is beyond the control of assessee. This was also confirmed by the statutory auditor vide his letter dated 20.3.2011. Being so, in our opinion there is a reasonable cause for filing the return of income belatedly and this is beyond the control of the assessee. When the substantial question of justice involved, technicalities should be ignored. Further, we are supported by the order of the Tribunal in ITA Nos. 1231 & 1199/Hyd/2010 in the case of DCIT v. M/s. Vega Conveyors & Automation Limited order dated 31st December 2010 wherein in para 5 of the order, the Tribunal held as follows:
'5. We have considered the rival submissions and perused the orders of the lower authorities, and other material available on record, including the case-law relied upon by the parties. It is an undisputed fact that the assessee in the present case has filed the audit report in Form 10CCB during the course of re-assessment proceedings. The issue that arises for consideration is whether the assessing officer was justified in disallowing the Page 23 of 30 23 ITA No.386/Bang/2012 assessee's claim for deduction under s.80IB on the ground that the audit report in Form 10CCB was not filed along with the return of income; or whether the CIT (A) was correct in proceeding on the basis of Form 10CCB filed during the course of re-assessment proceedings and directing the assessing officer to allow the claim of the assessee for deduction under s. 80IB of the Act. It is settled position of law, as consistently held by various Benches of this Tribunal and as held in various decisions referred to by the CIT (A) in the impugned order, that though filing of audit report in Form 10CCB is mandatory and pre-requisite for deduction under s. 80IB, non-filing of the same along with the return of income is only a curable defect, and assessee's claim for deduction has to be considered on its merits as sand when the defect is cured by filing Form 10CCB. We are fortified in this behalf by the decision of the jurisdictional High Court in the case of Hemsons Industries (supra), relied upon by the learned counsel for the assessee. It is contended by the learned Departmental Representative that the assessee's claim for deduction under s. 80IB can be entertained and examined on merits, when the audit report is filed before the completion of assessment, which has not been done in the present case, since the audit report was filed only during the course of re-assessment proceedings initiated by the assessing officer, which cannot end up giving additional deductions/benefits to the assessee. We do not find merit even in this contention of the learned Departmental Representative. In the case of Hemsons Industries (supra) before the jurisdictional High Court, of one of the years under appeal before Hon'ble High Court, viz., assessment year 1979-80, audit report was filed during the course of re-assessment proceedings and in response to the show-cause notice under s. 148 issued by the assessing officer. In this view of the matter, respectfully following the decision of the jurisdictional High Court cited above, among others, we find no Page 24 of 30 24 ITA No.386/Bang/2012 justification to interfere with the order of the CIT (A). We accordingly uphold the same and reject the grounds of the Revenue in this appeal.'
14. In our opinion, in view of the above discussion, the claim of the assessee cannot be denied on technicalities when the assessee is legally otherwise entitled for deduction. As such, we are inclined to dismiss the appeal filed by the Revenue as devoid of merit."
7. Considering the facts and circumstances of the issue as deliberated upon in the fore-going paragraphs and also in conformity with the rulings of the Hon'ble Supreme Court, the Hon'ble jurisdictional High Court and also the findings of the Hon'ble Benches of Delhi and Hyderabad Tribunals cited supra, we are of the considered view that s. 80AC of the Act which prohibits deduction u/s 80IB if the return is not furnished on or before the due date specified u/s 139(1) of the Act is only directory and not mandatory, provided there was reasonable cause for filing of return of income belatedly.
7.1. However, a salient feature in the present case was that the claim of deduction u/s 80-IB (10) of the Act was denied by the AO primarily on the ground that the return of income was filed beyond the due date as specified u/s 139(1) of the Act. Since the assessment was concluded under section 144 of the Act, neither the AO had an occasion to verify the cause for such a delay in filing the return of income nor the assessee had an opportunity to defend itself for having furnished its return belatedly. Page 25 of 30 25 ITA No.386/Bang/2012 7.1.1. In this connection, as narrated supra, the assessee, during the course of hearing, sought the permission of this Bench to adduce additional evidence and also an affidavit explaining the reason for delayed filing of return. According to the assessee, the additional evidence could not be furnished either before the AO or before the CIT (A) since the return was e-filed and no enclosures were to be attached and neither the Assessing Officer nor the CIT(A) called for 44AB audit or Form 10CCB, as the claim of the assessee under section 80IB was denied prima facie without much deliberation for the reason that return was filed belatedly. This attempt of the assessee was objected to by the Revenue for the reasons also recorded supra.
7.2. We have carefully considered the assessee's submission as well as the objection raised by the Revenue.
7.2.1. To drive home its point, the Revenue had extensively quoted the rule 29 of Appellate Tribunal Rules 1963. Let us now deal with the issue as under:
Rule 29 of Appellate Tribunal Rules, 1963 says as under:
"Rule 29: The parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but, if the Tribunal requires any document to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause, or, if the income-tax authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them or not specified by them or not specified by them, the Tribunal, for reasons to be recorded, may allow such document to Page 26 of 30 26 ITA No.386/Bang/2012 be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced."
7.3. In the present case, the assessee submitted that there was sufficient cause for filing its return of income belatedly and to substantiate its stand, the assessee sought the permission of this Bench to lay its reasoning. One of the reasons for the delay in filing its return of income in time and the additional evidences could not be filed before the AO or before the CIT (A) was that -
"During the relevant assessment year, there was confusion prevalent with regard to claim of deduction under sec. 80IB of the Act. Assessees, professionals and even for that matter the Income-tax Department was not very clear as to deduction u/s 80IB (10) would be available on a year to year basis where an assessee is showing profit on partial completion or if it would be available only in the year of completion of the project.....
The statutory audit of accounts of the appellant for the previous year 2007-08 relevant to the AY 2008-09 was completed on 12.9.2008. However, tax audit u/s 44AB of the Act was completed on 22.4.2009.
The appellant had filed the return of income on 25.4.2010 (sic) 25.5.2009 through electronic filing mechanism. As no enclosures to be given while e-filing of the returns, the same have not been filed along with the return of income."
7.3.1. At this point of time, we would like to recall that a similar situation had been confronted by the Hon'ble Delhi Bench of the Tribunal in the case of ACIT v. Dhir Global Industrial (P) Ltd (supra) wherein the Hon'ble Bench had, after taking cognizance of the peculiar situation in which Page 27 of 30 27 ITA No.386/Bang/2012 that assessee was placed, observed that 'Act does not prohibit relief in this regard when genuine hardship is faced.' 7.4. Furthermore, in the affidavit(s) furnished, the director of the present assessee had affirmed on oath that -
"1. Return of income of the appellant company for the AY 2008-09 was filed belatedly on 25.4.2009. The delay was due to the following reasons:
(a) Mr. Lokesh, Accountant who was working with us for quite long quit abruptly without providing prior intimation while finalizing the accounts for the financial year 2007-08;
(b) We could not trace the password of the system despite our best efforts;
(c) We tried to retrieve the data from the system with the help of hardware engineers, in the process lost couple of important data. Financial information of the company was one such data that was lost;
(d) We tried to reconstruct the data with available information on hand. We could not succeed in reconstructing the data as the Income-tax Department had impounded many of the vital documents in pursuance to survey carried on in the business premises of the appellant on 04.01.2008;
(e) Therefore, it took quite some time for us to reconstruct the financial statements and submit to the Income-tax Department. Thus, there was delay in 207 days for filing the return of income for the AY 2008-09;
In its affidavit dated 13.11.2012,it was affirmed on oath that:
Page 28 of 30 28 ITA No.386/Bang/2012
(i) The statutory audit accounts of the appellant for the previous year 2007-08 relevant to the AY 2008-09are completed on 12.9.2008. However, tax audit u/s 44AB of the Act was completed only on 22.4.2009;
(ii) Audit report under sec. 80IB of the Act in Form 10CCB was obtained on 22.9.2008 7.5. Considering the facts as narrated in assessee's petition and also in the affidavits furnished by the director of the assessee, we are of the considered view that the additional evidences furnished and reasons furnished for delayed filing of return need to be taken on record.
7.6. As pointed out earlier and also in conformity with the findings of the (i) Hon'ble Delhi Bench of the Tribunal (supra) that [at the cost of repetition] "Proviso fourth to s. 10B(1) which prohibits deduction under this section if the return is not furnished on or before the due date specified under s. 139(1) is directory and not mandatory and, therefore, relief can be granted by the appellate authority in case, there was genuine and valid reason for the marginal delay in filing of return"
and (ii) in the case of S. Venkataiah, the Hon'ble Bench of the Hyderabad Tribunal (supra) that 14.In our opinion, in view of the above discussion, the claim of the assessee cannot be denied on technicalities when the assessee is legally otherwise entitled for deduction. As such, we are inclined to dismiss the appeal filed by the Revenue as devoid of merit,"Page 29 of 30 29 ITA No.386/Bang/2012
we would like to reiterate that since the additional evidences now produced by the assessee were not placed before the AO for his consideration and also keeping the principles of natural justice and equity in mind, the issue requires verification at the AO's level. Accordingly, this issue is remitted back to the file of the AO with a specific direction to look into the merits of the assessee's claim for exemption u/s 80IB (10) of the Act afresh:
(i) Whether the assessee was prevented by a reasonable cause, as attributed by it in its affidavits (above), in furnishing its return of income belatedly? &
(ii) Whether the assessee has satisfied the other conditions stipulated in s. 80-IB of the Act to determine the quantum of deduction u/s 80IB of the Act?
7.6.1. It is further emphasized that while carrying out the directions of this Bench referred above, the AO shall keep in view the findings of the Hon'ble Benches of the Delhi & Hyderabad Tribunals quoted above and to take appropriate action in the matter. The assessee on its part shall co- operate with the AO in carrying out the directions of this Bench cited supra.
8. In the result, the assessee's appeal is treated as partly allowed for statistical purpose.
The order pronounced on the 7th day of December, 2012 at Bangalore.
Sd/- Sd/-
(N BARATHVAJA SANKAR) (GEORGE GEORGE K)
VICE PRESIDENT JUDICIAL MEMBER
Page 30 of 30 30 ITA No.386/Bang/2012
Copy to :
1. The Revenue 2. The Assessee 3. The CIT concerned. 4. The CIT(A) concerned. 5. DR 6. GF MSP/ By order Senior Private Secretary, ITAT, Bangalore.