Income Tax Appellate Tribunal - Kolkata
Dhanoolal And Sons vs Deputy Commissioner Of Income-Tax on 31 March, 1995
Equivalent citations: [1996]57ITD426(KOL)
ORDER
R. Acharya, Accountant Member
1. This appeal has been instituted by the assessee against the order of the CIT(A) for the assessment year 1989-90 on the following grounds:
(1) That on the facts and in the circumstances of the case and the evidence on record, the CIT(A) erred in holding that Form 10CCAC was not filed by the assessee along with the Return and in refusing to rectify the income taken in the intimation slip.
(2) That on the facts and in the circumstances of the case and the evidence on record, the CIT(A) erred in holding that D.C. was justified in refusing to rectify the income taken in the intimation slip on the basis of a Form 10CCAC filed subsequently.
(3) That on the facts and in the circumstances of the case and the evidence on record, the CIT(A) erred in confirming the order of the D.C. charging interest under Section 234B in the instant case.
(4) That on the facts and in the circumstances of the case and the evidence on record, the CIT(A) erred in confirming the order of the D.C. charging additional tax under Section 143(1A) of the Income-tax Act, 1961 in the instant case.
(5) That the above grounds of appeal will be urged in detail at the time of hearing and the assessee further craves leave to submit additional grounds of appeal, if any, at or before the time of hearing.
2. Ground Nos. 1 and 2 relate to the grievance of the assessee that the CIT(A) erred in holding that Form No. 10CCAC under Rule 18BBA(3) read with Section 80HHC(4) of Income-tax Act, 1961 was not filed along with the Return and in confirming the order of the Assessing Officer under Section 154 by which he refused to rectify the income taken in the intimation slip on the basis of Form No. 10CCAC filed subsequently.
3. Briefly stated facts of the case are that the assessee filed Return of income on 25-10-89 declaring total income at Rs. 87,356 and assessment was completed under Section 143(1)(a). Intimation under Section 143(1)(a) was issued on 8-8-90 on an adjusted total income of Rs. 5,88,706. In the intimation under Section 143(1)(a), deduction under Section 80HHC amounting to Rs. 5,01,350 was not allowed on the ground that auditors' certificate in Form No. 10CCAC had not been filed. Thereafter, the assessee filed two petitions under Section 154 - one on 28-8-90 and the other on 24-9-90 along with certificate in Form No. 10CCAC stating therein that (i) the adjustment sheet (Annexure III) was not served on assessee ; (ii) deduction of Rs. 5,01,350, claimed under Section 80HHC was not allowed though auditors' certificate in Form No. 10CCAC was filed along with the Return; and (iii) Interest of Rs. 23,888 charged under Section 234B is not leviable as advance tax of Rs. 35,700 and TDS of Rs. 15,910 were paid while tax on returned income is only Rs. 8,509.
4. The Assessing Officer declined to make any rectification or amendment because, according to him, adjustment sheet was served on the assessee on 22-8-90, because auditors' certificate in Form No. 10CCAC was not filed along with the return as it is evident from the acknowledgement receipt issued by the department, and because the contention of the assessee regarding chargeability of interest under Section 234B is not acceptable.
5. The assessee preferred an appeal to the CIT(A) and submitted that Form No. 10CCAC certificate was omitted in the acknowledgement slip because of lack of place. It was further submitted that the certificate dated 8-9-89 was filed on 24-9-90 following rectification petition dated 28-8-90 and on the basis of that certificate, Assessing Officer should have allowed the deduction. The CIT(A) verified the acknowledgement slip and entries therein and came to the conclusion that Form No. 10CCAC was not filed along with the Return. The CIT(A)'s decision on the second issue whether deduction is allowable on the basis of certificate in Form No. 10CCAC filed subsequently before Assessing Officer is quoted as under for the sake of convenience:
As we are aware the assessment procedure has been substantially amended by the D.T. Laws (Amendment) Act, 1987 and by a similar Act of 1989. Under the new assessment procedure, the Department is to accept the returns filed, excepting in a very small percentage of cases. Therefore, it has been clarified by the Board that there should be a finality about the furnishing of the return from the assessee's side, i.e., the assessee should furnish a correct and complete return along with the different enclosures. In this case, it becomes clear that there is no evidence that the said Form 10CCAC was filed along with the return. Therefore, in my opinion, the A.O. is quite justified in refusing to rectify the income taken in the intimation slip, on the basis of a Form filed subsequently. I am conscious that this will cause hardship to the appellant as substantial amount of tax is involved. But I am afraid there is no appellate remedy available to the appellant against such hardship. It can be suggested that the appellant can take resort to certain other provisions of the Act for removal of hardship, viz., Section 119(2)(6)or264.
6. The assessee was neither satisfied with the sympathy expressed nor with the advice and suggestions made by the CIT(A) and, therefore, being still aggrieved by the order of the CIT(A), the assessee preferred this appeal to the Tribunal.
7. Sri P.K. Kataruka, Id. counsel for the assessee appeared at the stage of hearing and filed a paper book containing 86 pages along with Board Circular Nos. 601, 669 and 680 dated 4-6-91, 25-10-93 and 24-8-94 respectively. He invited our attention to the Audit Report and Form No. 10CCAC, computation of income filed with the return, copy of acknowledgement receipt and a certificate from the auditors placed at pages 1 to 32, 33, 34 and 35 of the paper book respectively and submitted that these documents prove beyond doubt that the certificate in Form No. 10CCAC was filed along with the return. According to him, the phrases and words "deduction Under Section 80HHC as per certificate of the auditors in Form No. 10CCAC at Rs. 5,01,350" is very clearly mentioned in the computation sheet filed along with the return and the same amount of Rs. 5,01,350 is also mentioned at col. 7 of the acknowledgement slip issued by the department and, therefore, it is automatically proved that the certificate was already there along with the auditors' report. Sri Kataruka also pointed out that export sales in P. & L. A/c. of this year and past records of assessment years 1986-87 and 1987-88 also show that the assessee is entitled to deduction Under Section 80HHC. He argued that Assessing Officer and CIT(A) were not justified in rejecting the assessee's application Under Section 154 when the mistake was very much apparent from the record and when the certificate under consideration was filed along with application Under Section 154. He relied on the following decisions in order to support his contention :
(i) L. Hirday Narain v. ITO [1970] 73 ITR 26 (SC)
(ii) New United Motors v. Asstt. C.I.T. [1993] 45 ITD 302 (Delhi).
8. Then, the Id. counsel for the assessee also pleaded that the term "shall" appearing in Section 80HHC is directory and not mandatory and, therefore, even when the certificate was furnished later on along with application Under Section 154, the Assessing Officer should have entertained the same and rectified the order. To support his argument he placed reliance on the following decisions:
(i) CIT v. Rai Bahadur Bissesswarlal Motilal Malwasie Trust [1992] 195 ITR 825 (Cal);
(ii) CIT v. Malayalam Plantations Ltd. [1976] 103 ITR 835 (Ker.).
9. The Id. counsel for the assessee also drew our attention to the case laws on entertainment of claim by the appellate authorities, not made in original assessment and contended that the CIT(A) was not justified in rejecting the claim of the assessee without considering the same on merit. According to Sri Kataruka, the following High Court decisions support his contention:
(a) CIT v. Western Rolling Mills (P.) Ltd. [1985] 156 ITR 54 (Bom.)
(b) CIT v. Oswal Woollen Mills Ltd. [1987] 163 ITR 484 (Punj. & Har.)
(c) Union Coal Co. Ltd. v. CIT[1968] 70 ITR 45 (Cal.)
(d) CIT v. K.N. Oil Industries [1983] 142 ITR 13 (MP)
(e) CIT v. Gangappa Cables Ltd. [1979] 116 ITR 778 (AP).
10. Lastly the counsel for the assessee drew our attention to the Circulars of the Central Board of Direct Taxes No. 581 dated 28-9-90; No. 669 dated 25-10-93 and No. 689, dated 24-8-94 and submitted that the departmental authorities rejected the claim of the assessee having in their mind and following the Board's circular No. 581 dated 28-9-90 which has already been modified in favour of the assessee by Circular Nos. 669 and 689, dated 25-10-93 and 24-8-94 respectively. It was further clarified that according to the latest circular application under Section 154 can be entertained if the required certificate is furnished afterwards and the claim of the assessee under Section 80HHC can be allowed. In view of all these arguments and contentions, Shri Kataruka urged to allow the claim of the assessee.
11. Sri. A.K. Das, the Id. senior departmental representative, on the other-hand, vehemently argued and strongly supported the orders of the departmental authorities.
12. We have carefully considered the rival contentions, relevant facts and material placed on the record and we have also gone through the decisions and Board circulars on which reliance has been placed. In this case, the first issue which arises to be decided immediately is whether a certificate in Form No. 10CCAC was filed by the assessee or not. We find that in the computation of income, the assessee has mentioned the claim under Section 80HHC at Rs. 5,01,350 as per circular in Form No. 10CCAC. In acknowledgement slip also the claim of Rs. 5,01,350 at col. 7 is mentioned and in the return of income also the assessee has claimed the same. It is also noticed that in the past also the claim is allowed for the assessment years 1986-87 and 1987-88 and the export sales are shown in the P. & L. A/c. of this year as it is very clearly indicated by the note therein. Thus, according to circumstantial evidence and the certificate of auditors, prima facie it appears that the certificate under consideration was filed along with the auditors' report attached with the return. Therefore, benefit of doubt can be granted to the assessee. But since there is no direct documentary evidence and since the department has not acknowledged the same in the receipt issued to the assessee, the presumption that the certificate was filed with the return cannot be accepted. In the absence of evidence, the revenue authorities had, therefore, rightly decided that no certificate in Form No. 10CCAC was filed.
13. The second important issue which follows is whether it is mandatory to file the certificate in order to claim the deduction under Section 80HHC. According to the Id. counsel for the assessee, the word "shall" used in Sub-section (4) of Section 80HHC is not mandatory but is directory as decided by several High Courts. He has relied on the decision of Hon'ble Calcutta High Court in the case of Rai Bahadur Bissesswarlal Motilal Malwasie Trust(supra) wherein it was held that the provisions of Section 12A of the Income-tax Act, 1961 are directory in the sense that the Assessing Officer is not powerless to allow an assessee to file the audit report, if not filed along with the return, any time before the completion of assessment. In the case of Malayalam Plantations Ltd. (supra), the Hon'ble Kerala High Court interpreted the meaning of "shall" used in Section 33A and held that the term "shall" need not in all context, circumstances and situations be treated as indicating a mandatory rule is a proposition by now well-settled. We find that in past, the claim of assessee under Section 80HHC has been allowed and this year it has been disallowed simply because the certificate was not filed along with the return. The question of fulfilling all the conditions laid down under Section 80HHC are not under dispute. In our opinion, therefore, the instant case is covered by Calcutta High Court decision in the case of RaiBahadur Bissesswarlal Motilal Malwasie Trust (supra) wherein it was held as under:
That, in the instant case, the assessee, for the past several years, was treated as as charitable institution and granted exemption under Section 11 of the Act. It was not shown that, in the relevant assessment year, the delay in getting the accounts audited and in filing of the report in Form No. 10B defeated any object of the Act or the assessee's action was in substance not in conformity with the intent and purpose of the Act. The Tribunal was right in law in holding that the assessee could not be denied exemption for the assessment year 1984-85.
Thus, according to this decision of the Calcutta High Court, submission of audit report along with the return is not a mandatory condition. The same view is expressed by the Kerala High Court in the case of Malayalam Plantations Ltd. (supra) wherein it was held that though filing of the certificate is mandatory, the failure to file it along with the return will not result in forfeiture of the claim of development allowance under Section 33A. In our opinion, what is applicable to Sections 12A and 33A is also applicable to Section 80HHC and, therefore, it can on the basis of above High Court decisions be decided that it was not mandatory to submit the certificate in Form No. 10CCAC along with the return. What is necessary is to file the certificate before the assessment is made. But we find that in the instant case, it was submitted at the stage of Section 154, i.e., when the assessment was completed under Section 143(1) (a). For that the counsel of the assessee has contended that such claims can be entertained by the appellate authorities even if they were not claimed in the original assessment. He has given five case laws to support his contention. The ratio of these decisions are briefly given as under for the sake of convenience :
(a) In Western Rolling Mills (P.) Ltd.'s case (supra) the Bombay High Court held, that the AAC had jurisdiction to consider the question of relief under Section 80-1 for the first time.
(b) In Oswal Woollen Mills Ltd.'s case (supra), although the assessee failed to claim weighted deduction under Section 35B of the Income-tax Act, 1961, the Punjab and Haryana High Court held that in the instant case all necessary facts for allowing weighted deductions were available on record and there was no fresh claim set up at the appellate stage and the allowance of weighted deduction was justified.
(c) The Calcutta High Court in the case of Union Coal Co. Ltd. (supra) held that there is nothing to debar an assessee from making a new claim for deduction in appeal before the AAC, and nothing to prevent the AAC prima facie to examine the facts of such a claim and if he is satisfied about the maintainability of such a claim, the AAC may remand the matter to the ITO for consideration of the new claim for deduction.
(d) The ratio of judgment of Madhya Pradesh High Court in the case of K.N. Oil Industries (supra) is that "on the facts of the case, if it is apparent from the record that the assessee was entitled to relief admissible under Section 35B that relief can be granted to him by an order under Section 154 by rectifying the assessment even though relief under that section had not been claimed by the assessee in the original assessment proceedings".
(e) In Gangappa Cables Ltd's case (supra) where the claim under Section 80J was neither raised before the ITO nor before the AAC but was raised before the Tribunal only, the High Court held that the Tribunal was correct in allowing the claim of the assessee as there was material on record for allowing the same.
14. If we put the facts of the instant case to these decisions, we find that the assessee's claim is placed on better position. In the case of assessee all the material were available on record and the certificate was also filed at the level of Assessing Officer only at the stage of the proceedings under Section 154. The Assessing Officer and the CIT(A) have admitted that the certificate was filed along with the application under Section 154 submitted before the Assessing Officer. In this view of the matter, there was no question of denying the claim of the assessee made under Section 80HHC. According to the principles laid down in these cases, the Assessing Officer and the CIT(A) should have entertained the claim of assessee especially when there is no other defect and lacuna in the claim of the assessee. Applying the ratio of the decision of Calcutta High Court in the case of Un ion Coal Co. Ltd (supra), we find that not only the Assessing Officer but the CIT(A) too was prima facie satisfied about the maintainability of the claim of assessee but because of technical and procedural defect that the certificate is not filed along with the return, he has rejected the claim of assessee instead of remanding the same. Since the CIT(A) has not entertained the claim of assessee, his order cannot be sustained in the eyes of law.
15. Yet, this matter is to be looked into from another angle as in this case action under Section 154 is also involved. Therefore, we have to decide third legal issue as to whether there was any mistake apparent from record and was worth rectifying. We find that the counsel for assessee has filed a paper book containing computation of income, copy of acknowledgement receipt, copy of P. & L. A/c. and copies of assessment orders for the assessment years 1986-87 and 1987-88 which formed the part of the assessment records. In the computation of income filed along with the return, it is very clearly mentioned as follows :
Less deduction under Section 80HHC, as per certificate of the Auditors in F. No. 10CCAC.
In intimation slip also the amount of Rs. 5,01,350 as deduction under Section 80HHC is mentioned. In P. & L. A/c. the export sales are shown at 92.5% as it is evident from the note given therein. On perusal of assessment orders for assessment years 1986-87 and 1987-88, it is obvious that in past, deduction under Section 80HHC has been allowed to the assessee. The assessee's claim in the return also cannot be denied as the returned income is shown at Rs. 87,356 after deducting claim under Section 80HHC. In addition to this the assessee also has filed a certificate dated 6-3-94 and two applications under Section 154 along with Form No. 10CCAC to bring it to the notice of the Assessing Officer that there is a mistake apparent from record. In our opinion, therefore, there was sufficient evidence to prove that the mistake was apparent from the record and it was worth rectifying. The Assessing Officer rejected the application under Section 154 on the ground that the alleged auditors' certificate in Form No. 10CCAC was never filed. Although the assessee submitted once again a certificate under Section 80HHC(4) along with rectification application under Section 154 dated 24-9-90, the Assessing Officer has not taken cognizance of the same. He simply ignored the certificate filed along with the application under Section 154 and did not decide the issue on merit as to whether there is a mistake apparent from the record and can be rectified on the basis of the certificate filed subsequently.
16. Although the CIT(A) has taken cognizance of the certificate filed along with the application under Section 154, he held that there is no evidence that the said Form No. 10CCAC was filed along with the return and, therefore, the Assessing Officer is quite justified in refusing to rectify the income taken in intimation slip on the basis of Form No. 10CCAC filed subsequently. Of course, while taking this sort of decision, he is completely governed by the new assessment procedures laid down by the Direct Tax Laws (Amendment) Act, 1987 and Direct Tax Laws (Amendment) Act, 1989 and also by Board Circular as mentioned by him in his order. For the sake of convenience, the relevant portion of Section 143(1)(a) after amendment and effective from 1-4-89 is extracted as under:
143(1)(a). Where a return has been made under Section 139, or in response to a notice under Sub-section (1) of Section 143,--
(i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of Sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under Section 156 and all the provisions of this Act shall apply accordingly; and
(ii) if any refund is due on the basis of such return, it shall be granted to the assessee :
Provided that in computing the tax or interest payable by, or refundable to the assessee, the following adjustments shall be made in the income or loss declared in the return, namely : --
(i) any arithmetical errors in the return, accounts or documents accompanying it shall be rectified;
(ii) any loss carried forward, deduction, allowance or relief, which, on the basis of the information available in such return, accounts or documents, is prima facie admissible but which is not claimed in the return, shall be allowed;
(iii) any loss carried forward, deduction, allowance or relief, claimed in the return, which, on the basis of the information available in such return, accounts or documents, is prima facie inadmissible, shall be disallowed:
Provided further that where adjustments are made under the first proviso, an intimation shall be sent to the assessee, notwithstanding that no tax or interest is found due from him after making the said adjustments.
17. In normal course of assessment procedure as envisaged in Section 143(1)(a), the Assessing Officer ought to have allowed the claim of assessee under Clause (ii) of first proviso to Section 143(1)(a) or later on under Section 154 by rectifying the intimation under Section 143(1)(a) when certificate was filed along with application under Section 154. But the Assessing Officer could not do that because by that time the Board had issued circular No. 581 dated 28-9-90 and had directed the Assessing Officer not to pass rectif icatory orders under Section 154 in such cases like this. The relevant portions of Board Circular No. 581 being paragraphs 3 and 4 are reproduced as under for the sake of convenience:
3. Similarly, filing of evidence in support of an exemption/deduction at the time of furnishing the return of income has been prescribed as a necessary condition in certain other sections of the Income-tax Act, such as Sections 32AB(5), 33AB(2), 54(2), 54B(2), 54D(2), 54F(4), 54G(2), 80HH(5), 80HHA(4), 35D(4), 35E(6), 80HHB(3), 80HHC(4), 80HHD(6), 80-I(7), etc. in such cases also, where the exemption/deduction claimed in disallowed as prima facie inadmissible for want of evidence in support thereof under Section 143(1)(a), it cannot be subsequently allowed by a rectification order under Section 154 if the assessee later on furnishes evidence in support thereof.
4. Such a view is also necessary from the administrative angle as if the department condones such lapses in the initial stages, a tendency may develop amongst the taxpayers not to file relevant evidence at the time of filing the return and then make a claim by putting in an application under Section 154. This tendency would unnecessarily infructuous work for the department. Hence, a strict view which is in accordance with the legal provisions is necessary in such cases.
18. This circular was issued as the Board was of the view that the scope of powers to make prima facie adjustment under Section 143(1)(a) is some- what co-terminus with the power to rectify a mistake apparent from record under Section 154. As this was a very strict view, the Board reconsidered the matter and modified Circular No. 581 by issue of another Circular No. 669 dated 25-10-93, the relevant portions of which are reproduced as under:
2. The Board have reconsid sred the matter and are of the opinion that where the sums referred to in the first proviso under Section 43 B had in fact been paid on or before the due dates mentioned therein, but the evidence therefor had been omitted to be furnished along with the return, the Assessing Officer can entertain applications under Section 154 for rectification of the intimation under Section 145(1)(a) or orders under Section 143(3), as the case may be, and decide the same on merits.
3. Circular No. 581 dated 28th September, 1990 stands modified to the above extent.
19. This circular was clarificatory in nature and was issued at the first instance with reference to the evidence of payment of tax, duty, etc., under Section 43B only. Thereafter the matter was further reconsidered by the Board in the light of the recommendations of the Tax Reforms Committee and another Circular No. 689 dated 24-8-94 was issued. In this circular, it was decided that prima facie disallowance shall be made only in respect of certain types of claims. One of them is mentioned at Clause (b) of the Circular and assessee's case is covered by that. Therefore, only the relevant portion of the Board Circular No. 689, dated 24-8-94 is quoted as under for consideration :
(b) any claim in respect of which there is an omission of information which is required, under the specific provisions of the Act or the Rules, to be furnished along with the return to substantiate such claim.
Example If the audit report specified under Section 80HHC(1), which is required to be filed along with the return of income, is not so filed, the deduction claimed under that section can be disallowed as a prima facie adjustment. Some more examples in this regard are the non-filing of audit reports or other evidence along with the return of income as required under Sections 12A(b), 33AB(2), 35E(6), 43B (first proviso), 54(2), 54B(2), 54D(2), 54F(4), 54G(2), 80HH(5), 80HHA(4), 80HHB(3), 80HHD(6), 80HHE(4), 80-I(7), 80-IA(8) and the like. But if evidence is subsequently furnished, rectification under Section 154 should be carried out to the extent permitted by Board's Circular No. 669 dated 25-10-93. No prima facie disallowance shall however be made if any evidence, required to be filed along with the return of income only in pursuance of the non-statutory guidance notes for filing in the return of income, is not so filed.
20. From these circulars we find that the Board have relaxed the strict view taken by them in Circular No. 581 and have extended the concession which was so far confined to only Section 43B as per Circular No. 669 to other sections like 33AB(2), 35E(b), 54(2), 80HH(5), 80HHA(4), 80HHC(1), etc. According to this circular if the evidence is subsequently furnished the rectification under Section 154 should be carried out. But it is restricted or allowed to the extent permitted by Board Circular No. 669, dated 25-10-93. According to Circular No. 669 the Assessing Officer can entertain application under Section 154 for rectification of intimation under Section 143 (1) (a) or order under Section 143(3), as the case may be, and decide the same on merit. If we read both the circulars together, we come to the correct view and intention of the Board that if an avidence required in sections mentioned in both circulars is omitted to be furnished along with the return and is subsequently furnished, the Assessing Officer can entertain application under Section 154 for rectification of intimation or order and decide the same on merit.
21. Judged in the light of the Board Circular stated hereinabove, we find that although the assessee has filed the certificate subsequently along with application under Section 154 and the mistake was apparent from record, neither the Assessing Officer nor the CIT(A) entertained the evidence and rectified or got rectified the intimation under Section 143(1)(a). Thus, neither they have followed the correct procedure of law nor the instructions of the Board and, therefore, their orders cannot be affirmed as such. We, therefore, hold that the departmental authorities were not justified in rejecting the claim of assessee under Section 154 on the basis of evidence filed subsequently.
22. Now, the last issue to be decided in this case is whether the claim of the assessee can be allowed on merit. We notice that the assessee has filed necessary certificate in Form No. 10CCAC certifying that the assessee is entitled to deduction of Rs. 5,01,350 under Section 80HHC and has claimed the same in the computation of income and return of income. The departmental authorities have not controverted the claim of the assessee on merit. They have also not pointed out any flaw or defect in the certificate or in the claim of deduction under Section 80HHC. In the absence of any reason and material against the claim of the assessee, we hold that the deduction under Section 80HHC can be allowed and is allowable on merit as well.
23. After deciding all important and relevant issues involved in this case, we come to the conclusion and hold that the revenue authorities were not justified in rej ecting the claim of the assessee under Section 80HHC. Their orders are, therefore, vacated and the Assessing Officer is directed to allow the deduction under Section 80HHC.
24. These grounds of appeal, therefore, succeed.
25. Ground Nos. 3 and 4 relate to charging of interest under Section 234B and additional tax under Section 143(1A) and are consequential in nature and Ground No. 5 is general in nature.
26. In the result, the appeal of the assessee is allowed.