Whether The Tribunel Wedsjustified In Law In Not Following The Decisionof Madras High Court In The Case Of Scmcreations v. Acit (2008) 304 Itr 319(Mad), But Followed The Decision Of Thetribunal In The Case Of Acit Vs. Hindustanmint And Agro Products (P) Ltd. (2009)199 Itd 107 (Delhi

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 13 DAY OF JANUARY 2071 PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’‘’BLE MR. JUSTICE NATARAJ RANGASW A BETWEEN: LT.A. NCO.115 OF 2010 M/S. SUTURES INDIA PVT. LTD.,REP. BY ITS MANAGING DIRECTORSRI. L.G. CHANDRASEKHAR|NO.118, 3RD PHASE, 13TH CROSS.PEENYA INDUSTRIAL AREA|BANGALORE-560058. (BY SRI. A. SHANKAR, SR. COUNSEL FOR.SRI. M. LAVA, ADV.,) ... APPELLAN| AND* THE COMMISSIONER OF INCOME-TA®BANGALORE-III, C.R. BUILDING QUEENS ROAD, BANGALORE-560001. .., RESPONDENT (BY SRI. K.V. ARAVIND, ADV.) THIS I.T.A. IS FILED UNDER SEC. 260-A OF INCOME TAX|ACT 1961, ARISING OUT OF ORDER DATED 13.11.2009 PASSEDIN ITA NO.1261/BANG/2008 FOR THE ASSESSMENT YEAR 2003-04, PRAYING TO: (i) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW,STATED THEREIN. | (ii) ALLOW THE APPEAL AND SET ASIDE THE ORDER.PASSED BY THE ITAT BANGALORE IN ITA NO.1261/BANG/2008,DATED 13.11.2009, IN THE INTEREST OF JUSTICE AND EQUITY. THIS I.7T.A. COMING ON FOR’ HEARING, THIS’ DAY, | ALOK ARADHE J.,DELIVERED THE FOLLOWING: | JUDGMENT This appeal under Section 260A of the Income TaxAct, 1961 (hereinafter referred to as the Act for short)has been preferred by the assessee. The subject matter|of the appeal pertains to the Assessment year 2003-04.The appeal was admitted by a bench of this Court videorder dated 19.04.2020 on the following substantial|questions of law:| “(1)Whether the Tribunel wedsjustified in holding that the Commissionerof Income Tax was fully Justified ininvoking the provisions of Section 263 ofthe Income Tax Act, 1961? (il)Whether the Tribunal wes|justified in holding that the deductionUnder Section SOQOHHC of tne Act is to ballowed after deduction of the amount ofprofit allowed as deduction under SectionSOIB of the Act? (111)Whether the Tribunel wedsjustified in law in not following the decisionof Madras High Court in the case of SCMCreations Vs. ACIT (2008) 304 ITR 319(Mad), but followed the decision of theTribunal in the case of ACIT Vs. HindustanMint and Agro Products (P) Ltd. (2009)199 ITD 107 (Delhi)? (iv)Whether the Tribunel wedsjustified in holding that at the time of filingaudit report in form 10CCB along with thereturn was mandatory in nature on thefacts and circumstances of the case?" 2.|Facts leading to filing of this appeal brieflystated are that the assessee is a private limitedcompany and is engaged in the business of manufactureand sale of surgical products. The assessee filed itsreturn of income for the Assessment Year 2003-04 and.declared a total income of Rs.84,06,640/-. The returnwas processed under Section 143(1) of the Act.Thereafter, the case of the assessee was selected for scrutiny. The assessment was completed under Section143(3)of the Act by the Assessing Officer by order dated14.06.7005|anddisallowancesCO thetune|OF Rs.17,96,250/-.Wefemade.and|demandofRs.9,85,514/- was made on the assessee. Thereafter,|the Commissioner of Income Tax invoked the powersunder Section 263 of the Act and a show cause notice.dated 23.10.2007 was issued by the Commissioner of.Income Tax. In the notice, it was stated that the orderdated 14.06.2005 passed by the Assessing Officer waserroneous and was prejudicial to the interest of revenue.|The assessee filed a response to the aforesaid showCaUlS€noticeand|alsoSubmittedobjectionson07.03.2008. The Commissioner of Income Tax by anorder dated 11.03.2008 rejected the objections filed bythe assessee and denied the deduction under Section>SOIA of the Act and directed the Assessing Officer to re-compute the deduction under Section 8QHHC of tne Actsubjecting the same to the provisions of Section 80IA(9)_ of the Act if necessary. The assessee thereupon filed anappeal before the Income Tax Appellate Tribunal(hereinafter referred to as ‘the tribunal for short). Thetribunal by an order dated 23.11.2009 has dismissedthe appeal preferred by the assessee. In the aforesaidfactual background, the assessee has filed this appeal. 3Learned Senior counsel for the assesseeSubmitted that the assessee had claimed deduction of.Rs.11,44,832/- under Section 8O0HHC of the Act and ofRs.40,93,489/- under Section 80IA of the Act. It isfurther submitted that Commissioner of Income Tax vide.order dated 11.03.2008 inter alia held tnat tnededuction under Section 80IA of the act is not allowable.as the assessee nad not filed the Form No.10CCB asrequired under Section 80IA(7) of the Act along with the|return of income. It is pointed out that the assessee hadfiied tne.aforesaid form along with the~ writtenSubmissions before the Commissioner of Income Tax,which was duly acknowledged in the order dated 11.03.7008. It is also submitted that the deduction|under Section SOIA of the Act should be allowed even in.cases as such Section 80IA(/7) does not cast anyObligation on the assessee that return must be)accompanied by the audit report. It is further submittedthat there is no bar in claiming the deduction underSection S8OIA as well as Section SOHHC of the Actsimultaneously. It IS|furtherSubmittedthat|theinvocation of Section 263 of the Act was impermissiblein the fact situation of the case and the Commissioner of.Income Tax ought to have appreciated that theAssessing Officer had taken one of the plausible views .In support of aforesaid submissions, reliance has been.placed on decisions in"SRILB.R.MURTHY (HUF) VS.ITO IN ITA NO.686/2009 DATED 30.11.2009, ‘CITVS. A.N.ARUNACHALAM'’, (1994) 208 ITR 481(MADRAS), ‘CIT VS. MILLIPORE INDIA P. LTD.',341 ITR 219 (KAR.), ‘ACIT VS. MICRO LABS LTD.',(2016) 380 ITR 1, ‘MALABAR INDUSTRIAL CO. LTD. VS. CIT 243 ITR 83 (SC), ‘COMMISSIONER OFINCOME-TAX VS. G.M,.MITTAL STAINLESS STEEL(P.) LTD’, 263 ITR 255 (SC) AND ‘CIT VS. M/SSARAVANA DEVELOPERS IN ITA NOS.68/2014C/W 67/2017 (KARNATAKA). a |On the other hand, learned counsel for therevenue submitted that the controversy is pending.before the larger bench of the Supreme Court, which is.evident from perusal of 380 ITR 1 (SC) and therefore,hearing of this appeal should be deferred till the matteris adjudicated by the larger bench of the Supreme.Court. It is further submitted that Section 263 of the Act.provides for revisional order by the Commissioner if theSame is erroneous and is prejudicial to the interest ofthe revenue. In the instant case, the assessee had notfiled Form No.10CCB as required under Section 80IA(7).of the Act along with the return of income which ismandatory and therefore, assessee is not entitled todeduction under Section 80IA of the Act. However, the Assessing Officer without examining the aforesaidaspect permitted the deduction and therefore, the orderpassed by the Assessing Officer is erroneous and is.prejudicial to the interest of the revenue. It is also urgedthat Section 80IA (9) of the Act mandates deduction tothe extent of such profits and gains which has beenallowed under the heading ‘deductions in respect ofcertain incomes... The Assessing Officer had allowed thededuction under Section S8OHHC of the Act witnoutreducing the deduction allowed under Section 80IA of.the Act, which is mandated under Section 80IA(9) of theAct. It is further submitted that the order of assessment.is erroneous and is prejudicial to the interest of therevenue. 5.|It is also argued that as the assessee isquestioning the invocation of power of revision underSection 263 of tne Act, the correctness of the ordersubjected to the revision nas to De tested on the basis ofsituation and position of law and compliance of the same 5.|It is also argued that as the assessee isquestioning the invocation of power of revision underSection 263 of tne Act, the correctness of the ordersubjected to the revision nas to De tested on the basis ofsituation and position of law and compliance of the same by the assessee. It is submitted that audit report inForm No.10CCB which was mandatorily required to befiled was not filed in the course of assessment.proceeding. The order passed by the Assessing Officersuffers from the vice of non application of mind. It is”further submitted that twin conditions for invoking.powers under Section 263 of the Act are satisfied due toincorrect application of law and without any application.of mind. It is further submitted tnat failure conduct.enquiry into the issues would also justify invokingpowers of revision under Section 263 of the Act. In.Support of aforesaid submissions, reliance has beenplaced on decisions in'NATURAL STONES EXPORTSLTD. VS. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 11(1), (2014) 42 TAXMANN.COM467 (KARNATAKA), ‘INCOME TAX OFFICER VS.SMT,MANDIRAD,.VAKHARIA',(2001)1/7TAXMAN 236 (KARNATAKA), ‘COMMISSIONER OFINCOME TAX, MUMBAI VS. AMITABH BACHCHAN, (2016) 69 TAXMANN.COM 170 (SC), “MALABARINDUSTRIAL COMPANY VS. CIT’, 243 ITR 83 6.|We have considered the submissions made§by learned counsel for the parties and have perused therecord. Before proceeding further it is apposite to deal.with the submission made by learned counsel for theassessee made with regard to deferment of hearing ofthe appeal. A bench of this court by an order dated20.11.2018 in view of submission made by learnedcounsel for the revenue that question of law whichwould arise for consideration in this appeal has beenreferred to a larger bench of tne Supreme Court,directed that the appeal be listed after disposal of thespecial leave petition. Thereafter the counsel for theassessee filed an application for modification of theorder dated 20.11.2018 on the aforesaid application thefollowing order was passed by this court on 04.12.2020.the relevant extract of wnicn reads as under: “learnedcounsel fortheadSSCSSCEsubmits that by order dated 20.11.2018, thehearing of the appeal was deferred on the|ground that the substantial question of law|InvolvedIn|theappealISpendingconsideration before the Larger Bench of the.Hon ‘bleSupremeCourt.However,ItISsubmitted that the learned counsel for the|aASSCSSCEdoesNOTintend.CO addressarguments on the issue which Is pending|before the Hon’ble Supreme Court and it Is°contended that the appeal may be disposed ofas the Assessing Officer has adopted one of|the views which is possible and therefore, the Invocation of Section 263 of the [Income TaxAct by the Commissioner of Income Tax in the facts and circumstances was not Justified. Theaforesaid fact has not been disputed by the.learned counsel for the Revenue. For theaforesaid reason and in view of the statement|madeby thelearned.counsel fortheassessee, we deem it appropriate to modifythe ad interim order dated 20.11.7018 and.direct that the appeal be listed for hearing” The aforesaid order has not been challenged bythe Revenue before the Supreme Court. Therefore theaforesaid order binds us and the submission made bylearned counsel for the Revenue that the hearing of the.appealneeds|tObe|deferreddoes|notdeserveacceptance. 7The conditions precedent for invocation ofpower under Section 263 of the Act namely that anorder passed by an assessing officer must be prejudicial to the interest of the Revenue and must be erroneoushave to be fulfilled before power under section 263 ofthe Act is invoked. It is equally well settled legalproposition that where the view taken by assessing.officer is one of the possibie views the powers undersection 263 of the Act would not be invoked [See:'MAILABARINDUSTRIALCO.LTD.VY.COMMISSIONER OF INCOME TAX, 243 ITR 83(SC), CIT V. MAX INDIA LTD., 295 ITR 282 ANDULTRATECHCEMENTLID.V,,STATEOF| RAJASTHAN, (2020)1/7TAXMANN,.COM807 (SC)|. 7The conditions precedent for invocation ofpower under Section 263 of the Act namely that anorder passed by an assessing officer must be prejudicial to the interest of the Revenue and must be erroneoushave to be fulfilled before power under section 263 ofthe Act is invoked. It is equally well settled legalproposition that where the view taken by assessing.officer is one of the possibie views the powers undersection 263 of the Act would not be invoked [See:'MAILABARINDUSTRIALCO.LTD.VY.COMMISSIONER OF INCOME TAX, 243 ITR 83(SC), CIT V. MAX INDIA LTD., 295 ITR 282 ANDULTRATECHCEMENTLID.V,,STATEOF| RAJASTHAN, (2020)1/7TAXMANN,.COM807 (SC)|. 8 _In the backdrop of aforesaid well settled legalposition, we may advert to the facts of the case. Theassessee had filed Form No.10CCB of the Act along with|written submissions before the Commissioner of Income.Tax (Appeals), which was acknowledged by him in the)order dated 11.03.7008. A bench of this court In)'CIT V.ACE MULTIAXES SYSTEMS (P.) LTD.', (2009) 317ITR 207 (KAR.)has taken a view that assessee Is.entitled to deduction under Section 8OIA of the Act even.if the audit report is filed at the appellate stage. Similarview nas been taken by Madras High Court in A.N.Arunacnalam (supra). Thus, the view taken by theassessing officer with regard to eligibility of the assessee|to claim deduction under section 80IA of the Act was.One of the possible views. We are fortified in ouraforesaid conciusion in view of the order passed by tne Commissioner of Income Tax under section 263 of the.Act. The relevant extract of which reads as under: “The order u/s. 143(3) dated 14-06-2005is, therefore, modified to the extent thatdeduction claimed u/s. 80OIA is withdrawn andfor the purpose of computing deduction U/S.|SOHHC, deduction allowable u/s. 8OIA has tobe reduced from the business profits. Since|deductions u/s. 80IA is being denied, there willbe no change in the computation of deductionu/s. S8OHHC for the time being. However, incase it is held by the appellate authority that.the assessee Is entitled to deduction u/s. 80IA,the deduction u/s. 80OHHC will have to berecomputed keeping in mind the provisions of|section SOIA(9)”. 9 |Tnus the order passed by the Commissionerof Income Tax itself discloses that two views arepossible. Therefore it is not necessary for us to deal withvarious contentions made by learned counsel for theparties. In the result the substantial questions of law areanswered in favour of the assessee and against tne revenue. In the result, the order dated 11.03.2008passed by the Commissioner of Income Tax and orderdated 23.11.2009 passed by the Tribunal are herebyquashed.— In the result, the appeal is allowed. — Sd/-—JUDGE. SS| Sd/-JUDGE.