TaxTMI 
TaxTMI 
2023 (1) TMI 708
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....O. is neither erroneous nor prejudicial to the interest of revenue. 2. That the Id. Pr. CIT is wrong in passing order u/s 263 to set-aside the claim of deduction u/s 80IC by ignoring the fact that said deduction was allowed by the Id. A.O. after making enquiries or verification as required by law and also covered by the Hon'ble SC judgment in the case of CIT vs CM. Knitting Industries (P) Ltd.: 376 ITR 456, so assessment order passed by Id. A.O. is neither erroneous nor prejudicial to the interest of revenue. 3. The brief facts of the case are that assessee is a Limited Company and has been engaged in the manufacturing of aluminum rolled products, such as aluminum sheets. The assessee had e-filed its return of income on 26.10.2017, declaring total income of Rs. 11,21,66,380/-. Subsequently, the return of income was revised by the assessee on 07.09.2018, declaring income of Rs.7,97,20,580/- after claiming deduction u/s 80-IC amounting to Rs.3,24,45,802/-. The case was selected for scrutiny under CASS for the following reasons:- "Large deductions claimed u/s 80IA/80IAB/80IAC/80IB/80IC/80IBA/ 80ID/80IE/10A/10AA in comparison to preceding year". 4. The scrut....
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....ot the case that after squaring-off the outstanding balance on 10.12.2015, the assessee had made 3 payments to the same party for creating debit balance of Rs. 1,66,70,246/- which is subsequently written-off in the next financial year. These three entries on dated 20.12.2015, 20.12.2015 and 14.01.2016 are debit entries due to reversal of above stated unrealized cheques and not due to payments made to party. Actually, these 3 entries are reversal entries. It is not a case, where payments were made to the party and which were subsequently written-off being irrecoverable. Here is a case, where debit balance became outstanding due to reversal of cheques which were earlier received by the assessee company against sales. Also, the cheque numbers in the receipt entry as well as payment entry are same with each other, thus evidencing our claim that these 3 entries are not fresh payments, but reversal of entries. In respect to the observation of our goodself that amount of Rs. 1,676,70,246/-has been written-off without any reason, it is submitted that assessee company had written-off the outstanding debit balance amounting to Rs. 1,66,70,246/- on 31.03.2017 as the assessee company ....
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....of Rs.1,66,70,246/-. Thus, it is the not case that Id. A. O had not conducted enquiry in respect to the written-off amount of Rs.1,66,70,246/-.Since the Id. A.O. duly ascertained the validity of the assessee's claim of write-off from the documentary evidences like ledger accounts, Profit and Loss account, sales register of preceding years, debtors list and by considering the applicable legal provisions. Hence, the assessment order is not erroneous and prejudicial to the interest of the revenue." (iii) The Ld. PCIT noted that there was a regular give and take between the assessee and M/s Metalmine Enterprises, and that there was a relationship of deep trust, based on which the assessee was regularly transferring such huge amounts to the given concern on a single day. That there was thus nothing on record to establish that the given amount qualified for deduction u/s 36(1)(vii) r.w.s. 36(2) of the Act. In reply to this point, the assessee submitted as under: "In respect to the above observation of your goodself, it is submitted that the assessee has not transferred any huge amounts to the given concern on a single day. The assessee has not made any fresh payment of....
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....coverable amount is written-off in the books of account of the assessee company during the relevant year. Since the assessee company duly included the sale to the said party in the profit and loss account in the preceding years and recoverable amount was written off during the relevant year, thus satisfying the twin conditions of section 36(1)(vii) and so, it is an allowable expenditure u/s 36(1)(vii) of the Income Tax Act,1961. 4. The Ld. PCIT further show caused the assessee to the effect that the said write off of Rs. 1,66,70,246/-has not even been reflected under the head "Bad debts" in Col 39 of the ITR-6. That the assessee had camouflaged the entry of this write-off to hood wink the authorities. That the AO failed to conduct the requisite enquiries and cross verification in respect of the given issue. Assessee replied: In regard to the above observation of your goodself, it is submitted that assessee company mistakenly omitted to fill the amount under bad debt column of ITR form, however, even otherwise, assessee company has given the due disclosure of the amount written-off of Rs. 1,66,70,246/- in the audited profit & loss account, so it is not the case that a....
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....der bad debt column of ITR form, however, even otherwise, assessee company has given the due disclosure of the amount written-off of Rs. 1,66,70,246/- in the audited profit & loss account, so it is not the case that assessee company has concealed/hide any information or material fact from the department......." The said reply of the assessee, however, is devoid of any strength, as the amount of bad debts written off was large, and, therefore, its omission from the specified column of bad debts in the ITR form was obviously with a view to escape attention and consequent selection for scrutiny assessment under CASS. The assessee's argument that the amount was duly disclosed in the audited profit and loss account, in no way, condones its failure to make a true, and complete disclosure of the given amount in the IRT-6 in the column exclusively specified for this purpose. ITR-6 is a primary document which has the specific Column in which the assessee was required to make true and complete disclosure, so as to allow the Income Tax Department to make preliminary examination of various claims made by the assessee in its ITR and to identify the high risk and suspect transactions as per ....
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....f in the books of accounts and therefore, allowable as bad debts. This plea is not acceptable because from the perusal of the ledger of the said company furnished by you, it is noticed that the said company made transaction during the F.Y. 2013-14, 2014-15, 2015-16 regularly then how it is possible the said company certainly do not made any transactions during the F.Y. 2016-17. Further, you have shown the amount of Rs.1,66,70,246/- as written off in the books of account without furnishing any reasonable reasons alongwith documentary evidence." 5.4 The assessee has now submitted that it had responded to the said notice of the AO, through its reply uploaded on 25.12.2019. It is noted that this reply is not available on the assessment record. Without prejudice to this, however, a perusal of the said reply shows that the assessee had not given any specific information to establish the genuineness of its claim of the given write off. It simply states that the sales were made to the Metalmine Enterprises Pvt. Ltd. in the preceding years, which were taken into account in computing the income of those preceding years, and that the give transactions were duly recorded in the sales ....
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.... Sadar Journal/Trf Rs. 1,11,32,895/- 10.11.2015 OBC 03654011000190 CCReceipt/ch no. 002315 Rs.50,00,000/- 25.11.2015 Metalmine Enterprises P Ltd- Delhi Joumal/Trfdelhi Rs. 1,29,425/- 02.12.2015 OBC 03654011000190 CC Receipt/ch no. 002316 Rs.60,03,470/- 10.12.2015 OBC 03654011000190 CC Receipt/ch no.005261 Rs.56,66,776/- 20.12.2015 OBC 03654011000190 CC Payment/ch no.002315 Rs.50,00,000/- OBC 03654011000190 CC Payment/ch no. 002316 Rs.60,03,470/- 14.01.2016 OBC 03654011000190 CC Payment/ch.no. 005261 Rs.56,66,776/- Total Rs.3,34,69,917/- Rs.1,67,99,671/- Closing Balance Rs.1,66,70,246/- Rs.3,34,69,917/- Rs.3,34,69,917/- Ledger Account with M/s Metalmine Enterprises Pvt Ltd (01.04.2016 to 31.03.2017): Date Particulars Vch type/No. Debit Credit 01.04.2016 Opening balance Rs. 1,66,70,246/- 31.03.2017 Amount off Written Journal/Amount written off &nb....
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....#39;ble Delhi High Court in Gee Vee E iterprises vs. Additional Commissioner of Income Tax, [1975] 39ITR 375 (Delhi), has observed as under: "The reason is obvious. The position and function of the Incometax officer is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word "erroneous" in section 263 emerges out of this context. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an inquiry. T....
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....led on 11.09.2018. Thus, the audit report in Form 10CCB was neither furnished by the assessee at the time of filing of original ITR on 26.10.2017, nor at the time of filing of revised ITRon 07.09.2018 " Assessee's remarks: "In respect to the observation of your goodself vide Para-4 of the notice, it is submitted that for the relevant assessment year, due date of filing the revised return of income was 31.03.2019. So, the revised return filed on 07.09.2018 was much earlier than the due date. Within 4 days of filing the revised ITR, the assessee company also filed audit report in Form 10CCB on 11.09.2018. So, the ITR as well as audit report, both were filed before the expiry of the due date for furnishing revised ITR. The intention of legislature is to file ITR and Audit report both before the due date. It does not matter whether the audit report is filed earlier than ITR or ITR is filed earlier than audit report. If both ITR and Audit import are filed before the due date, then it is a sufficient compliance to treat that both ITR and Audit Report are filed within the permissible time limit as prescribed by law. The objective of law is to submit both ITR / Aud....
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....tion 80-IC. Moreover, in the present case, the audit report has been filed within the permissible time limit as prescribed by the law. Further, regarding the non- application of judgment of the Hon'ble Supreme Court in the case of "Commissioner of income Tax Vs G.M. Knitting Industries (P) Ltd." it is submitted that in the said case law, two issues are decided in favour of assessee which are as under.- 1. Allowability of additional depreciation if form 3AA was not filed along with the return of income but same was filed during the assessment proceedings before final order of assessment was made. 1. Allowability of deduction u/s 80-IB if the Form 10CCB has not been field along with the return of income but before the final order of assessment was made. Since both legal issues(i.e. along with the return of income) were identical, so Hon'ble SC dismissed the appeal of Revenue by one finding and passed a consolidated order CIT vs G.M. Knitting Industries (P) Ltd. & others vide Civil appeal No. 10782 of 2013 & 4048 of 2014. The Civil Appeal No. 4048 of 2014 (CIT Chennai vs M/s Aks Alloys (P) Ltd.) was tagged with the Civil Appeal No. 10782 of ....
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....py of Form-10CCB which gives the complete information to substantiate the claim of deduction of assessee vide its reply dated 1^.11.2019 before the Id. Assessing officer. The Id. A.O had duly examined the documents and other supporting materials produced and filed by the assessee and only after examination of supporting documents as well as submission filed by the assessee, claim of deduction u/s 801C was al owed. Thus, it is a not a case that Id. AO had allowed the deduction u/s 80IC without verifying or paying adequate attention to the facts and relevant legal provisions, as the same were duly verified by the then Id. Assessing officer. Hence, the assessment order is neither erroneous nor prejudicial to the interest of the revenue. Thus, keeping in view the above facts and circumstances of the case, it is requested to your goodself to kindly accept the assessment order passed by the Id. Assessing Officer, as the same was passed after making proper enquiries and verification, thus the said order is not erroneous and prejudicial to the interests of the revenue." 8. The Ld. PCIT, however did not get satisfied with the above reply of the assesse and observed as under: ....
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....ssessee as specified for the purposes of the section 80IC shall be furnished "electronically". Besides, the assessee is required to file its return of income electronically under digital signatures, as per Sub Rule (3) of Rule 12 of the Income Tax Rules. As already mentioned above, section 80IC(7) read with section 80IA(7) clearly provides that the deduction under sub section (1) shall not be admissible unless the assessee furnishes, along with his return of income, the audit report in the prescribed form duly signed and verified by an accountant. 9.1 It has been held by the Hon'ble ITAT, Delhi Bench in the case of Pardeep Kumar Batra vs DCIT,CPC, New Delhi in ITA 6384/del/2019 in the case relating to AY 2017-18 through order dated 23.10.2022 that "..........after introduction of the electronic filing of the return of income as well as all other documents, there is no debate available that even if the audit report is filed before the assessments is made, same is acceptable and the deduction cannot be denied to the assessee. When selection of the cases for further scrutiny, processing of the return of income, claim of the refunds of the assessee are all determined based....
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....ier than audit report...." were to be accepted, it would completely undermine the sanctity of law, leaving the Income Tax department at the mercy of the assessees, with the assessees arbitrary choosing the dates of filing the requisite audit report as per their own convenience and sweet will. Therefore, the assessee's distorted interpretation of law and arguments are not found acceptable in this regard. 10.2 It is, therefore, prima-facie evident that deduction of Rs. 3,24,45,802/- as claimed by the assessee u/s 80IC of the Act has been allowed by the AO, without paying adequate attention to the facts and relevant legal provisions. Thus the excess deduction of Rs. 3,24,45,802/- has been wrongly allowed by the AO to the assessee." 6. The Ld. PCIT, accordingly, held that the order passed by the assessing officer was prima-facie erroneous in so far as it was prejudicial to the interests of the revenue, as the order had been passed by the assessing Officer without paying attention to the relevant provisions of law and without making enquiries or verification which should have been made in respect of the issues discussed above. She accordingly, set aside the assessment or....
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....oduced in the order of the ld. Pr. CIT, itself shows that the credit entry of the amount of Rs.56,66,776/- is dated 10/12/2015, received vide cheque no. 005261, which is after the journal transfer entry dated 25/11/2015 of Rs.1,29,425/-. However, the said cheque was dishonoured, for which reversal entry for the said amount is dated 14/01/2016 and not 12/03/2015. The assessee has duly explained about the credit and debit entries in his reply and we do not find any discrepancy in the same. It has been duly explained by the assessee that the amount of Rs.1,66,70,246/- was written off on 31/03/2017 as the assessee company could not recover the outstanding balance from the said party. The fact that the cheques issued by the said party got dishonoured, itself, proves the contention of the assessee that he could not recover the outstanding amount from the said party. 9.1. So far as the contention of the ld. Pr. CIT that the assessing officer had not made adequate enquiries is concerned, the assessee has duly explained in his reply that the Assessing Officer duly examined and verified about the aforesaid issue. Our attention has been invited to page 104 of the paper book, which is a ....
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....he notice of the assessing officer, but the same has also been examined and verified by the assessing officer and under the circumstances there remains no prejudice to the revenue of not reflecting of the aforesaid amount of bad debt under the relevant column of the online ITR form. 10. The issue is otherwise squarely covered by the decision of the Hon'ble Supreme Court in the case of TRF Ltd. vs CIT (supra) wherein, the Hon'ble Supreme Court has held that it is not necessary for the assessee to establish that the debt, income, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. Moreover, in this case, as observed above, the dishonor of cheques and thereby reversal entries, itself, show that the said debt had become bad. In this case the assessing officer had duly made enquiries and verification and showcaused the assessee in this aspect and the assessing officer has allowed the claim after being satisfied with the explanations offered by the assessee. 11. So far as the issue relating to the claim of deduction u/s 80IC of the Act is concerned, the only contention raised by the ld. Pr. CIT is that the assessee....
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.... of processing of the return u/s 143(1) of the Act. Even the Hon'ble Apex Court in the case of CIT vs. G.M.Knitting Industries (P) Ltd. & Others and in the case of M/s Aks Alloys (P) Ltd. (supra), vide a consolidated order has held that even though, necessary certificate in Form 10CCB along with the return of income has not been filed, but, the same was filed before the final order of assessment, the assessee, even in such circumstances, was entitled for claim of deduction u/s 80IB of the Act. The facts of the assessee's case are on much better footing. The assessee has duly filed the audit report before the due date of filing of the return of income which was very much part of the return of income as on the due date of filing of the return of income. Therefore, the contention of the ld. Pr.CIT that the audit report must have been filed along with the return of income is mis-conceived and unjustified. 11.3. So far as the reliance placed by the ld. Pr. CIT on the decision of the Co-ordinate Bench of the ITAT Delhi in the case of Pardeep Kumar Batra vs DCIT,CPC, New Delhi (supra) is concerned, we find that the ld. Pr. CIT, herself, has noted that the Tribunal denied deduction to t....