Commissioner of Income Tax vs M/s. Southern Packaging

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

ON THE 14TH DAY OF NOVEMBER, 2018

BEFORE THE HON'BLE MR. JUSTICE RAVI MALIMATH

AND

THE HON'BLE MR. JUSTICE K. NATARAJAN

INCOME TAX APPEAL NO.335 OF 2010 CONNECTED WITH INCOME TAX APPEAL NO.336 OF 2010

BETWEEN:

COMMISSIONER OF INCOME TAX C.R. BUILDINGS, QUEENS ROAD, BANGALORE.

THE DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1 (3), BANGALORE.

... APPELLANTS (COMMON)

(BY SRI E.I. SANMATHI, ADVOCATE)

AND:

SRI DEVI GRANITES AVR ROAD, KANAKAPURA, BANGALORE RURAL DISTRICT, BANGALORE.

... RESPONDENT (COMMON)

(BY SRI A. SHANKAR & SRI M. LAVA, ADVOCATES)

THESE INCOME TAX APPEALS ARE FILED UNDER SECTION 260-A OF THE INCOME TAX ACT, 1961, PRAYING TO DECIDE THE FOREGOING QUESTIONS OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON’BLE COURT AS DEEMED FIT AND TO MODIFY THE APPELLATE ORDER DATED 16-4-2010 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, ‘A’ BENCH, BANGALORE, IN APPEAL PROCEEDINGS IN I.T.A.NO.16/BANG/2008 AND I.T.A.NO.13/BANG/2008 RESPECTIVELY FOR BLOCK PERIOD 1996-97 TO 2002-03 WITH REGARD TO HOLDING THAT THE INCOME ASSESSED UNDER SECTION 158BC IN THE BLOCK ASSESSMENT ORDER AND DIRETING THE ASSESSING AUTHORITY TO ALLOW DEDUCTION UNDER SECTION 80HHC AND TO GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE.

THESE INCOME TAX APPEALS COMING ON FOR HEARING, THIS DAY, RAVI MALIMATH, J., DELIVERED THE FOLLOWING:

J U D G M E N T

On 6-11-2001, a search was conducted in the premises of the assessee, who was involved in granite business and a search was also conducted in the premises of others. A block assessment was concluded and undisclosed income was determined at Rs.1,49,43,800/-. Aggrieved by the same, the assessee preferred an appeal. The appeal was partly

allowed. No relief was granted for the year 2000-2001. Aggrieved by the same, the Revenue as well the assessee preferred appeals before the Tribunal. The Tribunal allowed the appeals and granted relief to the assessee to an extent of the entire amount. Aggrieved by the same, the present appeal is filed.

By the order dated 1-2-2012, the appeals were admitted to consider the following substantial questions of law:

i. In the facts and circumstances of the case, whether the tribunal is correct in law in holding that the income assessed under section 158BC in the block assessment order is not justified just because a notice under section 142(1) was issued prior to the search and the proceeding so initiated remained to be concluded, when the assessee has neither filed a return of income in response to notice under section

142(1) so issued nor has paid any taxes by way of advance tax, TDS etc.,?

ii. In the facts and circumstances of the case, whether the tribunal is correct directing the assessing authority to allow deduction under section 80HHC when the assessee has failed to file the same before assessing authority when the assessing authority had specifically asked the assessee to file the same during the course of assessment proceedings and has filed only at the 1st appellate stage?

iii. In the facts and circumstances of the case, whether the tribunal is correct directing the assessing authority to allow deduction under section 80HHC when the assessee had not maintained any proper books of account to support the certificate in Form 1000CCAC furnished at the 1st appellate stage?

Learned counsel for the appellant contends that the answer to the first substantial question of law would be covered by the consideration of the second and third substantial questions of law. He contends by placing reliance on Section 80HHC (4) that a deduction will not be admissible, unless the assessee furnishes in the prescribed form along with the return of income, the report of the Accountant.

The said proviso reads as under:

(4) The deduction under sub-section (1) shall not be admissible unless the assessee furnishes in the prescribed form, along with the return of income, the report of an accountant, as defined in the explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed [in accordance with the provisions of this section:]

[Provided that in the case of an undertaking referred to in sub-section (4C), the assessee shall also furnish along with the return of income, a certificate from the undertaking in the special economic zone containing such particulars as may be prescribed, duly certified by the auditor auditing the accounts of the under-taking in the special economic zone under the provisions of this Act or under any other law for the time being in force.]

On the other hand, the learned counsel for the respondent placed reliance on the judgment in the case of COMMISSIONER OF INCOME TAX AND ANOTHER v. ACE MULTITAXES SYSTEMS PVT. LTD. reported in (2009) 317 ITR 207, wherein the very question of law, has been answered in favour of the

assessee and the Court therein held, that it is not necessary in all cases that a return must be accompanied by the audit report which is under Section 80-IA(7). The said proviso is a parimateria to Section 80 HHC.

Under the circumstance, the second and third substantial questions of law being covered by the judgment in the case of COMMISSIONER OF INCOME TAX AND ANOTHER v. ACE MULTITAXES SYSTEMS PVT. LTD. reported in (2009) 317 ITR 207, the second and third substantial questions of law are answered in favour of the assessee and against the Revenue. Consequently, the first substantial question of law does not arise for consideration. The appeals are, accordingly, disposed off.

SD/-

SD/- JUDGE

JUDGE kvk

Commissioner of Income Tax vs. M/s. Southern Packaging