2021 (1) TMI 791 - HC - Income Tax

Court rules in favor of assessee, quashes Section 263 orders.

The court ruled in favor of the assessee, quashing the Commissioner of Income Tax's orders invoking Section 263 of the Income Tax Act. It emphasized that ... Revision u/s 263 - Disallowance of deduction u/s 80IA(7) - assessee had not filed Form No.10CCB as required u/s 80IA(7) along with the return of income which is mandatory and therefore, assessee is not entitled to deduction under Section 80IA - AO without examining the aforesaid aspect permitted the deduction and therefore, the order passed by the Assessing Officer is erroneous and is prejudicial to the interest of the revenue - HELD THAT:- The assessee had filed Form No.10CCB of the Act along with written submissions before the CIT (Appeals), which was acknowledged by him in the order dated 11.03.2008. A bench of this court in 'CIT V. ACE MULTIAXES SYSTEMS (P.) LTD.' [2009 (1) TMI 260 - KARNATAKA HIGH COURT] has taken a view that assessee is entitled to deduction under Section 80IA of the Act even if the audit report is filed at the appellate stage. Similar view has been taken by Madras High Court in A.N. Arunachalam [1994 (1) TMI 65 - MADRAS HIGH COURT]. Thus, the view taken by the assessing 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 our aforesaid conclusion in view of the order passed by the Commissioner of Income Tax under section 263. Thus the order passed by the Commissioner of Income Tax itself discloses that two views are possible. Therefore it is not necessary for us to deal with various contentions made by learned counsel for the parties. In the result the substantial questions of law are answered in favour of the assessee and against the revenue. Issues:1. Interpretation of Section 263 of the Income Tax Act, 1961.2. Deduction under Sections 80HHC and 80IA of the Act.3. Requirement of filing audit report in Form 10CCB.4. Invocation of revisional powers under Section 263 of the Act.Analysis:Issue 1: Interpretation of Section 263 of the Income Tax Act, 1961The appeal under Section 260A of the Income Tax Act pertained to the Assessment year 2003-04, challenging the invocation of Section 263 by the Commissioner of Income Tax. The key question revolved around whether the Tribunal was justified in holding that the Commissioner was correct in invoking the provisions of Section 263. The court emphasized that the conditions precedent for invoking power under Section 263 required the order to be both prejudicial to revenue and erroneous. It was established that where the assessing officer's view was one of the possible views, the powers under Section 263 should not be invoked, citing relevant legal precedents.Issue 2: Deduction under Sections 80HHC and 80IA of the ActThe dispute involved the deduction claimed under Sections 80HHC and 80IA of the Act. The Commissioner had denied the deduction under Section 80IA, citing non-filing of Form No.10CCB along with the return of income. However, the court noted that the assessee had submitted the form along with written submissions before the Commissioner, which was acknowledged. Legal authorities were cited to support the contention that deduction under Section 80IA could still be allowed even if the audit report was filed at the appellate stage. The court found that the assessing officer's view on the eligibility for deduction under Section 80IA was one of the possible views, as supported by the Commissioner's order under Section 263.Issue 3: Requirement of filing audit report in Form 10CCBThe controversy also centered around the mandatory requirement of filing the audit report in Form 10CCB along with the return. The court noted that the assessing officer's failure to reduce the deduction allowed under Section 80IA from the deduction under Section 80HHC was a procedural error. However, since the Commissioner's order acknowledged the possibility of two views, the court did not delve deeper into this aspect.Issue 4: Invocation of revisional powers under Section 263 of the ActThe judgment ultimately quashed the orders passed by the Commissioner of Income Tax and the Tribunal, in favor of the assessee. The court found that the order passed by the Commissioner itself indicated the existence of two possible views, rendering the invocation of Section 263 unjustified. The decision was based on the principle that where one of the possible views was taken by the assessing officer, revisional powers should not be invoked. The appeal was allowed, leading to the quashing of the previous orders.This detailed analysis of the judgment highlights the intricate legal arguments and interpretations involved in each issue raised in the case.