TMI Blog2017 (1) TMI 251X X X X Extracts X X X X X X X X Extracts X X X X ..... Directors who attended the meeting. Instead of this, he rejected revised return of income itself, which is not appropriate. More so, in our opinion, the assessee could make claim even at appellate stage as held by the Supreme Court in the case of National Thermal Power Co. Ltd. in [1996 (12) TMI 7 - SUPREME Court]. We find that the procedural irregularities committed by the assessee either under the Companies Act or Income Tax Act, cannot be considered as a fatal so as to disallow the claim of assessee. Accordingly, we direct the AO to consider the revised return as a valid return filed by the assessee in terms of Sec.139(5) of the Act and complete the assessment as per the revised return filed before him. This ground of assessee is allowed. Addition u/sec.40(a)(ia) - payments to two sub-contractors - Held that:- This issue is squarely covered by the order of the Special Bench of the Tribunal in the case of Merilyn Shipping and Transports v. Addl. CIT [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] wherein held that when the “expenses” is not outstanding at the end of the close of the financial year, provisions of the section 40(a)(ia) of the Act cannot be applied. Being so, if the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets shares. The Assessing Officer has noticed certain discrepancies in the original return compared with that of revised return such as dates of Audit Report filed u/s 44AB as 25.06.2009 and in second return the date was mentioned as 03.09.2009. Similarly method of accounting also changed from cash to mercantile in the above said returns. On verifying the Column No.12A of the Audit Report regarding the conversion of Capital Assets into Stock-in- trade which was mentioned as NIL however, the Chartered Accountant stated in his notes on accounts that the assessee has converted certain investments into stock-in-trade during the year without furnishing any details. Even the Minutes book and Board of Meeting books were not produced either before the Assessing officer or before the CIT(A) to prove that shares were converted as a result of any Resolution passed by the Board of Directors. According to AO, the assessee has clearly violated Regulation 71 of Table A (Schedule 1) of Companies Act. The Assessing Officer has elaborately discussed the failure on the part of the assessee company to conduct any Board Meeting for passing any Resolution for the above said conversion of shares into s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r relating to the Assessment Year under consideration. The said audit reported was dated 3.9.2009 whereas in the original return of income the said date was wrongly typed as 25.6.2009 inasmuch as the said original return of income was filed electronically on 26.9.2009. The provisions in Section 139(5) of the Act prescribe for filing of the revised return of income within one year from the end of the relevant Assessment Year or before the completion of the assessment whichever is earlier for correcting any omission or any wrong statement upon discovery of such omission or wrong statement by the Appellant. There are two principles emerging from the consideration of the provisions in Section 139(5) of the Act and the first principle is relating to the interpretation of such provisions in canvassing the theory of the revised return effacing the original return. The other theory/principle on the interpretation of Section 139(5) of the Act is that such valid revised return does not wash away original return inasmuch as an originally filed return is a return in all essential respects and the revised return only cures the defects contained in the original return. 4.1. The ld.A.R s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the permitted time u/s 139(5) of the Act and the clerical mistake in the said Tax Audit Report especially in Column No.12A was not taken into consideration as a bonafide mistake. The act of the Assessing Officer in rejecting the revised return of income based on the said mistake committed in the Tax Audit Report is erroneous and invalid. 4.1.5 In fact, the Tax Auditor appeared before the Assessing Officer during the course of the assessment proceedings as reflected and recorded in the impugned order at Page No.2, Para 1.3 and fortified the fact of mistake in issuing the Tax Audit Report. In the process, the Assessing Officer had referred to the notes on accounts giving the accounting policies which formed part of the annual accounts of the Assessment Year under consideration. The reasoning of the Assessing Officer in this regard as mentioned in para 1.3 of the impugned order is not well taken inasmuch as there was no conflicting statement in this regard by the Tax Auditor and the fact of conversion even though stated in the annual report was not brought out in the Tax Audit Report due to the bonafide mistake in view of the clerical error. Hence, the Appellant produced the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 008. 4.1.8 He submitted that the copy produced before the Assessing Officer had clearly mentioned the conduct of the Board Meeting as on 22nd April 2008 and hence the conclusion reached to reject the claim of business loss on conversion of capital assets/investments in the form of shares in the listed companies into stock-in-trade in the computation of taxable total income is flimsy and devoid of merits. The procedural requirements in the maintenance of the records of the Board Meetings under the Companies Act, 1956 were widely touched upon and discussed in the impugned order by the Assessing Officer and the irregularities in following such procedural requirements under the Companies Act, 1956 are not fatal to the claim of business loss based on the conversion of investments into stock-in-trade as on 22.4.2008. 4.1.9 He pleaded and raised another legal issue questioning the power of the Assessing Officer in rejecting the revised return of income filed validly within the scope of Section 139(5) of the Act. In this regard, it is submitted that there is no power vested with the Assessing Officer to reject a valid revised return of income which revised return of income, procedura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 5.1 In this case, the assessee filed revised return on 13.05.2010, admittedly total loss business of ₹ 10,68,99,214/- and short term loss of ₹ 6,05,51,477/-. The reasons for filing the revised return of income was on the reason that a part of the investment held by the company has been converted into stock-in trade at the market price. As on the date of conversion, the difference between the cost and conversion, amounting to ₹ 6.15 lakhs has been considered as loss under the head business income . 5.1.1 Now, let us see, what is the relevant provisions of the section 139(5) of the Act for filing the revised return of income, which reads as under:- S.139(5): If any person, having furnished a return under sub-section (1), or in pursuance of a notice issued under sub-section (1) of section 142, discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier: Provided that where the return relates to the previous year relevant to the assessment year commencing on the 1st day of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of evolution or material on record. 5.3 It was therefore, necessary to ascertain as to whether there was any wrong statement made in the return of income originally filed by the assessee and whether the assessee was not aware of such wrong statement at the time of filing the original return. For this purpose, the claim made by the assessee in revised return of income, vis- -vis the return of income filed originally to be examined on merit to ascertain whether there was any wrong statement made in the original return of income of which the assessee was not aware at the time of filing the original return of income. Such examination of the assessee s claim will reveal as to whether the condition No.(ii) was satisfied in the present case in order to enable the assessee to furnish the revised return of income u/s.139(5) of the Act. In the present case, the main reason for filing the reviser return of income by the assessee was that the assessee has changed the method of treatment of long term investments. Earlier it has treated the investments as capital asset and now it has changed it to stock-in trade, which resulted in claim of business loss. In other words, originally the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, Supreme Court in the case of M/s.S.A Builders Vs. CIT reported in 288 ITR 1 wherein held that the Revenue cannot claim not put itself in the arm chair of businessman or in the position of Board of Director and assume the role to decide whether to incur any expenditure or not. The reasonableness of the expenditure has to be decided from the point of view of the businessman and not the Revenue. 5.6. Now, coming to the first reason for rejecting the revised return was that in original return, the assessee has changed the method of accounting as cash , in the second return it was shown as Mercantile . However, the AO accepted the method of accounting of assessee as Mercantile as noticed from the first page of the column-8 of the assessment order wherein mentioned as Mercantile . Once the AO has accepted the method of accounting of the assessee as mercantile , there is no question of doubting the method of accounting by AO. 5.7 The next reason given by the AO is that the audit report filed during the course of scrutiny showed that against column No.12A regarding particulars of capital assets converted into stock-in trade, the Chartered Accountant has stated NIL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proper reasons and justification. 6.1 The facts of the issue are that the Assessing Officer disallowed ₹ 1,28,83,860/- being the payments to two sub-contractors for want of remittance of TDS amounts within the stipulated period on the application of Section 40(a)(ia) of the Act.. The appellant has not deducted any TDS on the payments made up to February 2009 to the two sub-contractors at ₹ 1,28,83,860/-. The assessee company has not made any TDS till end of the year i.e. 31.03.2009. As per the amended provisions of Section 40(a)(ia) the appellant can avail time to remit into the Government accounts of TDS amount deducted before the end of the Financial Year. This amended provision is applicable from 01.04.2010 onwards. In the instant case under consideration the appellant has not deducted any TDS amount on the payments made to two sub contractors till February 2009 at ₹ 1,28,83,860/-. Thus clearly violated the provision of Section 40(a)(ia) hence the Assessing Officer has correctly disallowed the entire amount and added to the income returned. Aggrieved, the assessee carried the appeal before the Ld.CIT(A). On appeal, the Ld.CIT(A) observed that the addition ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Calcutta High Court is referred to in the decision rendered on 14.5.2012 by the Chennai Bench in para 3 and according to the said decision, the said proviso is retrospective inasmuch as consequently all payments of TDS made/remitted before the due date of filing of the return of income in terms of Section 139(1) of the Act are outside the purview of applicability of Section 40 (a) (ia) of the Act. 7.1.5 He relied on the order of the Delhi Bench of the Income Tax Appellate Tribunal in the case of Sri Naresh Kumar represented through his legal heir, Sri Naveen Kumar in l.T.A.No.1300/DEL/2012 dated 21.5.2012 had held in para 6 that the insertion of the proviso was to be considered as remedial and curative in nature and hence had retrospective effect. 7.1.6 Similarly, the ld.A.R relied on another decision of Delhi Bench of the Income Tax Appellate Tribunal rendered on 22.5.2012 in l.T.A.No.3592/DEL/2011 had echoed and approved the retrospective nature of the amendment brought-in in the insertion of the proviso below the Section 40 (a) (Ia) of the Act. 7.1.7 The ld.A.R relied on the order of Ahmedabad Bench of the Income Tax Appellate Tribunal in the case of M/s Alpha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of P H High Court reported in the case of CIT Vs. Hero Cycles Ltd. reported in 323 ITR 518 wherein held that disallowance u/s.14A requires finding of incurring expenditure. When it is found that for earning exempted income, expenditure has been incurred, disallowance u/s.14A cannot stand. He also pointed out that the AO failed in discharging the initial burden of proving the incurring expenses for earning the tax free income would vitiate his action in applying sec.14A of the Act. 11. We have heard both the parties and perused the material on record. The Ld.CIT(A) based his conclusion on his earlier order in assessee's own case for assessment year 2009-10. For assessment year 2009-10, the same issue came for consideration before this Tribunal in the case of M/s Consolidated Construction Consortium Ltd in ITA No.594/Mds./14 702/Mds./14 dated 06.01.2016 wherein the Tribunal remitted the issue to the file of AO with the following observations:- 5. We have heard both the parties and perused the material available on record. In our opinion, the decision of the Special Bench Delhi in the case of Cheminvest vs ITO (supra) is no more good law as this decision is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed by the ld. First Appellate Authority as apportionment of expenditure for earning the dividend income was done as per the provisions of the Act. It was pleaded that section 14A r.w. Rule 8D of the Rules is clearly applicable to the facts of the present appeal. 2.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee is a limited company, engaged in trading of bulk and fine, chemicals, solvent and pharmaceutical raw materials declared its income at ₹ 74,40,000/- on 26/09/2009. The assessee credited dividend income of ₹ 1,82,262/- in its profit and loss account. The Assessing Officer while framing the assessment invoke section 14A r.w. Rule 8D by contending that assessee claimed various expenses which are related to exempt income in its profit loss account and disallowed ₹ 14,58,412/-. On appeal, before the ld. Commissioner of Income tax (Appeals) broadly the stand taken in the assessment order was affirmed against which the assessee is in further appeal before this Tribunal. The totality of facts clearly indicates, as claimed by the assessee that no borrowed funds were utili ..... X X X X Extracts X X X X X X X X Extracts X X X X
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