Section 269SS not violated if Assessee borrows in cash from Relatives to meet urgent needs: -
In our considered view, in the light of
the relationship between the assessee and her father-in-law, the
Tribunal has rightly held that the genuineness of the transaction is not
disputed, in which, the amount has been paid by the father-in-law for
purchase of property and the source had also been disclosed during the assessment proceedings.
If there was a genuine and bonafide transaction and the tax payer could not get a loan or deposit by account payee cheque or demand draft for some bona fide reason, the authority vested with the power to impose penalty has a discretion not to levy penalty.
If there was a genuine and bonafide transaction and the tax payer could not get a loan or deposit by account payee cheque or demand draft for some bona fide reason, the authority vested with the power to impose penalty has a discretion not to levy penalty.
The contention of the Revenue
is that the amount received by the assessee from her father-in- has to
be treated only as a loan and if is a loan, then the assessee is liable
to pay penalty under Section 271D of the Income Tax Act.
Whether it is a loan or other transaction, still the other provision,
namely, Section 273B of the Income Tax Act, comes to the rescue of the
assessee, if she ables to show reasonable cause for avoiding penalty
under Section 271D of the Income Tax Act.
The Tribunal has rightly found that the transaction between the
daughter-in-law and father-in-law is a reasonable transaction and a
genuine one owing to the urgent necessity of money
to be paid to the seller. We find that this would amount to reasonable
cause shown by the assessee to avoid penalty under Section 271D of the Income Tax Act.
The Tribunal, referring to the decision of this Court reported in Lakshmi Trust Co. (supra), has rightly allowed the appeal.
HIGH COURT OF MADRAS
Commissioner of Income-tax – I
v.
Smt. M.Yesodha
TAX CASE (APPEAL) NO. 320 OF 2010
Date of pronouncement – 05.02.2013
JUDGMENT
R. Banumathi, J. – The Revenue has come forward with this appeal and the same was admitted on the following substantial question of law:
“Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in deleting the penalty of Rs. 20,99,393/- levied under Section 271D of the Income Tax Act
for violation of Section 269SS on the ground that the assessee had
taken the loan only from her father-in-law and the transaction was
genuine?”
2. The assessee, for the assessment
year 2005-2006, claimed loan of Rs. 20,99,393/- taken from her
father-in-law for purchasing the property. The Assessing Officer
initiated penalty proceedings under Section 271D of the Income Tax Act,
1961 on the ground that the assessee had obtained a loan of Rs.
20,99,393/- in cash from her father-in-law, which is in contravention of
the provision of Section 269SS of the Income Tax Act. During the
penalty proceedings, the assessee claimed that the amount received in
cash from her father-in-law – M. Kathirvel, was a gift and not a loan.
The Assessing Officer held that the assessee received the amount as a
loan and not as a gift, because the same was shown as a loan in the
balance sheet of the assessee,
which was filed along with the return of income. Hence, the Assessing
Officer levied penalty of Rs. 20,99,393/-.
3.
The assessee challenged the penalty levied by the Assessing Officer
before the Commissioner of Income Tax (Appeals). The Commissioner of
Income Tax (Appeals) dismissed the appeal holding that the Assessing
Officer has rightly levied penalty under Section 271D of the Income Tax
Act
after giving opportunity to the assessee and on being fully satisfied
that the amount in cash taken by the assessee from her father-in-law was
not a gift but only a loan.
4. In the appeal preferred before
the Tribunal by the assessee, the Tribunal referred to the decision of
the Tribunal in the case of Shri M. Raju v. Addl. CIT [I.T.A. No. 899/Mds/2006] and the decision of the Tribunal, Pune Bench in the case of ITO v. Sunil M. Kasliwal [2005] 94 ITD 281 (Pune)(TM). The Tribunal also referred to the judgment of this Court CIT v. Lakshmi Trust Co. [2008]
303 ITR 99 (Mad.) and held that in the facts and circumstances of the
case, levy of penalty is not warranted. The Tribunal further held that
the transaction of receiving amount of Rs. 20,99,393/- is between the
father-in-law and daughter-in-law and the genuineness of the transaction
is not disputed, in which, the amount has been paid by the
father-in-law for the purchase of property. On those findings, the
Tribunal allowed the appeal.
5.
Mr. J. Narayanasamy, learned standing counsel appearing for the Revenue
submitted that the Tribunal has not appreciated the nature of
transaction and that the assessee had taken only loan of Rs. 20,99,393/-
from her father-in-law. He further submitted that the assessee had no
where pleaded any ‘reasonable cause’ as contemplated under Section 273B
of the Income Tax Act and while so, the Tribunal was not right in saying
that the genuineness of the transaction is not disputed. He also
submitted that the Tribunal was not right in re-appreciating the factual
findings recorded by the Assessing Officer and the Commissioner of
Income Tax (Appeals) that the cash taken by the assessee from her
father-in-law was only a loan transaction.
6. Per contra, learned counsel
appearing for the assessee submitted that as evident from the stand of
the assessee before the Assessing Officer, the amount taken by the
assessee from her father-in-law was a cash gift and no loan was taken by the assessee.
7. We have carefully considered
the submissions of learned standing counsel appearing for the appellant
and the learned counsel appearing for the assessee.
8.
Under Section 273B of the Income Tax Act,
on ‘reasonable cause’ being shown, no penalty shall be imposable. As
rightly pointed out by the learned counsel appearing for the assessee,
in the reply furnished before the Assessing Officer, the assessee
clearly mentioned that her father-in-law – M. Kathirvel sent the amount
of Rs. 20,99,393/- directly to the seller of the house bought in the
name of the assessee at Chennai and that necessary funds were provided
by the assessee’s father-in-law as a cash gift and the said cash gift
was taken urgently by the assessee to get the purchase deed executed and
no loan
was taken from her father-in-law. Even though the assessee had not
taken a specific plea of reasonable cause, it must be considered as
applied to human action. Where the transactions are bonafide, penalty
cannot be imposed.
9.
To substantiate the plea that her father-in-law had advanced the amount
as cash gift, the assessee’s father-in-law had filed an affidavit
before the Commissioner of Income Tax (Appeals). Regarding the
affidavit, remand report was called for from
the Assessing Officer. In the remand report, the Assessing Officer has
doubted the nature of transaction. In our considered view, in the light
of the relationship between the assessee and her father-in-law, the
Tribunal has rightly held that the genuineness of the transaction is not
disputed, in which, the amount has been paid by the father-in-law for
purchase of property and the source had also been disclosed during the
assessment proceedings. If there was a genuine and bonafide transaction
and the tax payer could not get a loan
or deposit by account payee cheque or demand draft for some bona fide
reason, the authority vested with the power to impose penalty has a
discretion not to levy penalty.
10.
The contention of the Revenue
is that the amount received by the assessee from her father-in- has to
be treated only as a loan and if is a loan, then the assessee is liable
to pay penalty under Section 271D of the Income Tax Act. Whether it is a
loan or other transaction, still the other provision, namely, Section
273B of the Income Tax Act, comes to the rescue of the assessee, if she
ables to show reasonable cause for avoiding penalty under Section 271D
of the Income Tax Act.
The Tribunal has rightly found that the transaction between the
daughter-in-law and father-in-law is a reasonable transaction and a
genuine one owing to the urgent necessity of money to be paid to the
seller. We find that this would amount to reasonable cause shown by the
assessee to avoid penalty under Section 271D of the Income Tax Act.
11. Referring to the decision reported in CIT v. Kundrathur Finance and Chit Co. [2006] 283 ITR 329 (Mad.), this Court in the decision reported in Lakshmi Trust Co. (supra), held as follows:
“In the instant case, the Commissioner
of Income-tax (Appeals) and the Appellate Tribunal found on the facts
that the transactions were genuine and the identity of the lenders was
also satisfied. The Appellate Tribunal also upheld the order of the
Commissioner of Income-tax (Appeals) that there was no intention on the
part of the assessee to evade the tax.
Once the said finding as to the
genuineness of the transactions is arrived at by the Tribunal on the
facts, following the decision of this Court in CIT v. Ratna Agencies [2006]
284 ITR 609, wherein it was held that the finding recorded by the
Tribunal in this regard is a finding of fact and no question of law much
less a substantial question of law would arise, we do not have any
hesitation to hold that it may not be proper for this court to interfere
with such a finding of fact.”
12. The Tribunal, referring to the decision of this Court reported in Lakshmi Trust Co. (supra),
has rightly allowed the appeal. We do not find any error or infirmity
in the order of the Tribunal to warrant interference. Accordingly, the
substantial question of law is answered in favour of the assessee and
this Tax Case (Appeal) stands dismissed. No costs.
Deduction not claimed in Return U/s. 139(1) can be claimed in Return filed U/s.153A: -
In the present case, the assessees being
the builders, had the option to recognize their income either on
percentage completion method or on project completion method. Therefore,
it was not certain to hold that the assessees were liable at all to
file returns under section 139(1).
Whether the assessees had recognized their income for the impugned assessment years is also not clear. The returns were filed after search made under section 132 but before the issue of notice under section 153A. Those returns were belated returns. Therefore, those returns are non est in law. The emerging picture is that the assessees had filed returns for the first time only in response to notices issued under section 153A. They were filed within the time. Law has not prescribed any time limit for issue of notice under section 153A or for filing of the return in response to notice issued under section 153A. Law provides that an assessee shall file his return in pursuance of the notice issued under section 153A within the time stipulated in the notice. But it is also available in the hands of the Assessing Officer to extend the period of time to file the return. In these cases the assessees have filed returns within the extended time. Therefore, it is to be held that these returns were filed by the assessees under section 153A within the time. By way of a corollary stated earlier, these returns filed under section 153A within the time are necessarily to be treated as returns filed under section 139(1).
Whether the assessees had recognized their income for the impugned assessment years is also not clear. The returns were filed after search made under section 132 but before the issue of notice under section 153A. Those returns were belated returns. Therefore, those returns are non est in law. The emerging picture is that the assessees had filed returns for the first time only in response to notices issued under section 153A. They were filed within the time. Law has not prescribed any time limit for issue of notice under section 153A or for filing of the return in response to notice issued under section 153A. Law provides that an assessee shall file his return in pursuance of the notice issued under section 153A within the time stipulated in the notice. But it is also available in the hands of the Assessing Officer to extend the period of time to file the return. In these cases the assessees have filed returns within the extended time. Therefore, it is to be held that these returns were filed by the assessees under section 153A within the time. By way of a corollary stated earlier, these returns filed under section 153A within the time are necessarily to be treated as returns filed under section 139(1).
Where an assessee has filed his return
of income as prescribed by law, even if as a consequence of search
carried out under section 132 and in consequence of notice issued under
section 153A, the assessee is obviously entitled for claiming
corresponding deductions provided in law. The deduction claimed in a
return filed under section 153A cannot be denied on the ground that the
claim was not made earlier in a return filed under section 139(1).
In the present case, the returns were
filed because of section 132, section 153A and consequently because of
section 139. Income of the assessees had to be declared because of the
event of search. At that time the assessees were equally entitled to
claim lawful deductions available to them. A claim made by an assessee
cannot be denied only on the ground that the return was filed in
consequence of search.
The litmus test in the present case is
whether the assessees have filed the returns in time, in response to the
notices issued under section 153A. If the returns were filed within the
time allowed under section 153A, it is as good as having the returns
filed under section 139(1) within the due date.
It is in the light of the above
discussion that we have to consider the two relevant decisions of the
Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal,
F-Bench, Mumbai in the case of Faisal Abbas (supra) has
held that the return of income filed under section 153A was to be deemed
to be a return filed under section 139 and therefore all other
provisions of the Act would apply in view of the provisions of law
stated in section 153A(1)(a). The Tribunal, therefore, held that even if
a return of income was filed under section 153A, the assessee was
entitled for the benefit of brought forward losses to be set off against
the assessable income. Section 139(3) provides that if any person who
has sustained a loss in any previous year under the head ‘Profits and
gains of business or profession’, the same could be carried forward and
set off against future income only if the assessee has filed his return
within the due date prescribed under section 139(1). It is exactly like
the provisions of law stated in section 80AC. Inspite of that, the
Tribunal in the above stated case of Faisal Abbas (supra)
has held that the assessee is still entitled for carry forward and set
off of business loss as the return filed by the assessee under
section153A has to be treated as a return filed under section 139(1).
The same principle has been followed by the Income-tax Appellate
Tribunal, Mumbai G-Bench in the case of Eversmile Construction Co. (P.) Ltd. (supra).
In view of the above discussion and
relying on the above mentioned decisions of the Income-tax Appellate
Tribunal, Mumbai Benches, we hold that the returns filed by the
assessees under section 153A are to be treated as returns filed under
section 139(1) by virtue of the law stated in section 153A(1)(a). As
such, the assessees are entitled for the deduction available under
section 80IB(1). The rider provided in section 80AC does not apply to
the present cases, as the returns filed by the assessees under section
153A have been considered as returns filed under section 139(1) within
time.
ITAT CHENNAI BENCH ‘A’
Assistant Commissioner of Income-tax
v.
V.N. Devadoss
IT Appeal Nos. 1219 to 1223 (Mds.) of 2012
[ASSESSMENT YEARS 2008-09 TO 2010-11]
[ASSESSMENT YEARS 2008-09 TO 2010-11]
Date of Pronouncement – 04.02.2013
ORDER
Dr. O.K. Narayanan, Vice-President
– This is a bunch of five appeals, all filed by the Revenue. The
relevant assessment years are 2008-09, 2009-10 and 2010-11. The Revenue
has filed two appeals in the case of Shri V.N. Devadoss in his
individual case for the assessment years 2008-09 and 2009-10. The three
remaining appeals are filed in the case of Shri V.N. Devadoss(HUF) for
the assessment years 2008-09, 2009-10 and 2010-11.
2. The appeals in the case of
Shri V.N. Devadoss in his individual case are directed against the
common order passed by the Commissioner of Income-tax(Appeals)-I at
Chennai, dated 26-3-2012. These two appeals arise out of the respective
assessments completed under section 153A, read with section 143(3) of
the Income-tax Act, 1961.
3. The remaining three appeals
filed in respect of Shri V.N. Devadoss (HUF) are directed against the
common order passed by the Commissioner of Income-tax(Appeals)-I at
Chennai, dated 26-3-2012. In these cases the appeals for the assessment
years 2008-09 and 2008-09 arise out of the assessments completed under
section 153A, read with section 143(3) of the Income-tax Act, 1961. The
appeal for the assessment year 2010-11 arises out of the regular
assessment completed under section 143(3) of the Act.
4. The assessees herein are
engaged in the business of developing and building of housing projects
approved by local authorities. The assessees have not filed their
returns of income for the impugned assessment years within the due dates
prescribed under section 139(1) of the Income-tax Act, 1961. Meanwhile,
there was a search action under section 132 conducted on the business
premises of the assessees on 6-8-2009 and 17-8-2009. In pursuance of the
said search carried out under section 132, the Assessing Officer issued
notices under section 153A, requiring the assessees to file their
returns of income for the period relevant to six assessment years. The
notices under section 153A were issued on 26-7-2011. As the assessment
in the case of HUF for the assessment year 2010-11 was a regular
assessment completed under section 143(3), there was no question of
issuing notice under section 153A for the said assessment year 2010-11,
in the case of the HUF.
5. Even though the assessees have
not filed the returns of income before the due date prescribed under
section 139(1) for the impugned assessment years, they had furnished
their returns of income before the issue of notices under section 153A
of the Act. In the individual case and in the HUF case returns were
filed on 11-11-2010, after the due date prescribed under section 139(1)
and after the search conducted, but before the issue of notice under
section 153A. The return in the case of HUF for the assessment year
2010-11 was filed on 29-11-2011. Thereafter, the assessees again filed
returns for the assessment years 2008-09 and 2009-10 on 23-9-2011, in
response to the notices issued under section 153A of the Act.
6. It is in the above background
that the story of these appeals begins. In the returns filed by the
assessees, they claimed the deduction provided under section 80IB(10) of
the Act. Section 80IB(10) provides for deduction in respect of profits
and gains in the case of an undertaking developing and building housing
projects approved before the 31st day of March, 2008, by a local
authority, of hundred per cent of the profits derived in the previous
year relevant to the assessment year. It is how the assessees have
claimed deduction under section 80IB(10).
7. There is another restrictive
provision given in section 80AC of the Income-tax Act, 1961. The said
section 80AC provides that where in computing the total income of an
assessee of the previous year commencing on the 1st day of April, 2006
or any subsequent assessment year, any deduction is admissible under
section 80IA or section 80IAB or section 80IB or section 80IC or section
80ID or section 80IE, no such deduction shall be allowed to him unless
he furnishes a return of his income for such assessment year on or
before the due date specified under sub-section (1) of section 139.
8. In the course of assessment
proceedings the Assessing Officer invoked the provision of law stated in
section 80-AC on the ground that the assessees have not filed their
returns of income on or before the due date specified under sub-section
(1) of section 139 of the Act. Accordingly, he denied the claim of
deduction made by the assessees under section 80IB(10) of the Act.
9. In first appeals, when this
issue was agitated, the Commissioner of Income-tax (Appeals) recorded
the following findings of fact:
1. The appellants had undertaken housing projects which are eligible for deduction under section 80IB(10).
2. All the mandatory conditions specified under section 80IB have been complied with.
3. There has been a delay in filing of returns within the time limit specified under section 139(1) of the Act.
4. As per section 80AC to be
eligible for deduction under section 80IB, the returns should have been
filed within the time stipulated under section 139(1).
10. In the light of the above
findings of fact, the Commissioner of Income-tax(Appeals) framed two
questions to be decided on the issue of deduction under section
80-IB(10):
(i) Whether section 80AC is directory or mandatory, and
(ii) Whether the
returns filed in response to notices issued under section 153A can be
taken as returns filed within the time limit stipulated under section
139(1) of the Act.
11. While adjudicating the issue
as to whether section 80AC is directory or mandatory, the Commissioner
of Income-tax (Appeals) has relied on the various principles of
statutory interpretations. Relying on the doctrine of substantial
compliance, the Commissioner of Income-tax (Appeals) pointed out that if
an attempt is made in good faith to perform the statutory requirements,
even if it does not precisely meet the terms of the statutory
requirements, the performance will still be considered complete if the
essential purpose is accomplished. The Commissioner of Income-tax
(Appeals) also referred to similar provisions as well as the
restrictions provided under chapter VI-A, where a claim for deduction
should be supported by an audit report, etc. and the cases where in such
circumstances the courts have held that filing of audit report is
directory and not mandatory. The Commissioner of Income-tax (Appeals)
also held that having considered the substantial compliance of statutory
requirements made by the assessees, the principle of liberal
interpretation should be adopted to decide whether the operation of
section 80-AC is mandatory or directory.
12. Finally the Commissioner of
Income-tax (Appeals) referred to the 4th proviso to section 10B, wherein
similar restriction is provided in claiming the deduction under section
10B. section10B provides deduction of profits and gains as are derived
by a hundred per cent export oriented undertaking from the export of
articles or things or computer software for a period of ten consecutive
assessment years beginning with the assessment year relevant to the
previous year in which the undertaking begins to manufacture or produce
articles or things or computer software, as the case may be. The fourth
proviso inserted under section 10B puts a rider that no deduction under
this section shall be allowed to an assessee who does not furnish a
return of his income on or before the due date specified under
sub-section (1) of section 139.
13. The Commissioner of
Income-tax (Appeals) found that the wordings given in section 80-AC and
in the fourth proviso to section 10B are similar and there are decisions
in the context of the fourth proviso to section 10B that filing of
return on or before the due date prescribed under section 139(1) is
directory and not mandatory. In support of the above proposition, the
Commissioner of Income-tax (Appeals) relied on the decision of the
Income-tax Appellate Tribunal, Delhi, in the case of Asstt. CIT v. Dhir Global Industries (P.) Ltd. [2011] 43 SOT 640 and also on the decision of the jurisdictional Tribunal in the case of Asstt. CIT v. Polyhose India (P.) Ltd.
in ITA No.122(Mds)/2011 dated 30-6-2011. The Commissioner of Income-tax
(Appeals) also relied on the judgment of the Hon’ble Delhi High Court
in the case of CIT v. Web Commerce (India) (P.) Ltd., [2009] 318 ITR 135.
14. In the light of the above,
the Commissioner of Income-tax (Appeals) held that section 80-AC is
directory and, therefore, the assessing authority was not justified in
denying the assessees’ claim for exemption under section 80IB(10) of the
Act.
15. The Commissioner of
Income-tax (Appeals) has also examined the issue whether the returns
filed by the assessees in response to the notice issued under section
153A can be taken as returns filed within the time stipulated under
section 139. He found that section 139 provides for filing of returns in
different situations. Return of income has to be filed within the due
date prescribed under section 139(1). Belated return is to be filed
within the time allowed under section 139(4). Any return filed beyond
the time limit prescribed either under section 139(1) or under section
139(4) would be non est in law and cannot be acted upon.
16. On the above principle the
Commissioner of Income-tax (Appeals) held that in these cases the
assessees having not filed any return under section 139(1) or under
section 139(4), no valid return existed before the issue of notices
under section 153A of the Act. Accordingly, he held that the only valid
returns filed by the assessees herein are the returns filed by them in
response to the notices issued under section 153A of the Act. Since the
returns under section 153A have to be construed as returns filed under
section 139, all provisions of the Act would apply including the
provisions of Chapter VI-A, which deals with various deductions.
17. The Commissioner of
Income-tax (Appeals) relied on the order of the Income-tax Appellate
Tribunal, Mumbai Bench-F in the case of Faisal Abbas v. Dy. CIT
ITA No. 3485 & 3487/Mum/2010, dated 25-10-2011 and the decision of
the Income-tax Appellate Tribunal, Mumbai G-Bench, rendered in the case
of Dy. CIT v. Eversmile Construction Co. (P.) Ltd. in ITA
No.4238/Mum/2010, dated 30-8-2011. In the case of Mr. Faisal Abbas, the
Assessing Officer had denied set off of brought forward losses in the
assessment made under section 153A on the ground that such set off could
not be given in the assessment under section 153A. The Tribunal held
that once the return of income filed under section 153A was to be deemed
to be a return of income filed under section 139, all other provisions
would apply in view of the provisions of section 153A(1)(a) and,
therefore, the brought forward losses were to be set off even in an
assessment made under section 153A. Similarly, in the case of Eversmile Construction Co. (P.) Ltd. (supra)
the assessee has claimed deduction of interest expenditure by way of a
note appended to the return of income filed under section 153A. The said
expenditure had earlier been disallowed by the Assessing Officer in the
regular assessment, which the assessee has not appealed against. In
view of the provisions of section 153A(1)(a) that all the provisions
would apply to the return of income as if it was a return filed under
section 139, the Tribunal directed the Assessing Officer to allow the
interest expenditure in the assessment made under section 153A.
18. Relying on the above two
decisions of the Tribunal and in the light of the detailed discussion
made by him, the Commissioner of Income-tax(Appeals) accepted the
alternate contention of the assessees that the returns filed under
section 153A should be treated as returns filed under section 139(1)
and, therefore, the assessees are entitled for the deduction available
under section 80IB(10) of the Act.
19. Thus the Commissioner of
Income-tax(Appeals) held that the assessee is entitled for the deduction
under section 80IB(10) on both the grounds examined and adjudicated by
him.
20. This is one of the common
grounds raised by the Revenue in all these appeals before us. As the
issue is common, the grounds raised by the Revenue in all the five
appeals are also common as far as this issue of deduction under section
80IB(10) is concerned. It is the case of the Revenue that the
Commissioner of Income-tax(Appeals) has erred in allowing the deduction
under section 80IB(10) by accepting the main as well as the alternate
grounds raised by the assessees. The Commissioner of Income-tax(Appeals)
has failed to note that section 80AC was inserted by the Finance Act,
2006 to ensure compliance in furnishing the return of income by the due
date under section 139(1). Although furnishing the return of income by
the due date under section 139(1) is mandatory and a precondition for
claiming deduction under section 80IB(10) as clearly brought out in para
10 of the circular issued by the CBDT in circular No.14/2006 dated
28-12-2006, the assessees failed to furnish their returns of income by
the due date under section 139(1) and thereby failed to satisfy the
conditions of section 80AC. In fact, the assessees have not filed any
valid return of income under section 139 for the impugned assessment
years. There is no provision in the Income-tax Act to waive the
condition imposed under section 80AC. The concept of liberal
interpretation, minor lapse, etc. are not applicable since the
legislative intention is clear and unambiguous. It is also the case of
the Revenue that the Commissioner of Income-tax(Appeals) has failed to
note that the decision of the Income-tax Appellate Tribunal, D-Bench,
Chennai, rendered in the case of Polyhose India (P.) Ltd. (supra)
dated 30-6-2011 in ITA No.122(Mds)/2011, is not directly relevant,
since that decision is applicable to the exemption provided under
section 10B of the Act.
21. Shri Shaji P Jacob, the
learned Commissioner of Income-tax appearing for the Revenue, contended
that compliance of section 80AC is mandatory and not directory, as
decided by the Commissioner of Income-tax (Appeals). The learned
Commissioner of Income-tax explained that the Commissioner of Income-tax
(Appeals) has relied on the decisions of the Tribunal in the case of Dhir Global Industries (P.) Ltd., (supra) and in the case of Polyhose India (P.) Ltd. (supra)
rendered by Delhi Bench and Chennai Bench respectively. Those decisions
were rendered in the context of the fourth proviso to section 10B. The
wordings of the restriction provided in section 80AC are exactly the
same as the wordings provided in the fourth proviso to section 10B. In
both cases it is stated that no such deduction shall be allowed to an
assessee unless return of income for the assessment year is filed on or
before the due date specified in sub-section(1) of section 139.
22. The learned Commissioner of
Income-tax further explained that the restrictions provided in the
fourth proviso to section 10B and in section 80AC are in pari materia
similar to the proviso under section 10A(1A). The proviso to section
10A(1A) provides that no deduction under section 10A shall be allowed to
an assessee who does not furnish a return of his income on or before
the due date specified under sub-section(1) of section 139. The
Income-tax Appellate Tribunal, Rajkot Special Bench has examined the
question whether the said stipulation in the proviso to section 10A(1A)
is mandatory or directory. The Special Bench in the case of Saffire Garments v. ITO [2013]
40 ITD 6 (Rajkot) (SB) has held that the provisions of the proviso to
section 10A(1A), which say that no deduction under section 10A shall be
allowed to an assessee who does not furnish a return of his income on or
before the due date specified under section 139(1), are mandatory and
not directory. The requirement of filing the return of income is not a
procedural aspect. The Special Bench held that when the consequences of
not filing the return of income within the due date prescribed under
section 139(1) of the Income-tax Act, 1961 are so grave, i.e., charging
of interest under section 234A, the possibility of prosecution under
section 276CC and denial of various deductions under sections 10A, 10B,
10BA and various sections under Chapter VI-A, it cannot be said that the
requirement of filing the return of income is a procedural aspect.
23. The learned Commissioner of
Income-tax, therefore, explained that in view of the above Special Bench
decision of the Tribunal, the decisions of the Tribunal relied on by
the Commissioner of Income-tax (Appeals) stand overruled. Regarding the
decision of the Delhi High Court in the case of Web Commerce(India) (P.) Ltd. (supra)
relied upon by the Commissioner of Income-tax (Appeals), the learned
Commissioner of Income-tax stated that the said decision covers filing
of audit report and not filing of return within the due date provided
under section 139(1) . He, therefore, submitted that the Commissioner of
Income-tax (Appeals) has erred in holding that the provision of law
contained in section 80AC is directory and not mandatory.
24. We heard both sides in detail
on this point. Ofcourse, the Commissioner of Income-tax (Appeals) has
discussed in a profound manner the principles regarding substantial
compliance in the rules regarding interpretation of statutory
provisions, especially governing the provisions granting various
deductions and reliefs to assessees. But, inspite of all these things,
as of now, we are bound by the decision of the Income-tax Appellate
Tribunal, Rajkot Special Bench, rendered in the case of Saffire Garments (supra).
25. The riders provided in the
proviso to section 10A(1A); in the fourth proviso to section 10B and in
section 80AC are similarly worded and analogous and pari materia
conveying the very same statutory intention. In all these restrictive
clauses, the rule is that no deduction under the respective provisions
shall be allowed to an assessee unless the assessee furnishes the return
of income for the said assessment year on or before the due date
specified under sub-section(1) of section 139 of the Act. This rider was
examined by the Income-tax Appellate Tribunal, Rajkot Special Bench in
the case of Saffire Garments (supra). The Special Bench
has held that the restriction provided by way of the proviso to section
10A(1A) is mandatory as the matter governs filing of the return of
income within the due date provided under section 139(1). Therefore, we
find that the said decision of the Special Bench applies not only to
section 10A, but also to sections 10B and 80AC.
26. In the facts and
circumstances of the case and in the light of the decision rendered by
the Special Bench of the Income-tax Appellate Tribunal, Rajkot in the
case Saffire Garments (supra), we hold that filing of
return under section 139(1) within the due date prescribed under law is a
mandatory provision. If the assessees want to claim deduction under
section 80IB(10), it is necessary that the assessees must file their
returns of income before the due date prescribed under section 139(1) of
the Income-tax Act, 1961.
27. Accordingly, this issue is
decided in favour of the Revenue and the finding of the Commissioner of
Income-tax (Appeals) on this point is set aside.
28. Next we have to examine the
decision of the Commissioner of Income-tax (Appeals) rendered on the
alternate ground raised by the assessees before him. The alternate
ground was whether the returns filed in response to notices issued under
section 153A can be taken as returns filed within the time limit
stipulated under section 139(1). The Commissioner of Income-tax
(Appeals) has decided in favour of the assessees holding that the
returns filed under section 153A are to be treated as returns filed
under section 139(1) within the time allowed under the statute.
29. The learned Commissioner of
Income-tax appearing for the Revenue argued at length that this finding
of the Commissioner of Income-tax (Appeals) is erroneous and
unsustainable in law. He has pointed out that section 153A(1)(a)
provides that the return filed in pursuance of notice under section 153A
will be treated as a return required to be furnished under section
“139″ and it does not say that it will be treated as a return filed
under section “139(1)”. The learned Commissioner of Income-tax explained
that the interpretation given by the Commissioner of
Income-tax(Appeals) leads to absurdity. A person who did not file return
before the date prescribed under section 139(1) will be denied the
benefit of deduction under section 80IB(10) in view of section 80AC, but
if the defaulter is subsequently searched under section 132 of the Act,
he will be getting back his right to make claims for such deductions by
filing a return consequent to notice issued under section 153A. This
leads to a question as to whether a search under section 132 is
conducted for the benefit of an assessee or department. The learned
Commissioner of Income-tax argued that the decisions relied upon by the
Commissioner of Income-tax(Appeals) in support of his finding on this
point are not relevant, as the facts in those cases are different. He
also argued that for the assessment years 2008-09 and 2009-10, even the
reason given by the Commissioner of Income-tax(Appeals) is not
applicable as the assessees did not file the returns in pursuance of
issue of notices under section 153A within the time allowed by the
assessing authority and the returns were filed within the extended
period of time granted by the Assessing Officer. He, therefore,
submitted that there is no justification in the finding of the
Commissioner of Income-tax(Appeals) that the returns filed by the
assessees in these cases in pursuance to notices issued under section
153A satisfy the requirement of filing of the returns within the due
date prescribed under section 139(1).
30. We considered this issue in a
detailed manner. In these cases, returns were not voluntarily filed by
the assessees within the due date prescribed under section 139(1).
Returns were filed by the assessees after search operation was
conducted. But it was before the issue of notices under section153A. As
such, those returns filed before the issue of notices under section 153A
are non est. The assessees have filed returns in pursuance of the
notices issued by the Assessing Officer under section 153A. It is to be
seen that the returns filed by the assessees in response to the notices
issued under section153A alone are valid returns sustainable in law.
31. The issue is to be examined
in the above background. Valid returns sustainable in law are the
returns filed by the assessees in response to notices issued by the
Assessing Officer under section 153A of the Act, consequent to the
search action carried out under section 132 of the Income-tax Act, 1961.
32. How the requirement of
section 139(1) is satisfied by filing a return under section 153A? This
is assumed in the light of section 153A(1)(a), where it is stated that
where a search is initiated under section 132, the Assessing Officer
shall issue notice to such person requiring him to furnish within such
period, as may be specified in the notice, the return of income in
respect of each assessment year falling within six assessment years in
the prescribed form and verified in the prescribed manner and the
provisions of this Act shall, so far as may be, apply accordingly as if
such return were a return required to be furnished under section 139. It
is because of the above provision of law stated in section 153A(1)(a)
that a statutory presumption is made that a return filed under section
153A is a return required to be filed under section 139(1).
33. Where the law has declared
that all the provisions of the Income-tax Act will apply to the returns
filed by an assessee in response to a notice issued by the Assessing
Officer under section 153A as if such return filed by the assessee was a
return filed under section 139(1), there cannot be a clash of
interpretation between the character of section 139(1) and section 139
adopted in section 153A(1)(a). It is to be seen that the law stated in
section 153A starts with a non obstante clause. It overrides all other
provisions stated in the Act in matters of filing of return of income
consequent to a search. By declaring through a non obstante clause when
section 153A adopts section 139 for the purpose of completing the
assessment under section153A, there is no scope for drawing a dividing
line between section 139 provided in section 153A and section 139(1)
simpliciter.
34. The liability to file a
return of income in response to a notice issued under section 153A is as
much good as the liability of file a return under section 139(1). The
liability to file return arises under section 139(1). All other
sub-sections of section 139 are only derivatives thereof and
explanations thereto. Therefore, the reference made to section 139 in
section 153A(1)(a) is virtually the reference made to section 139(1).
35. It is suffice to mention
section ’139′ while stating the character of the return filed under
section 153A. That is why, sub-section(1) of section 139 has not been
more particularly provided in section 153A(1)(a).
36. Search under section 132
enables an Assessing Officer to issue notice to file returns under
section 153A. Section 153A is a substantive provision to do the
assessment for six assessment years. Section 153A, by way of adaptation,
conveys the responsibility for filing of the return under section 139
Therefore, a return filed in pursuance of a notice issued under section
153A is as good as a return filed under section 139 and more
particularly under section 139(1).
37. In the present case, the
assessees being the builders, had the option to recognize their income
either on percentage completion method or on project completion method.
Therefore, it was not certain to hold that the assessees were liable at
all to file returns under section 139(1). Whether the assessees had
recognized their income for the impugned assessment years is also not
clear. The returns were filed after search made under section 132 but
before the issue of notice under section 153A. Those returns were
belated returns. Therefore, those returns are non est in law. The
emerging picture is that the assessees had filed returns for the first
time only in response to notices issued under section 153A. They were
filed within the time. Law has not prescribed any time limit for issue
of notice under section 153A or for filing of the return in response to
notice issued under section 153A. Law provides that an assessee shall
file his return in pursuance of the notice issued under section 153A
within the time stipulated in the notice. But it is also available in
the hands of the Assessing Officer to extend the period of time to file
the return. In these cases the assessees have filed returns within the
extended time. Therefore, it is to be held that these returns were filed
by the assessees under section 153A within the time. By way of a
corollary stated earlier, these returns filed under section 153A within
the time are necessarily to be treated as returns filed under section
139(1).
38. Where an assessee has filed
his return of income as prescribed by law, even if as a consequence of
search carried out under section 132 and in consequence of notice issued
under section 153A, the assessee is obviously entitled for claiming
corresponding deductions provided in law. The deduction claimed in a
return filed under section 153A cannot be denied on the ground that the
claim was not made earlier in a return filed under section 139(1).
39. In the present case, the
returns were filed because of section 132, section 153A and consequently
because of section 139. Income of the assessees had to be declared
because of the event of search. At that time the assessees were equally
entitled to claim lawful deductions available to them. A claim made by
an assessee cannot be denied only on the ground that the return was
filed in consequence of search.
40. The litmus test in the
present case is whether the assessees have filed the returns in time, in
response to the notices issued under section 153A. If the returns were
filed within the time allowed under section 153A, it is as good as
having the returns filed under section 139(1) within the due date.
41. It is in the light of the
above discussion that we have to consider the two relevant decisions of
the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal,
F-Bench, Mumbai in the case of Faisal Abbas (supra) has
held that the return of income filed under section 153A was to be deemed
to be a return filed under section 139 and therefore all other
provisions of the Act would apply in view of the provisions of law
stated in section 153A(1)(a). The Tribunal, therefore, held that even if
a return of income was filed under section 153A, the assessee was
entitled for the benefit of brought forward losses to be set off against
the assessable income. Section 139(3) provides that if any person who
has sustained a loss in any previous year under the head ‘Profits and
gains of business or profession’, the same could be carried forward and
set off against future income only if the assessee has filed his return
within the due date prescribed under section 139(1). It is exactly like
the provisions of law stated in section 80AC. Inspite of that, the
Tribunal in the above stated case of Faisal Abbas (supra)
has held that the assessee is still entitled for carry forward and set
off of business loss as the return filed by the assessee under
section153A has to be treated as a return filed under section 139(1).
The same principle has been followed by the Income-tax Appellate
Tribunal, Mumbai G-Bench in the case of Eversmile Construction Co. (P.) Ltd. (supra).
42. In view of the above
discussion and relying on the above mentioned decisions of the
Income-tax Appellate Tribunal, Mumbai Benches, we hold that the returns
filed by the assessees under section 153A are to be treated as returns
filed under section 139(1) by virtue of the law stated in section
153A(1)(a). As such, the assessees are entitled for the deduction
available under section 80IB(1). The rider provided in section 80AC does
not apply to the present cases, as the returns filed by the assessees
under section 153A have been considered as returns filed under section
139(1) within time.
43. Therefore, we uphold the
decision of the Commissioner of Income-tax(Appeals) on the alternate
ground raised by the assessee as to whether the returns filed in
response to notices under section 153A can be taken as returns filed
within the time stipulated under section 139(1). We hold that the
returns filed under section 153A need to be treated as returns filed
within the time limit stipulated under section 139(1). Therefore, the
rider provided in section 80AC does not apply to these cases. Therefore,
the assessees are entitled for claiming the benefit of deduction
available under section 80IB(10) of the Act.
44. Thus the first common issue
raised in all these appeals relating to deduction under section 80IB(10)
is decided in favour of the assessees and the orders of the
Commissioner of Income-tax(Appeals) on this issue is upheld on the
ground that the returns filed under section 153A are returns filed under
section 139(1).
45. The second common issue
raised in all these appeals is regarding levy of interest under section
234A. The case of the Revenue is that the Commissioner of Income-tax
(Appeals) has erred in directing the Assessing Officer to charge
interest under section 234A from the date of expiry of the notice period
given in the notices under section 153A without noting that charging of
interest under section 234A is compensatory and that as per the
provisions of section 80AC, the assessees ought to have filed returns of
income within the due date under section 139(1) and hence the
provisions of section 234A(1) is applicable. It is also the case of the
Revenue that the Commissioner of Income-tax (Appeals) has failed to note
that the order of the Income-tax Appellate Tribunal, B-Bench, Chennai
in the case of Dr. V. Jayakumar v. Asstt. CIT 46 SOT 68 (Chennai) (URO) is not applicable to these cases since the facts are distinguishable. In the case of Dr. V. Jayakumar (supra),
the assessee had paid taxes much before filing the return, whereas in
the present cases the assessees have paid taxes under section 140A. The
returns of income filed by the assessees on 23-9-2011 cannot be equated
with the returns of income required to be filed under section 139(1). It
is the case of the Revenue that the assessees have committed default
both under sections 234A(1) and 234A(3). It is true that the
jurisdictional Tribunal at Chennai in its order rendered in the case of Dr. V. Jayakumar (supra)
has held that interest is chargeable under section 234A from the date
of expiry of the notice period given to the assessee under section 153A.
It is because the return filed under section 153A would be deemed to be
a return of income under section 139 as per the express language of the
provisions of section 153A(1)(a) and therefore the return of income
filed under section 153A also is to be processed under section 143(1)
and the income determined thereof. These are all consequences of search
conducted under section 132 and the issuance of notice under section
153A. Once a recomputation in the assessment order under section 153A is
done, the interest chargeable under section 234A would have to be
reckoned from the date of determination of income under section 143(1),
read with section 153A to the date of the recomputation of income under
section 153A, read with section 143(3). This position is in tune with
the law stated in section 234A(3). Therefore we find that the
Commissioner of Income-tax(Appeals) is justified in holding that the
interest under section 234A is chargeable from the date of expiry of the
notice period given under section 153A to the date of completing the
assessment under section 143(3). This issue is decided in favour of the
assessees.
46. The next common issue raised
by the Revenue in all these appeals is that the Commissioner of
Income-tax (Appeals) has erred in directing the Assessing Officer to
charge interest under section 234B from the date of determination of
income under section 143(1), read with section 139, read with section
153A(1)(a) to the date of the assessment order under section 153A, read
with section 143(3). It is to be seen that interest under section 234B
is to be levied only on the additional tax levied on the enhanced income
determined under section 153A, read with section 143 and therefore the
period of charge should be from the date of determination of the income
under section 143(1), read with section 153A to the determination of
increased total income under section 153A, read with section 143(3). For
the reasons already stated in the case of levy of interest under
section 234A we hold that the decision of the Commissioner of Income-tax
(Appeals) on the question of levy of interest under section 234B is
also just and proper. This common ground is also rejected.
47. The next common issue raised
by the Revenue is regarding the allocation of administrative expenses.
This ground is not raised in appeal No.1221(Mds)/2012 relating to the
assessment year 2009-10 in the case of Shri V.N. Devadoss in his
individual file. The common ground of the Revenue is that the allocation
of administrative expenses between 80IB and non 80IB units was without
any basis. The assessee has not allocated the administrative expenses
relating to the projects eligible for claiming the deduction under
section 80IB and therefore the assessee should have allocated
administrative expenses atleast 30% of the total administrative
expenditure.
48. On going through the facts of
the case the Commissioner of Income-tax (Appeals) has made a clear
finding of fact that the assessees have already taken into account
direct expenses as well as indirect expenses including the
administrative expenses while computing the profits under section
80IB(10). As the assessees themselves have allocated the expenses
including administrative expenses pertaining to eligible projects and
other projects separately, there is no need of any estimate in the
present case. We, therefore, uphold the order of the Commissioner of
Income-tax(Appeals) on this point.
49. In result, these appeals filed by the Revenue are partly allowed.
