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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI G.S.PANNU & SHRI AMARJIT SINGH
ORDER PER G.S.PANNU,A.M:
The captioned are three appeals, which relate to the same assessee involving certain common issues, therefore, they have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity.
First we may take up the appeal in CIT(A)-22, Mumbai dated 25/02/2013, which in turn, arises out of an order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) dated 14/12/2006. The assessee has raised following Grounds of appeal:-
“Aggrieved by the order of the Assessing Officer (A.O) as confirmed by Commissioner of Income Tax (Appeals) [CIT(A)], your appellant prefers an appeal against the same on following grounds, which, it is prayed, may be considered without prejudice to one another.
On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the Assessment Order, which has been passed in gross violation of principles of natural justice and hence, is bad in law.
2. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the AO's stand of not accepting of 3rd revised return filed u/s. 139(5) of the Income Tax, 1961.
3. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the AO's stand of not considering the rectification of error carried out in the computation of total income along with 3rd revised return, on account of provision for leave encashment.”
In brief, the controversy in this appeal can be understood as follows. In this case, assessee company originally filed its return of income on 01/11/2004 declaring a total income of Rs.3,55,79,908/-, which was duly accompanied by the statement showing computation of total income, profit and loss account, balance sheet as at 31/03/2004 and other schedules forming part of the balance sheet and audit report required to be filed in terms of section 44AB of the Act. Subsequently, the assessee filed a revised return on 09/08/2005 declaring a total income of Rs.5,37,81,184/-, which was also again revised on 24/08/2005 declaring total income of Rs.5,83,45,984/- on account of certain wrong claim of depreciation made in the earlier revised return. On 13/10/2005, assessee filed a third revised return declaring an income of Rs.3,87,76,433/- correcting the excess add-back made earlier on account of unpaid Provision for leave encashment. The Assessing Officer has finalized the assessment under section 143(3) dated 14/12/2006, whereby the total income has been assessed at Rs.5,83,71,664/- after making an addition of Rs.25,680/- to the income of Rs.5,83,45,984/- declared by the assessee in the second revised return filed on 24/08/2005. Ostensibly, the Assessing Officer did not take cognizance of the third revised return filed by the assessee on 13/10/2005, wherein the total income was scaled down to Rs.3,87,76,433/-.
3.1 Before the Assessing Officer, assessee pointed out that the income of Rs.5,83,45,984/- declared in the second revised return was required to be corrected because inadvertently, the unpaid Provision for leave encashment was reported at Rs.2,14,35,533/- instead of correct figure of Rs.18,64,982/-, thereby resulting excess add-back to the income of a sum of Rs.1,95,69,551/-. The claim of the assessee was that the correct income computable was Rs.3,82,76,433/- instead of Rs.5,83,45,984/- declared in the second revised return and, hence, the filing of the third revised return on 13/10/2205. The Assessing Officer did not accept the plea of the assessee on the ground that in the Tax Audit Report filed under section 44AB of the Act the amount reported on account of unpaid Provision for leave encashment was Rs.2,14,35,533/-. In view of the said reason, the Assessing Officer did not take into consideration the income determined in the third revised return filed on 13/10/2005.
In appeal before CIT(A), assessee pointed out that the action of the Assessing Officer was erroneous in law and on facts because third revised return filed on 13/10/2005 was within the period prescribed under section 139(5) of the Act and that the revision was based on justifiable ground. The CIT(A) called for a remand report from the Assessing Officer and after considering the remand report and the submissions of assessee, he has proceeded to affirm the stand of the Assessing Officer. The CIT(A) in her concluding discussion records as under:- “So even if the 3rd revised return is accepted which is permissible as it is filed within time, the claim made by the appellant in the 3rd revised return cannot be granted because it is not done property without the submission of the auditors’ Report or note. In the instant case, the appellant should have submitted the note of the auditor with the 3rd revised return to make it a complete and proper revised return. Hence, this ground of appeal is dismissed.”
5. Against the aforesaid decision of the CIT(A), assessee is in further appeal before us. Before us, the solitary grievance of the assessee is that the CIT(A) has wrongly confirmed the stand of the Assessing Officer of not considering the third revised return filed under section 139(5) of the Act and further that the error pointed out by the assessee in the computation of total income in the second revised return on account of excess add-back of unpaid Provision for leave encashment has been rejected without any justifiable reason.
On the other hand, Ld. Departmental Representative has placed reliance on the orders of the authorities below by pointing out that the mistake in the second revised return claimed by the assessee was inadmissible in view of the contents of the audit report filed under section 44AB of the Act.
We have carefully considered the rival submissions. Section 139(5) of the Act permits an assessee to file a revised return of income if he discovers any omission or any wrong statement therein at any time before the expiry of one year from the end of the relevant assessment year or before the completion of assessment , whichever is earlier. In the present case, it is not the case of the Revenue that the third revised return filed by the assessee on 13/10/2005 was beyond the period stipulated in section 139(5) of the Act. In our considered opinion, if the original return filed by the assessee under section 139(1) of the Act is within the prescribed period, and the revised return has been filed within the period prescribed in section 139(5) of the Act, then the Assessing Officer is bound to take cognizance of that return as if it has been originally filed under section 139(1) of the Act. No doubt, revision of a return is prescribed under section 139(5) of the Act in cases where assessee ‘discovers any omission or any wrong statement’ in the original return. So however, whether or not there is an omission or a wrong statement in the original return can only be verified by the Assessing Officer after he takes into consideration the revised return so filed. In the present case, the discussion by the Assessing Officer in para-5 of the assessment order and the computation of total income in para-6 reveal a somewhat contradictory approach. While in para-6 of the assessment order the Assessing Officer has refused to take cognizance of the third revised return filed on 13/10/2005 while computing the total income whereas in para-5 he has rejected the plea of the assessee that there was any excess add-back of unpaid Provision for leave encashment in second revised return filed on 24/08/2005. Ostensibly, the approach of the Assessing Officer in para-5 to examine the efficacy of the adjustment made to the total income in the third revised return can be justified only if he was to take cognizance of the same, which clearly he did not do, as reflected in para-6 of the assessment order. Moreover, the approach of the CIT(A) is also untenable because she has proceeded to reject the claim of the assessee in the third revised return merely in the absence of any note of the auditor with regard to the error/omission sought to be corrected by the assessee in third revised return. The approach of the CIT(A), in our considered opinion, is hyper-technical and in fact is dehors the fact-situation, which assessee has been consistently trying to put-forth regarding the excess add- back to the total income made in the second revised return on account of unpaid provision for earned leave. The claim of the assessee has been countered by the lower authorities on the ground that the tax audit report furnished by the auditor under section 44AB of the Act reflected the unpaid Provision for leave encashment at Rs.2,14,35,533/- and not Rs.18,65,982/- claimed by the assessee. In our considered opinion, the claim made by the assessee ought to have been examined on merit and not shut-out in a superficial manner. Obviously, the claim of the assessee is based on the fact that there is an error in the reporting of the unpaid Provision for leave encashment in the audit report but the claim has been rejected without subjecting it to any kind of verification. Under these circumstances and considering that the revised return filed on 13/10/2005 was within the period prescribed under section 139(5) of the Act and that the original return was filed within the period prescribed under section 139(1) of the Act, the Assessing Officer was bound to take cognizance of the revised return filed on 13/10/2005 and consider the plea of the assessee on merits having regard to the material sought to be relied upon by the assessee before him. On the failure of the lower authorities to do so, we deem it fit and proper to set-aside the order of the CIT(A) and direct the Assessing Officer to take cognizance of the third revised return filed on 13/10/2005 and consider the plea of the assessee relating to the unpaid Provision of leave encashment on merits having regard to the material that the assessee seek to rely before him. Needless to mention, the Assessing Officer shall allow the assessee a reasonably opportunity of being heard and only thereafter shall pass an order afresh on the aforesaid limited aspect, as per law. Thus, the appeal of the assessee is allowed, as above.
Now we may take up the cross-appeal in and ITA No.5100/Mum/2013 which are directed against an order passed by CIT(A)-22, Mumbai dated 08/04/2013, which in turn, arise out of an order passed by the Assessing Officer under section 143(3) r.w.s. 263 of the Income Tax Act, 1961 (in short ‘the Act’) dated 24/12/2006. The Grounds of appeal raised by the assessee as well as Revenue read as under:-
Assessee’s Grounds of Appeal:-
“Aggrieved by the order of the Assessing Officer (A.O) as confirmed by Commission of Income Tax(Appeals) [CIT(A)], your appellant prefers an appeal against the same on following grounds , which, it is prayed, may be considered without prejudice to one another.
1. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition under section. 145A of Rs.1,34,88,803/- made by the A.O.” Revenue’s Grounds of appeal:- 1. "On the fact and in the circumstance of the case and in law, the Ld. CIT(A) erred in directing the AO to compute income as per 3rd revised return without considering the fact that AO proved that 3rd revised return was invalid as the signature of the Director on the tax audit report was improper"
2. "On the facts and in the circumstances of the case, the Ld. CIT(A)erred in allowing the appeal of the assessee without considering the pendency of assessee's appeal in regard to order u/s 263 for the A.Y under consideration'.
3. The appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of appeal.
9. First, we may take up the appeal of the Revenue, wherein the only grievance is that the CIT(A) has erred in directing that the third revised return filed by the assessee on 13/10/2005 be taken into consideration by the Assessing Officer while computing the total income. This aspect of the controversy has already been adjudicated by us in Assessing Officer ought to have taken cognizance of the third revised return filed on 13/10/2005. In view of our decision in the appeal of the assessee in the stand of the Revenue in the present appeal is liable to be dismissed. We hold so. Resultantly, the appeal of the Revenue is dismissed.
10. In the appeal of assessee, the dispute arises from an addition of Rs.1,34,88,803/- made by the Assessing Officer on account of adjustment under section 145A of the Act in an assessment finalized as a consequence of an order passed by the CIT-10,Mumbai under section 263 of the Act dated 16/3/2009.
11. At the time of hearing, Ld. Representative for the assessee point out that the total income adopted by the Assessing Officer in the impugned order in order to give effect to the order of the CIT under section 263 is Rs.5,83,71,664/-, which was computed in the assessment order passed under section 143(3) of the Act dated 14/12/2016. It is pointed out that the determination of total income in the order passed under section 143(3) of the Act dated 14/12/2006 was after ignoring the revised return filed on 13/10/2005. The said dispute has been considered by us in earlier paras while dealing with the appeal in The Ld. Representative for the assessee pointed out that if assessee were to succeed in the earlier appeal, the dispute in the present appeal would be rendered infructuous as the computable total income would stand reduced and assessee would have no grievance left. We have upheld the plea of the assessee in principle in the appeal in and also in the cross-appeal by the Revenue in ITA No.5100/Mum/2013 that the Assessing Officer is to take cognisance of the third revised return filed on 13/10/2015. In this appeal, the matter relating to determination of total income is being remanded back to the file of the Assessing Officer. Accordingly, the Assessing Officer would consider afresh the issue relating to the addition under section 145A of the Act of Rs.1,34,88,803/- in the ensuring proceedings after considering the explanation of the assessee, as per law. Accordingly, for statistical purposes the appeal of the assessee in ITA No.4788/Mum/2013 is also allowed, as above.
In the result, whereas the appeals of the assessee are allowed, that of Revenue is dismissed.
Order pronounced in the open court on 25/11/2016