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Facts
Bodygear International Pvt. Ltd., engaged in manufacturing and export of Toys, filed a revised return for AY 2007-08 claiming deduction under Section 10B, along with a belated audit report. The Assessing Officer denied the claim, stating it was not made in the original return and the audit report was late, a decision upheld by the CIT(A).
Held
The Tribunal ruled that a revised return, if filed within the time allowed under Section 139(5), substitutes the original return, and the claim made therein is valid. It also held that the audit report can be filed before the completion of assessment proceedings. However, as the AO did not examine other conditions for Section 10B deduction, the matter was remitted back to the AO for verification.
Key Issues
1. Whether a claim for deduction under Section 10B made in a revised return of income is valid even if not present in the original return. 2. Whether the audit report prescribed for Section 10B can be filed after the Section 139(1) due date but before assessment completion.
Sections Cited
10B, 10B(1), 139(1), 139(5), 143(3)
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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Inturi Rama Rao & Shri Soundararajan K
:Asst.Year 2007-2008 Bodygear International Pvt.Ltd. The Assistant Commissioner V/803, A and B, Edayar v. of Income-tax, Cir.1(2) Industrial Development Area Kochi. Muppthadam PO Alangad, Ernakulam – 683 110. PAN : AAACB9545J. (Appellant) (Respondent) Appellant by : Sri.Radhesh Bhatt, CA Respondent by : Sri.Omanakuttan, Senior AR Date of Date of Hearing : 20.03.2025 Pronouncement : 14.05.2025 O R D E R
Per Inturi Rama Rao, AM :
This is an appeal filed by the assessee co-operative society directed against the order of the National Faceless Appeal Centre / Commissioner of Income-tax (Appeals) [“the CIT(A)”] dated 17th February, 2023 for the assessment year 2007-2008.
Briefly, the facts of the case are that the appellant is a company incorporated under the provisions of Companies Act, 1956. It is engaged in the business of manufacture and export of Toys. The return of income for the assessment year 2007-2008 was originally filed on 23rd October, 2007. The same was revised on 24.11.2007 and again it . Bodygear International Pvt.Ltd. was revised on 22.02.2008 showing taxable income at Nil, after claiming deduction u/s.10B of the Income-tax Act, 1961 (“the Act”). The audit report as per Rule 16E and Form 56G was submitted by the appellant company on 22nd February, 2018. Against the said return of income, the assessment was completed by the Assistant Commissioner of Income-tax, Circle 1(2), Kochi (“the AO”) vide order dated 23rd December, 2009 passed u/s.143(3) of the Act assessing the total income at Nil after setting off of brought forward losses of Rs.30,75,833. While doing so, the AO denied the claim for deduction u/s.10B of the Act by holding that the appellant had not made a claim for deduction u/s.10B of the Act in the original return of income filed and the prescribed audit report in Form 56G was furnished only on 22nd February, 2008, i.e., after the due date for filing the return of income u/s.139(1) of the Act. The AO was of the opinion that since the claim for deduction u/s.10B of the Act was made only in the revised return and the requisite audit report in Form 56G was filed only on 22.02.2008, it does not conform to the requirement of provisions of section 10B(1) of the Act, and accordingly, denied claim for deduction u/s.10B of the Act.
Being aggrieved by the above assessment order, an appeal was filed before the CIT(A) contending that filing of the prescribed audit report before the completion of the assessment constitutes a sufficient compliance, placing reliance on series of judgments of the High Courts, which are extracted by the CIT(A) at page 4 of the impugned order. It is further submitted that since the original return was filed within the due date prescribed u/s.139(1) of the Act, and therefore, there is no violation of provisions of section 10B of the Act. However, the CIT(A) has . Bodygear International Pvt.Ltd. confirmed the action of the AO in disallowing the claim for deduction u/s.10B of the Act by holding that filing revised return does not amount to substitution of the original return filed u/s.139(1) of the Act, and therefore, does not constitute a sufficient compliance, and accordingly dismissed the appeal placing reliance on the decision of the Hon’ble Supreme Court in the case of PCIT v. Wipro Limited (2022) 140 taxmann.com 223 (SC).
Being aggrieved, the appellant is in appeal before us in the present appeal. It is submitted that the appellant had filed original return of income within the due date prescribed u/s.139(1) of the Act. Once an assessee files a revised return of income, it amounts to substitution of the original return of income. The time limit prescribed for filing of the requisite audit report is directory in nature and can be file at any time before the completion of the assessment proceedings, placing reliance on the following judgments :- (i) CIT v. G.M.Knitting Industries Pvt. Ltd.(2015) 376 ITR 465 (ii) CIT v. Yokogwa India Ltd. (2017) 391 ITR 274 (SC) (iii) CIT v. Vegetable Products Ltd. (1973) 88 ITR 192 (SC) (iv) Tracks & Towers Infratech Pvt. Ltd. (ITA No.1514 & 1515/Hyd/2019), Hyderabad Bench.
On the other hand, the learned Sr.DR placing reliance on the orders of the authorities below submits that no interference is called for, as the appellant had not made the claim in the original return of income
We heard the rival submissions and perused the material available on record. The issue in the present appeal relates to the claim for deduction u/s.10B of the Act. The AO had denied the claim of deduction u/s.10B of the Act solely on the ground that no claim for deduction u/s.10B was made in the original return of income filed u/s.139(1) of the Act, but made the claim in the revised return of income, and also on the ground that the requisite audit report in Form 56G was filed belatedly, i.e. on 22,08.2008. There is no dispute that the original return of income was filed within the due date prescribed u/s.139(1) of the Act. The AO also accepted the revised return of income filed by the assessee. Therefore, the validity of the revised return of income is not under challenge before us, as the same was filed within the time allowed under the provision of sub-section (5) of section 139 of the Act. Once a revised return of income is filed, the natural consequence is that the original return of income is effaced for all the purposes, and it is not open to the AO to advert to the original return of income as filed by the assessee company. It is a settled position of law that an assessee is entitled to revise return of income within the time allowed under the provisions of sub-section (5) of section 139 of the Act, once a revised return of income is filed, the natural consequence is that the original return of income is effaced or obliterated for all the purposes, it is not open to the Assessing Officer to advert to the original return of income. This position of law was approved by Hon'ble Supreme Court in CIT vs. Mahendra Mills /Arun Textile, Glassgow . Bodygear International Pvt.Ltd. Consultants, 243 ITR 56 (SC), wherein, the Hon'ble Supreme Court had inter alia approved the decision of the Hon'ble Karnataka High Court in the case of (i) CIT vs. Mangalore Chemicals & Fertilizers Ltd., 191 ITR 156 (Kar.), (ii) CCIT vs. Machine Tool Corpn. of India Ltd., 201 ITR 101 (Kar.) and the decision of the Hon'ble Punjab & Haryana High Court in the case of Beco Engineering Co. Ltd. vs. CIT, 148 ITR 478 (P&H).
Therefore, in the light of the above legal position, it can be safely concluded that the claim made in the revised return of income, although not made in the original return of income, amounts to claim made in the original return of income. It is nowhere prescribed that the claim should be made only in the original return of income filed u/s.139(1) of the Act. The only requirement under the provisions of section 10B of the Act is that only the return of income should be filed within the due date prescribed u/s.139(1) of the Act, and similarly, filing of the prescribed audit report before the date of completion of the assessment proceedings constitutes a sufficient compliance in view of the judgment of the Hon’ble Supreme Court in the case of CIT v. G.M.Knitting Industries Pvt. Ltd.(2015) 376 ITR 465, and therefore, in the light of above legal position, reasoning of the lower authorities cannot be sustained in the eyes of law. However, since the AO had no occasion to examine the satisfaction or otherwise of the other conditions prescribed u/s.10B of the Act, we remit the matter back to the file of the AO with a direction to allow the deduction u/s.10B of the Act, on being satisfied that the other conditions prescribed for allowing of deduction u/s.10B were satisfied.
In the result, the appeal filed by the assessee stands partly allowed. Order pronounced on this 14th day of May, 2025.