M/S KAMAL TRADING COMPANY,RAICHUR vs. CIT, KALABURAGI

This is an appeal by the Assessee against the order dated 29-02-2016 of Pr.CIT, Kalaburagi passed u/s 263 of the Income Tax Act, 1961 (‘Act’) in relation to assessment year 2011-12.

The Assessee is engaged in the business of cotton merchandise and wind power generation. The Assessee filed return of income for the assessment year 2011-12 on 23-11-2011 declaring a taxable income of Rs.1,97,430/-. The Assessee claimed deduction u/s 80IA of the Act of a sum of Rs.17,34,048/. The claim for deduction u/s.80IA of the Act was accepted by the AO and an 2 order of assessment u/s 143(3) of the Act was passed on 29-01-2014 accepting the income declared in the return of income.

The Pr.CIT in exercise of powers u/s 263 of the Act, was of the view that the aforesaid order of AO was erroneous and prejudicial to the interest of revenue. According to Pr.CIT, as per the provisions of sec.80AC of the Act, if the assessee does not file the return of income within the time prescribed u/s 139(1) of the Act, then such Assessee is not entitled to any deduction under chapter VIA of the Act under which Chapter Sec.80IA of the Act falls. Since the Assessee in the present case had filed the return of income on 23-11-2011 which was beyond the time allowed u/s 39(1) of the Act for assessment year 2011-12, the AO ought not to have allowed deduction u/s 80IA of the Act. According to Pr.CIT, the AO while passing the aforesaid order of assessment failed to apply his mind and make proper verification. Accordingly he issued a show cause notice u/s 263 of the Act dated 27-01-2016.

In reply to the above said show cause notice, the Assessee by a letter dated 30-01-2016 submitted that the proceedings u/s 263 of the Act will not be maintainable under the facts and circumstances of the case and that provisions of sec.80AC of the Act referred to in the show cause notice were only directory and not mandatory and therefore failure to file return of income on or before the due date u/s.139(1) of the Act is not fatal to a claim being allowed u/s.80-IA of the Act.

The Pr.CIT, however, held that the AO while passing the assessment order failed to enquire as to whether the Assessee had filed the return of income beyond the period prescribed u/s 139(1) of the Act and is consequence upon the Assessee’s claim for deduction u/s 80IA of the Act, in the context of provisions of Sec.80AC of the Act. The Pr. CIT, therefore, placing decision on the Hon’ble Delhi High Court in the case of M/s GEE VEE Enterprises Vs Addl.CIT & Others 99 ITR 375(Del) came to the conclusion that failure to make

One of the contention of the Assessee before the Pr.CIT was that the Hon’ble ITAT in the case of M/s Vanshree Builders & Developers (P)Ltd., Vs CIT in for assessment year 2007-08 vide order dated 12- 03-2013 was pleaded to hold, on identical facts of the case as that of the assessee in the present appeal, that the proceedings u/s 263 of the Act were not appropriate. The Pr.CIT in the impugned order distinguished the aforesaid decision as follows; “ Further, the Assessee has relied upon the judgment of Hon’ble ITAT in case of Vanshree Builders & Developers (P) Ltd.,Vs CIT. The facts of the case law relied upon by the assessee are distinguishable with the present facts of the case. In case of Vanshree Builders & Developers (P)Ltd. Vs CIT, the assessee did not file any return of income u/s 139(1) of the IT Act. A survey was conducted on assessee’s premises and consequently assessee’s case was reopened u/s 147 and thereafter in response to notice u/s 148 of the IT Act the assessee has filed its return of income. Hence, in case of Vanshree Builders & Developers (P) Ltd., the Assessing Officer has allowed the claim of the assessee as he was well aware of the fact that the assessee has filed a belated return. Hence, the order passed u/s 263 has been quashed by the Hon’ble ITAT. However, in the present case, the AO was not at all aware of the fact as the case was selected under regular scrutiny proceedings u/s 43(3) and the AO did not raise any query why the return of income filed belatedly and why the deduction u/s 80IA should not be withdrawn keeping in view of the provisions of section 80AC of the IT Act. Hence, the case law relied upon by the assessee is not applicable in the present case. Further, there is no separate correspondence found no record which shows that the assessee has put the fact before the AO during the assessment proceedings that the return of income has been filed belatedly. The assessee has failed to do so. The Hon’ble Apex Court in ca of CIT Vs Calcutta Agency Limited (SC) 19 ITR 191., CIT Vs R.Venkataswamy Naidu (SC) 29 ITR 529, and Gopi Ram Lila Vs CIT(Raj.) 225 ITR 320 has held that to claim any exemption/deduction, duty of assessee to substantiate it with records and evidences. Moreover, the AO has no discretionary power to condone the delay in filing the return of income so as to allow deduction u/s 80IA r.w.80AC of the Act. The fact of the matter is that the return of income was filed belatedly and as per the provisions of section 80AC, the return should

We have heard the rival submissions. It is not disputed before us that in view of the decision of the Special Bench, Rajkot in the case of M/s Saffire Garments vs ITO reported in (2013) 151 TTJ (Rajkot) (SB) 114, wherein the provisions of section 80AC were held to be mandatory and that an assessee who does not file its return of income on or before the due date prescribed u/s 139(1) of the Act will not be entitled to claim deduction u/s 80IA of the Act. Therefore on merits of the claim for deduction u/s.80IA of the Act, the Assessee has no case.

The ld.counsel for the assessee again placed reliance on the decision of the ITAT, Bangalore Bench in the case of M/s Vanshree Builders & Developers (P) Ltd., (supra). We have gone through the aforesaid decision and we find that the Tribunal in the aforesaid decision, firstly held that in view of the decision of Special Bench in the case of M/s Saffire Garments vs ITO (supra) an assessee who does not furnish the return of income on or before the due date as prescribed u/s 139(1) of the Act will not be entitled to deduction u/s 80IA of the Act. The Tribunal however, went on to hold that on the facts of that case, the AO had taken a conscious decision on this aspect while concluding the assessment after application of mind and therefore, proceedings u/s 263 of the Act could not have been initiated. However, in the present case, we find that the AO made no enquiries whatsoever on the question of applicability of Sec.80AC of the Act (Para 5.7.3 of the Tribunal’s order). We are therefore, of 5 the view that the decision on which the learned counsel for the assessee had placed reliance is not of any use to the plea made by the assessee. The ld. counsel also placed reliance on the decision of the ITAT, Pune Bench in the case of M/s Sharp Designers & Engineers India Pvt.Ltd.,Vs ACIT, in for assessment year 2010-11 vide order dated 29-01-2018 wherein, the provisions of Sec.80AC were held to be directory and not mandatory. The aforesaid decision is contrary to the decision of the Special Bench in the case of M/s Saffire Garments vs ITO (supra) and in that decision cited, there is no reference to the decision of the Special Bench. Therefore, the aforesaid decision cited by the learned counsel for the assessee will also not help the plea of the assessee.

We are of the view that in the present case, the order of the AO is erroneous and prejudicial to the interest of revenue for the failure on the part of the AO to make proper enquiries on the claim of deduction as claimed by the Assessee u/s 80IA of the Act and therefore, as laid down in the case of M/s GEE VEE Enterprises Vs Addl.CIT & Others (supra) the jurisdiction u/s 263 of the Act was rightly invoked by the Pr.CIT. We therefore, find no merit in this appeal filed by the assessee and accordingly, we dismiss the same.

In the result, the appeal filed by the assessee is dismissed.