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Income Tax Appellate Tribunal, JAIPUR BENCHES, JAIPUR
Before: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM
PER VIJAY PAL RAO, JM :
This appeal by the assessee is directed against the order dated 30th March,
2017 of ld. CIT (A)-2, Jaipur for the assessment year 2013-14. The assessee has
raised the following grounds :-
“ 1. On the facts and in the circumstances of the case, the learned Authorities below have legally and factually erred in making/confirming addition of Rs. 78,49,967/- by disallowing deduction claimed u/s 80 IA of the I.T. Act, 1961 without appreciating the facts of the case in right perspective and also ignoring the explanation offered by the assessee during the course of assessment as well as appellate proceedings. As per instructions of the Board and in view of various judicial pronouncements on the subject, the claim of such deduction should not be disallowed for ‘bona-fide’ and ‘procedural lapse’. Thus the disallowance so made is bad in law and the addition made and confirmed on this account deserves to be deleted summarily.
2 ITA No. 366/JP/2017 M/s. Nihal Chand Jain Infra Project Pvt Ltd., Jaipur.
On the facts and in the circumstances of the case, the Authorities below have legally and factually erred in making/sustaining following additions by disallowing various expenses detailed as under on adhoc basis without pointing out any specific instance or discrepancy and also without appreciating the facts of the case in right perspective. Thus the disallowances so made/sustained are bad in law and deserve to be deleted summarily :
(a) Out of Sales Promotion Expenses Rs. 25,000/- (b) Out of Telephone and Conveyance exp. Rs. 20,000/- (c) Out of Pump Repair & Maintenance exp. Rs. 25,000/- (d) Out of Office, Staff Welfare and Vehicle Repair & Maintenance Expenses Rs. 30,000/-
The appellant craves to add, amend or withdraw any of the ground of appeal either before or at the time of hearing of appeal.
Ground No. 1 is regarding disallowance of deduction claimed under
section 80IA of the IT Act for want of tax audit report in Form 10CCB
along with the return of income.
The assessee filed its return of income electronically on 30.09.2013 and
claimed deduction under section 80IA of Rs. 78,49,967/-. The AO noted that form
no. 10CCB is also to be e-filed along with the return of income and audit report has
not been done. Accordingly, the AO held that in view of the provisions of section
80IA(7) the deduction shall not be admissible in the absence of audit report in form
no. 10CCB furnished along with the return of income. Hence the AO denied the
deduction under section 80IA. The assessee challenged the action of the AO before
the ld. CIT (A) and contended that the primarily responsibility to file the return of
income was discharged by the assessee within the stipulated time period. The
assessee further contended that filing of audit report is a procedural aspect and not
3 ITA No. 366/JP/2017 M/s. Nihal Chand Jain Infra Project Pvt Ltd., Jaipur.
a fundamental legal obligation. Therefore, the assessee subsequently filed the audit
report in satisfaction of the provisions of section 80IA(7) of the Act. The assessee
relied upon the decision of Hon’ble Jurisdictional High Court in the case of CIT vs.
Dr. L.M. Singhvi, 289 ITR 425 (Raj.). The ld. CIT (A) was not convinced with the
contention of the assessee and also distinguished the decision relied upon by the
assessee on the ground that for the assessment year under consideration e-filing of
audit report is mandatory and, therefore, non-compliance of the necessary condition
is not a technical or procedural aspect but disentitle the assessee to claim deduction
under section 80IA.
Before us, the ld. A/R of the assessee has reiterated his contention as raised
before the authorities below and submitted that the assessee duly explained the
reasons for not filing the form no. 10CCB along with the return of income e-filed.
The ld. A/R has referred to the affidavit of the Authorized Representative/Chartered
Accountant of the assessee who filed the return and submitted that the tax audit
report was duly prepared by the Auditor, however, at the time of filing the return
due to oversight form no. 10CCB could not be sent as the same was mixed up with
other papers while scanning them. Thus when the report was ready but due to
inadvertence and bonafide mistake it could not be filed along with the return, the
same cannot be a reason for denial of deduction under section 80IA when the
assessee has duly filed the form no. 10CCB during the assessment proceedings. He
has relied upon various decisions on this point including the decision of Hon’ble
Jurisdictional High Court in the case of CIT vs. Dr. L.M. Singhvi (supra).
4 ITA No. 366/JP/2017 M/s. Nihal Chand Jain Infra Project Pvt Ltd., Jaipur.
3.1. On the other hand, the ld. D/R has relied upon the orders of the authorities
below and submitted that for the year under consideration the audit report in form
no. 10CCB was required to be filed along with the return of income through e-filing.
Therefore, as per rule 18BBB the assessee was required to e-file the form no. 10CCB
along with the return of income and non compliance of the said condition disentitle
the assessee for the deduction under section 80IA of the Act.
We have considered the rival submissions as well as the relevant material on
record. This is not the first year of claim of deduction under section 80IB and,
therefore, it is not the case of the A.O. that the assessee’s undertaking is not eligible
for deduction under section 80IB. However, only for want of filing of form no.
10CCB along with the return of income and through e-filing, the AO has denied the
claim of deduction under section 80IA. The assessee subsequently filed the form
no. 10CCB during the assessment proceedings and also explained the reasons for
not e-filing the form 10CCB along with the return of income. There is no dispute
that the return of income was filed within the period of limitation provided under
section 139(1) of the IT Act. Hence only because the assessee could not e-file the
form no. 10CCB along with the return of income, the assessee cannot be denied the
benefit of section 80IA of the Act. The Hon’ble Jurisdictional High Court in the case
of CIT vs. Dr. L.M. Singhvi (supra) while considering the issue of filing of audit report
along with the return of income has held in para 9 to 15 as under :-
“9. The last condition remained to be filled, viz., that the report of such audit to be annexed with return but was furnished during the course of proceedings. The claim to deduction was disallowed for this breach by the Assessing Officer. Whether the last of condition, viz., filing of audit report is mandatory in the sense that mere submission of audit report later on during the course of enquiry renders the claim void ab initio or requirement being procedural is only directory in nature and compliance in substance will be sufficient compliance? In other
5 ITA No. 366/JP/2017 M/s. Nihal Chand Jain Infra Project Pvt Ltd., Jaipur.
words, where there is any distinction between the nature of substantive condition, procedural condition and technical condition.
The distinction between the prescription of substantive condition and a procedural and technical part of condition to avail tax exemption was succinctly stated by the Supreme Court in Mangalore Chemicals & Fertilizers Ltd. v. Dy. Commissioner of Commercial Taxes AIR 1992 SC 152. The contention was raised before the Supreme Court that a condition statutorily provided for availing a benefit must be held substantive in all cases and non-compliance of statutory condition must result in forfeiture of exemption. The Court repelled this contention and explained :
". . .There is a fallacy in the emphasis of this argument. The consequence which Shri Narasimha Murthy suggests should flow from the non-compliance would, indeed, be the result if the condition was a substantive one and one fundamental to the policy underlying the exemption. Its stringency and mandatory nature must be justified by the purpose intended to be served. The mere fact that it is statutory does not matter one way or the other. There are conditions and conditions. Some may be substantive, mandatory and based on considerations of policy and some others may merely belong to the area of procedure. It will be erroneous to attach equal importance to the non-observance of all conditions irrespective of the purposes they were intended to serve." (p.157)
The Court approved the following principle stated by Francis Bennion in his "Statutory Interpretation":—
"Unnecessary technicality; Modern courts seek to cut down technicalities attendant upon a statutory procedure where these cannot be shown to be necessary to the fulfilment of the purposes of the Legislation."
The judgment of the High Court was reversed on the ground that view taken by the High Court does not acknowledge the essential distinction between what was a matter of form and what was one of substance.
A like principle was enunciated by the Supreme Court in case of Krishna Kumar Mediratta v. Phulchand Agarwala [1977] 2 SCC 5, while considering the case under Mineral Concessions Rules, 1960, where the question was about the validity of entertaining the application accompanied with fees.
The High Court upheld the contention about incompetency of such application to be entertained while setting aside the order of Central Government. Reversing the judgment of High Court, the Supreme Court said :—
"On the other hand, we find that the High Court itself committed an error, which seems to us to be very apparent, in holding that an application, which had only to be accompanied by the fee would be considered validly filed on the date on which it was made only if proper fee had been tendered with it when it was filed. A right and reasonable procedure looks to substance rather than form of a transaction in order to determine its nature. The statute and the rules made thereunder would have said so if the application itself was to be deemed to be void ab initio for non- compliance with a particular technical requirement if that was the intention behind them."
In coming to this conclusion, the Court said :—
". . .the use of word ‘shall’ in imposing a duty is not conclusive on the question whether the duty imposed is mandatory or directory. Moreover, that question was only incidentally involved here. It is the breach of every mandatory duty in performing a prescribed act that could make an action totally ineffective or void ab initio. The filing of application is one thing and completion of some annexed duty, which is legally separable, is another unless a statute or a rule provides otherwise."
Accordingly, in view of binding precedent of Hon’ble Jurisdictional High Court, we
hold that the assessee cannot be denied the benefit of section 80IA merely because
form no. 10CCB was not filed along with the return of income when it was found to
6 ITA No. 366/JP/2017 M/s. Nihal Chand Jain Infra Project Pvt Ltd., Jaipur.
be ready and filed during the course of assessment proceedings and further the
assessee had duly explained the reasons for not filing form no. 10CCB along with the
return of income by way of filing the affidavit of the auditor of the assessee. Hence
we allow the claim of the assessee and orders of the authorities below are set aside.
Ground No. 2 is regarding adhoc disallowance of certain expenses.
We have heard the ld. A/R as well as the ld. D/R and considered the relevant
material on record. In view of our finding on ground no. 1 regarding the claim of
deduction under section 80IA, the expenses to the extent of the eligible business of
the assessee shall have no revenue effect even if adhoc disallowance is made by the
AO. Accordingly, the AO is directed to reconsider this issue in the light of the
adjudication of ground no. 1.
In the result, appeal of the assessee is allowed.
Order is pronounced in the open court on 14/08/2018.
Sd/- Sd/- (foØe flag ;kno) (fot; iky jkWo ½ (VIKRAM SINGH YADAV ) (VIJAY PAL RAO) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member. Jaipur Dated:- 14/08/2018. Das/ आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- M/s. Nihal Chand Jain Infra Project Pvt. Ltd., Jaipur. 2. The Respondent – The ITO, Ward 5(1), Jaipur. 3. The CIT(A). 4. The CIT, 5. The DR, ITAT, Jaipur 6. Guard File (ITA No. 366/JP/2017) vkns'kkuqlkj@ By order,
सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत
7 ITA No. 366/JP/2017 M/s. Nihal Chand Jain Infra Project Pvt Ltd., Jaipur.