2017 (11) TMI 1361 - AT - Income Tax

Tribunal remands appeal for verification, emphasizes liberal interpretation of procedural provisions

The Tribunal allowed the appeal for statistical purposes, remanding the issues back to the AO for verification and detailed examination while directing ... Disallowing of deduction u/s 80IC - return had not been filed within the time specified u/s 139(1) but within the extended period as specified u/s 139(4) - Held that:- Once it has been held that Section 80AC is a machinery provision, then the issue is to be considered in the light of the facts available. The legal position that the relevant provision is a machinery provision, applying the principles that being directory in nature enables the authorities to consider the reasons, consistently on record for late filing of the return. The delay in filing of the return in the facts of the present case was for reasons beyond the control of the assessee and in fact, there was reasonable cause in the late filing of the return within the extended period as statutorily available under sub-section (4) of Section 139 of the Act. The decision rendered in the case of P.Bhavani [2015 (8) TMI 1147 - ITAT CHENNAI], we find, on facts is not applicable and is entirely distinguishable. As is evident from the assessment order itself, the supporting documents for the claim u/s 80IC was filed well within the extended time prescribed u/s 139(4). The said fact is evident from a reading of the assessment order itself. We also note that the principle of law as applicable to claim of exemption u/s 54 as considered by the Hon'ble jurisdictional High Court in the case of CIT V Jagriti Aggarwal [2011 (10) TMI 279 - PUNJAB AND HARYANA HIGH COURT] is fully applicable to the case at hand The claim of the assessee could not be ousted on the fact that the return was filed within the extended period of sub section(4) of Section 139. Accordingly, we hold that the assessee deserves to succeed in principle. The matter is remanded to the AO for the purposes of verification. Needless to say that the assessee shall be given a reasonable opportunity of being heard. Disallowance of interest u/s 36 - Held that:- We note that though the assessee had canvassed before the AO that the loans were advanced for business purpose namely to Shri Shatrughan Sinha as a sale promotion exercise and to Shri Adil Latif Khan who was a Sales Manager as advance to be adjusted against work, however, in the discussion in the assessment order or the impugned order, there is no finding of fact given thereon. There is no finding whether Shri Shatrughan Sinha to whom an advance of ₹ 5,90,000/- was given, was entrusted with any sales promotion exercise or not and whether Shri Adil Latif Khan was the sales Manager of the company and the advance was adjusted against the work which he was stated to be performing. Accordingly, we deem it appropriate to set aside the issue back to the AO directing the said authority to first address the facts and thereafter consider the applicability of decisions thereon. Accordingly, in the absence of any relevant discussion in the order or the material fact, ground No. 2 of the assessee is set aside and restored back to the file of AO. Payment of PF ESI after due but before the due date of filing of the return - Held that:- We find that though the issue is addressed before the CIT(A), however, there is no specific finding coming out from the order. Since the issue is first to be considered on facts, it is also, accordingly, set aside back to the file of the AO with the direction to first address facts and thereafter pass a speaking order thereon in the light of the provisions of the Act and settled legal position thereon. Issues Involved1. Deduction under Section 80IC amounting to Rs. 1,16,26,310.2. Addition of Rs. 93,237 on account of proportionate interest on advances.3. Addition of Rs. 42,975 out of ESI and PF payments.Analysis of the JudgmentIssue 1: Deduction under Section 80ICThe assessee challenged the denial of the deduction under Section 80IC due to the late filing of the return. The assessee argued that all necessary documents, including the audit report and balance sheet, were filed within the due date, but the return was uploaded late due to the counsel's misunderstanding of the filing deadline. The Tribunal considered the peculiar facts, including the collusion of the tax consultant with dissenting shareholders, which led to the delay. The Tribunal referred to various judicial precedents, including the decision of the jurisdictional High Court in CIT v. Jagriti Aggarwal and the Supreme Court's principle that incentive provisions should be interpreted liberally. The Tribunal concluded that the delay was due to reasonable cause and directed the AO to verify the claim and allow the deduction.Issue 2: Addition on account of proportionate interest on advancesThe AO added Rs. 93,237 to the assessee's income, arguing that the advances given to individuals were not for business purposes. The assessee contended that the advances were for sales promotion and to a Sales Manager for work purposes. The Tribunal noted the absence of specific findings by the AO on these claims and referred to the decision of the Punjab & Haryana High Court in Bright Enterprises Pvt. Ltd. v. CIT, which supports the non-disallowance of interest if the assessee has sufficient interest-free funds. The Tribunal remanded the issue back to the AO for a detailed factual examination and to apply the relevant legal principles.Issue 3: Addition out of ESI and PF paymentsThe assessee argued that no disallowance should be made for ESI and PF payments made after the due date under the respective Acts but before the due date of filing the return, citing the decision in Sagun Foundry Pvt. Ltd. v. CIT. The Tribunal noted the lack of specific findings in the CIT(A)'s order and remanded the issue back to the AO to address the facts and pass a speaking order in light of the settled legal position.ConclusionThe Tribunal allowed the appeal for statistical purposes, remanding the issues back to the AO for verification and detailed examination while directing that the assessee be given a reasonable opportunity to be heard. The Tribunal emphasized the liberal interpretation of procedural provisions and the need for a factual basis before applying legal principles.