M/S.l-Cube Innovative Solutions P Ltd v. The Commissioner Of Income Tax, Chennai-Ii

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE MR.JUSTICE C.SARAVANAN (Through Video Conferencing) M/s.L-Cube Innovative Solutions P Ltd.1148, I Block, Sixth Avenue,Anna Nagar West,Chennai – 600 040. ...Petitioner Vs 1. The Commissioner of Income Tax, Chennai-II, 121, Mahatma Gandhi Road, Chennai – 600 034. 2. The Income Tax Officer, Company Ward II (1), 121, Mahatma Gandhi Road, Chennai – 600 034. ...Respondents Prayer: Petition filed under Article 226 of the Constitution ofIndia to issue a Writ of Certiorarified Mandamus, to call forthe records of the Petitioner company in C.No.264/02/CIT-II/2013-14 on the file of the First Respondent and quash theimpugned order dated 25.03.2014 and consequently direct theRespondents to grant the deduction/exemption/tax holiday benefitwithin the scope of Section 10B of the Income Tax Act, 1961relating to the Assessment Year 2006-07. The petitioner has challenged the impugned order dated25.03.2014 passed by the 1[st] respondent/Commissioner of IncomeTax, Chennai, under Section 264 of the Income Tax Act, 1961(hereinafter referred to as the IT Act, 1961). https://hcservices.ecourts.gov.in/hcservices/ 2. By the impugned order, the 1[st] respondent has dismissedthe revision petition dated 09.12.2009 filed by the petitioneragainst the order dated 06.10.2009 passed by the 2[nd]respondent/Income Tax Officer, Chennai, under Section 154 of theIT Act, 1961 rejecting the petitioner’s application filed forrectification of the alleged mistakes in the assessment orderpassed under Section 1431(a) of the IT Act, 1961. 3. The Petitioner is engaged in providing software serviceand was entitled to avail the benefit of exemption under Section10B of the IT Act, 1961. However, while filing the Income TaxReturn on 30.11.2006, the petitioner failed to claim the benefitof exemption/deduction under Section 10B of the IT Act, 1961. 4. As per Section 80A(5) of the IT Act, if an assessee failsto make a claim in his return of income for any deduction underSection 10A or Section 10AA or Section 10B or Section 10BA orunder any provision of the Chapter under the heading “C”, nodeduction shall be allowed to him thereunder. 5. It is the specific case of the petitioner that this wasthe first year when the filing of return on income was mandatorythrough electric mode. By the time when the Intimation dated28.03.2008 was issued by the Income Tax Department, notice underSection 143(1) (a) of the IT Act was received by the petitioneron 18.05.2008 and the statutory period of limit prescribed forfiling revised return under Section 139(5) of the IT Act as itstood then had already expired on 31.03.2008. 6. The learned counsel for the petitioner submits that theproviso read with Section 139 of the IT Act, 1961, during therelevant period read as follows:- (5) If any person, having furnished a return undersub-section (1), or in pursuance of a notice issuedunder sub-section (1) of Section 142, discovers anyomission or any wrong statement therein, he mayfurnish a revised return at any time before theexpiry of one year from the end of the relevantassessment year or before the completion of theassessment, whichever is earlier:- Provided that where the return relates to theprevious year relevant to the assessment yearcommencing on the 1[st] day of April, 1988, or anyearlier assessment year, the reference to one yearaforesaid shall be construed as a reference to twoyears from the end of the relevant assessment year.” (5) If any person, having furnished a return undersub-section (1), or in pursuance of a notice issuedunder sub-section (1) of Section 142, discovers anyomission or any wrong statement therein, he mayfurnish a revised return at any time before theexpiry of one year from the end of the relevantassessment year or before the completion of theassessment, whichever is earlier:- Provided that where the return relates to theprevious year relevant to the assessment yearcommencing on the 1[st] day of April, 1988, or anyearlier assessment year, the reference to one yearaforesaid shall be construed as a reference to twoyears from the end of the relevant assessment year.” 7. Under these circumstances, the petitioner was compelledto file petition for rectification of assessment under Section154 of the IT Act on 18.08.2009 which came to be dismissed videorder dated 06.10.2009. Against the dismissal of the saidorder, the petitioner preferred the 1[st] revision petition on09.11.2009 under Section 264 of the IT Act which also came to bedismissed by an order dated 08.03.2011 and therefore, the 2[nd]revision petition was filed by the petitioner on 25.02.2013which also came to be disposed of by the impugned order dated25.03.2014. 8. The learned counsel for the petitioner submits that therespondents erred in not allowing the rectification and in notcondoning delay in claiming the exemption/deduction underSection 10B of the IT Act primarily on account of fact that 143(1) Intimation was received by the petitioner on 18.05.2008, bywhich time, time for filing revised return had expired. Hefurther submits that well-settled principles of law and thatrectification of order includes rectification of mistake in thereturn under Section 139(1) of the IT Act. In this connection,he relied on the following decisions:- 9.Hefurthersubmitsthatthebenefitofexemption/deduction under Section 10B of the IT Act has beengiven to the petitioner for the succeeding Assessment Year 2007-2008 vide Assessment Order dated 09.12.2009. 10. The learned counsel for the petitioner relied upon thedecision of this Court rendered in Annamallais Agencies VsCommissioner of Income-Tax and in M/s.Craftsman Automation PLtd., Coimbatore Vs The Commissioner of Income Tax-II,Coimbatore and another in W.P.No.3967 of 2009. He submits thatdelay in filing the return cannot be act in prejudice to thecase of the petitioner for rectification of the order and for arevision of the order, the Court has already taken a view inCraftsman Automation P Ltd (referred to supra). The learned https://hcservices.ecourts.gov.in/hcservices/ counsel for the petitioner further submits that dealing with asimilar situation, the Division Bench of the Bombay High Courtin Sese Goa Ltd., Vs Additional Commissioner of Income-Tax,allowed the similar relief to the petitioner herein. 11. The learned counsel for the petitioner further submitsthat this Court in Annamallais Agencies Vs Commissioner ofIncome-Tax, has held that for the purpose of rectification of anorder under Section 154 of the IT Act, 1961, the record for thepurpose does not merely mean the assessment order alone. It issubmitted that the Court held that the return, the things whichaccompanied the return are also part of the record and whenthere was an omission on the part of the Assessing Officer totake note of the contents of that record, while making hisorder, the mistake in the assessment can be regarded as apparent. 12. The learned counsel also drew my attention to thedecision of this Court in M/s.Craftsman Automation P Ltd.,Coimbatore Vs The Commissioner of Income Tax-II, Coimbatore andanother, wherein, the Court held as follows:- 12. The learned counsel also drew my attention to thedecision of this Court in M/s.Craftsman Automation P Ltd.,Coimbatore Vs The Commissioner of Income Tax-II, Coimbatore andanother, wherein, the Court held as follows:- “7. A careful look at sub-sections (1) and (2)of Section 154 would allow that the OriginalAuthority is conferred with two types of powers tomake an amendment. The first type of power is tomake an amendment suo motu. The second type of poweris to order an amendment whenever any mistake isbrought to his notice either by the assessee or bythe deductor or by the Collector. 8. The types of mistakes that could be rectifiedunder Section 154 are also two fold. While Sub-section (1) uses the expression “any mistakeapparent from the records”, Sub-section (2) uses theexpression “rectifying any such mistake which hasbeen brought to its notice”. In other words, thetype of mistake that Sub-section (1) deals with isdifferent from the type of mistake that clause (b)of Sub-section (2) deals with. While Sub-section(1) deals with a mistake apparent from the record,clause (b) of Sub-section (2) deals with a mistakethat is brought to the notice of the AssessingOfficer by the assesse. The word “such” used inclause (b) of Sub-section (2) is actually not inejusdem generis with Sub-section (1), but it goesalong with what follows in clause (b) itself, namely“mistake which has been brought to its notice”.Therefore, the thinking in the mind of theCommissioner as well as the Tribunal that Section 154 is available only to correct a mistake apparentfrom the record, may not be in tune with the Schemeof Sub-section (2) of Section 154. 9. That takes us to the next question as to whatcould be construed as a mistake so as to fall withineither Sub-section (1) or Sub-section (2) of Section154. According to the Assessing Officer, the mistakewas on the part of the assessee in not filing anauditor’s certificate at the time of filing of thereturn. But, according to the assesse, in his replyto the notice under Section 263, the mistake was onthe part of the Assessing Officer is not giving anopportunity under Section 139(9). 10. Mistakes can be of several kinds. Anomission to produce the record is as much a mistakeas an omission to take note of a record. Therefore,the Tribunal as well as the Commissioner were wrongin presuming that the case would not fall underSection 154. Hence, the questions of law areanswered in favour of the assessee and the appeal isallowed. No costs.” 13. The learned counsel for the petitioner also submittedthat in the context of Section 35 of the Indian Income Tax Act,1922 which is pari materia with Section 154 of the Income TaxAct, 1962. The Hon’ble Supreme Court in Maharana Mills (P.) LtdVs Income-Tax Officer, 36 [1956] 36 ITR 360 (SC), wherein, heldas follows:- “ “(1) The Commissioner or Appellate AssistantCommissioner may, at any time within four years fromthe date of any order passed by him in appeal or, inthe case of the Commissioner, in revision undersection 33A and the Income-Tax Officer may, at anytime within four years from the date of anyassessment order or refund order passed by him onhis own motion rectify any mistake apparent from therecord of the appeal, revision, assessment or refundas the case may be, and shall within the like periodrectify any such mistake which has been brought tohis notice by an assessee” The question therefore is was it a mistakeapparent from the record which was Income-taxOfficer has rectified. It was submitted thatrecalculation is not rectifying a mistake which isapparent from the record. The words used in the The question therefore is was it a mistakeapparent from the record which was Income-taxOfficer has rectified. It was submitted thatrecalculation is not rectifying a mistake which isapparent from the record. The words used in the section are “apparent from the record” and therecord does not mean only the order of assessment byit comprises all proceedings on which the assessmentorder is based and the Income-tax Officer isentitled for the purpose of exercising hisjurisdiction under section 35 to look into the wholeevidence and the law applicable to ascertain whetherthere was an error. If he doubts the written downvalue of the previous year it is open to him tocheck up the previous calculations and if he findsany mistake it is open to him to make freshcalculations in accordance with the law applicableincluding the rules made thereunder. The power under section 35 is not doubt limitedto rectification of mistakes which are apparent fromthe record. A mistake contemplated by this sectionis not one which is to be discovered as a result ofan argument but it is open to the Income-tax Officerto examine the record including the evidence and ifhe discovers any mistake he is entitled to rectifythe error provided that if the result is enhancementof assessment or reducing the refund then notice hasto be given to the assessee and he should be alloweda reasonable opportunity of being heard.” 14. Defending the impugned order passed by the respondents,the learned counsel for the Income Tax Department submits thatthe petitioner has not challenged the order dated 08.03.2011 andtherefore the rejection of application for rectification oforder dated 18.08.2009 had attained finality. It is submittedthat the petitioner has filed only a subsequent revisionpetition for reviewing the earlier order dated 08.03.2011 andtherefore the writ petition was not maintainable. 15. The learned counsel for the respondents further submitsthat it was open for the petitioner to file a statutory appealagainst the Assessment Order made under Section 143(1)(a) of theIT Act, 1961 dated 28.03.2008 and therefore relied on thesimilar decision relied by the petitioner in Commissioner ofIncome Tax Vs Malind Laboratories P. Ltd in T.C.A. No. 874 of2014, where in the Honourable Division Bench of this Courtcomplied the decision of theHon’ble Supreme Court in Ram Lal VsReva Coal Field Ltd. AIR [1962] 361 and dismissed the caseby answering the question of law raised against the revenue. 16. The learned counsel also submits that the scope ofinterference under Article 226 of Constitution of India is https://hcservices.ecourts.gov.in/hcservices/ limited and therefore submits that as per the Hon’ble SupremeCourt in Tata Cellular Vs Union of India, (1994) 6 SCC 651, thepresent writ petition is to be dismissed has none of theconstitutions enumerated by the Hon’ble Supreme Court areattracted. She draws my attention to Para 77 of the saiddecision, which reads as under:- “77. The duty of the court is to confine itselfto the question of legality. Its concern should be: 1.Whether a decision-making authority exceededits powers? 2. Committed an error of law, 3. committed a breach of the rules of naturaljustice, 4. reached a decision which no reasonabletribunal would have reached or, 5. abused its powers. Therefore, it is not for the court to determinewhether a particular policy or particular decisiontaken in the fulfilment of that policy is fair. Itis only concerned with the manner in which thosedecisions have been taken. The extent of the dutyto act fairly will vary from case to case. Shortly,put the grounds upon which an administrative actionis subject to control by judicial review can beclassified as under: (i) Illegality : This means the decision-maker mustunderstand correctly the law that regulates hisdecision-making power and must give effect to it. 2. Committed an error of law, 3. committed a breach of the rules of naturaljustice, 4. reached a decision which no reasonabletribunal would have reached or, 5. abused its powers. Therefore, it is not for the court to determinewhether a particular policy or particular decisiontaken in the fulfilment of that policy is fair. Itis only concerned with the manner in which thosedecisions have been taken. The extent of the dutyto act fairly will vary from case to case. Shortly,put the grounds upon which an administrative actionis subject to control by judicial review can beclassified as under: (i) Illegality : This means the decision-maker mustunderstand correctly the law that regulates hisdecision-making power and must give effect to it. (ii)Irrationality,namely,Wednesburyunreasonableness. The above are only the broad grounds but it does notrule out addition of further grounds in course oftime. As a matter of fact, in R.V.Secy of State forHome Department, ex p Brind, (1991) 1 AC 696 :(1991) 2 WLR 588 (HL), Lord Diplock refersspecifically to one development, namely, thepossible recognition of the principle of https://hcservices.ecourts.gov.in/hcservices/ proportionality. In all these cases, the test to beadopted is that the court should, ‘consider whethersomething has gone wrong of a nature and degreewhich requires its intervention’.” 17. The learned counsel for the respondents further refersto another decision of the Karnataka High Court in Nataraju(HUF) Vs Principal Commissioner of Income Tax, Mysuru, [2018] 91TAXMAN 467, wherein, scope of Section 264 of the IT Act, 1961,was explained by the Court. Paragraph (9) of the said order reads as under:- “9. The fact that the revision petitions underSection 264 of the Act was filed by them within ayear of passing of the impugned assessment order on21.03.2014 namely, on 09.03.2015 and 17.03.2015,shows that the petitioners-assessees were very wellguided about the relevant provisions of the IncomeTax Act and for the reasons best known to them, theyavoided the appellate remedies provided in the Act.” 18. The learned counsel for the respondents/revenuesubmits that the petitioner has not filed revised returns intime and therefore the petitioner is not entitled torectification and revision of the order. 19. I have considered the arguments advanced by the learnedcounsel for the petitioner and the respondents. 20. This is a case where the petitioner had failed to claimthe benefit of exemption/deduction under Section 10B of the ITAct, 1961 as per Section 80A(5) of the IT, 1961 in Income TaxReturns. The petitioner was acquired to make a claim in thesaid Returns filed under Section 139 of the IT Act, 1961. 21. In case, no such deductions are claimed when the Returnsfiled under Section 139 of the IT Act, 1961, no deduction can beallowed. Under these circumstances, the Assessment Order passedby the Assessing Officer under Section 143 (1) (a) of the ITAct, 1961 cannot be said to be an erroneous order passed by theAssessing Officer as it is based on the Returns filed by thepetitioner. Assessments under IT Act, 1961 are driven based onthe Returns that are filed under Section 139 of the IT Act, 1961. 22. The Hon’ble Division Bench of this Court in AnnamallaisAgencies Vs Commissioner of Income-Tax has accepted theproposition that for the purpose of rectification of errorapparent on the face of record can be corrected. The expressionrecord is not merely confined to error/mistake in the AssessmentOrder. It would include the mistake in Return and documentswhich accompanied the Returns as a part of the record. If there has been omission on the part of the Assessing Officer thereinto take note of the contents of that record, while making hisorder, the mistake in the assessment can be rectified. 22. The Hon’ble Division Bench of this Court in AnnamallaisAgencies Vs Commissioner of Income-Tax has accepted theproposition that for the purpose of rectification of errorapparent on the face of record can be corrected. The expressionrecord is not merely confined to error/mistake in the AssessmentOrder. It would include the mistake in Return and documentswhich accompanied the Returns as a part of the record. If there has been omission on the part of the Assessing Officer thereinto take note of the contents of that record, while making hisorder, the mistake in the assessment can be rectified. 23. Though the said order is dated 28.03.2008, it is thecase of the petitioner that the intimation was received by thepetitioner only on 18.05.2008 by which time, the time to filerevised returns under Section 139(5) had already expired on31.03.2008. Therefore, the only option available to thepetitioner was to file rectification petitioner before theAssessing Officer under Section 154 of the IT Act, 1961, whichthe petitioner did by filing of rectification petition on18.08.2009. 24. However, the Assessing Officer by an order dated06.10.2009 rejected the same while recording that the petitionerhad enclosed the revised returns by stating that the assesseehad filed the return on 30.11.2006 and if there was any mistakefound in the returns, the petitioner could have to filed arevised return on or before 31.03.2008. However, the intimationissued under Section 1431A of the IT Act, 1961 is dated28.03.2008. It is about 3 days prior to the expiry oflimitation for filing revised return on 31.03.2008. 25. Therefore, I am of the view that even if the intimationdated 28.03.2008 was despatched on the said date after it wassigned in all likelihood, it could not have been received by thepetitioner on 31.03.2008 to file a revised returns in time.Therefore, the petitioner was entitled for rectification underSection 154 of the IT Act, 1961. 26. In my view, the rejection of the application forrectification by the Assessing Officer under Section 154 of theIT Act, 1961 was unjustified, considering the fact that thepetitioner is entitled to substantive the benefit and delay, ifany, wholly attributed on account of the system. 27. The rejection of the revision application filed by thepetitioner vide order dated 08.03.2011 and vide order dated25.02.2013 impugned herein, it is also not justified as theofficers acting under the IT Department are duty bound to extendsubstantive benefits that are legitimately available to anassessee. 28. Dealing with a somewhat similar case, this Court inM/s.Craftsman Automation P Ltd., Coimbatore Vs The Commissionerof Income Tax-II, Coimbatore and another in W.P.No.3967 of 2009vide order dated 03.12.2019, has allowed the benefit wherereturns was filed beyond the period of limitation prescribedunder Section 139(5) of the IT Act, 1961. The operative portion of the order reads as under:- “20. As far as non-filing of the returns for theAssessment Year 2004-05 is concerned, the time-limitprescribed for revising the return under Section 139(1) in terms of Section 139(5) would not eclipse thepowers vested with the 1[st] respondent under Section264 of the Act to act fairly. In this connection,reference has been made to the decision of thisCourt in Sri. SelvaMuthu Kumar Vs. Commissioner ofIncome Tax, [2017] 394 ITR 247 a Division Bench ofthis Court held as follows:- ………………..………………… The operative portion of the order reads as under:- “20. As far as non-filing of the returns for theAssessment Year 2004-05 is concerned, the time-limitprescribed for revising the return under Section 139(1) in terms of Section 139(5) would not eclipse thepowers vested with the 1[st] respondent under Section264 of the Act to act fairly. In this connection,reference has been made to the decision of thisCourt in Sri. SelvaMuthu Kumar Vs. Commissioner ofIncome Tax, [2017] 394 ITR 247 a Division Bench ofthis Court held as follows:- ………………..………………… 25. The 1[st]respondent has observed that as persub-Section 2 to Section 80JJAA of the Income TaxAct, 1961, deduction cannot be allowed unless theassessee furnishes certificate along with the returnof income, the report of the accountant, as definedin the explanation below such sub-section (2) ofSection 288 giving such particulars and the reportas may be prescribed. Secondly, it is stated thatthe revised return was filed beyond the period oflimitation prescribed under Section 139(5) of theIncome Tax Act, 1961. …………….…………….. 28. The Assessing Officer is also duty-bound toextend substantive benefits which were available andarrive at just tax to be paid. Benefits which areotherwise available to an assessee cannot be deniedon the ground of technical failure of an assessee issuch assessee is legitimately entitled to suchsubstantive benefit. In this connection, it may beapt to refer to the following quotation of theHon’ble Supreme Court in the case of Commissioner ofSales Tax Vs. Auriya Chambers of Commerce (1986) 3SCC 50, wherein the Hon’ble Court held thatprocedures are handmaids of justice and not mistressof law. In Unichem Laboratories Vs. Commissioner ofCentral Excise, (2002) 7 SCC 145, the Hon’bleSupreme Court held that it is no part of duty of anofficer of the revenue to demand tax which are notdue to it merely to augment more revenue. They mustact fairly and justly. 29. In this case, the 2nd respondent has notgiven to benefit while reassessing the income of thepetitioner while passing order on 29.12.2008. It isprecisely for dealing with situations like this,powers have been vested with superior officers likethe respondent under Section 264 of the Income TaxAct, 1961. 30. Though, orders have to be passed subject toprovisions of the Act, the intention of thelegislative is not whittle down or deny benefitwhich are legitimately available to an assessee. 31. Failure to file return within the periodunder Section 139 of the Income Tax Act, 1961 forthe purpose of claiming benefit of deduction underSection 80 AAJJ of the Income Tax Act, 1961, in myview is a more procedural formality. In my view,denial of substantive benefit cannot be justifiedsince the assessment itself was reopened by the 2ndrespondent and the assessment already made on29.12.2006 was put to jeopardy. 32. If an assessee is entitled to benefit,technical failure on the part of an assessee toclaim the benefit in time, should not come in thegrant of substantial benefit/benefits that was/wereotherwise available under the Income Tax Act, 1961but for such technical failure. 33. I am therefore of the view that thepetitioner would be entitled to the benefit ofSection 80JJAA of the Income Tax Act, 1961. The 1strespondent ought to have allowed the applicationfiled by the petitioner under Section 264 of theIncome Tax Act, 1961. 34. In the light of the discussion, I am of theview that the petitioner is entitled to partialrelief at this stage. Accordingly, the impugnedorder is set aside by condoning the delay in filingthe return. The 2nd respondent is therefore directedto pass appropriate orders on merits in accordancewith law, ignoring the delay on the part of thepetitioner in filing the returns under Section 139(5) of the Income Tax Act and/or failure to furnishthe report of an accountant. 33. I am therefore of the view that thepetitioner would be entitled to the benefit ofSection 80JJAA of the Income Tax Act, 1961. The 1strespondent ought to have allowed the applicationfiled by the petitioner under Section 264 of theIncome Tax Act, 1961. 34. In the light of the discussion, I am of theview that the petitioner is entitled to partialrelief at this stage. Accordingly, the impugnedorder is set aside by condoning the delay in filingthe return. The 2nd respondent is therefore directedto pass appropriate orders on merits in accordancewith law, ignoring the delay on the part of thepetitioner in filing the returns under Section 139(5) of the Income Tax Act and/or failure to furnishthe report of an accountant. 35. The 2nd respondent shall pass a speaking orderwithin a period of three months from the date ofreceipt of a copy of this order. Needless to state,the petitioner shall be heard before order is passed. 36. Writ Petition stands allowed with the aboveobservation. No cost.” 29. In view of the above decision of this Court and thediscussions, I am inclined to allow this writ petition.Accordingly, this writ petition stands allowed. No costs.Consequently, connected miscellaneous petitions are closed. Sd/- Assistant Registrar(CS III) //True Copy// Sub Assistant RegistrararbTo 1. The Commissioner of Income Tax, Chennai-II, 121, Mahatma Gandhi Road, Chennai – 600 034. 2. The Income Tax Officer, Company Ward II (1), 121, Mahatma Gandhi Road, Chennai – 600 034. +1CC Mrs.Hema Muralikrishnan Advocate SR No 6640 W.P. No. 17023 of 2014 BR(Co)SRG 12/07/2021 https://hcservices.ecourts.gov.in/hcservices/