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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI V. DURGA RAO& SHRI D.S. SUNDER SINGH
आदेश /O R D E R
PER D.S. SUNDER SINGH, Accountant Member: This appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]-12, Hyderabad vide Appeal No.10161/2017-18 dated 16.04.2018 for the Assessment Year (A.Y.)2010-11.
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In this case, the assessee filed additional ground along with petition for admission of additional ground. The contention of the assessee for admission of additional ground is that the assessment in this case was made u/s 153A consequent to search u/s 132 of the Income Tax Act, 1961 (hereinafter called as ‘Act’) and the addition was made not on the basis of seized material, thus, contended that the addition made by the Assessing Officer (AO) without having the seized material is unsustainable and required to be deleted. The additional ground raised by the assessee reads as under : “On the facts and in the circumstances of the case, whether the addition made by recomputation of the total income at Rs.3,03,50,780/- is outside the scope of assessment u/s 143(3) r.w.s. 153A in as much as the proceedings for A.Y.2010- 2011 stood finalized on 6.1.2015 i.e. the date of search and further the recomputation of total income was made without reference to any seized material.” After hearing both the parties, since the additional ground is purely related to the legal issue and no enquiry required to be made, the additional ground raised by the assessee is admitted for adjudication.
In this case, the assessee filed the return of income originally for the A.Y.2010-11 on 30.09.2010 declaring total income of Rs.67,08,152/-. Subsequently, search u/s 132 was carried out in this case and a notice u/s 153A was issued by the AO. In response to the notice issued u/s 153A,
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the assessee filed the return of income declaring nil income on 28.11.2015 and no claim was made u/s 80IA of the Act. According to the assessee, for the A.Y.2010-11, the business income resulted in ‘nil’ income and the taxable profits u/s 115JB was Rs.3,13,17,100/-, thus there was no scope for claiming the deduction u/s 80IA of the Act. The AO selected the case for scrutiny and during the assessment proceedings, the AO issued the questionnaire. In response to the questionnaire issued by the AO, the assessee has furnished written submissions and during the assessment proceedings, the AO observed that the assessee did not claim the deduction u/s 80IA in the original return as well as in the return filed in response to the notice issued u/s 153A, and there was computation mistake. When the assessee was asked to clarify the mistake and explain why there was “nil” income, the assessee made submission stating that the assessee is owning captive power plant and the undertaking is eligible for deduction u/s 80IA of the Act and due to inadvertent mistake, the assessee did not claim the deduction u/s 80IA in the return filed in response to the notice issued u/s 153A. The assessee further submitted that it has complied with all the requirements to be eligible for claiming deduction u/s 80IA of the Act, thus requested to allow the deduction. The assessee also filed a revised return of income on 17.12.2016 claiming deduction u/s 80IA of the Act and relied
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on the following decisions : (a) CIT Vs. Ramco International reported in 221 CTR 0491, High Court of P&H. (b) Chicago Pneumatic India Ltd. Vs. Deputy Commissioner of Income Tax, Bombay Tribunal reported in 15 SOT 0252. (c) Commissioner of Income Tax Vs. Jindal Saw Pipes Ltd. High Court of Delhi reported in 328 ITR 0338. (d) National Thermal Power Co. Ltd. Vs. Commissioner of Income Tax, Supreme Court of India reported in 229 ITR 0383
4.0 The AO observed that the assessee did not make any claim of deduction u/s 80IA in the original return as well as in the return filed in response to notice u/s 153A of the Act and the claim was made only in the revised return dated 17.12.2016 which was barred by limitation. The AO viewed that, since the return of income filed by the assessee on 17.12.2016 was beyond the due date the same was invalid and hence the fresh claim made by the assessee u/s 80IA is inadmissible. Accordingly rejected the claim of the assessee for deduction u/s 80IA.
4.1 The assessee in the revised return, computed the profit of power plant which is eligible for deduction u/s 80IA estimating the consumption of husk expenditure @10%. The AO rejected the assessee’s contention for consumption of husk expenditure @10% and estimated the expenditure of husk at 55% of total consumption as attributable to captive power plant
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and accordingly recomputed the total income at Rs.3,03,50,780/-.
Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) dismissed the appeal of the assessee placing reliance on the observations of Hon’ble ITAT, Mumbai in Sirova Developers (2017) 162 ITD 718 and Section 80AC of the Act and held that the assessee is ineligible for deduction/s 80IA, having not made the claim in the return filed u/s 139(1) and in the return filed u/s 153A. The CIT(A) upheld the order of the AO in disallowing the deduction u/s 80IA. With regard to the alternate ground of the assessee on additions made without incriminating material during the course of search, the Ld.CIT(A) observed that the AO did not make any addition, it is the assessee who has claimed the deduction during the assessment proceedings which was rejected by the AO and accordingly upheld the order of the AO.
Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before this Tribunal.
We have heard both the parties and perused the material placed on record. With regard to the issue of consumption of husk for captive power plant, the same is covered by this Tribunal order in the assessee’s own
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case for the A.Ys 2012-13 and 2015-16 in I.T.A No.293-296/Viz/2018. Accordingly the appeal of the assessee on this ground is allowed and the AO is directed to recompute the income relating to captive power plant estimating the consumption of husk expenditure @10% of total husk consumption as decided in our earlier order.
The assessee filed the return of income originally for the A.Y. 2010-11 on 30.09.2010 declaring total income of Rs.67,08,152/- and no deduction was claimed under Chapter-VIA, thus there was no claim of deduction u/s 80IA of the Act in the original return. In response to the notice issued u/s 153A, the assessee filed the return of income declaring ‘nil’ income and also did not claim the deduction u/s 80IA under Chapter VIA of the Act. The assessee placed copy of acknowledgement as well as the statement of computation of income both for the return filed in response to notice u/s 153A as well as the revised return filed during the course of assessment proceedings. On careful verification of the return of income filed u/s 153A, it is observed that there was mistake in computation of income and it resulted in ‘nil’ taxable income. Thus, there is no occasion for the assessee to claim the deduction u/s 80IA of the Act. The entire profit as per P&L account was offered for taxation u/s 115JB of the Act, under the book
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profits and filed the nil return of income. Subsequently, when the AO detected the incorrect computation of income during the assessment proceedings the assessee realized the mistake and claimed the deduction u/s 80IA as the correct computation resulted in taxable income instead of nil income declared by the assessee. Therefore, the assessee filed revised return with revised computation of income claiming the deduction u/s 80IA of the Act to the extent of Rs.2,11,99,336/- before the AO. In the instant case, though the assessee has not claimed the deduction u/s 80IA, it has filed the return of income u/s 139(1) declaring ‘nil’ income before the due date. Section 80AC places conditions for allowing the deduction under Chapter VIA and primary condition is filing the return of income before the due date. In the instant case, the assessee had filed the return of income within the due date allowed u/s 139(1) of the Act, but not claimed the deduction u/s 80IA. In the return filed in response to notice u/s 153A, the return was filed showing ‘Nil’ income due to wrong calculation which shows that the claim was not made due to no taxable income. On realizing that there was a mistake in calculation and the revised computation resulted in taxable income, the profit from the unit entitled for deduction u/s 80IA, was claimed as deduction and filed all the necessary documents required for allowing the deduction along with the revised return. The
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question is whether the AO is permitted to allow the additional claim made by the assessee during the assessment proceedings or not. Since the AO takes up the case for scrutiny for understatement of income, the AO is not empowered to entertain the fresh claim which goes to reduce the returned income, otherwise than by revised return. However, in the instant case, the assessee filed the return of income declaring nil income and the revised return filed during the assessment proceedings also resulted in nil income after the deduction u/s 80IA and hence the same is not against the spirit of scrutiny proceedings or for the purpose of issue of notice u/s 143(2) of the Act. It is decided issue that the assessee is required to pay the taxes only on true and correct income and the Government is not permitted to collect the taxes more than what was due from the assessee. It is settled issue that even if the AO is not permitted to entertain the fresh claim, the assessee is not barred from making additional claim before the appellate authorities and the appellate authorities are permitted to entertain the genuine additional claims in the interest of justice as held by the Hon’ble Supreme Court in the case of Goetze(India) Ltd. Vs. CIT (2006) [284 ITR 323 (SC)]. Hon’ble Delhi High Court in the case of Vedanta Ltd. Vs. Pr.CIT-9, New Delhi (2018) 93 Taxman.com 392 also held in connection with the additional depreciation that the AO is bound to allow the
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additional depreciation, whether there was a claim or not. Similarly Hon’ble Supreme Court in the case of CIT Vs. G.M.Knitting Industries Pvt. Ltd. (2016) 71 Taxman.com 35 held that additional claim made by the assessee required to be allowed before finalizing the assessment proceedings. In the case cited (supra), the Hon’ble Supreme Court concurred with view that even if the assessee did not file form 3AA along with the return and filed during the assessment proceedings and before the final order of the assessment, it would be sufficient compliance to allow the deduction. Thus Hon’ble courts have allowed the assessing officer as well as the appellate authorities to entertain the genuine claims during the pendency of proceedings. In the instant case, the issue is deduction u/s 80IA. As per the scheme of deduction u/s 80IA the assessee is entitled for deduction u/s 80IA for 10 consecutive assessment years out of 15 years beginning from the year in which the undertaking manufactures or begins to operate the eligible industry. The assessee is free to decide the initial assessment year and entitled for deduction u/s 80IA for 10 consecutive assessment years from the initial assessment year. Once the initial assessment year is selected by the assessee, the assessee would be entitled for deduction u/s 80IA till completion of 10 consecutive years and the AO is bound to allow the
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deduction if the assessment results into positive income, even if the assessee did not make the claim in the return of income. If the assessee do not claim the deduction for some reason or the other during the block period of 10 years, the assessee would not be entitled to postpone and claim the deduction in the subsequent assessment years after completion of block period of 10 years, thus, the assessee would loose the benefit forever. Therefore, if there is no choice for postponement of the deduction in the subsequent years, it is mandatory for both revenue as well as the assessee to claim deduction or to allow the deduction. In the instant case, when the return was filed in response to notice u/s 153A, the assessee did not claim the deduction since the taxable income as per the computation of income was zero. If the scrutiny assessment results in to positive income it is obligation on the part of the AO to allow all the statutory deductions including the deduction u/s 80IA for arriving the taxable income. However in this case during the pendency of proceedings, when it has come to the notice of the assessee that there was taxable income, the assessee itself had claimed the deduction and was entitled for deduction u/s 80IA. The assessee made the claim before the AO and even after allowing the deduction claimed by the assessee, the resultant income would not go to reduce the returned income originally. There is no dispute that the
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assessee is entitled for deduction u/s 80IA. Therefore, we are of the considered opinion that it is injustice to deny the claim by appellate authorities who are permitted to entertain the fresh claim, when assessee makes the bonafide claim. The assessee’s case is squarely covered by the decision of Hon’ble Supreme Court in the case of CIT Vs. G.M.Knitting Industries Pvt. Ltd. (supra) as well as the decision of Hon’ble Delhi High Court in the case of Vedanta Ltd. (supra) and we hold that the assessee is entitled for the deduction u/s 80IA. Accordingly, we direct the AO to allow the deduction u/s 80IA of the Act. However, the quantum of deduction, compliance of statutory requirements for claiming the deduction u/s 80IA was not discussed in the assessment order. Therefore, we remit the matter back to the file of the AO for limited issue of deciding the quantum of deduction and for obtaining the required details such as audit report etc.. before allowing the deduction. Accordingly we direct the AO to verify the documents placed by the assessee during the assessment proceedings and allow the eligible deduction u/s 80IA. It is needless to say that the AO is required to give opportunity to the assessee. The appeal of the assessee on this ground is allowed for statistical purpose.
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As far as additional ground is concerned we observe that the AO has not made any addition and only recomputed the income correctly. For recomputing the income correctly no incriminating material is necessary and the AO is permitted to make the corrections during the proceedings after giving opportunity to the assessee. Hence, we do not find any merit in the additional ground, accordingly the same is dismissed.
In the result, appeal of the assessee is partly allowed for statistical purpose.
Order pronounced in the open court on 3rd January, 2019.
Sd/- Sd/- (िी.दुगाा राि) (धड.एस. सुन्दर धसंह) (V. DURGA RAO) (D.S. SUNDER SINGH) न्याधयक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER नवशधखधपटणम /Visakhapatnam नदनधंक /Dated : 03 .01.2019 L.Rama, SPS
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आदेश की प्रनतनलनप अग्रेनर्त/Copy of the order forwarded to:- 1. ननधधाऩरती / The Assessee – M/s Sree Murali Mohana Boiled & Raw Rice Mill (P) Ltd.,D.No.1-54, Kommaripalem, Biccavolu Mandal, East Godavari Dist. 2. रधजस्व / The Revenue– The Assistant Commissioner of Income-Tax, Central Circle-1(1), Rajahmundry 3. The Pr.Commissioner of Income Tax (Central), Visakhapatnam 4. The Commissioner of Income Tax-(Appeals)-12,Hyderabad 5. नवभधगीय प्रनतनननध, आयकर अपीलीय अनधकरण, नवशधखधपटणम /DR, ITAT, Visakhapatnam 6. गधर्ा फ़धईल / Guard file
आदेशधनुसधर / BY ORDER // True Copy //
Sr. Private Secretary ITAT, VISAKHAPATNAM