The Commissioner Of Income Tax,Chennai v. M/S.aks Alloys P. Ltd.,193

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE: 14.10.2015. CORAM THE HON'BLE MR.JUSTICE V.RAMASUBRAMANIANANDTHE HON'BLE MR.JUSTICE T.MATHIVANAN T.C.(A) No.860 of 2015 The Commissioner of Income Tax,Chennai. Appellant vs. M/s.AKS Alloys P. Ltd.,193 & 232, Walltax Road,Chennai 600 003. Respondent Tax Case (Appeal) against the order of the Income TaxAppellate Tribunal Madras "D" Bench, Chennai dated 29.4.2014passed in I.T.A.No.2171/Mds/2013 against the order of theCommissioner of Income Tax (Appeals)-1, Chennai-34, made inITA.No.194/09-10/A-1, dated 20/09/2013 against the order of theDeputy Commissioner of Income Tax Company Circle1(1), Chennai,made in PA/GIR.No.AADCA6937C/Ax6-296, dated 30/10/2009, whichwas preferred against the order of The Commissioner of IncomeTax Chennai, dated 20/3/2009 made in C.No.218/CIT-1/42 /263/2007-08, which was filed against the order of the AssistantCommissioner of Income Tax, Company Circle 1(1) Chennai dated31/7/2006 made in PAN/GIR No. /Ax6-296 for theAssissment year 2004-05 For appellant: Mr.T.Ravikumar (Judgment of the Court was delivered by V.RAMASUBRAMANIAN, J. ) This appeal is by the Revenue, raising the followingquestion of law:- "Whether, on the facts and in the circumstances ofthe case, the Appellate Tribunal was right inallowing deduction under section 80IB to theassessee, when the provisions of Section 80IB(13)read with section 80IA(7) mandates filing of AuditorForm 10CCB by qualified accountant for making a claimfor deduction?" https://hcservices.ecourts.gov.in/hcservices/ 2. Heard Mr.T.Ravikumar, learned Standing Counsel appearingfor the appellant/Revenue. 3. Assessment for the assessment year 2004-2005 in respectof the respondent/assessee was completed on 31.7.2006 undersection 143(3) on a total income of Rs.13,24,370/-. Theassessee had claimed deduction under section 80IB for aparticular amount in the revised computation, as against ahigher amount claimed in the return filed. But, the assesseefailed to furnish audit report in Form 10CCB read with Rule18BBB of the Rules, either with the original return or with therevised computation. Unfortunately, the assessing officerfailed to call for the certificate but, allowed the claim. 4. Therefore, the Commissioner of Income Tax initiatedproceedings under section 263 and issued a notice on 19.1.2009.The assessee gave a reply enclosing the audit report. 5. The Commissioner of Income Tax, after holding that theaudit report ought to have been filed alongwith the return ofincome, set aside the assessment on the ground that there werealso discrepancies in the certificate and consequently, remittedthe matter back to the assessing officer. 6. Thereafter, the assessing officer passed a fresh order ofassessment dated 30.10.2009, disallowing the claim under section80IB on the ground that certificate in Form 10CCB was notenclosed. The assessee filed an appeal and the same wasallowed by the Commissioner of Income Tax(Appeals), by an orderdated 20.9.2013. The Revenue appeal was dismissed by theTribunal by an order dated 29.4.2014 forcing the Revenue to comeup with the above appeal. 7. It is no doubt true that under sub-section (7) of section80IA, the deduction under sub-section (1) from profits and gainsderived from an Undertaking is not admissible unless theaccounts of the Undertaking for the previous year relevant tothe assessment year for which deduction is claimed, have beenaudited by an Accountant and the assessee furnishes, alongwithhis return of income, the report of such audit in the prescribedformat. The prescribed format is form 10CCB. Therefore, themandate of the statute is that the audit report should be filedalongwith the return of income. This is clear on a plainreading of sub-section (7) of Section 80IA. However, byjudicial interpretation, the assessees are permitted to file the 7. It is no doubt true that under sub-section (7) of section80IA, the deduction under sub-section (1) from profits and gainsderived from an Undertaking is not admissible unless theaccounts of the Undertaking for the previous year relevant tothe assessment year for which deduction is claimed, have beenaudited by an Accountant and the assessee furnishes, alongwithhis return of income, the report of such audit in the prescribedformat. The prescribed format is form 10CCB. Therefore, themandate of the statute is that the audit report should be filedalongwith the return of income. This is clear on a plainreading of sub-section (7) of Section 80IA. However, byjudicial interpretation, the assessees are permitted to file the audit report atleast before the completion of assessment, evenif they have omitted to furnish the certificate alongwith thereturn of income. Therefore, the only question that should beaddressed to in these cases is as to whether the audit reportwas filed either alongwith the return of income or atleastbefore the completion of assessment or not. 8. On the facts of this case, there is no dispute that theassessee failed to furnish the audit report alongwith his returnof income. It is admitted that he filed the report in thecourse of the proceedings under section 263. Will it be asufficient compliance, is the question that we should addressourselves for finding an answer to the question of law raisedherein. 9. A look at the operative portion of the order passed bythe Commissioner of Income Tax on 20.3.2009, under section 263of the Act would show that what was done by him was not anoutright rejection of the certificate. The relevant portion ofpara 4 of the order of the Commissioner of Income Tax passedunder section 263 is extracted hereunder:- "I have carefully considered the assessee'sreply. Filing of Audit certificate u/s 80-IBis not an idle formality. It is a statutoryrequirement and it is mandatory for theassessee to furnish the certificate. Thoughthe Assessing Officer might have consideredthe computation furnished by the assessee, hehad no occasion to examine the Audit Report inthe prescribed format. Copy of the AuditReport furnished by the assessee along withits reply to the present notice u/s 263 showsthat the certificate is dated 06.12.2005,which is 21 months after the end of therelevant previous year. There is alsodiscrepancy with regard to the year for whichthe deduction is being claimed. The initialassessment year is stated to be assessmentyear 2000-2001, but in the certificate 10CCBenclosed to the present notice u/s 263, it isstated that the year under consideration viz.,A.Y.2004-05 is the fourth year of claim ofdeduction u/s 80-IB. The assessee has notstated either in the Return of income or anyother documents furnished in the course ofhearing, the actual date of incorporation ofthe assessee and the year of commencement of the assessee's business. It has beenregistered with the Registrar of Companiesfrom the year 1994 itself. As the assessementhas been completed without the statutory auditreport prescribed under sec.80-IB of the Act,I consider it necessary that the AssessingOfficer should examine the claim on the basisof certificate furnished by the assessee inthe course of proceedings u/s 263 of the Actand for the limited purpose, set aside theassessment completed by the Assessing Officer.The Assessing Officer shall also examine thedate of incorporation of the company the yearfrom which the company is assessed to tax, theprevious location of the manufacturing unitand the date of shifting of the unit toPondicherry while considering the year formwhich the claim is admissible." the assessee's business. It has beenregistered with the Registrar of Companiesfrom the year 1994 itself. As the assessementhas been completed without the statutory auditreport prescribed under sec.80-IB of the Act,I consider it necessary that the AssessingOfficer should examine the claim on the basisof certificate furnished by the assessee inthe course of proceedings u/s 263 of the Actand for the limited purpose, set aside theassessment completed by the Assessing Officer.The Assessing Officer shall also examine thedate of incorporation of the company the yearfrom which the company is assessed to tax, theprevious location of the manufacturing unitand the date of shifting of the unit toPondicherry while considering the year formwhich the claim is admissible." 10. Two things could be deciphered from the order of theCommissioner of Income Tax under section 263. They are (1) thatthe Commissioner of Tax did not reject the audit report outrighton the basis of sub-section (7) of section 80IA and (2) that theCommissioner of Income Tax actually set aside the order ofassessment and remitted the matter back to the assessing officer. 11. As rightly pointed out by the Commissioner of Income Tax(Appeals) and the Tribunal, it was open to the Commissioner ofIncome Tax, in his proceedings under section 263, even to refuseto accept the audit report and to reject it outright on theground that furnishing of the same in the course of theproceedings under section 263 is not a sufficient compliance.The Commissioner of Income Tax did not choose to do so. 12. On the contrary, the Commissioner of Income Tax gave apositive direction to the assessing officer to examine the claimof the assessee for the benefit of section 80IB on the basis ofthe certificate furnished in the course of the proceedings undersection 263. Therefore, the limited purpose for which theCommissioner of Income Tax remanded the matter to the assessingofficer was actually to see whether the discrepancies disentitlethe assessee to the benefit and not to see whether the non-furnishing of the audit report disentitle him to the benefit. 13. The issue could be looked at from another angle. Oncethe original order of assessment is set aside and the matter isremitted back to the assessing officer, it should be deemed that https://hcservices.ecourts.gov.in/hcservices/ the assessment is not complete. If the law permits the assesseeto file the audit report before the completion of the assessmentand before the passing of the order of assessment, therespondent cannot be denied the benefit. 14. As a matter of fact, the question of law, as raised bythe Department, focusses attention on what the Commissioner ofIncome Tax (Appeals) and the appellate Tribunal did. It doesnot focus attention on what the Commissioner of Income Tax didin the proceedings under section 263. Once the certificate hasbeen accepted by the Commissioner of Income Tax in theproceedings under section 263 and the original order ofassessment has been set aside, the same has attained finality.Therefore, the question of law, as framed, does not arise forconsideration. Hence, the Tax Case appeal is dismissed. Nocosts. Sd/- Assistant Registrar(CS III) //True Copy// Sub Assistant Registrar To1.Income Tax Appellate Tribunal Madras "D" Bench, Chennai. 2.The Commissioner of Income Tax, (Appeals)-1Chennai-34. 3.The Deputy Commissioner of Income Tax Company Circle 1 (1),Chennai. 4.The Commissioner of Income Tax,Chennai. 5.The Assistant Commissioner of Income Tax Company Circle 1(1),Chennai. +1cc to Mr.T.Ravikumar, Advocate sr.56386 T.C.(A) No.860 of 2015 nm(CO)srg(08/01/2016)