M/S BINDRA WAREHOUSING CORPORATION vs. INCOME TAX OFFICER WARD 1(1),

ITA No. 153/Jab/2016 (AY 2008-09) Bindra Warehousing Corporation v. ITO IN THE INCOME TAX APPELLATE TRIBUNAL, JABALPUR BENCH, JABALPUR (SMC) (through Video Conferencing) BEFORE SH. SANJAY ARORA, HON'BLE ACCOUNTANT MEMBER ITA No. 153/JAB/2016 Assessment Year : 2008-09 Bindra Warehousing Income Tax Officer, vs. Ward-1(1), Corporation, Itarsi, Itarsi Hoshangabad (M.P.) (M.P.) [PAN: AAHFB 1982B] (Appellant) (Respondent) Appellant by S/Sh. Sanjay Mishra & Rajeshwar Dayal Advocates Respondent by Smt. Swati Agarwal, Sr. DR Date of hearing 03/09/2021 Date of pronouncement 30/09/2021

ORDER Per Sanjay Arora, AM This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)-31, New Delhi (Camp Bhopal) (‘CIT(A)’ for short) dated 16.03.2016, dismissing the assessee’s appeal contesting its’ assessment under section 143(3) of the Income Tax Act, 1961 (‘the Act’ hereinafter) for the Assessment Year (AY) 2008-09 vide order dated 06.12.2010. 2. The appeal raises two grounds, as under: 1. That the learned first appellate authority has erred in arbitrarily conforming the addition of Rs. 8,43,219/- made by the learned assessing authority by ,1

ITA No. 153/Jab/2016 (AY 2008-09) Bindra Warehousing Corporation v. ITO disallowing the claim of deduction U/S 80IB(11A) of the I.T. Act 1961 which is neither correct nor justified therefore same is liable to be deleted. 2. That the learned first appellate authority has erred in arbitrarily conforming the addition of Rs.1,01,259/-made in the total income by disallowing the claim of depreciation and imposing the tax on the same which is neither correct nor justified therefore same is liable to be deleted. However, prior to arguing the same, the ld. Counsel for the assessee, Shri Mishra, would plead for admission of legal Grounds (Gds. 3 & 4), reading as under, also praying for their adjudication first inasmuch as the acceptance thereof, where so, would render infructuous the adjudication of Grounds 1 and 2: 3. The reopening of case u/s. 147 of the Act, is illegal and unjustified because no additions has been made, for the reasons for recorded by the assessing officer dated 04/05/2010. Hence the consequential assessment is ab-initio void, and deserves to be set aside. 4. That, the assessment of the appellant was reopened on non-existing and irrelevant reasons hence the reopening u/s. 147/148 of the IT Act, 1961 and assessment order dated 06.12.2010 is illegal, without jurisdiction and void. 3. Grounds 3 and 4 being legal were admitted after brief arguments. Qua Gd. 4, adverting to the reasons recorded, reproduced hereunder, it was submitted by Shri Mishra, that the only reason for reopening the assessee’s assessment for the relevant year was the assessee stating per its’ return of income of it being not liable to get its’ account audited u/s. 44AB of the Act. This was understood by the Assessing Officer (AO) as a non-conduct of the audit there-under and, inexplicably, audit u/s. 80-IB of the Act and, consequently, non-eligibility to deduction u/s. 80IB(11A) of the Act, claimed at Rs.8,43,219: (PB-2, pg. 32) ‘The assessee is running a warehouse and has filed return of income for AY 2008-09 on 27-9-2008 through E-filing. The assessee has claimed deduction u/s. 80IB (11A) and the whole warehouse income of Rs. 8,43,219/- is claimed exempt under this section. The assessee should have got his accounts audited by statutory auditor before ,2

ITA No. 153/Jab/2016 (AY 2008-09) Bindra Warehousing Corporation v. ITO the due date of filing of IT return. Perusal of return of income filed by the assessee reveals that in Part A of general information of return, where there is specific column of details of audit u/s. 44AB, the assessee has specifically marked that he is not liable for audit u/s. 44AB. To claim deduction u/s 80IB of the IT Act the assessee must have his accounts audited by statutory auditor as per the provisions of section 80IB(13) read with section 80IA (7) of the IT Act. Thus the deduction/s 80IB (11A) is not allowable to the assessee. I have therefore reason to believe that income of Rs 8,43,219/- chargeable to tax has escaped assessment within the meaning of section 147 of the IT Act 1961. Issue notice u/s. 148 for the A.Y. 2008-09.’ There was no requirement, he would continue, for furnishing the audit report along with the return of income, and toward which he would draw my attention to Instructions for filling-out Form ITR-5, placing a copy of the same on record. The reason recorded, he argued, is thus infirm. Ms. Agarwal, the ld. Sr. DR, would, on the other hand, submit that the Instruction referred to by Sh. Mishra forms part of the Board Circular No. 09/2006, dated 10/10/2006, placing a copy of the same on record, and which was for AY 2006-07 (and not for AY 2008- 09) and, two, applicable only to returns for other than business income, viz. in Forms 1, 2, 3, and not Form 5, applicable to the assessee. Adverting to sections 80-IB(13) and 80IA(7), she would continue, there was thus no dichotomy in law, i.e., as to the requirement of furnishing the audit report along with the return of income – filed on 27.09.2008, and which had admittedly not been done, on one hand, and the procedural requirement per the relevant rule (r. 12) read with the Board Instruction for filling-up the return form in respect of business income, which are thus in harmony. As regards the validity of the reason to believe, the reason recorded, as apparent, has two limbs, each of which has to be given due weight. The second limb of the reason recorded clearly states of non-compliance of the provision of section 80IA(7), so that deduction u/s. 80IB(11A) is not admissible in terms of section 80IB(13), which makes some clauses of section 80IA, including sec. 80IA(7), applicable to a ,3

ITA No. 153/Jab/2016 (AY 2008-09) Bindra Warehousing Corporation v. ITO claim for deduction u/s. 80IB. How could the AO infer compliance of s. 80IA(7), or the conduct of audit u/s. 80IB, where the same was not, as required by law, filed along with the return of income and, in fact, even thereafter? 4. I have heard the parties, and perused the material on record. 4.1 It would be relevant to reproduce the relevant provisions of law, as under: 80-IA. Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. (7) The deduction under sub-section (1) from profits and gains derived from an undertaking shall not be admissible unless the accounts of the undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, and the assesse furnishes, along with the return of income, the report of such audit in the prescribed form duly signed and verified by such accountant. Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. 80-IB (1) Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections (3) to (11), (11A) and (11B) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. (2) to (12)… (13) The provisions contained in sub-section (5) and sub-sections (7) to (12) of section 80-IA shall, so far as may be, apply to the eligible business under this section. 4.2 Qua the first limb of the reason recorded, when the assessee states in its’ return of income – a duly verified document, that it is not liable to get its’ accounts audited u/s. 44AB, it only means that, in view of the assessee, the said provision is not applicable thereto for the relevant year. The only inference arising from the said statement by the assessee in its’ return, which is to be regarded as true and, further, only where the AO has reason/s to believe of the assessee being, on the contrary, liable to get its’ account audited u/s. 44AB, is

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ITA No. 153/Jab/2016 (AY 2008-09) Bindra Warehousing Corporation v. ITO that the assessee has not complied with the provisions of the said section. There is no income implication, even as none emanates from the (part of the) said reason, as recorded, as well. The assessee may at best be liable to penalty u/s. 271B. The first limb of the reason recorded, is, thus, clearly not valid. 4.3 The second limb of the reason recorded, to be read on its terms, concerns the requirement for eligibility for deduction u/s. 80-IB. The assessee’s contention that the reason recorded only speaks of the requirement of audit (u/s. 80IB), which had in fact been undertaken, though the audit report not furnished along with the return of income, but only during the reassessment proceedings, so that the reason does not hold, cannot be accepted. The reason, read holistically, speaks of non-compliance of the statutory provisions of section 80IB(13) read with s. 80IA(7); it noting a failure to comply with the said provisions. When the reason, as recorded, adverts to these provisions, the same have to be necessarily read into the said reason, and which explains the reproduction thereof hereinbefore. The requirement of law is, as apparent, two- fold. The first requirement is to get the accounts audited u/s. 80-IB and obtain the audit report, duly verified, in the prescribed form and, two, to furnish the same along with the return of income. Section 80AC proscribes deduction under, among others, section 80-IB, where the return of income is not furnished by the due date of filing the return u/s. 139(1). Implicit therein is the requirement to get the accounts audited u/s. 80-IB by the said date. The relevant rule (r.18BBB) prescribes Form 10CCB (for deduction u/s. 80-IB). The same, i.e., the audit report (in the said or any other form) was admittedly not submitted along with the return of income, furnished electronically on 27.9.2008 (and physically on 10/10/2008), or even by the due date u/s. 139(1) (30.09.2008), or even by 20.01.2010, the date of recording of the reason to believe. Both the conditions of section 80-IA(7) are, thus, as per the reason recorded, not met.

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ITA No. 153/Jab/2016 (AY 2008-09) Bindra Warehousing Corporation v. ITO At this stage, one may advert to the Board Instructions (copy on record) referred to and relied upon by the ld. counsel, Sh. Mishra, during hearing, being, contrary to what the ld. Sr. DR contended, for AY 2008-09 (also at 302 ITR (St.) 151-276). The same, as clarified therein (para 1), are non-statutory in character, to be taken as a guideline for filling-up Forms ITR 1 to 8, notified by the Board per Notification No. 752(E), dated 25/3/2008, in exercise of its’ powers u/s. 295 of the Act, which confers power to the Board to, subject to the control of the Central Government, make rules for the whole or part of India for carrying out the purposes of the Act by notification in the Gazette of India. The Instructions provide for both paper-less (i.e., electronically) as well as paper returns for returning income under different heads of income and by different classes of persons, including business income by, among others, firms, i.e., ITR- 5 (para 5). However, in either case, i.e., paper or electronic, these are annexure- less, i.e., without any documents, viz. audited accounts, audit reports, TDS/TCS challans, receipts, etc. required to be furnished along with the return of income, clarifying that the Departmental officials have been instructed to detach such documents where filed along with the return forms (para 4). How, pray, then, could the assessee furnish the audit report u/s. 80-IB, i.e., as required by ss. 80- IB(13) r/w s. 80-IA(7)? How, again, one may ask, does the said non-furnishing lead to the reason to believe non-conduct of audit u/s. 80-IB and, thus, non- eligibility to deduction u/s. 80-IB(11A)? The second limb of the reason recorded appears infirm. The matter in view of the clear mandate of law (s. 80-IB(13) r/w s.80- IA(7)) requires a closer look. Something, surely, is amiss, as, rather than being facilitative, providing mechanism for its compliance, the Instructions are disabling and in conflict with the substantive law, which would in that case prevail. No doubt, para 1 of the Instruction, clarifying the legal status thereof, states that in case of doubt reference be made to the provisions of the Act and ,6

ITA No. 153/Jab/2016 (AY 2008-09) Bindra Warehousing Corporation v. ITO the Income-tax Rules, 1962. Further, para 10(1)(b)(vi) of the Instruction, explaining the scheme of the law, states that deductions u/c. VI-A of the Act (which Chapter contains ss. 80-IA, 80-IB) be claimed from the gross total income by following the procedure prescribed by law. What, however, when the Board, whose rule-making powers are for the purposes of the Act, itself provides for, contrary to the procedure per the express provision of law, annexure-less returns? A procedure, in any case, is one which could be followed, i.e., to the extent possible, or practicably so. A browse of the Act clears any vestige of doubt. The Instruction is wholly in terms of and consistent with the Act. Sections 139C & 139D stand coopted on the statute by Finance Act, 2007, w.r.e.f. 01/6/2006, and provide for the power to the Board for specifying persons or classes of persons not required to furnish documents, statements, receipts, audit reports, etc., required to be furnished along with the return of income by or under the other provisions of the Act, but on demand produce the same before the Assessing Officer, i.e., in respect of electronic and paper returns. Section 295(2), which defines the areas or matters qua which the Board may frame rules, also witnessed, simultaneously, insertion of two corresponding clauses, i.e., Cl. (eeba) and Cl. (eebb), one each for paper and electronic returns. This, then, resolves any ambiguity or the apparent conflict between the procedure/s required by the Act and by the Board, whose rule making power is subordinate to the former, and admittedly for carrying out the purposes of the Act, and not in derogation thereof. One area of concern still remains. The rule prescribes Form ITR-5, while there is nothing to show that the assessee returned its’ income for the year in the said Form. This is relevant as the annexure-less return rule is applicable only to the new Forms, i.e., Form 1 to Form 8, detailed per the said Notification. However, the Board has per its’ Circular 09/2006, relied upon by the ld. Sr. DR, clarified that the returns in old forms would not be valid, and that the assessees ,7

ITA No. 153/Jab/2016 (AY 2008-09) Bindra Warehousing Corporation v. ITO shall be required to furnish returns in the new forms. This is only in terms of the law; s. 139(1) providing for furnishing the return of income in the prescribed form. No dispute or objection stands raised by the Revenue in the matter, at any stage, accepting the return furnished as valid. This is particularly relevant in view of s. 80-AC. No issue qua the prescribed form, therefore, obtains. In the instant case, the assessee has acted consistent with law – furnishing the return within the prescribed time, in the annexure-less mode; obtained the audit report in the prescribed form (Form 10CCB) in time (on 25/8/2008)(PB-1, pgs. 24-29), and furnished the same before the AO at the earliest possible time, i.e., on 23/2/2010, along with the reply in response to the notice u/s. 148(1) dated 20/1/2010 (refer letter dated 22/6/2010 at PB-2, pgs. 33-35). No reason to believe non-conduct of audit u/s. 80-IB and, thus, non-eligibility to deduction thereunder could have been, in view of the foregoing, formed by the AO, who cannot but be aware of the extant procedure, or is required to be, particularly when the reason formed is based on the provisions of law. As clarified by the Apex Court in Jaganmohan Rao (V.) v. CIT [1970] 75 ITR 373 (SC), it is only the true and correct state of law that can form a basis for the reason to believe escapement of income from assessment. The AO, where he wanted to clear his doubts in the matter, ought to have inquired with the assessee, as u/s. 133(6). No wonder, the law stands amended since (by Finance Act, 2020, w.e.f. 01/4/2020), delinking the furnishing of the audit report from that of the return of income, so that both are independently required to be furnished by the due date/s prescribed in their respect. The second limb of the reason recorded is, thus, also not valid. 4.3 The assessee, accordingly, succeeds in its’ legal challenge per Gd.4, so that there is no valid assumption of jurisdiction u/s. 147 in the instant case. In view thereof, it is not necessary to travel to other Grounds (i.e., Gds. 1 to 3) of appeal, also argued at the bar, which therefore become infructuous. ,8

ITA No. 153/Jab/2016 (AY 2008-09) Bindra Warehousing Corporation v. ITO 5. I wish to, however, before parting with this order, express my concern at the state of representation before this Tribunal. Sh. Mishra, while bringing out the relevant Instruction, failed to bring it within the legal framework; rather, conceding, on being asked during hearing, to there being a conflict between the provisions of the Act and the Board Instruction, which have no legal status. That the income stands returned in the new Form (ITR-5) is also not exhibited. Ms. Agarwal, the ld. Sr. DR, also did not help matters when she submitted, incorrectly, and to no rebuttal by the ld. counsel, that the Instruction being referred to by him is a part of the Board Circular 09/2006, applicable to AY 2006-07, and not to the current year. The whole premise of representation, it needs to be appreciated, is to assist the Court or Tribunal to arrive at the correct decision, i.e., in accordance with law and consistent with the justice of the case. 6. In the result, the assessee’s appeal is allowed. Order pronounced in the Open Court on September 30, 2021 Sd/- (Sanjay Arora) Accountant Member Dated: 30/9/2021 Aks/- Copy of the Order forwarded to: 1. The Appellant: M/s. Bindra Warehousing Corporation, Lahoria Road, Industrial Area Itarsi, Disst. Hosangabad (M.P.) 2. The Respondent: Income Tax Officer, Ward-1(1), Itarsi, Hosangabad (M.P.) 3. The Pr. CIT-1, Bhopal 4. The CIT(Appeals)-1, Bhopal 5. The Sr. DR, ITAT, Jabalpur 6. Guard File // True Copy //

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