AI Drafter 
TaxTMI 
TaxTMI 
2022 (9) TMI 498
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....urn of income manually filed u/s. 139(1) of the Act within due date 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 R....
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....d upon the decision of co-ordinate Bench in case of shri Dwarkadas G. Panchmatiya vs. ACIT in ITA 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 t....
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....mine as to whether or not there was a reasonable belief on the part of the AO to come to a prima facie view that the income chargeable to tax has 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 ....
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....also Mr Rajeev Agarwal who are arrested and jailed in relation to the matters relating to the 2G scam. Due to this, no person in the DB group was ready to cooperate in giving the digital 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 defectiv....
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....ncome may be considered as defective but not invalid return is without any merit. The return of income compulsory required to be filed electronically, but filed manually will not partake the character of return of income filed u/s 139 (1) as per 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 ....
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....f income by mistakes, defects or omission are of such a nature that the substance and effect is in conformity with the intent and purposes of the IT act. Once, the intent of the IT act is very clear that the return of income for the year Under consideration 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 relianc....
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....on claimed by the appellant u/s 80 IB in view of the conditions laid down u/s 80 AC that the assessee was required to file a valid return Under the provisions of Section 139 (1) of the IT act. The AO is also relied upon the decision in the case of Dwarkadas G Panchmatya versus ACIT 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 sam....
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....come filed for claim of deduction Under chapter VI A. However, in the instant case, as held in the preceding paragraphs, there is no valid return filed for the year Under consideration for such claim of deduction u/s 80 IB. The same time, the reliance of the AO on the decision of honourable Mumbai tribunal in the case of 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 t....
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....l from M/s PK Trading is produced amounting to Rs.51,063/-. However, in the reasons recorded by the learned Assessing Officer amount mentioned is only Rs.49,163/-. He therefore submitted that information received by the learned Assessing Officer is vague. He further referred that assessee purchase material from that party of Rs.51,640/- and 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/-. H....
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....ound no 5 , grounds no. 3 and 4 become academic. 015. He stated that assessee has challenged the addition of Rs.9,80,300/- made under section 69C of the Act. If assessee succeeds on ground no. 5 even then, grounds no. 3 & 4 do not survive for the reason that reopening has been made for only one ground of addition under section 69C of the Act 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 ....
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.... AO has correctly held that assessee has not filed any return of income. For the purpose of claim of any deduction u/s 80 IB (10) of the act, assessee should have filed its return of income in time, which has not been filed, therefore the deduction u/s 80 IB (10) of the act has been correctly denied to the assessee. He further stated that all the decisions 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 Sur....
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....ing officer should have applied his mind to the materials produced to conclude that he has reason to believe that income has escaped assessment. Carefully reading the facts of that case it is evident that the return of income in that particular case was assessed u/s 143 (3) of the income tax act 1961. Therefore, the learned assessing officer was having the original return of income as well as 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 fa....
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....hich has also been verified by engineers of the assessee. The learned assessing officer has made the addition only because of the reason that assessee has not produced the parties/suppliers. When assessee was asked to furnish the correct and current address of the suppliers for making necessary enquiries, assessee stated that they are not available on the addresses mentioned in the purchase bills and 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 ....
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....nformation that 5 different parties have provided bogus bills to the assessee, he has also the information that those parties have given their statement that they are non genuine suppliers, the information is also travelled to the DGIT investigation to the learned assessing officer, therefore, it is evident that assessing officer was having information about those parties such as their address and whereabouts. Therefore 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 carr....
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..... Now it is apparent that only issue in the reasons for reopening of the assessment was with respect to alleged bogus purchases of Rs. 980,300/-, This addition has been deleted by us for the reasons given hereinabove, whether any other disallowance, which was not part of the reasons for reopening of the assessment, can be made by the learned assessing officer or not. The issue also arises that the addition for which the assessment 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 ....
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.... AO is fully empowered to bring to tax any other income which has escaped assessment and which comes to his notice subsequently in the course of proceedings u/s 147, apart from the income escaping assessment on which the AO formed reason to believe about the escapement of income and issued notice u/s 148. The use of words "and' between the income escaping assessment forming reasons to believe for issuing notice u/s 148 and other income 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 mul....