1998 (2) TMI 611 - AT - Income Tax

Tribunal upholds CIT(Appeals) decision on deduction under section 80HHC

Assistant Commissioner of Income-tax Versus R.R. Hosiery (P.) Ltd.

The Tribunal dismissed the revenue's appeal and upheld the CIT(Appeals)'s decision to rectify the assessment and allow the deduction under section 80HHC. ... - Issues Involved:1. Whether the CIT(Appeals) erred in directing the Assessing Officer to rectify the mistake and allow necessary relief under section 80HHC.2. Whether there was a mistake apparent from the record in the order passed by the Assessing Officer under section 143(3).3. Whether the audit report in Form No. 10CCAC should have been filed along with the return or could be submitted later.4. Whether the CIT(Appeals) was correct in allowing the application under section 154 for rectification.Detailed Analysis:Issue 1: Direction to Rectify Mistake and Allow Relief Under Section 80HHCThe CIT(Appeals) initially denied the assessee's claim for deduction under section 80HHC due to the non-filing of the audit report in Form No. 10CCAC along with the return or during the assessment proceedings. However, upon the assessee's application for rectification under section 154, the CIT(Appeals) allowed the claim, noting that the audit report was subsequently filed and that the failure to file it initially was a procedural formality. The CIT(Appeals) directed the Assessing Officer to rectify the mistake and allow the necessary relief.Issue 2: Mistake Apparent from Record in Order Under Section 143(3)The Assessing Officer completed the assessment under section 143(3) and denied the deduction under section 80HHC due to the absence of the audit report. The CIT(Appeals) found that the assessee had made a footnote in the return indicating that the audit report would be submitted if required. The CIT(Appeals) held that the Assessing Officer should have provided an opportunity to the assessee to file the audit report once the income was computed as a positive figure. The failure to provide this opportunity was deemed a mistake apparent from the record.Issue 3: Filing of Audit Report in Form No. 10CCACThe Department argued that the audit report should have been filed at least before the assessment was made, citing the jurisdictional High Court's judgment in CIT v. Shivanand Electronics. However, the assessee contended that the requirement to file the audit report was a procedural formality and not mandatory. The Tribunal agreed with the assessee, noting that the audit report could not have been filed initially due to the nil income computation. The Tribunal emphasized that the law does not expect compliance with impossible conditions.Issue 4: Allowing Application Under Section 154 for RectificationThe Tribunal upheld the CIT(Appeals)'s decision to allow the rectification application under section 154. The Tribunal noted that beneficial circulars from the Board, such as Circular No. 689 and Circular No. 669, permit the consideration of evidence submitted after the assessment. These circulars support the rectification of assessments to allow deductions if the required documents are subsequently furnished. The Tribunal emphasized that these circulars are binding on the Assessing Officer and should be given due effect.ConclusionThe Tribunal dismissed the revenue's appeal, upholding the CIT(Appeals)'s order to rectify the assessment and allow the deduction under section 80HHC. The Tribunal concluded that the failure to provide the assessee an opportunity to file the audit report was a mistake apparent from the record, and the subsequent submission of the audit report warranted rectification under section 154. The Tribunal directed the Assessing Officer to consider the claim for deduction under section 80HHC as per law.