Indian Kanoon - Search engine for Indian Law

4. Before ld. Pr. CIT, the A.R. of the assessee submitted that assessee satisfied all conditions enumerated u/s. 10AA of the Act and was eligible for True Sparrow System Pvt. Ltd. vs. Pr. CIT claiming deduction under the said section. He submitted that filing of audit report u/s. 56F by chartered accountant is a procedural condition in order to support the claim of the assessee. In the present case, the fact that form 56G was filed by the auditor is a bonafide inadvertent mistake on part of the chartered accountant of the assessee. The books of the assessee have been audited and further in the said form 56G, the auditor has verified the claim made by the assessee u/s. 10AA of the Act to be true and correct. The assessee also filed copy of revised form 56F by the CA certifying the deduction claimed u/s. 10AA of the Act before Pr. CIT during the course of proceeding u/s 263 of the Act. The assessee placed reliance on various judicial precedents in support of his contention that procedural flaws such as non-filing of audit report or delay in furnishing the same is a procedural default and cannot be invoked to disallow the benefits of exemptions/deductions available to the assessee once he has satisfied all other conditions laid down under the section for claiming deductions/exemptions. The assessee submitted that the fact that form 56G was filed instead of form 56F was a bonafide inadvertent mistake on part of the chartered accountant of the assessee. However, the same should not be construed as an action prejudicial to the interest of the Revenue. The conditions behind the claim of deduction u/s. 10AA of the Act have been duly fulfilled by the assessee company. The assessee should not be deprived of benefit u/s. 10AA of the Act owing to procedural lapse of filing incorrect form 56G instead of 56F at the time of the assessment proceedings.

6. Before us, the ld. counsel for the assessee submitted that during the course of original assessment, the ld. A.O. called upon the assessee to furnish details in respect of claim of exemption u/s. 10AA of the Act. The True Sparrow System Pvt. Ltd. vs. Pr. CIT assessee furnished details in relation to claim u/s. 10AA along with form 56G vide letter dated 05-08-2015 and gave further explanation in relation to claim u/s. 10AA vide letter dated 15-12-2016. The ld. A.O. after considering the details filed by the assessee chose not to disturb the claim of exemption u/s. 10AA of the Act while framing assessment u/s. 143(3) vide order dated 30-11-2016. The ld. counsel for the assessee submitted that filing of form 56F at the "revision stage" is sufficient compliance of the procedural aspect and hence exemption u/s. 10AA of the Act cannot be disturbed. He submitted that filing of form 56B instead of form 56F was a procedural lapse which was duly corrected during the course of proceeding u/s. 263 before Pr. CIT. The ld. Pr. CIT in the instant case failed to appreciate that for the purpose of invoking revisionary jurisdiction, it is essential that both the conditions u/s. 263 of the Act viz. that the A.O's order must be erroneous and prejudicial to the interest of the Revenue, must be satisfied. The issue of claim u/s. 10AA of the Act was examined in detail at the time of original assessment stage and after due application of mind, the ld. A.O. allowed the 10AA claim of the assessee. It is a settled proposition of law that when an issue has been examined at the time of original assessment stage, it is not open to the Department to invoke revisionary jurisdiction, if the view taken by the AO is a plausible view. The ld. D.R. in response placed reliance on the observations of the ld. Pr. CIT in the 263 order.

7.3 Another aspect for consideration is that whether there is sufficient compliance once assessee has filed the revised Form 56F in section 263 proceedings before Pr. CIT. In the case of M/s. ACN Info-Tech vs. ACIT the assessee claimed deduction u/s. 10B of the Act in the income tax return. The A.O. rejected the claim on the ground that assessee did not file form 56F along with return of income and had filed form 56G instead. The ld. A.R argued that the AO ought to have allowed the deduction u/s. 10AA since the assessee had filed form 56F during assessment proceeding which was a pure technical mistake. The Tribunal held that benefit of deduction should not be disallowed as the assessee had duly fulfilled the conditions for True Sparrow System Pvt. Ltd. vs. Pr. CIT claiming exemption u/s. 10AA of the Act. In the case of ITO v. Accentia Technologies 52 taxmann.com 89 (Mum), the Mumbai Tribunal held that deduction under section 10A cannot be denied merely because at time of filing of return, claim had mistakenly been made under section 10B of the Act. The Gujarat High Court in the case of Zenith Processing Mills v CIT 219 ITR 721 (Guj) held that provision of section 80J(6A) to extent it requires furnishing of auditor's report in prescribed form along with return, is directory in nature and not mandatory. Further, assessee can be permitted to produce such report at later stage when question of disallowance arises during course of assessment proceedings. In the instant case, the ld. Pr. CIT has not disputed that the issue for claiming deduction u/s. 10AA of the Act has been discussed with the assessee during the course of assessment proceeding. The ld. Pr. CIT has also not disputed the fact that this is the second year for claiming deduction u/s. 10AA of the Act by the assessee and that the Pr. CIT has not challenged that the assessee has not fulfilled the conditions eligible for claiming deduction. The ld. Pr. CIT has initiated 263 proceeding only on account of an inadvertent error on the part of the chartered accountant of the assessee by filing form 56G instead of form 56F in support of claim of deduction u/s. 10AA of the Act. This error has also been rectified by the A.R. of the assessee during the course of 263 proceeding wherein revised form 56F for claiming deduction u/s. 10AA of the Act was produced before Pr. CIT during 263 proceeding. We are therefore of the view that there is sufficient compliance if the correct form 56F has been filed during the course of revisionary proceeding, there is no material objective to be achieved by directing revision of the original True Sparrow System Pvt. Ltd. vs. Pr. CIT assessment order once the procedural lapse for which revisionary proceedings has been initiated has been rectified during 263 proceedings.

7.4 The third aspect for our consideration is whether once the Ld. AO has examined the claim u/s 10AA of the Act and has accepted the same, on appreciation of documents placed on record, can it be said that the twin conditions of section 263 of the Act viz. order passed is erroneous and prejudicial to the interests of revenue are satisfied, in the instant facts. On going through the records of the case, it is seen that the issue of deduction u/s 10AA of the Act has been dealt in detail by the Ld. AO during the course of assessment proceedings. On a perusal and comparison of Form 56G (earlier filed with Ld. AO during assessment proceedings) and Form 56F with Ld. Pr. CIT, it is seen that the contents of exemption filed are similar. In Form 56G filed with Ld. AO, the assessee has claimed exemption u/s 10AA of the Act and has given a working of how the claim of exemption u/s 10AA of the Act has been arrived at. Identical details were filed before Ld. Pr. CIT in 263 proceedings albeit in a different form (revised Form 56F). Therefore, in our considered view, in the instant case though there may be a procedural breach, but on the aspect of claim of deduction u/s 10AA, the issue has been analyzed by the Ld. AO in detail during the assessment proceedings and relied granted accordingly. Even in the 263 proceedings, the Ld. Pr. CIT has not challenged the assessee's eligibility to claim deduction u/s 10AA of the Act nor has he pointed out any error in the findings of the Ld. AO with regards to the assessee's claim u/s 10AA of the Act. The only contention of Ld. Pr. CIT is that the Ld. AO failed notice that claim of exemption u/s 10AA of the Act has been filed in an incorrect Form, True Sparrow System Pvt. Ltd. vs. Pr. CIT which the assessee revised during the course of revisionary proceedings. In our considered view, in the instant facts, the twin conditions of section 263 of the Act viz. order passed is erroneous and prejudicial to the interests of revenue are not satisfied in the instant facts. In our view, Ld. Pr. CIT erred in law and in facts in invoking section 263 of the Act to revise the order of Ld. AO 7.5 In the result, we hold that the Ld. Pr. CIT(A) has erred in law and in facts in initiating proceedings u/s 263 of the Act. In the result, Ground Numbers 1 to 6 of the assessee are allowed.