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TMI Blog2020 (4) TMI 824X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the order of CIT(A) which the Ld. CIT(A) held that the Unit-II was eligible for claiming deduction u/s 80-IA of the Act, where it had not filed form No.10CCB alongwith return of income in original assessment proceedings? B. Whether on the facts and in the circumstances of the case, the ITAT erred in upholding the order of CIT(A) in which the Ld. CIT(A) held that the Unit-II was eligible for claiming deduction u/s 80-IA of the Act, when the profits shown by the Unit-II in respect of sales to consumption of raw material clearly showed that the profit claimed by Unit-II for deduction u/s 80-IA of the Act was erroneous? 3. Briefly stated, the facts of the present case, as mentioned in appeal memo, are that the respondent-assessee engages in the business of formulation of pesticides, insecticides and micro-nutrient fertilizers. The original assessment of the respondent for the assessment year 2004-05 was completed under Section 143(3) of the Act vide order dated 26.06.2006 accepting the returned income wherein deduction of Rs. 16,71,579/- under Section 80-IA of the Act was claimed and determining the book profit under Section 115JB of the Act at Rs. 14,68,371/-. The said assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel for the assessee at the time of motion hearing, which was declined by order dated 22.03.2017 and thereafter, the appeal was admitted on the substantial questions of law, as noted above. However, today, nobody has chosen to appear on behalf of the assessee. 5. Learned counsel for the appellant has vehemently argued that the CIT(A) as well as the Tribunal both erred in not properly appreciating that the assessee had failed to fulfill the requirement of filing Form No.10CCB along with the return of income in the original assessment proceedings and therefore, could not have been allowed deduction under Section 80-IA of the Act at the time of reassessment. As prescribed under Section 80-IA(7) of the Act, the requirement of filing audited report in Form No.10CCB is mandatory and therefore, could not have been dispensed with merely on the ground that the same relief was granted in the immediately preceding year. He further argued that the Unit-II in its profit & loss account showed profit of Rs. 96,67,206/-, consumption of raw material as Rs. 31,36,696/- and sale of Unit-II as Rs. 1,67,56,520/- after deducting all other overheads, whereas on comparison with the combined accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to refer to the relevant provisions of the Act, which read, thus:- "Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. - 80-IA. (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years. *** *** *** (7) The deduction under sub-section (1) from profits and gains derived from an undertaking shall not be admissible unless the accounts of the undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, and the assessee furnishes along with his return of income, the report of such audit in the prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act is merely to empower the Assessing Authority with the machinery for assessment. Fundamentally, both the assessment and reassessment need the same machinery. In other words, the provisions relating to regular assessments shall apply to the assessment made pursuant to the notice of reassessment. Once that is so, all the essential traits and requirements of procedure embodied for framing of regular assessment under the Act would also apply to reassessment proceedings as well. Therefore, the audit report furnished at the time of reassessment proceedings could not be ignored by the Assessing Officer while adjudicating the issue of admissibility of deduction under Section 80-IA of the Act. The point No.(ii) noticed above is decided accordingly. 12. Adverting to the factual matrix in the present case, it is noticed that the findings recorded by CIT(A) and the Tribunal indicate that the assessee was carrying on its business since 1973-74 and had set up a new unit in 1997-98 and had been claiming deduction under Section 80-IA of the Act since then which was allowed by the Department. In the assessment years 2001-02 and 2002-03 also the assessee claimed the deduction under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E Multitaxes Systems (P) Ltd. (2009) 317 ITR 307 (Kar.); CIT vs. Medicaps Limited (2010) 323 ITR 554 (MP); AKS Alloys Pvt. Ltd. (2012); 18 Taxman.com 25(Mad.); CIT vs. A.N. Arunachalam; 75 Taxman 529 (Mad.). The sum and substance of these decisions is that audit report can be filed with the revised return or at any stage up to framing of assessment. In view of these facts and judicial pronouncements, we find no justification to interfere with the impugned order. Our view is further fortified by the decision from Delhi High Court in CIT vs. Contimeter Electricals Pvt. Ltd.; 317 ITR 249. In view of these facts, we find no merit in the appeal of the Revenue. It is dismissed. 3. Since the relief has been granted on the basis of the decision of the ITAT in the immediately preceding year and facts remain the same, therefore, respectfully following the order of the Tribunal, we sustain the order of the learned CIT(A) in allowing relief u/s 80-IA of the Act to the assessee." 13. That apart, a perusal of the order passed by the Assessing Officer indicates that the assessee had filed audit report in Form No.10CCB dated 21.10.2004 along with the written submissions on 25.08.2011 showing pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) is reproduced as under:- "As regards profits derived from Unit-II of manufacturing of micronutrient fertilizers, the appellant had shown net profit of Rs. 96,67,206/- and the allowable deduction u/s 80-IA @30% works out to Rs. 29,00,162/-. But the deduction was restricted to Rs. 16,71,579/- equivalent to the total income of the appellant, which is equivalent to net profit of Rs. 55,71,932/- (30% of Rs. 55,71,932/- = Rs. 16,71,579). The products manufacture in Unit-I & Unit-II are entirely different as in Unit-I, the appellant was manufacturing pesticides and insecticides, whereas in Unit-II, the appellant was manufacturing micronutrient fertilizers which is a totally different product. Therefore, the AO was not correct in assuming that the percentage of raw material consumed would be same in both the units and calculating value of sale based on raw material consumed in Unit-II on the basis of same ratio of the raw material consumed in Unit-I. Therefore, considering the totality of facts and circumstances of the case, I am of the considered opinion that the appellant was eligible for claiming deduction u/s 80-IA of Rs. 16,71,579/- on the profits delivered from Unit-II ..... X X X X Extracts X X X X X X X X Extracts X X X X
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