TaxTMI 
TaxTMI 
TaxTMI 
2023 (1) TMI 708
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....est 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 scrutiny assessment u/s 143(3) of the IT. Act, 1961 was completed on 27.12.....
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....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 could not recover the outstanding balance from the said party. The outstanding amount relates to th....
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....n-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 Rs.1,66,70,246/- to M/s Metalmine during the AY 2017-18. These amounts were brought forward balances of preceding years.....
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....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 assessee company has concealed/hide any information or material fact from the department. Due to disclosure of amount written-off by the assessee company, the then Id. ....
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....ount, 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 the risk assessment parameters laid down by the Department. Thus the assessee's failure in the regard is prima-facie with a view to game the system. 5.2 The assessee has further....
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....ction 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 register and in the list of debtors in the preceding years. The assessee had further submitted that Metalmine Enterprises Pvt. Ltd. had not made the payments of sales amounts due, so the assessee company had not made further ....
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.... 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 Rs. 1,66,70,246/- Rs. 1,66,70,246/- Rs. 1,66,70,246/- (b) It is obvious from the chronology of the transactions tabulated above that there was a live relationship between the assessee and M/s Metalmine Enterprises, as the assessee has shown a transfer entry of Rs. 1,11,32,895/- even on 14.10.2015 to the assessee despite the fact that the assessee now claims that the cheque of Rs. 56,66,776/- issued by Metalmine to the assessee was dishonored on 12.03.2015. It is becau....
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....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. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct." Honble Delhi High Court in Income Tax Officer versus DG Housing Projects Limited(2012) 343 ITR 329 (Delhi) has observed: "The Assessing Officer is both an investigator and an adjudicator. If the Assessing Officer as an adjudicator decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the Commissioner in e....
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....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 / Audit report on or before the due date. In the present case, it does not seem the intention of law that for claiming deduction u/s 80IC, ITR was required to be filed on 11.09.2018 (i.e. ITR & Audit report both on same date) and if ITR is filed in advance i.e. on 07.09.2018, then the assessee company is not eligible for deduction u/s 80IC. Thus, deduction cannot be denied to the assessee on the ground that audit report was neither furnished along with original return nor at the time of revised return. Because, in the present case, ITR as well as Audit Report both are filed well in advance before the ....
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....n 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 2013 (CIT Maharashtra vs M/s G.M. Knitting Industries Pvt Ltd).Copy of SC judgment along with screen shot downloaded from the Hon'ble SC website is attached herewith as per Annexure-3 & 4 respectively. Further, copy of order of Hon'ble Madras High Court CIT Chennai vs M/s Aks Alloys (P Ltd is attached herewith as per Annexure-5,wherein issue was regarding the filing of audit report along with return of income for claim of deduction u/s 80IB. Thus, it is clear from the above that Id. Assessing officer had rightly placed the reliance on the aforesaid Hon'ble Supreme Court judgment as the judgment of Hon'ble Supreme Court is squarely apply to th....
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....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: " The submissions of assessee have been carefully considered with reference to the facts of the case and the relevant legal provisions. It is noted that the assessee has claimed deduction u/s 80IC(2)(a)(ii) of the Act amounting to Rs. 3,24,45,802/- for the first time for the year under consideration in the Revised return of income, which was filed on 07.09.2018. The requisite Audit Report in Form 10CCB was, however, filed 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 ITR on 07.09.2018. As per the provisions of section 80IC(7) r.w.s. 80IA(7)of the Act, for claiming ....
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.... 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 on the return filed by the assessee and when the provisions of the law and the relevant rules strictly provides that all necessary documents must be filed and approved along with the return of income or prior to that, subsequent filing of any document cannot be considered for processing of the return and intimation u/s 143 (IA) of the act. The several judgements relied upon by the assessee do not pertain to the era of the electronic filing of the return/documents and therefore same does not apply to the facts of the present case. In view of the above facts, we do not find any infirmity either in the procedure or in passing of intimation u/s 143(IA) of the act as well as in denying deduction u/s 80 IB of the act to the assessee for non filing....
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.... 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 order to the limited extent of the issues discussed above with the direction to the Assessing Officer to make requisite inquiries and proper verification with regard to the issues mentioned above and to make the assessment de-novo after due consideration of the facts and law in this regard. 7. Being aggrieved by the above order of the Ld. PCIT, the assesse has come in appeal before us. We have heard the rival contentions and gone through the record. We find that the Ld. PCIT was not justified in setting aside the assessment order in this case in exercise of revision jurisdiction u/s 263 of the Act. The twin conditions required for exercise of jurisdiction u/s 263 of the Act i.e. that the order of the AO must be erroneous and prejudicial to the interest of revenue, have not ....
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....he 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 copy of the show cause notice dt. 20/12/2019, issued by the Assessing Officer, whereby, the assessing officer has duly enquired from the assessee about the bad debts written off including the amount of Rs.1,66,70,246/-. Whereupon, the assessee furnished a detailed reply to the Assessing Officer, copy of which had been uploaded on the portal of the income tax department and is also placed at page no. 34 of the paper book, whereby, the assessee interalia has duly explained that the aforesaid debt had become bad and since the assessee was not able to recover the same from the concerned party, the same was written off in the accounts of the assessee. 9.2. We further note that on the one hand, the ld. Pr. CIT has noted that the Assessing Officer had not made proper enquiries relating to id....
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....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 had not uploaded the audit report in Form 10CCB along with the return of income. The ld. Pr. CIT in this respect has placed reliance on the relevant provisions of Section 80IA(7) r.w.s. 80IC(7) of the Act, which require the assessee to furnish the audit report along with his return of income to claim deduction u/s 80IA or 80IC of the Act, as the case may be. 11.1. We find that the ld. Pr. CIT had misconceived herself about the relevant provisions of the Act. In this case, the revised return of income was filed by the assessee on 07/09/2018 and the requisite audit report in Form 10CCB was filed on 11/09/2018. However, pertinent fact is that the due date of filing of the return was 31/03/2019. It shows that the assessee not only filed the revised return which was also within the due date but a....
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....at 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 the assessee for non-filing of the audit report in electronic manner "in time" (on or before the due date of filing of the return of income), whereas, in the instant case, since the assessee has filed the audit report on or before the due date of filing of the return, the aforesaid decision of the Co-ordinate Bench of ITAT Delhi, can be applied in favour of the assessee only. Even otherwise, it has been held that time and again that the Income Tax Authorities must charge the legitimate taxes from the tax payers. If the assessee is entitled to certain deductions under the provisions of the Income Tax Act, the same should not be disallowed, merely because of any bonafide mistake or error on the part of the tax payer, rather, the Income Tax Authorities should assist the concerned assessees in filing the....