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2015 (4) TMI 1323

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....vise the order of the AO. 3.The Appellant,therefore, prays that the revision proceedings u/s 263 be annulled as being ab-initio and/or otherwise void and bad-in-law. WITHOUT PREJUDICE TO GROUND I: GROUND II On the facts and circumstances of the case and in law, the CIT erred in observing that the Audit Report in Form 10CCB was not submitted before him. He failed to appreciate and ought to have held that the Audit report was submitted along with the written Submission filed on 16.2.2009. The Appellant therefore prays that the order passed u/s 263 based on erroneous observation be cancelled and order of the AO allowing deduction u/s.80IB be restored. The Appellant craves Leaves to add to, alter, and / or amend all or any of the above ground of Appeal." Brief facts:   2. Effective ground of appeal is about validity of proceedings initiated u/s.263 of the Act.Assessee company,engaged in business of manufacturing and export of readymade garments,filed its return of income on 12.10.2005,declaring income of Rs. 3.02 Crores,after claiming deduction u/s. 80IB of the Act,at Rs. 150,38,960/- being 30% of the profits of its Daman Unit.Later on the Commissioner of Income-....

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....ted.16.2,2009,it further relied upon the Gujarat High Court decision in the case of Zenith Processing Mills(219 ITR 721)in support of its conten -tion that the Audit Report in prescribed form no.10CCB could be filed even if revisional jurisdiction is exercised by the CIT u/s.263 of the Act.It also relied upon the matter of Shri Manjunatheshwara Packing Products & Camphor Works(231ITR 53)of the Apex Court.As per the CIT in its written submission the assessee had claimed to have submitted a copy of the Audit Report dated 1.8.2005 in prescribed form no.10CCB before him.But,as per the CIT,no such Audit Report was filed along with the written submission during the course of proceeding u/s.263 of the Act.The CIT held that the case of Shri Manjunatheshwara Packing Products & Camphor Works(supra)was not relevant to the issue under consideration as the said decision pertained to the valuation report submitted by the Departmental Valuation Cell on the reference made by the AO after passing the assessment order,that the other decisions relied upon by the assessee were not relevant to the issue under considera -tion.He further held that it had not filed any evidence in support of filing of the....

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....audit report disentitled the assessee form claiming deduction.She relied upon the cases of Punjab Financial Corp.(121taxman 656),Mahalaxmi Rice Factory (163 Taxman565),Sivanand Electronics,(75taxman93),Sechenectady Beck India Ltd.(supra). 4.We have heard the rival submissions and perused the material before us.We find that the undisputed facts of the case are that the assessee had not filed Audit Report in form no.10CCB at the time of filing of return, that the assessee had made claim u/s.80IB of the Act,that the AO did not allow the claim of the assessee fully,that it contested the issue of 80IB deduction before the FAA,,that the year under appeal was the tenth year of deduction claimed,that in earlier year the AO had never denied the assessee the benefits of deduction,that the CIT initiated revisionary proceedings u/s.263 of the Act,that the assessee filed a copy of the Audit Report before him,that the CIT held that because of non filing of audit report the assessee was not entitled to claim the deduction,that the AO had not considered the issue of non filing of report,that the CIT was of the opinion that the order of the AO was erroneous and prejudicial to the interest of reven....

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....dequate verification and no verification whatsoever by the AO.Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interests of the Revenue,but orders which are passed after inquiry/ investigation on the question/issue are not per se or normally treated as erroneous and prejudicial to the interests of the Revenue because the revisionary authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken.In cases where there is inadequate enquiry but not lack of enquiry,the CIT must record a finding that the order/inquiry made is erroneous.This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the AO,making the order unsustainable in law.One more principle stipulates that where a particular issue is before the FAA in appellate proceedings,the CIT should not invoke his revisionary jurisdiction with regard to that issue. If the facts of the case and the principles enumerated above are considered it becomes clear that had the assessee filed audit report along with the return or at the time of ass....

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....t held as under: "From a perusal of sub-section (6A),it is apparent that compliance with two things is necessary . The first requirement is that the statement of accounts for the previous year relevant to the assessment year for which deduction is claimed must have been audited by an accountant and the second part is that the assessee must furnish along with his return of income the report of such audit in the prescribed form duly signed and verified by such accountant. It can be stated without fear of contradiction that the former is the requirement which furnishes substantial foundation for claiming allowance and the latter is the requirement of furnishing proof that foundation for claiming such deduction has been laid. In our opinion, while compliance with the former before the deduction is claimed is mandatory and so far as manner of submitting proof of such compliance of filing along with the return is concerned, is directory because such requirement falls in the realm of procedure for furnishing evidence in support of the claim and which can be furnished at the time while allowance or disallowance under section 80J is being considered by the concerned authority. X X X....

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.... accounts have been audited and substantial compliance with this provision has been held to be sufficient compliance. During the course of assessment, the assessee has furnished accounts stamped with the auditor's seal as noticed above which were treated by the assessee as well as the Assessing Officer to be sufficient compliance of giving proof of the fact that accounts have in fact been audited and on that basis the assessment was framed. It was only during the course of proceedings before the Commissioner of Income-tax under section 263 that the question was considered whether the document furnished by the assessee amounted to sufficient compliance of furnishing such proof or not and that having been negatived the occasion arose to furnish the proof which according to the Commissioner of Income-tax was wanting in declaration that the accounts have been duly audited which is required by sub-section (6A) of section 80J and if the assessee requires production of evidence before the allowance made by the Income tax Officer under section 80J was withdrawn. In our opinion, that would have been sufficient compliance with the requirement and the assessee ought not to have been visit....