TaxTMI 
TaxTMI 
TaxTMI 
2022 (9) TMI 498
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....ate was an invalid return as it was not filed electronically. 4. The CIT (A) has erred in law and on facts in sustaining the disallowance of deduction u/s. 80-lB of the Act claimed at Rs.52,18,31,943/- solely as a consequence of the treatment given to the return of income manually filed u/s. 139(1) of the Act. 5. The CIT (A) has erred in law and on facts in confirming the addition of Rs.9,80,300/- made u/s. 69C of the Act. 6. The appellant craves leave to add to, amend, alter or delete all or any of the foregoing grounds of appeal." 02. Facts show that assessee is a firm engaged in business of real-estate development. Assessee has filed return of income on 30 September 2011, [in paper format and not online] declaring gross total income of Rs.52,18,31,943/-. It also claimed deduction under section 80 IB (10) of the income-tax Act, 1961 (the Act) of the same amount and offered total income at Rs. Nil. 03. Later on, Assessing Officer found that information has been received from DGIT (Investigation), Mumbai, that assessee has obtained accommodation entry in the form of bogus purchases of Rs.9,80,300/-, therefore, after recording reasons, notice under section 148 of the Act was....
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.... No. 4727/Mum/2012 for Assessment Year 2008-09 dated 30 January 2015. Accordingly, he held that the claim of deduction under section 80IB of the Act does not satisfy the conditions prescribed under section 80AC of the Act, which are mandatory. He therefore, disallowed the deduction under section 80IB of the Act of Rs.52, 18, 31,943/-. 08. Consequently, ld AO passed assessment order under section 143(3) of the Act read with section 147 of the Act on 28th March, 2016 assessing total income of the assessee at Rs.52,28,12,243/-. Thus, in the assessment order the learned Assessing Officer made two adjustments [1] Addition under section 69C of the Act of Rs.9,80,300/- for failure to justify purchases for which assessment is reopened u/s 147 of the Act and [2] Disallowance of deduction under section 80IB(10) of the Act of Rs.52,18,31,943/-. 09. The assessee aggrieved with the above order preferred an appeal before the learned CIT (A). Assessee challenged the reopening of the assessment on several counts but the LD CIT [A] held that "12. So far as reopening of the instant case is concerned, it is found that the information from Sales Tax Department and DGIT (investigation), was ver....
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....as escaped assessment, if on examination of the facts on record, it can be held that there was a prima facie belief, the reopening of assessment has to be held valid. Sufficiency of reasons cannot be questioned at the initial stage. 16. In view of the facts and circumstances explained above, I am of the opinion that the objections of the appellant regarding the reopening of the case u/s 147/148 for the year under consideration are not valid, hence dismissed. Thus, the action of the AO in issuing the notice u/s 148 is upheld. Hence, the grounds challenging reopening and passing of the order are found to be without merit and hence rejected." 010. On the validity of the return of income filed under section 139(1) manually, he upheld the findings of the learned Assessing Officer and confirmed that the return is an invalid return holding as under :- "17. Now coming to the issue whether return of income filed manually will be a valid return when provisions of Section 139 (1) clearly prescribed the requirement of filing return electronically with the digital signature in view of rule 12 (3) (ii) of IT rules applicable for the year Under consideration. 18. The AO has noted in para 4....
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....igital signature of the concerned person who is director of a partner company. Thus, the partners were not able to obtain digital signature and use the same for electronic filing. The electronic filing process were initiated but due to lack of digital signature, the appellant could not complete the uploading of the return electronically. The learned AR has relied upon the provisions of Section 292B. According to him, no return of income will be deemed to be invalid merely by reason of any mistake, defect or omission in such a return of income, if such return of income is in substance and in effect in conformity with or according to the intent and purpose of the IT act. As per learned AR the return of income filed manually on 30/9/2011 cannot be considered as invalid since it is in substance and in conformity with the intended purpose of the act. At best, the return of income may be considered as defective but same cannot be considered as invalid return. Moreover, if the return has been treated as defective return, then the appellant firm would have received the notice stating that the return of income is as defective. However, till date no such notice was received. The learned AR h....
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....er provisions of Section 139 (9) of the IT act related to defective return. There are two basic requirements for treating return as defective return. There should be a valid return of income furnished by the assessee and thereafter it should be in the opinion of the assessing officer that the said valid return of income is defective. I find that both the basic requirements are lacking in the instant case. As stated in the preceding paragraph, there is no valid return of income filed by the appellant for the year under consideration, in the form and manner prescribed u/s 139 (1) read with rule 12 (3). Further, the AO has not treated the manual return as defective since considered opinion of the AO is a prerequisite for treating the return as defective. Hence, the alternative argument of the learned AR of the appellant lacks merit. 24. It is also observed that the main reason professed by the appellant, for non-filing of the electronic return with digital signature is the main promoters of the DB group were arrested in relation to the 2G scam. Hence, no person in the DB group was ready to cooperate in giving the digital signature. I find no substance in the above argument of the le....
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.... are mandatory required to be filed electronically with digital signature by a firm, filing of such return of income manually cannot be said to be a curable mistake or defect. In the case of CIT versus Harjinder Kaur (2009) 180 taxman 23 (P&H), honourable High Court has held that where return of income filed by the assessee was neither signed by her, nor was it verified in terms of mandate of Section 140, such glaring inherent defect could not be cured in spite of deeming effect of Section 292B. In the instant case too, Section 139 (1) clearly specifies that the return of income in the case of has to be filed in accordance with rule 12 (3) (aaa) i.e. electronically with digital signature, non-compliance of this requirement of the act and the corresponding rule cannot be cured by the deeming effect of Section 292B as held by Honourable Punjab and Haryana High Court in the above-mentioned case. 26. The learned AR's reliance upon the board circular number 14 (XL - 35) of 1955, dated 11/4/1955 is also of no help to the appellant case as the appellant has failed in filing a valid return for the year Under consideration. Hence, no benefit can be provided in the light of the aforesaid b....
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....IT in ITA number 4727/M/2012 dated 30/1/2015. In the that decision honourable tribunal has held that deduction Under Section 80 IB shall not be allowed to the assessee unless he fights the return of income on or before the due date specified u/s 139 (1). Since, in this case no valid return of income was filed u/s 139 (1), the AO rejected the claim of the appellant u/s 80 IB. 29. On the other hand the learned AR argued the issue. The main points emerge from his arguments are- i. the return of income filed by the appellant cannot be treated as invalid and therefore deduction claimed u/s 80 IB is correct. ii. Even though the return is filed manually, claim of deduction u/s 80 IB needs to be allowed. The provisions of Section 80 AC are directory in nature and not mandatory. Merely for the technical reasons if the return of income is not file as per the provisions of Section 139 (1) but the same is filed within due date and also all the documents relevant to the claim are also filed within the due date then the deduction u/s 80 IB needs to be allowed. iii. The AR of the appellant has placed reliance on the following decision viz Hansa Dalakoti V ACIT (2012) 32 CCH 211 (del) (tribu....
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.... Dwarkadas G Panchmatiya versus ACIT (supra) is in order. 33. Finally, there is no merit in the argument of the learned AR that just because in the preceding and succeeding years, deduction has been allowed to the appellant, the same should be allowed for the instant year too. Each year being a separate assessment year, the appellant is required to fulfill the conditions laid down in various provisions of the income tax act for each assessment year. If the appellant has not fulfilled conditions for claim of deduction u/s 80 IB for assessment year 2011 - 12, it will not be allowed so, notwithstanding the deduction being allowed in the preceding years order in the succeeding years. 34. Looking to the totality of facts and circumstances of the issue involved in my considered opinion that appellant is not eligible for claim of deduction u/s 80 IB for the year Under consideration i.e. assessment year 2011 - 12. Hence, the grounds of appeal number 1, 2 and 4 dismissed." 012. With respect to the addition of bogus purchases, he confirmed the addition for reason that assessee failed to produce the relevant particulars for purchase of goods and production of suppliers before the learned....
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....nd which was paid by account payee cheque of the same account. He referred to the bank statement of the assessee to show the above payments and further referred to delivery challans, material receipt note of the above material. He further stated that the learned Assessing Officer stated a purchase of Rs.1,15,148/- being bogus from M/s RB Enterprises and for this proposition he referred to the invoice dated 15 November 2010, at page no. 83 and 84 of the Paper Book. He submitted that the bill itself shows material, delivery challans with date, lorry receipt numbers, quantity and the rate; quantity check and quality check report. The amount of consideration is paid by cheques and is supported with delivery challans etc. Similar details were also shown for purchase of Rs.2,65,054/- from M/s Dinesh Trading Company and M/s Deep Traders for Rs.31,185/-. He further stated that for purchase of Rs.5,19,750/- The learned Assessing Officer is not aware that whether the purchases are from M/s Maruti Enterprises or M/s Apex Corporation. He stated that assessee has purchased material from Apex Corporation, which is supported by delivery challans, receipt of material, as well as the payments by ch....
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....ct of Rs.9,80,300/- and if the same does not survive no other addition can be made. For this proposition, he relied on the decision of Hon'ble Bombay High Court in case of Jet Airways. 016. He also relied on the decision of Pune Bench of ITAT that even if the addition is deleted in any appellate proceedings on the issue on which reopening is made, and then other additions which are not part of reasons for reopening do not survive. He referred to the decision in case of Prabhakar Damodar Gawade vs. ITO (200 TTD 1017). 017. Even otherwise on the merits, he submitted that assessee filed manual return of income, as on that date the digital signature of the Director could not be affixed because of peculiar reasons. It was further stated that deduction under section 80IB (10) is allowed to the assessee for all earlier years in its entirety by passing orders under section 143(3) of the Act. He further relied on the decision of Hon'ble Supreme Court in CIT Vs. Zila Sahakari Bank Ltd. in ITA No. 60 of 2013, wherein return filed in old format was considered as valid as assessee has not sought to gain any unfair advantage in the matter. He therefore submitted that assessee is entitl....
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....ecisions cited by the learned authorised representative are distinguishable on facts and in none of the case, the facts are similar to that of the assessee. In all judicial precedents cited, assessee has filed its return of income. Therefore, there cannot be applied to the facts of the case. In view of this, he supported the orders of the lower authorities. 019. We have carefully considered the rival contention and perused the orders of the lower authorities. We have also perused the paper book containing 143 pages filed by the learned authorised representative as well as case law compilation where nine decisions have been cited. 020. Facts as available on record shows that the learned assessing officer has reopened the assessment by recording following reasons:- "Reasons Recorded For Reopening Of Assessment U/S 147 M/s Suraksha D B Realty [ABOFS0694R] AY 2011 - 12 In this case, no return of income was filed to date. Information has now been received from DGIT (Inv.) Mumbai, that the assessee is involved in bogus purchase transactions amounting to Rs. 980,300/- with the following parties during the relevant previous year. PK trading Co 49,163 Deep Traders 31,185 RB enterp....
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.... the material produced during the course of assessment proceedings before him. Further in that case the learned assessing officer has categorically stated before honourable high court that the material could not be located on basis of which the learned assessing officer has formed his opinion regarding reopening of the assessment. These facts are evident at Placitum 6 at page number 150 in first paragraph itself. Therefore, reliance on this decision does not help the case of the assessee. 024. Assessee further relied upon the decision of coordinate bench in case of Vaman international private limited versus DCIT in ITA number 1040/M/2017 dated 27/9/2017, which has also been upheld by the honourable Bombay High Court in ITA number 1940 of 2017 dated 29/1/2020. We have carefully perused the facts of that particular case wherein also the reasons recorded at paragraph number 9 at page number 15 clearly shows that assessee has filed its return of income which was processed u/s 143 (1) of the act. Therefore, the coordinate bench held that that mere reference to the material in reason to believe cannot be said to be a bona fide belief by the AO that income of the assessee has escaped ass....
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....nd expressed its inability to produce the suppliers for verification. The learned assessing officer has also relied upon the statement recorded of the key persons of the said parties before the sales tax Department Mumbai wherein they have denied to have made any genuine sales to their customers. The learned AO thus, heavily relied on the confession in the statement recorded on oath before the sales tax authorities by those suppliers. The assessee has categorically stated that assessee has not been given any of the copies of such statement on which learned that AO relied upon i.e. statement of those persons before the sales tax Department. The learned CIT - A confirmed the addition that assessee did not possess vital third party evidences with respect to supply of goods. We find that the above finding of the learned CIT - A is devoid of any merit as assessee has produced adequate information about receipt of goods, which remains uncontroverted. 027. Identical issue arose before the honourable Bombay High Court in case of principal Commissioner of income tax versus Shapporjii Pallonji and Co Ltd (2020) 423 ITR 220 (Bom) wherein the information was received from sales tax Department....
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....fore when the AO was having complete information about those parties and was so sure that those are the bogus parties and has merely provided the bills without supply of the material and also having information about making a statement before a government authority, not providing the correct address by the assessee, assessee was not having the same, is not fatal to the issue. The learned assessing officer himself made any enquiry with those parties further with respect to genuineness of purchase of material by the assessee. 029. As the learned assessing officer was having the complete details about these suppliers, he should have made some enquiry with the suppliers about mentioning of the lorry receipts etc. in the invoices. The learned assessing officer has not carried out any independent enquiry. The assessee has so far produced all possible available details with respect to receipt of material. Undoubtedly, no confirmation is available with the assessee of the five parties, but the signature on the bills wherein the complete material is available and receipt of payment by cheque itself shows are third-party confirmation of the transaction at least with respect to purchase of t....
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....essment was reopened has been made by the learned assessing officer, confirmed by the learned CIT - A and deleted by the tribunal, even then such other additions/disallowances which were not part of reasons of the reopening of the assessment, can be upheld or not. 033. This issue has been decided by the coordinate bench in case of Prabhakar Damodar Gawade V ITO (200 TTJ 1017) dated 9/05/2019. The coordinate bench in that case followed the decision of the honourable Bombay High Court in case of CIT versus Jet Airways Ltd (2011) 331 ITR 236 (Bom) and CIT versus Cheil communications India private limited (2013) 354 ITR 549 (del). In that particular case the learned assessing officer initiated reassessment proceedings with respect to an escapement of income of Rs 4 lakhs. In the assessment the addition of Rs. 4 lakhs were paid and also apart from that another addition was made to the extent of 15% amounting to Rs. 81,405/- the additions were confirmed by the learned CIT - A. The coordinate bench deleted the addition of Rs. 4 lakhs. When the issue of disallowance of Rs. 81,405/- arose before the coordinate bench it held that that the only addition made by the learned AO out of the reco....
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.... chargeable to tax which escaped assessment and comes to the notice of the AO in the course of the proceeding, amply shows that the existence of the former is a pre-condition for taxing the latter. To put it simply, if the grounds set out in the re-assessment notice are non-existent, i.e., either no addition is made on such grounds or the addition so made does not finally pass the scrutiny by the appellate forums, then, obviously, no further addition can be made for income which comes to his notice during the course of proceedings u/s 147. Without there being such a deterrent, the AO could have got unhindered powers to initiate re-assessment at the drop of a hat without any legally sustainable reasons and then made other additions resulting in multiplicity of proceedings, which the legislature has sought to curb. Any lawful jurisdiction to make addition on account of other incomes coming to the notice of the AO during the course of proceedings u/s 147 can be acquired only on the foundation of a validly acquired jurisdiction on legally sustainable items of income escaping assessment-forming reasons for issuing notice u/s 148. In other words, if the AO fails to acquire a valid jurisd....