2011 (12) TMI 39 - HC - Income Tax

Revenue appeal rejected; s.80-IA audit timing relaxed and unexplained share application money addition held unsustainable

HC dismissed the Revenue's appeal. On deduction under s.80-IA, HC, following Karnataka HC precedent, held that filing the audit report along with the ... Deduction u/s 80IA - mandatory requirement of filing of Audit Report - Held that:- The Karnataka High Court in the case in THE COMMISSIONER OF INCOME TAX AND ANOTHER vs. ACE MULTITAXES SYSTEMS (P) LTD. [2009 (1) TMI 260 - KARNATAKA HIGH COURT], has held that when a relief is sought for u/s 80IB of the Act, there is no obligation on the part of the assessee to file return accompanied by the audit report, thereby, holding that the same is not mandatory. Therefore, it is clear that before the assessment is completed if such report is filed, no fault could be found against the assessee. Unexplained share allegation money - AO observed that the companies existed only on paper and the identity and creditworthiness of the companies who allegedly had paid the share application money and the genuineness of the transaction had not been proved - Held that:- in view of the decision of the Delhi High Court in COMMISSIONER OF INCOME TAX v. STELLAR INVESTMENT LTD. [1991 (4) TMI 100 - DELHI HIGH COURT], which judgement has been confirmed by the Honourable Apex Court in [2000 (7) TMI 76 - SC ORDER] - Decided against the revenue. Issues:1. Claim of deduction under Section 80IB without filing necessary certificate in Form 10CCB.2. Addition of unexplained share application money under Section 68 of the Act.Issue 1: Claim of deduction under Section 80IB without filing necessary certificate in Form 10CCB:The appeal was filed by the Revenue against the order of the Income Tax Appellate Tribunal, which allowed the assessee's claim under Section 80IB of the Act. The assessing officer disallowed the claim as the necessary certificate in Form 10CCB was not filed along with the return of income. The Commissioner of Income Tax (Appeals) later granted the claim. The High Court referred to various judicial precedents, including decisions by the Karnataka High Court, Delhi High Court, Madras High Court, Bombay High Court, Gujarat High Court, and Punjab and Haryana High Court, which held that filing the audit report before the completion of assessment is not mandatory but directory. The High Court concluded that if the audit report is filed before the framing of assessment, the requirement of the provisions of the Act is considered met. The learned counsel for the appellant failed to produce any contrary judgments. Therefore, the substantial question of law regarding the mandatory filing of Form 10CCB did not arise for consideration.Issue 2: Addition of unexplained share application money under Section 68 of the Act:The second substantial question of law involved the deletion of the addition of Rs.1,20,00,000 under Section 68 of the Act by the assessing officer as unexplained share application money. The High Court referred to a judgment by the Madras High Court in a similar case, which ruled against the Revenue. The High Court also cited a judgment by the Delhi High Court, confirmed by the Supreme Court, to support its conclusion. The Court held that no substantial question of law arose for consideration, and the appeal was dismissed.In summary, the High Court dismissed the tax case appeal, as the judgments from various High Courts and the Supreme Court supported the assessee's position regarding the claim of deduction under Section 80IB and the addition of unexplained share application money under Section 68 of the Act.