DCIT 15(3), MUMBAI vs. KAMDHENU BUILDERS AND DEVELOPERS, NAVI MUMBAI

O R D E R PER R.C.SHARMA (A.M): This is an appeal filed by the Revenue against the order of CIT(A), for the assessment year 2007-08, in the matter u/s.143(3)(ii) of the I.T. Act, wherein the following three grounds taken of the assessee. (i) “On the facts and circumstances of case and in law, the Ld. CIT(A) erred in holding that the assessee is entitled to deduction u/s 80IB (10) of Rs.1,94,12,489/- inspite of the fact that the claim for deduction was not made in the original return and was only made in the return filed, for A.Y. 2007-08, on 31.08.2009, which is not a valid return in the eye of law and also cannot be treated as „revised return‟ u/s. 139(5).” (ii) “On the facts and circumstances of the case and law, the Ld. CIT(A) erred in allowing the deduction u/s 80IB (10) of Rs.1,94,12,489/-, as the same is contrary to the provisions of section 80A(5), effective from 01.04.2003, which does not permit allowance of deduction unless the claim for deduction is made in the return of income.”

4 As evident from the above that for claiming any such deduction under these sections, return of income has to be filed within the specified date u/s.139(1) whereas u/s.80A(5), there is no such specific limitation of date, therefore, in absence of any specific limitation of date, the „word‟ „return of income‟ provided u/s.80A(5) has to be construed to mean any such return of income filed prior to the completion of assessment or return of income filed during the assessment proceedings, provided the original return of income was filed within the time limit prescribed u/s.139(1). Obviously, appellant complies with the provision of section 80AC of the Income-tax Act. When the original return of income has been filed well within the „due date‟, the revised return filed thereafter before the completion of assessment proceedings or assessment order is passed, it is a valid return of income to be considered by the Assessing Officer, otherwise every purpose of giving such right to such appellant would be frustrated. The revised of return of income is essential for removal of defects of original return. It obviously corrects short comings from which it suffered. The revised return must therefore, be considered as it was originally filed vide Thakur Dharmapur Sugar Mills Ltd. vs. CIT (1973) 90 ITR 236, 239 & 240 (Allahabad) and Gopaldas Parshottamdas vs. CIT (1941) 9 ITR 130 (All.). It is important to point out that when a revised return cures the defects in the original return and does not obliterate the later, the assessment means on the basis of original return of income ignoring the revised return is liable to be set aside vide CIT vs. Chitranjali (1986) 159 ITR 801 (Cal). Similar view has also been taken in the case of CIT vs. Bansidhar Dalal and Sons (1994) 207 ITR 494 (Cal). It is also relevant to mention that Assessing Officer has important statutory functions to discharge. Such functions encompass power as well as duty to be exercised. Obviously, these powers are coupled with a duty to exercise them within the ambit of law. If order invested a public office with an authority to do an act in specified set of circumstances, it is imperative upon him to exercise the authority in a manner appropriate too the things when an party interested and having right to comply are to be benefited. Such preposition is there in the case of Jayamal Jayantilal Thakur vs. Chief CIT (1998) 230 ITR 142, 151, 152 (Guj.). It is worthwhile to mention that in the case of DCIT vs. Lab India Instruments (P) Ltd., 93 ITD 120 Hon‟ble Pune ITAT has held as under: - “Further, Rival submissions of the parties have been considered carefully in the light of case law referred to and the material placed before us. The first question to be considered is whether the claim of assessee under section 80-O can be denied merely on the ground that such claim was raised by the assessee in the revised return which was filed after the prescribed time but before the completion of assessment. In our humble opinion, the answer to such question is in negative for the reasons given hereafter. It is the true and correct total income of every person which is 5 assessable under section 4 of the Act. Consequently, the tax collector is rather duty bound to collect the legitimate tax due on such total income neither a penny less nor a penny more. The determination/ assessment of total income would depend on the relevant provisions of the Act irrespective of the nature of return filed by any person. An income which is not taxable cannot be taxed merely because the assessee forgot to claim the exemption/ deduction under some mistaken belief. For example, assessee‟s profit and loss account may include agricultural income, exempt under section 10(1) or share of profit from registered firm exempt under section 10(2A) or dividend income exempt under section 10(33) of the Act, but the assessee may forgot to claim such exemption in the return filed by him. Such inadvertent mistake cannot be exploited by tax authorities for rejecting the claim of assessee for exemption/ deduction even though such claim has been made by assessee in the course of assessment proceedings. Rather, it is the duty of the Assessing Officer to allow such deduction or exemption to which assessee is entitled to on the basis of material placed on record. No doubt, the claim of exemption/ deduction cannot be thrust upon, the assessee but, at least, it is the duty of Assessing Officer to apprise of the relevant provisions under which assessee is entitled to exemption/ deductions. Therefore, in our opinion, assessee is entitled to claim deduction if such claim is made by assessee before the completion of assessment proceedings. The above view of ours is also fortified by the judgment of Supreme Court in the case of Anchor Pressings (P) Ltd. vs. CIT (1986) 161 ITR 159 wherein it has been held that if on the basis of material placed on the record, the assessee is entitled to claim any deduction but forget to make his claim in the return or in the course of assessment proceedings then assessee is entitled to make such claim by moving application under section 154 for rectification since non- granting of deduction/ exemption would amount to mistake apparent from record. The ratio of this judgment is based on the principle that Assessing Officer is duty bound to grant the exemption/ deduction even where assessee failed to claim the same. The relevant observations of their Lordships are extracted below: “An obligation is imposed on the Income-tax Officer by section 84 of the Income-tax Act, 1961, to grant relief there under and the relief cannot be refused merely because the assessee has omitted to claim the relief, but the mere existence of such an obligation on the Income-tax Officer is not sufficient. Precise factual material and clear data must be contained in the record sufficient to enable the Income-tax Officer to consider whether the relief should be granted under section 84. In the absence of such material, 6 no fault can be found with the Income-tax Officer for not making an order under section 84 favouring the assessee.” Our view is further fortified by the judgment of Hon‟ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT [1998] 229 ITR 383 wherein it has been held that entire assessment proceedings are open before the Tribunal and, therefore, assessee is entitled to raise additional ground of appeal to claim any deduction/ exemption provided no investigation into facts is required at appellate stage. It was further held that claim of assessee cannot be rejected merely on the ground that assessee himself had offered the receipts to tax in the return filed by him. If any income is not taxable under the Act, the assessee is entitled to claim the same by raising the additional ground of appeal before the appellate authorities. If the claim can be raised before the appellate authorities for the first time then, in our opinion, there is no question of rejecting such claim if made before the Assessing Officer in the course of assessment proceedings.” In this case, where the claim for deduction u/s 80-O was made by the assessee before completion of assessment proceedings by way of a revised return filed after expiry of period specified u/s 139(5) (facts are very similar to the appellant), it was held that the assessee was entitled to the said deduction in computing his total income. The Hon‟ble Supreme Court in the case of National Thermal Power Co. Ltd. –Vs- CIT, 229 ITR 383 (SC), while deciding the issue of jurisdiction of the tribunal to deal with ground not raised before lower authorities, held “The purpose of the assessment proceeding before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law”. The Hon. Apex Court held that the tribunal could entertain a legitimate claim raised for the first time before it. In the case of CIT vs. Lucknow Public Educational Society (2009) 318 ITR 223, the Hon‟ble Allahabad High Court, Lucknow Bench has held as under: - “In the facts and circumstances of the case, we are of the view that the AO has treated the revised return as “non est” wrongly for the reason that the AO himself has passed the order under s.143(3) on the basis of the original return where the assessee was legally entitled for the exemption under s.11, if not under s.10(23C). The department should not take advantage of the ignorance of the assessee as per the CBDT circular No.14 (XL-35)/1995, dated 11th April, 1955 quoted in Parekh Bros. vs. CIT & Ors (1983)

36. CTR (Ker) 372: (1984) 150 ITR 105 (Ker). Hence, it was the duty of the AO to ask information before completing the assessment under s. 143(3) of the Act. It may also be mentioned that the 7 tax audit report along with return is not a mandatory condition as per the ratio laid down in the case of CIT cs. Rai Bahadur Bissesswarlal Motilal Malwasie Trust (1992) 195 ITR 825 (Cal) as well as in the case of CIT vs. Sankalp Welfare Society (2008) 303 ITR 64 (P & H). The audit report can be furnished before completing the assessment as per the ratio laid down in the case of CIT cs. Dr. L.M. Singhvi (2007) 207 CTR (Raj) 452 : (2007) 289 ITR 425 (Raj.). It may be out of place to mention that furnishing the audit report and the certificate for claiming the exemption under s. 80HHC in form 10CCAC was treated as procedural in nature. The mistake was treated as a technical breach and the AO was duty bound to ask it before denying claim as observed in the following cases – CIT vs. Gujarat Oil & Allied Industries (1993) 109 CTR (Guj) 272 : (1193) 201 ITR 325 (Guj.) CIT vs. Berger Paints (India) Ltd. (2002) 174 CTR (Cal)269 : (2002) 254 ITR 503 (Cal.) In the instant case, the AO has not asked any information before denying the exemption for which the assessee was legally entitled. On the other hand, he has rejected the second return which closed with the necessary documents for claiming the exemption”. Further, in the case of Emerson Network Power India (P) Ltd. vs. ACIT (2009) 122 TTJ/27 SOT/ 19 DTR jurisdictional Hon‟ble ITAT, Mumbai „H‟ Bench has held that any such claim made at the time of assessment but not made in original return nor made by way of valid revised return cannot be denied. AO is obliged to give due relief to the assessee or entertain its claim if admissible as per law even though the assessee had not filed revised return. It is further held by the Hon‟ble ITAT that the legitimate claim of assessee should not be rejected on technical grounds. The same proposition is also there in the case of Chicago Pneumatic India Ltd. vs. DCIT (2007) 15 SOT 252 (Mum). Therefore, in the background of all these decisions and facts of the case, the denial of claim of deduction of the appellant made through revised return of income during the course of assessment proceedings and well before the passing of assessment order, is not tenable in the eye of law. It is very evident from the evidences on records and as has been admitted by the Assessing Officer that appellant has fulfilled all the conditions laid down u/s. 8IB(10), therefore, appellant is entitled for deduction in respect of profit derived from the housing project known as „Eden Garden‟ at Kharghar, Navi Mumbai. Thus, AO is directed to allow the claim of deduction of Rs.1,94,12,489.00 and also as per decisions of ensuing paragraphs having consequential effect on profit u/s. 80IB(10) of the Income-tax Act, to the appellant while giving appeal effect.

4. Against the above order of CIT(A), the revenue is in appeal before us.

5. It was contended by ld. DR that as per the provisions of Section 80A(5) effective from assessment year 2003-04, the assessee is not entitled for deduction unless the claim of deduction was made in the original return filed by him. 6. On the other hand, ld. AR contended that original return was filed well within the time and the revised return was filed to correct the omission in the original return. Nowhere the AO has alleged that assessee has not complied with any of the conditions prescribed for claim of deduction u/s.80IB(10). He invited to our attention to the various judicial pronouncements placed on record which supports the case of the assessee to the effect that legal claim even if not made in the original return or even in the revised return but made by the assessee before the AO completing the assessment, should be allowed. 7. We have considered rival contentions, carefully gone through the orders of the authorities below and also deliberated on the judicial pronouncements cited at bar. From the record we found that assessee is engaged in development of housing project. However, the original return was filed well within the time u/s.139(1), wherein the assessee has not made any claim of deduction u/s.80IB(10). The assessee filed revised return wherein deduction u/s.80IB(10) was claimed, however, while framing assessment the AO decline claim of deduction in view of the provisions of Section 80A(5) of the Act. As per our considered view, 9 Section 80A(5) only requires filing of return, nowhere it suggests that claim should be made in the original return and not by way of revised return. When the original return of income has been filed well within the due date, the revised return filed thereafter before the completion of assessment proceedings, is a valid return of income to be considered by the AO. The assessee has been given opportunity to file revised return u/s.139(4) for removal of the any defect in the original return. The CIT(A) considering the remand report and the written submission of the assessee and after applying various judicial pronouncements recorded a finding to the effect that assessee has filed revised return claiming deduction u/s.80IB(10) before completion of assessment. Following the judicial pronouncement laid down by the Hon’ble Allahabad High Court in the case of Thakur Dharmapur Sugar Mills Ltd. 90 ITR 236, held that revised return must be considered as it was originally filed. It is the duty of the AO to allow legal claim if made before him and provided it all the conditions of the claim. Nowhere the AO has alleged that assessee has failed to comply with any of the conditions of Section 80IB(10), only grievance of AO was that claim was made in the return filed u/s.139(1). After applying the judicial pronouncements laid down by various High Courts and Tribunal, the CIT(A) recorded a finding to the effect that both the original return was filed well within the time limit prescribed under the law and the revised return filed before the AO completing the assessment that the assessee has fulfilled all the conditions u/s.80IB(10), therefore, entitled for deduction in respect of housing project. The findings recorded by the 10 ITA No.7010/2010 CIT(A) have not been controverted by department by bringing any positive material on record. Accordingly, we do not find any reason to interfere in the order of CIT(A) in allowing assessee’s claim for deduction u/s.80IB(10) of the Act.

Sd/- Sd/- (SANDEEP GOSAIN) (R.C.SHARMA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER भुंफई Mumbai; ददनांक Dated 27/01/2016. PKM आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीराथी / The Appellant 1. प्रत्मथी / The Respondent. 2. आमकय आमुक्त(अऩीर) / The CIT(A), Mumbai. 3. आमकय आमुक्त / CIT 4. ववबागीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, Mumbai 5. गार्ा पाईर / Guard file. 6. आदेशाि सार/ BY ORDER, सत्मावऩत प्रनत //True Copy//