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M/s Vanshee Builders & Developers P. Ltd., Versus The Income Tax Officer

2012 (12) TMI 1056 - ITAT BANGALORE

Claim of deduction u/s 80IB (10) - Held that:- This issue is remitted back to the file of the AO with a specific direction to look into the merits of the assessee's claim for exemption u/s 80IB (10) of the Act afresh: - (i) Whether the assessee was prevented by a reasonable cause, as attributed by it in its affidavits (above), in furnishing its return of income belatedly? & - (ii) Whether the assessee has satisfied the other conditions stipulated in s. 80-IB of the Act to determine the q .....

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s of appeal, raised ten grounds, in which, ground Nos. 1 and 3 are general in nature and, therefore, they do not survive for adjudication. Ground No.9 relates to the payment of cash of ₹ 4 lakhs for electrification work which did not attract TDS provisions of the Act. However, during the course of hearing, the Page 2 of 30 2 ITA No.386/Bang/2012 learned A R submitted that this ground is not pressed. Accordingly, ground No.9 is dismissed as 'not pressed'. Ground No.10 is not maintai .....

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that the CIT (A) also erred in confirming the disallowance of deduction made u/s 80IB of the Act. 3. The issues, in brief, are discussed as under: The assessee company ['the assessee' hence-forth] is engaged in the construction and real estate business. The assessee's premise was subjected to a survey u/s 133A of the Act on 4.1.2008. For the assessment year under consideration, the assessee had filed its return of income on 25.4.2009, admitting an income of ₹ 1,05,58,731/- and .....

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uction u/s 80IB, project completion, TDS details, cash payments etc. However, there was no further compliance. According to the AO, as the case was getting barred by limitation by 31.12.2010, the assessment was concluded u/s 144 of the Act based on the materials available on record. While doing so, the AO made the following addition, among others, namely: (i) Disallowance of deduction of ₹ 1,18,65,656/- u/s 80IB of the Act on the premise that the assessee had furnished its return of income .....

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the reasons that as per the provisions of s. 80AC of the Act, return has to be filed within due date of filing return under section 139(1) and the case laws relied on by the assessee were found to be on general normative premises rather than in any interfering with the clarity of the legal requirement as per s. 80AC. As there was no infirmity with the order of the AO on this account, the denial of deduction u/s 80IB (10) of the Act was upheld. 5. Aggrieved, the assessee has come up with the pres .....

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from the business subject to certain conditions contained therein; - that the entire thrust of the tax concession u/s 80IB (10) is aimed at providing more dwelling units and providing tax incentives; that in every budget speech, the Finance Ministers have made every endeavour to address the problem of acute shortage of dwelling units - primarily for less privileged sections of the society. The predominant objective of this incentive provision is, therefore, to encourage better availability of th .....

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porate entity is Sep. 30 of the relevant AY. However, s. 139(4) of the Act carves out an exception (extension) to the time limit under section 139(1) for filing the return of income; - that as per the provisions of s. 139(4), it is clear, that the time limit for filing the return of income is neither inflexible nor inelastic. The question that arises, Page 5 of 30 5 ITA No.386/Bang/2012 therefore, for consideration as regards the allowance of deduction under section 80-IB of the Act is whether t .....

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ssee has failed to comply with any requirement specified in such provision for claiming deduction there-under, subject to the conditions that the default in complying with such requirement was due to circumstances beyond the control of the assessee; and the assessee has complied with such requirement before the completion of assessment in relation to the previous year in which such deduction is claimed; - that it is clear, therefore, that the provision contained in s. 80AC as regards the time li .....

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o Union of India v. Wood Papers Ltd (1991) 83 STC 251; o CIT v. Gwalior Rayon Silk Mfg. Co Ltd AIR 1992 SC 1782; o Controller of Estate Duty v. R. Kanakasabai (1973) 89 ITR 251 (SC); o Bajaj Tempo Ltd v. CIT (1992) 196 ITR 188 (SC); o ACIT v. Dhir Global Industrial (P) Ltd 133 TTJ (Del) 580; & o ITO v. Sri S Venkataiah - ITA NO.984/Hyd/2011 dt..31.5.2012 of the Hyderabad Bench 'B'. (iv) that the section 80AC of the Act restricts deduction available u/s 80IB of the Act where the retu .....

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ce with the Electronic Furnishing of return of income Scheme, 2007 [EFRIS 2007] - Notification No.SO1281(E) dated 27.7.2007; - that the EFRIS 2007 provides that eligible person may at its option furnish his return of income which he is required to furnish u/s 139.....' of the Act for AY 2007- 08 or any subsequent AY to an e-return intermediary who shall digitize the data of such return and transmit the same electronically to a server designated for this purpose by the e-return Administrator .....

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mbandam Udaykumar v. CIT (IT Appeal No.175 of 2012 dt.15.2.2012 of Hon'ble Karanataka High Court; (v) Thus, the time limit prescribed u/s 139(1) is not mandatory but directory in nature; that this argument can be strengthened by the following example. In the instant case, the deduction u/s 80-IB was denied by the AO by the AO on the ground that the return of income was not filed within the due date. If a hypothetical situation is taken up wherein the time limit for filing return u/s 139(1) w .....

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s have taken a liberal view while interpreting the beneficial provisions of the Act. 5.1. In furtherance, the learned AR sought the permission of this Bench vide the assessee's petition 31.10.2012, for admission of the additional evidences. The contents of the petition for admission of additional evidences read as follows:- "1. the petitioner, a company, engaged in the business of real estate has submitted its return of income for the assessment year under consideration declaring 'N .....

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ed u/s 80AC of the Act. 3. In this connection, it is humbly submitted that there was sufficient reason for filing the return belatedly and in support of the same, we wish to submit an affidavit of Mr. Prabhu, Director and CBDT Circular No.4 of 2009 dated 30th June, 2009 as additional evidences. 4. The additional evidences sought to be filed now could not be filed before the AO and CIT (A) due to following reasons: (i) We were not properly advised in the proceedings before the lower authorities a .....

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bsequently clarified by the Board (by) way of Instruction No.4 of 2009 dated 30th June, 2009. 5. Under these circumstances, it is requested that the Hon'ble Tribunal be pleased to: (i) admit the additional evidences; (ii) hear and dispose of the appeal in accordance with law; and (iii) pass such other order as the Hon'ble Tribunal deems fit and proper and thus render justice. 5.1.1. In addition, the assessee furnished an affidavit dated 31.10.2012 wherein, the director of the assessee .....

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e help of Hardware Engineers, in the process lost couple of important data. Financial information of the company was one such data that was lost; d) We tried to reconstruct the data with available information on hand. We could not succeed in reconstructing the data as the Income-tax Department had impounded many of the vital documents in pursuance to survey carried on in the business premises of the appellant on 04.01.2008; e) Therefore, it took quite some time for us to reconstruct the financia .....

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ould be available only in the year of completion of the project. It was subsequently clarified by the Board by way of Instruction No.4 of 2009 dated 30th June 2009. 3. Due to this confusion, assessee company had to file the return of income admitting 'Nil' income and submissions were made to this effect before the learned Commissions of Income-tax (Appeals). 5.2. Yet again, in the subsequent hearing, the assessee through its petition dated 13.11.2012 sought the permission of this Bench t .....

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mechanism. As no enclosures to be given while e-filing of the returns, the same has been not filed along with the return of income; 4. During the course of the hearing before the AO and the Ld. CIT (A), sufficient opportunity was not provide to the appellant to furnish the Form 10CCB. Ld. AO completed the assessment under sec. 144 of the Act where as Ld. CIT (A) dismissed the appeal only on the ground that the return of income was filed belatedly. Therefore, there was no occasion for the appella .....

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escinding the same. To substantiate his claim, the learned A R came up with a paper book containing 1 - 41 pages which, inter alia, consist of various case laws. 5.3. On the other hand, the learned D R came up with a strong defense to the findings of the CIT (A). The submissions of the learned D R are, for appreciation of facts, summarized hereunder: - that the factual position was that the assessee had not filed the audit report u/s 44AB of the Act along with the return of income or in subseque .....

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d, namely: (i) Whether the accounts of the assessee got completed, if yes, when? (ii) Whether the accounts of the assessee got audited u/s 44AB, if yes, when? (iii) If audit of the accounts were completed then why the auditor's report in Form 10CCB could not be obtained? (iv) If both the audit report and report in Form 10CCB were obtained, then, what prevented the assessee to submit the same before the AO or before the CIT (A)? & (v) Whether and when the audit report is filed with the RO .....

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nce sought to be produced was vital and important did not provide a substantial reason to allow its admission at the appellate stage, especially, when the evidence was available to the party at the initial stage and had not been produced by it, without any reason. Relies on the following case laws: o CIT v. Jaipur Udyog Ltd. - 227 ITR 345 (Raj); o Velji Deoraj & Co., v. CIT - 68 ITR 708 (Bom); o A.K. Babu Khan v. CIT - 102 ITR 757 (AP); & o Ram Prasad Sharma v. CIT - 119 ITR 867 (All) It .....

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rvices of an Advocate was not acceptable and cannot be belied and that the assessee was represented before the CIT(A) by a qualified CA; (ii) that the plea of its Accountant left the work abruptly and the Computer system could not be operated was a very vague explanation as proof of its Accountant having employed with it was not forth-coming. If it were to be so in filing the return belatedly, the same should have been submitted before the authorities below. As the explanation submitted was very .....

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tem; (iii) it was explained that due to reasonable cause of problem in computer and re-entry of data, multilocation of business activity, time consumed for auditing by the statutory auditors; (iv) delay of 74 days as genuine and beyond the control of the assessee which was duly supported by the confirmation from the statutory auditor; (v) the computer got corrupted and the data lost for two months which was retrieved. He had multi locations of sales pointes in 12 States and collecting data and s .....

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ory and a pre-requisite for deduction u/s 80IB was filed with the return or in the subsequent proceedings; (iv) reason advanced was vague , unsubstantiated but an after thought which was supported by the fact that the assessee had brought no reason for the delay either before the AO or before the CIT (A); (v) there was no such problem which was beyond the control of the assessee; (vi) it appears the assessee was in the habit of filing its returns belatedly. For the AY 2007-08, the return was fil .....

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accept the return, if self assessment was not paid and thus, there was a delay of nearly 45 days for filing the return and the Hon'ble Tribunal after due consideration of the same as genuine and valid reason for the delay in filing the return. However, in the case of the present assessee, the claim for deduction was u/s 80IB and the application of provisions of s. 80AC. 5.4. In conclusion, the learned D R submitted that there was no reasonable cause for the assessee to file the return belat .....

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one by one as under: I. Asst. order was passed without providing sufficient opportunity: (i) On a perusal of the assessment order, it is observed that notice u/s 143(2) dated 21.8.2009, posting the case for hearing on 4.9.2009, was issued which was followed by notices u/s 142(1) of the Act on 24.5.2010 and on 30.8.2010 posting the case for hearing on 24.7.2010 and 6.9.2010 respectively. There was no compliance. In compliance to subsequent notice u/s 142(1) of the Act dated 9.9.2010, according to .....

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by a letter dt.22.11.2010 and a final notice dated 24.11.2010. (ii) In view of non-compliance to the notices mentioned supra and the case was getting barred by limitation by 31.12.2010, the AO was left with no alternative other than to conclude the assessment u/s 144 of the Act on the basis of materials available on record. (iii) Considering the scenario as detailed, we are of the considered view that there was no substance in the allegation of the assessee that the assessment was concluded wit .....

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e return of income was belated. As there was no proper compliance to the notices as detailed above, the assessment was concluded by the AO u/s 144 of the Act on the basis of details/materials on record. While doing so, the assessee's claim, among others, for deduction u/s 80-IB of the Act was turned down on the premise that the return of income of the assessee was belated and, thus, the assessee was disentitled for such a claim. (ii) When the issue was taken up before the first appellate aut .....

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lowed to the assessee only if the assessee furnishes a return of its income on or before the due date as specified under sub-section 139(1) of the Act. However, the learned AR had pointed out that the CIT (A) had failed to take recourse to s. 139(4) of the Act. For appreciation of facts and clarity, the relevant portion of s. 139(4) which has been substituted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1.4.1989 is extracted as below: "(4) Any person who has not furnished a return wi .....

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is whether the assessee is entitled to deduction u/s 80IB of the Act, even though it has not filed return of income within the due date of filing of return under section 139(1) of the Act but the same was filed within the due date mentioned under section 139(4) of the Act? (vi) At this point of time, let us analyse the judicial precedent on the subject. (1) In the case of Bajaj Tempo Limited v. CIT reported in (1992) 104 CTR (SC) 116: (1992) 196 ITR 0188 (SC), the Hon'ble Supreme Court had .....

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t - "5. There can be no dispute about the proposition that the term used in a fiscal legislation describing the subjects of taxation are to be normally understood in their popular sense unless the law itself indicates a different approach. Scientific and technical meanings are to be attributed to those words only when the context requires such meanings to be given. The normal rule is to give that meaning which to persons engaged in dealing with that subject matter attribute to that term, de .....

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be allowed to an assessee if the return of income is not furnished on or before the due date specified under sub-section (1) of s. 139. This proviso in s. 10B(1) is directory and not mandatory. In the present case, there was only a marginal delay of 1 ½ month infilling the return of income. The return filed was valid one. The same has also been accepted as a valid return by the AO. The reasonable cause attributed by the assessee for the delay is that new provision of e-filing of the retur .....

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he self-assessment tax on time, as a result of which there was a delay in the payment of tax and consequent filing of return by about 1 ½ months. It was further claimed that subsequently the software has been modified and now returns are being accepted, even when self-assessment tax is not paid. These factual factors have not been disputed by the Revenue. In these circumstances, there was genuine and valid reason for the delay in filing of return and moreover these provisions are director .....

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nuine hardship clearly indicates that provision in this regard is directory and not mandatory. Hence, in case of genuine hardship the relief can be granted by the appellate authority................................... In its conclusion, the Hon'ble Bench had observed thus - "Proviso fourth to s. 10B(1) which prohibits deduction under this section if the return is not furnished on or before the due date specified under s. 139(1) is directory and not mandatory and, therefore, relief can b .....

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)............................................................... 2. The CIT (A) erred in allowing the additional evidence without giving a reasonable opportunity to the AO to examine the evidence which is in contravention to the rule 46A(3) of IT Rules 1962; 3. The CIT (A) ought to have appreciated that the AO had rightly disallowed the deduction claimed u/s 80IC following the provisions of section 80AC; 4. The CIT (A) ought to have held that the explanation offered by the assessee was nothing b .....

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IE." (i) Taking into account the submission of the assessee and the rebuttal of the learned D R as recorded in its findings, the Hon'ble Tribunal had decided the issues against the Revenue. The relevant portions of findings of the Hon'ble Bench, for appreciation of facts, are extracted as under: "13..........................In this case, admittedly, the assessee filed the return of income on 23.12.2008. The due date for filing the return of income u/s 139(1) of the Act for the .....

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due to viruses and in spite of continuous efforts by the computer technical personnel to retrieve the data in time for filing the return of income, problem persisted in the system. By trying to retrieve the data for 4 days the required data could not be retrieved and the backed up data were available up-to 31st January 2008 in the CD and the entire data for the two months period, February and March, 2008, had to be re-entered into the computer system again. On preparation of the final accounts .....

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chnicalities should be ignored. Further, we are supported by the order of the Tribunal in ITA Nos. 1231 & 1199/Hyd/2010 in the case of DCIT v. M/s. Vega Conveyors & Automation Limited order dated 31st December 2010 wherein in para 5 of the order, the Tribunal held as follows: '5. We have considered the rival submissions and perused the orders of the lower authorities, and other material available on record, including the case-law relied upon by the parties. It is an undisputed fact t .....

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dings and directing the assessing officer to allow the claim of the assessee for deduction under s. 80IB of the Act. It is settled position of law, as consistently held by various Benches of this Tribunal and as held in various decisions referred to by the CIT (A) in the impugned order, that though filing of audit report in Form 10CCB is mandatory and pre-requisite for deduction under s. 80IB, non-filing of the same along with the return of income is only a curable defect, and assessee's cla .....

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assessment, which has not been done in the present case, since the audit report was filed only during the course of re-assessment proceedings initiated by the assessing officer, which cannot end up giving additional deductions/benefits to the assessee. We do not find merit even in this contention of the learned Departmental Representative. In the case of Hemsons Industries (supra) before the jurisdictional High Court, of one of the years under appeal before Hon'ble High Court, viz., assessme .....

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n our opinion, in view of the above discussion, the claim of the assessee cannot be denied on technicalities when the assessee is legally otherwise entitled for deduction. As such, we are inclined to dismiss the appeal filed by the Revenue as devoid of merit." 7. Considering the facts and circumstances of the issue as deliberated upon in the fore-going paragraphs and also in conformity with the rulings of the Hon'ble Supreme Court, the Hon'ble jurisdictional High Court and also the .....

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he AO primarily on the ground that the return of income was filed beyond the due date as specified u/s 139(1) of the Act. Since the assessment was concluded under section 144 of the Act, neither the AO had an occasion to verify the cause for such a delay in filing the return of income nor the assessee had an opportunity to defend itself for having furnished its return belatedly. In this connection, as narrated supra, the assessee, during the course of hearing, sought the permission of this Bench .....

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as filed belatedly. This attempt of the assessee was objected to by the Revenue for the reasons also recorded supra. 7.2. We have carefully considered the assessee's submission as well as the objection raised by the Revenue. 7.2.1. To drive home its point, the Revenue had extensively quoted the rule 29 of Appellate Tribunal Rules 1963. Let us now deal with the issue as under: Rule 29 of Appellate Tribunal Rules, 1963 says as under: "Rule 29: The parties to the appeal shall not be entitl .....

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ons to be recorded, may allow such document be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced." 7.3. In the present case, the assessee submitted that there was sufficient cause for filing its return of income belatedly and to substantiate its stand, the assessee sought the permission of this Bench to lay its reasoning. One of the reasons for the delay in filing its return of income in time and the additional evidences could not be filed .....

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audit of accounts of the appellant for the previous year 2007-08 relevant to the AY 2008-09 was completed on 12.9.2008. However, tax audit u/s 44AB of the Act was completed on 22.4.2009. The appellant had filed the return of income on 25.4.2010 (sic) 25.5.2009 through electronic filing mechanism. As no enclosures to be given while e-filing of the returns, the same have not been filed along with the return of income." 7.3.1. At this point of time, we would like to recall that a similar situ .....

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he appellant company for the AY 2008-09 was filed belatedly on 25.4.2009. The delay was due to the following reasons: (a) Mr. Lokesh, Accountant who was working with us for quite long quit abruptly without providing prior intimation while finalizing the accounts for the financial year 2007-08; (b) We could not trace the password of the system despite our best efforts; (c) We tried to retrieve the data from the system with the help of hardware engineers, in the process lost couple of important da .....

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delay in 207 days for filing the return of income for the AY 2008-09; In its affidavit dated 13.11.2012,it was affirmed on oath that: (i) The statutory audit accounts of the appellant for the previous year 2007-08 relevant to the AY 2008-09are completed on 12.9.2008. However, tax audit u/s 44AB of the Act was completed only on 22.4.2009; (ii) Audit report under sec. 80IB of the Act in Form 10CCB was obtained on 22.9.2008 7.5. Considering the facts as narrated in assessee's petition and also .....

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