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Assistant Commissioner of Income Vs. Sakay Traders - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Amritsar
Decided On
Reported in(2001)74ITD497(Asr.)
AppellantAssistant Commissioner of Income
RespondentSakay Traders
Excerpt:
.....mistake apparent from record in not allowing the deduction claimed which needs rectification. the assessing officer did not accept these contentions and rejected the application under section 154 of the act holding that filing of the audit report for claiming the said deduction was the statutory requirement and this requirement had not been complied with by the assessee. according to him the unsigned report could not been treated as valid audit report. thus, after detailed discussion in the impugned order he rejected the application made under section 154 of the act.aggrieved with this order, the assessee filed an appeal before the commissioner (appeals), who made the following observations in his order: 1.3 i have carefully considered the rival submissions. the issue which emerges is.....
Judgment:
The revenue is in appeal against the order of the Commissioner (Appeals), Jalandhar in appeal No. 569/92-93/Commissioner (Appeals)/Jal., dated 19-3-1993 on the following effective ground :- "That on the facts and in the circumstances of the case, the learned Commissioner (Appeals) has erred in allowing deduction under section 80HHC by the unsigned audit report as a valid report. Reliance is placed on the Board's Circular No. 581 dated 28-9-1990." Stated briefly, the facts pertaining to this ground are that the case was processed under section 143(1)(a) of the Act on 2-11-1992. While processing this case adjustment to the extent of Rs. 1,55,73,426 was made observing, "No audit report in support of deduction under section 80HHC for claiming deduction at Rs.1,55,73,426 is furnished along with the return as required under section 80HHC(4). Hence, no such deduction is admissible and as such the same is disallowed and added back." Thereafter an application under section 154 of the Act was moved by the assessee pointing out that audit report in Form No. 10CCAC was furnished along with the return. Due to inadvertent mistake unsigned copy was attached with the return which was filed on 30-10-1992.

Thereafter copy, of the said report was filed on 2-11-1992. Therefore, there was mistake apparent from record in not allowing the deduction claimed which needs rectification. The assessing officer did not accept these contentions and rejected the application under section 154 of the Act holding that filing of the audit report for claiming the said deduction was the statutory requirement and this requirement had not been complied with by the assessee. According to him the unsigned report could not been treated as valid audit report. Thus, after detailed discussion in the impugned order he rejected the application made under section 154 of the Act.

Aggrieved with this order, the assessee filed an appeal before the Commissioner (Appeals), who made the following observations in his order: 1.3 I have carefully considered the rival submissions. The issue which emerges is that whether audit report in prescribed proforma which was filed along with the return of income and was unsigned could be treated as a valid report or not. A reference to the records shows that the report in Form No. 10CCAC in accordance with rule 18BBA(2) of the Income Tax Rules, was attached with the return of income. Particulars in all the columns have duly been filled in. The said report is dated.

However, it is not signed. In my view in such circumstances it cannot be held that it was an invalid report. No doubt this was defective report but the defect was of such a nature which could have been removed. Once the report attached with the return of income is treated as a valid report, not allowing deduction under section 80HHC of the Act while processing the case under section 143(1)(a) of the Act tantamounts mistake apparent from the records which require rectification. The assessing officer rejected the rectification application which, in my view, was not justified. As regards reference to my decision in some other case, it is observed that facts of that case were different. With these observations, the application under section 154 of the Act is held to be maintainable and the assessing officer is directed to amend the intimation under section 143(1)(a) of the Act treating the report filed along with the return as a valid report and also after taking into account the report submitted later on." Aggrieved with this order of the Commissioner (Appeals), now the revenue is in appeal before us for setting aside the order of the Commissioner (Appeals) and for restoring the order of the assessing officer.

We have heard the authorised representatives of the parties, considered the rival contentions, perused the records and carefully gone through the orders of the lower authorities.

In order to dispose of this ground, we are required to settle the issue whether the deduction under section 80HHC can be allowed to the assessee when he has not filed any audit report along with the return as required under section 80HHC(4) of the Income Tax Act, 1961 made in support of claiming the deduction under section 80HHC. It has been argued by the learned Departmental Representative for the revenue that as per CBDT's Circular No. 582 dated 28-9-1990, the unsigned report furnished along with the return cannot be treated as a valid report by subsequent furnishing of the unsigned audit report for claiming deduction under section 80HHC of the Income Tax Act, 1961.

On the other hand, the learned counsel for the assessee has brought to our notice CBDT's Circular No. 669 dated 25-10-1993 and Circular No.689 dated 24-8-1994 on the basis of which if evidence is subsequently furnished, rectification under section 154 should be carried out no prima facie disallowance shall, however, be made, if any evidence required to be filed along with the return of income is not so filed.

In order to appreciate this argument of the representative of the parties, we hereby reproduce the relevant portion of clause 3 of the CBDT's Circular No. 581 dated 28-9-1990 relied upon by the Departmental Representative:- "3. Similarly, filing of evidence in support of an exemption/deduction at the time of furnishing the return of income has been prescribed as a necessary condition in certain other sections of the Income Tax Act, such as sections 32AB(5), 32AB(2), 54(2), 54B(2), 54D(2), 54F(4), 54G(2), 80HH(5), 80HHA(4), 35D(4), 35E(6), 80HHB(3), 80HHC(4), 80HHD(6), 80-I(7), etc. In such cases, also where the exemption/deduction claimed is disallowed as prima facie inadmissible for want of evidence in support thereof under section 143(1)(a), it cannot be subsequently allowed by a rectification order under section 154 if the assessee later on furnishes evidence in support thereof." This clause of the circular hereby indicates that if evidence in support of exemption/ deduction claimed under section 80HHC(4) of the Income Tax Act, 1961 has not been filed along with the return then such exemption/deduction is to be disallowed as prima facie inadmissible for want of evidence in support thereof under section 143(1)(a) of the Income Tax Act. It means that in case for claiming the deduction under section 80HHC, no audit report has been filed along with the return by the assessee then the assessing officer can, prima facie disallowed this deduction if inadmissible under section 143(1)(a). In subsequent portion of this very clause of the circular, it has further been laid down that even this deduction cannot be allowed subsequently by rectification order under section 154 by the assessing officer even if the assessee/later on furnished evidence in support thereof.

In this case, the undisputed facts are that the assessee has furnished unsigned audit report which is no report in the eyes of law and hence the assessing officer was fully justified on the basis of circular and prima facie disallowed this deduction claimed by the assessee under section 143(1)(a) because the assessee has not furnished any evidence in support of the claim as the unsigned audit report furnished by the assessee was no report in the eyes of law. On further reading of this circular, it is clear that subsequent furnishing of a signed report along with rectification application under section 154 filed by the assessee he cannot be allowed deduction subsequently even if he has furnished a signed report as a token of evidence in respect of his claim of deduction.

Whereas, on the other hand, the assessee has relied upon the Circular No. 689 dated 24-8-1994 sub-clause (b) along with example for ready reference is reproduced below:- "(b) any claim in respect of which there is an omission of information which is required, under the specific provisions of the Act or the rules, to be furnished along with the return to substantiate such claim.

If the audit report specified under section 80HHC(4), which is required to be filed along with the return of income is not so filed, the deduction claimed under that section can be disallowed as a prima facie adjustment. Some more examples in this regard are the non-filing of audit report or other evidence along with the return of income as required under sections 12A(b), 33AB(2), 35E(6), 43B (first proviso), 54(2), 54B(2), 54D(2), 54F(4), 54G(2), 80HH(5), 80HHA(4), 80HHB(3), 80HHD(6), 80HHE(4), 80-1(7), 80-IA(8) and the like. But if evidence is subsequently furnished, rectification under section 154 should be carried out to the extent permitted by the Board's Circular No. 669 dated 25-10-1993. No prima facie disallowance shall, however, be made, if any evidence required to be filed along with the return of income only in pursuance of the non-statutory guidance notes for filling in the return of income, is not so filed.,' However, this sub-clause lays down certain proviso by referring to Circular No. 669 dated 25-10-1993 by mentioning that rectification under section 154 should be carried out to the extent permitted by the Board's Circular No. 669 dated 25-10-1993.

For ready reference, clauses (2) and (3) of Circular. No. 669 dated 25-10-1993 are also reproduced as below.-- "(2). The Board have reconsidered the matter and are of the opinion that where the sums referred to in the first proviso under section 43B had in fact been paid on or before the due dates mentioned therein, but the evidence therefore had been omitted to be furnished along with tile return, the assessing officer's can entertain applications under section 154 for rectification of the intimation under section 143(1)(a) or orders under section 143(3), as the ease may be, and decide the same on merits.

3. Circular No. 581, dt. 28-9-1990, stands modified to the above extent." Now on reading of these circulars simultaneously, we find that Circular No. 581 dated 28-8-1990 clearly lays down that in case the assessee claims deduction/exemption in a particular provision of law (as specified in detail in that circular) but does not file any evidence in support thereof then the assessing officer can prima facie disallow the same as inadmissible under, section 143(1)(a) of the Income Tax Act, 1961 and the same, later on, cannot be allowed by the assessing officer by passing an order under section 154 even if the assessee subsequently furnished the evidence in support thereof. However, by Circular No. 669 dated 25-10-1993, this above Circular No. 581 dated 28-9-1990 was modified to the extent that where the sums referred to in the first proviso to section 43B had, in fact, been paid on or before the due dates mentioned therein, but the evidence therefore, had been omitted to be furnished along with the return, the assessing officer can entertain applications under section 154 for rectification of the intimation under section 143(1)(a) or orders under section 143(3), as the case may be, and decide the same on merits. It means that by this circular, the earlier Circular No. 581 stood modified because the assessing officer was given power to rectify under section 154 in case the assessee furnished proof of payment on or before the due date as required under section 43B of the Act and so the same could be taken into consideration by the assessing officer at the time of considering the application under section 154 whereas due to previous Circular No.581, could not do so.

Therefore, by this Circular No. 669 dated 25-10-1993, the power of the assessing officer to rectify under section 154 was only limited to the exemption/deduction relating to the first proviso to section 43B of the Income Tax Act. However, this provision of rectification was further broadened in the subsequent Circular No. 689 dated 24-8-1994 wherein even deduction/exemption claimed under section 80HHC(4), 12A(b), etc., and the like could be rectified by, the assessing officer under section 154 of the Income Tax Act, 1961. In case the assessee later on furnishes evidence in support thereof if he did not furnish the same, which was required to be furnished by him along with the return of income. Hence, we are of the opinion that when Circular No. 581 is only considered in isolation then the assessing officer was justified in refusing rectification under section 154 of the Income Tax Act, 1961 because an unsigned audit report filed along with the return of the assessee for claiming exemption was not audit report in the eyes of law and so the assessing officer was fully within his right not to consider the signed audit report subsequently furnished by the assessee while passing order under section 154 but due to the subsequent Circular Nos.

669 dated 25-10-1993 and 689 dated 24-8-1994 issued by the CBDT which clearly laid down that if the audit report, specified under section 80HHC(4), required to be filed along with the return of income for claiming deduction has not been filed by the assessee along with the return of income, the deduction/claimed under that section can be disallowed as a prima facie adjustment by the assessing officer but if such report/evidence is subsequently furnished then the rectification under section 154 should be carried out by the assessing officer in the light of that evidence subsequently furnished by the assessee in support thereof.

Hence, we conclude that considering these subsequent Circular Nos. 669 dated 25-10-1993 and 689 dated 24-8-1994, the assessing officer was not justified in refusing the rectification by not considering the subsequent signed audit report filed by the assessee.

The net result of our above discussion leads us to the conclusion that ground of appeal taken by the revenue has no merits and the same is rejected and the order of the Commissioner (Appeals) wherein he held that the application made by the assessee before the assessing officer under section 154 of the Income Tax Act, is maintaining, is sustained, though, of course, on a different reasoning as hereinabove given in our order. We further direct the assessing officer to amend the intimation under section 143(1)(a) of the Income Tax Act, 1961 by considering the signed audit report filed by the assessee in support of his application under section 154 of the Income Tax Act, 1961.

17. In the result, the appeal of the revenue fails and the same is dismissed.


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