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IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH, JAIPUR D.B. Income Tax Appeal No.62/2000 COMMISSIONER OF INCOME TAX, BIKANER HEAD QUARTERS AT JAIPUR v. SHRI KAMALJEET SINGH AHLUWALIA, 65, GOPAL BARI, JAIPUR Reserved on : 2nd August, 2016 Pronounced on : 8th September, 2016 Hon'ble Mr. Justice Ajay Rastogi Hon'ble Mr. Justice J.K. Ranka Mr. R.B. MATHUR Mr. K.D. MATHUR
} }
…counsel for appellant
Mr. ANANT KASLIWAL
…counsel for respondent
By the Court (per Ranka, J.) 1.
This appeal under Section 260-A of the Income
Tax Act, is directed against the order dated 19.6.2000 passed by the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur.
2.
The
It pertains to assessment year 1995-96.
appeal
was
admitted
on
the
following
substantial questions of law :"(i) Whether Tribunal was justified in holding that assessee (respondent) is entitled to claim deduction under Section 80HHC? (ii) Whether the Tribunal was justified in holding that assessee complied with the mandatory requirement of Section 80HHC(4) and hence entitled to claim benefit of the said Section while calculating his income tax liability on his gross turnover?"
3.
The brief facts noticed for disposal of this
appeal are that the respondent assessee derives income from share of profit from firm and export business. The export business is conducted in the name and style
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of Lotus International.
The assessee claims to have
filed return of income on 31.10.1995 declaring total taxable income of Rs.1,59,029/-, and inter alia also claimed exemption under Section 80HHC of the Income Tax Act
at
course
Rs.1,07,33,971/-. of
processing
It
under
transpired Section
during
143(1)(a)
the that
though the assessee has claimed deduction under Section 80HHC
but
the
required
certificate
of
a
Chartered
Accountant claiming deduction under Section 80HHC was not
enclosed
along
with
the
return
of
income
and
accordingly the claim was rejected vide order dated 24.1.1999.
4.
The
assessee
moved
an
application
for
rectification under Section 154 of the Act claiming that the requisite certificate under Section 80HHC was duly attached along with the return of income and thus the
claim
was
rightly
made,
however,
the
Assessing
Officer passed order under Section 154 rejecting the contention of the assessee by observing that no such certificate was enclosed with the return of income and the fact was also supported on perusal of part-V of the return
of
mentioned
income anything
in
which
about
the
assessee
annexing
had
certificate
not of
a
Chartered Accountant, and according to the AO it was mandatory
and
statutory
requirement
of
the
Act
for
claiming deduction under Section 80HHC that the claim is supported by a certificate of a Chartered Accountant and it ought to have been annexed along with the return of
income
and
accordingly
rejected
the
application
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filed
under
5.
The
Section
matter
154
was
of
the
assailed
Act.
before
the
Commissioner of Income Tax (Appeals), who also went into the issue elaborately, where it was contended by the assessee
that the assessee did comply
with the
requirement of the provisions of the Act, and requisite report of Chartered Accountant was furnished along with the return of income and that claim of the AO was contrary to the material on record, and further that the audit report furnished even at later point of time is sufficient compliance of the provisions of law.
The
CIT(A) also called for the records and in particular the return of income and noticed that Part-V of the return is full of cuttings and overwritings and after noticing the cuttings and overwritings, the enclosures stated
were
computation
of
income,
balance-sheet
of
Lotus International, audit report under Section 44AB, challan of taxes (4) and note on computation of income regarding
surrender,
and
certainly
available
with
6.
all the
these
documents
return
of
are
income.
It was also noticed by the CIT(A) that the
enclosures which have been scored off are balance-sheet and profit and loss account of KJS Ahluwalia, Construction,
Kamal
Transport,
photo
copies
of
K.P. LIC
premium and all these enclosures are not attached with the return of income, though it was claimed that these documents
were
enclosed
along
with
the
return.
Analysing the contents of Part-V the CIT(A) further
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noticed that handwriting and the ink are the same and there is no separate entry for report under Section 44AB which is otherwise available along with the return of income. The CIT(A) also observed that though the assessee claimed deduction under Section 80HHC of the Act for an amount of Rs.1,07,33,971/- on the other hand the certificate of Anil Nagori and Associates, CA, had worked out allowable deduction under Section 80HHC of the Act at Rs.6,00,410/- only.
The CIT(A) also noticed
contradictions in the claim of the assessee and also expressed that even otherwise assessee could not have moved an application under Section 154 since the issue was highly debatable and accordingly the application under
Section
154
was
dismissed the appeal.
not
maintainable
and
thus
Even before the CIT(A) no audit
report u/s 80HHC claiming deduction at Rs.1,07,33,971/was filed.
7.
The
assessee
further
assailed
by
filing
an
appeal before the Tribunal, however, the Tribunal vide the order impugned observed that since the assessee is an exporter and as per the computation of income, had claimed deduction under Section 80-HHC to the tune of Rs.1,07,33,971/- and such claim being allowable, thus held the claim to be allowable and accordingly allowed the same.
8.
Learned
counsel
for
the
Revenue
vehemently
contended that the audit report was not annexed with the return of income and even as per the certificate of
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the Chartered Accountant, the allowable deduction was only Rs.6,00,410/-
and in none of the three orders
namely, order of the AO, CIT(A) or Tribunal there is an averment by the assessee that two audit reports were filed
one
claiming
deduction
of
Rs.6,00,410/-
and
another claiming deduction of Rs.1,07,33,971/- and even the Tribunal has gone into in a cursory manner and allowed the claim of the assessee.
9. are
Learned counsel further contended that there no
two
opinions
that
had
there
been
an
audit
report, the AO would have certainly allowed the claim but even the CIT(A) called for the record and examined the same personally and after analysing the enclosures, clearly upheld the finding that the return of income was
not
accompanied
by
an
audit
report
claiming
deduction of Rs.1,07,33,971/-. That apart, the return of income in this case was filed on 31.10.1995 and order under Section 143(1)(a) is dated 24.1.1999 i.e. almost after three years and even by then the assessee was not having the audit report computing deduction at Rs.1,07,33,971/-.
To
claim
deduction
under
Section
80HHC it is mandatory and the requirement is not only to have an audit report but also to enclose with the return of income.
Merely claiming that the assessee is
an exporter, is no sufficient compliance of the Act and CA has to certify correctness of claim under Section 80HHC.
Learned
order
of
counsel
Tribunal
further is
contended
that
the
wholly
perverse.
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10.
Per contra, learned counsel for the assessee
contended that an audit report was annexed with the return of income and in case it was noticed that said audit report was not part of the return of income, the AO was under legal obligation to have issued a notice under
Section
139(9)
of
the
Act,
to
make
good
the
deficiency and in the instant case no such notice was served, therefore, the disallowance of deduction under Section 80HHC is in violation of principles of natural justice.
He further contended that the assessee is an
exporter and was entitled to deduction under section 80HHC on such exports having been made and the claim of deduction under Section 80HHC was claimed in accordance with the provisions of the Act.
10.1
In
the
alternative,
learned
counsel
further contended that audit report could have been filed at later stage before the Appellate Authorities and it is held by the judicial pronouncements that it is sufficient compliance of the mandate of law.
He
also drew attention of this Court to a Circular of the Central
Board
24.8.1994
read
25.10.1993 relaxed
of
the
to
Direct
with bring
rigour
Taxes
Circular home of
law
bearing bearing
that
even
by
giving
no.689
dated
no.669
dated
the
Board
has
administrative
relief and such Circulars are binding on the Revenue Authorities
and
in
support
has
relied
on
judgments
rendered in Seeyan Plywoods v. ITO & Another [1999] 238 ITR 295 (Ker), Tanna Exports & Another v. M.G. Kamat & Another [1993] 202 ITR 210 (Bom), Khatau Junkar Ltd. &
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Another
v.
K.S.
Pathania
&
Another
and
JCT
Ltd.
&
Another v. Hari Kishan & Another [1992] 196 ITR 55 (Bom)
and
of
Apex
Court
in
Mangalore
Chemicals
&
Fertilizers Ltd. v. DCIT AIR 1992 SC 152.
11.
We
have
heard
the
learned
counsel
for
the
parties and perused the material placed before us.
12.
It would be appropriate to quote Section 80HHC
of the Act and in particular sub-clause (1) and (4) respectively, which reads ad infra:80HHC. Deduction in respect of profits retained for export business.-(1) Where an assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of export out of India of any goods or merchandise to which this section applies, 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 the (profits) derived by the assessee from the export of such goods or merchandise : Provided that if the assessee, being a holder of an Export House Certificate or a Trading House Certificate (hereafter in this section referred to as an Export House or a Trading House, as the case may be,) issues a certificate referred to in clause (b) of sub-section (4A), that in respect of the amount of the export turnover specified therein, the deduction under this sub-section is to be allowed to a supporting manufacturer, then the amount of deduction in the case of the assessee shall be reduced by such amount which bears to the total profits derived by the assessee from the export of trading goods, the same proportion as the amount of export turnover specified in the said certificate bears to the total export turnover of the assessee in respect of such trading goods. (1A) (2)(a) (b)
xxxx xxxx xxxx
xxxx xxxx xxxx
xxxx xxxx xxxx
xxxx xxxx xxxx
Explanation 1.- The sale proceeds referred to in clause (a) shall be deemed to have been received in India where such sale proceeds are credited to a separate account maintained for the purpose by the assessee with any bank outside India with the approval of the Reserve Bank of India.
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Explanation 2.-
xxxx
xxxx
xxxx
(3) (3A)
xxxx xxxx
xxxx xxxx
xxxx xxxx
xxxx xxxx
(4) The deduction under sub-section (1) shall not be admissible unless the assessee furnishes in the prescribed form, along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this section:”
13.
The
provision
clearly
envisages
that
an
assessee who is engaged in the business of export out of India of any goods or merchandise and the amount is received within entitled
in the to
convertible time a
foreign
prescribed,
deduction
to
exchange
an the
in
assessee extent
India becomes
of
profits
derived by the assessee from the export of such goods or merchandise.
To claim such deduction, sub-clause
(4)
80HHC
of
Section
mandates
that
report
of
a
Chartered Accountant who has audited the accounts, duly signed and verified, is required to be furnished in the prescribed form defined
in
Section
288
claimed
in
Therefore,
the
along with the return of income as Explanation
who
certifies
accordance twin
with
conditions
to that
sub-section deduction
(2)
of
has
been law.
the
provisions
of
are
necessary:
(i)
the
assessee should be an exporter and convertible foreign exchange is required to be received in the given time in India, and (ii) to claim such deduction, report of a Chartered Accountant is mandatory.
13.1
While
the
foremost
requirement
is
that
the assessee has to be an exporter and the return of
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income
is
to
latter
is
the
be
supported
requirement
by of
an
audit
furnishing
report.
The
substantive
foundation for claiming such allowance and it is the requirement of furnishing proof that the foundation for claiming such deduction has been laid. While compliance of audit report under sub-clause (4) to claim deduction is mandatory with the return is concerned, being the requirement in the realm of procedure for furnishing evidence in support of the claim in the given facts and circumstances,
if
furnished
during
the
assessment
proceedings or even at the appellate stage, Courts have held
that
the
claim
cannot
ordinarily
be
denied.
[Zenith Processing Mills v. Commissioner of Income-Tax [1996] 219 721 (Guj); Commissioner of Income-Tax v. Nagpur Hotel Owners' Association [2001] 247 ITR 201 (S.C.); Commissioner of Income-Tax v. Punjab Financial Corporation [2002] 254 ITR 6 (P&H); Commissioner of Income-Tax v. Berger Paints (India) Ltd. (No.2) [2002] 254 ITR 503 (Cal); Commissioner of Income-Tax v. G. Krishnan Nair [2003] 259 ITR 727 (Ker); Commissioner of Income-Tax v. Magnum Export (P) Ltd. [2003] 262 ITR 10 (Cal); Commissioner of Income-Tax v. Gupta Fabs [2005] 274 ITR 620 (P&H); Income-Tax Officer v. VXL India Ltd. [2009] 312 ITR 187 (Guj)]
14.
We have gone through all the three orders,
namely the order passed by AO, learned CIT(A) as well as learned Tribunal.
While the AO as also the CIT(A)
came to the conclusion that there is an audit report of Chartered
Accountant
claiming
deduction
of
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Rs.6,00,410/-, about
an
and
even
audit
Rs.6,00,410/-.
the
report
Tribunal
only
claiming
Indisputably
on
mentions
deduction
analysing
the
of three
orders, we do not find any mention of audit report claiming deduction under Section 80HHC in reference to Rs.1,07,33,971/-. quoted
the
placed
assessee
has if
before
failed
any,
is
a
it,
to
being
Rs.1,07,33,971/-. there
CIT(A)
has
written-submissions
assessee
report,
The
and
bring filed
in
extenso
of
the
we
notice
on
record
claiming
even
respondent that the
the
audit
deduction
of
The CIT(A), earlier do mention that
certificate
of
one
Anil
Nagori
and
Associates, CAs, computing allowable deduction under Section 80HHC of Rs.6,00,410/- only, and is taken note of by the Tribunal.
The CIT(A) further observed that
there are several cuttings and over-writings and even thereafter he could nowhere find about an enclosure of audit report claiming deduction under Section 80HHC of Rs.1,07,33,971/-.
Indisputably no tangible evidence
was enclosed either with the return of income or at the later stage claiming deduction of Rs.1,07,33,971/-.
14.1 unable
Even the learned counsel for the assessee is to
place
such
audit
report
for
claiming deduction under Section 80HHC.
our
perusal
We further
enquired from the learned counsel for the assessee as to the dates of the two audit reports, but he was unable
to
provide
such
dates
to
infer
prima
facie
conclusion and the indisputed fact remains that there is an audit report claiming deduction of Rs.6,00,410/-
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and there
is no audit report claiming deduction of
Rs.1,07,33,971/-.
15.
The
Tribunal,
in
our
view,
has
also
conveniently ignored the factum of making a mention of any audit report having been placed before it claiming deduction under Section 80HHC at Rs.1,07,33,971/-.
It
would be appropriate to quote few lines of para 11 of the impugned order which reads ad infra :“The Audit Report specifying the amount of rebate allowable at Rs. 6,00,410/- was on the basis of the amount received in the country in convertible foreign exchange when the Auditor audited the accounts. The Auditor, therefore, justifiably issued the certificate only to this extent but after the order of the CIT Jaipur controversy in regard to the total amount to be considered for purposes of rebate u/s 80HHC totalled to Rs.1,07,33,971/-, which was claimed as per the computation of total income while filing the return of income. Under these circumstances, we have no hesitation in allowing the appeal of the appellant in full and directing the AO to allow the benefit u/s 80HHC to the assessee.” (emphasis supplied) 16.
On
simply
observes
amount
of
basis
of
perusal that
rebate the
of
an
audit
allowable
amount
the
at
above, report
the
Tribunal
specifies
Rs.6,00,410/-
received
in
the
on
country
the the in
convertible foreign exchange, but the Tribunal is also silent
about
any
Rs.1,07,33,971/claim
of
and
audit simply
Rs.1,07,33,971/-
report
in
observes was
reference
to
that
the
said
claimed
as
per
computation of total income while filing the return of income and merely because the claim was made in the computation of total income, in our view such a finding is wholly perverse and not sustainable.
We disapprove
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the manner in which the claim has been allowed by the Tribunal on the basis of computation of total income alone and in not even uttering a word about the audit report
to
claim
Rs.1,07,33,971/-.
deduction
for
an
amount
of
Merely because claim is allowable as
per computation of income, is no reason to allow when sub-clause (4) of Section 80HHC mandates filing of an audit report in support for claiming deduction.
17.
The
judgments
relied
upon
by
the
learned
counsel for the assessee rendered by Kerala High Court in
the
case
of
Seeyan
Plywoods
v.
ITO
&
Another
(supra), and Bombay High Court in the case of Khatau Junkar Ltd. & Another v. K.S. Pathania & Another and JCT Ltd. & Another v. Hari Kishan & Another (supra), are on the proposition of deficiency in the return of income and to issue a notice u/s 139(9) of the Act and for the reasons assigned, issuance of notice u/s 139(9) looses significance.
18.
Accordingly, the Tribunal erred in allowing
deduction under Section 80HHC of Rs.1,07,33,971/- and in our view the finding of Tribunal is perverse and we have
no
hesitation
in
allowing
this
appeal,
in
answering both the substantial questions of law against the assessee and in favour of the Revenue.
(J.K. Ranka) J.
db
No costs.
(Ajay Rastogi) J.
