Asia Pacific Marbles P.Ltd, Mumbai vs Assessee

ी डी. म मोहन, उपा य एवं ी संजय अरोड़ा, लेखा सद य के सम ।

BEFORE SHRI D. MANMOHAN, VP AND SHRI SANJAY ARORA, AM

आयकर अपील सं./I.T.A. No. 1893/Mum/2012 ( नधा रण वष / Assessment Year: 2006-07)

Asia Pacific Marbles Pvt. Ltd. Asst. CIT-8(1), CTS 1971/72, Near Laxmi Narayan Mumbai Temple, Airport Side, Service Road, बनाम/ Western Express Highway, Vs. Vile Parle (E), Mumbai-400 099

थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. AACCA 2066 R (अपीलाथ# /Appellant) : ($%यथ# / Respondent)

अपीलाथ# क& ओर से / Appellant by : None

$%यथ# क& ओर से/Respondent by : Shri Asghar Zain

सनु वाई क& तार,ख / : 18.03.2015 Date of Hearing घोषणा क& तार,ख / : 27.03.2015 Date of Pronouncement

आदे श / O R D E R Per Sanjay Arora, A. M.:

This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)-16, Mumbai ('CIT(A)' for short) dated 23.02.2012, partly allowing the assessee's appeal contesting its assessment for the assessment year (A.Y.) 2006-07 vide order u/s. 143(3) of the Income Tax Act, 1961 ('the Act' hereinafter) dated 21.11.2008.

2 ITA No. 1893/Mum/2012 (A.Y. 2006-07) Asia Pacific Marbles Pvt. Ltd. vs. Asst. CIT

2. None appeared for and on behalf of the assessee-appellant when its appeal was called out for hearing, despite service of notice of hearing through RPAD. Even no adjournment motion stands moved by the assessee. In fact, we observe non- representation by and on behalf of the assessee throughout the course of its appeal before the Tribunal. Even no authority/power of attorney is on record. Under the circumstances, it was only considered fit and proper to proceed with the hearing, and decide the appeal after hearing the party before us after considering the material on record.

3. The assessee is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of processing of marbles. For the A.Y. 2006-07, it filed its return of income on 30.11.2006 through the electronic mode, declaring a total income of Rs.24,13,007/-. The same was subsequently selected for scrutiny under the verification procedure under the Act, and assessment framed u/s. 143(3) by the Assessing Officer (A.O.) vide order dated 21.11.2008 at a total income of Rs.37,74,570/-. The variation between the returned and assessed income is on account of disallowance of deduction claimed under the section 80-IB, at Rs.10,34,146/-; interest of Rs.3,12,509/-; and addition of undisclosed contract receipts at Rs.14,907/-. The present appeal though agitates only the disallowance of the deduction claimed u/s.80-IB, which was principally for the reason of non-furnishing the prescribed audit report in Form No. 10CCB. The assessment having been confirmed by the first appellate authority as such; aggrieved, the assessee is in second appeal, raising the following grounds:

'1. Disallowance of Interest u/s. 80lB - Rs. 10,34,146/-

i) a) The ld. CIT(A) erred in denying the claim u/s. 80IB inspite of the fact that after having accepted the belatedly filed Audit Report u/r. 46A and calling for Remand Report, he has grossly failed to consider that while appreciating an incentive provision, technical infirmities need to be discounted. Therefore, denying a genuine claim on technical ground is against the principle of natural justice when in earlier years and in later years, the same had been allowed to your Appellant.

3 ITA No. 1893/Mum/2012 (A.Y. 2006-07) Asia Pacific Marbles Pvt. Ltd. vs. Asst. CIT

b) The ld. CIT(A) ought to have appreciated that the Appellant's accounts were audited by an Accountant as prescribed u/s. 288(2) and as per the requirement of Sec. 80IA(7).

c) Without prejudice to above, removing technical deficiency whether at assessment stage or at remand stage, the Assessing Officer ought to have appreciated the merits which was also ignored by the CIT(A).

d) Without prejudice to above, the ld. CIT(A) erred in not considering the fact that the requirement of filing Audit Report along with Return is not mandatory and since not filing Audit Report is a curable defect, the ld. CIT(A) is not justified to disallows the claim.

2. LEVY OF PENAL INTEREST

The Appellant, on merits, denies its liability to penal interest.'

3. We have heard the party before us, and perused the material on record. 3.1 As afore-noted, the principal reason for the impugned disallowance was the non- furnishing of the audit report, as required by the provision itself (s. 80-IB(13) r/w s. 80- IA(7)). The same was though furnished by the assessee in the appellate proceedings, with the ld. CIT(A) calling for a remand report from the A.O. in its' respect. The A.O., relying on the decision in the case of CIT vs. Unnikrishnan vs. CIT [1998] 233 ITR 485 (Ker), objected to the same in-as-much as sufficient opportunity had been granted to the assessee at the assessment stage to present its case and, two, no reason/s for non- furnishing the said report before the assessing authority in the assessment proceedings had been stated by the assessee. The ld. CIT(A), however, confirmed the assessment, i.e., after reproducing the remand report dated 02.02.2012 by the A.O., holding as under:

'4.3.1 .................. I find that the similar issue arose to my consideration in the earlier years and I have dismissed the appeal of the appellant for the reasons contained therein. Accordingly, following my earlier decision the appeal of the appellant is accordingly dismissed.'

3.2 We, firstly, observe that the impugned order is a non-speaking order in-as-much as it does not convey the reason/s informing the decision. It is only when a judicial order bears the reason/s leading to the decision, that it can be said to be valid and, further, 4 ITA No. 1893/Mum/2012 (A.Y. 2006-07) Asia Pacific Marbles Pvt. Ltd. vs. Asst. CIT

enable its review, to which it is subject, i.e., upon either party taking it before a higher appellate forum, as has been. Even if the ld. CIT(A) were to merely follow his order/s for the earlier years, which are not on record, the relevant part/s thereof ought to have been reproduced by him, so as to convey the said reasons, which would then by incorporation form the reasons informing his order or decision, besides constituting a self-contained order, while in the present case it does not state, even broadly, the basis for the confirmation of the disallowance, i.e., for the earlier years. Again, it would also enable the reader to see if the facts and circumstances of the instant case are or are not, identical or similar, as the case may be, for the said decision to apply for the current year. Further still, it was also incumbent on the ld. CIT(A) to state as to why the decision/s by the tribunal, confirming the deduction u/s.80-IB for the earlier years in the assessee's own case, binding upon him, was not followed, as judicial discipline would dictate. His order, accordingly, does not satisfy the mandate of section 250(6), and is accordingly to be set aside for passing a fresh, speaking order in accordance with the law.

3.3 We further observe that though the A.O. has raised objections to the admission of the audit report per his remand report dated 02.02.2012, the ld. CIT(A) had already called for a remand report (supra) thereon from him. As, per Rule 46A (of the Income Tax Rules, 1962), the A.O.'s comments, i.e., an opportunity thereto to examine the additional evidence/s produced by the assessee or to produce any evidence/s in rebuttal, could only be upon admitting the same. The ld. CIT(A) has also not recorded any reasons for admission, as mandated by rule 46A(2) r/w r. 46A(1). So, however, the same has not been impugned by the Revenue, either by filing an appeal or a cross objection (CO), so that its admission attains finality. Further, the A.O. did not examine the said audit report, which was incumbent upon him to, even if without prejudice to his objection to its admission, which he was in law entitled to. True, furnishing of the audit report is a statutory condition, and being uncomplied with, formed the principal ground for the disallowance of deduction u/s.80-IB. Its examination, however and, rather, therefore, could not be circumvented. As such, its' belated filing apart, which the A.O. objects for 5 ITA No. 1893/Mum/2012 (A.Y. 2006-07) Asia Pacific Marbles Pvt. Ltd. vs. Asst. CIT

admission in-as-much as the same was not filed despite adequate opportunity during the assessment proceedings, the same was required to be examined by him, i.e., on merits, and which he did not. His failure to do so would not automatically imply the said report as having been examined by him as to its correctness. The ld. CIT(A), accordingly, ought to have caused the necessary verification of the said audit report by the assessing authority. Rather, r. 46A precludes the placing of reliance by the first appellate authority on any additional evidence which has not been examined apriori by the assessing authority, who, as it appears, construed the remand report to only imply a statement of the objections, if any, to its admission. This is all the more so in the present case as the same has also not been examined by the ld. CIT(A), whose purview as an appellate authority is to enable determination of the income rightly chargeable to tax and, consequently, the assessee's correct tax liability. Reference in this context may also be usefully made to the decision in the case of Kapurchand Shrimal v. CIT [1981] 131 ITR 451 (SC). This constitutes the second aspect on which the impugned order is deficient.

Finally, the A.O. has, without prejudice to his other claims, stated that the assessee is in any case not entitled to deduction u/s.80-IB on the following incomes in-as-much as they are not derived from the assessee's eligible undertaking/business (refer para 4.6 of the assessment order):

Interest on bank FDRs Rs.1,37,762/- Rent Rs.90,000/- Interest income Rs.9,07,685/- Foreign exchange rate difference Rs.12,227/-

We observe no finding by the ld. CIT(A) qua the assessee's claim for deduction on these incomes, only validating our finding, recorded at the beginning of our discussion, of the impugned order as not being a speaking order, also exhibiting a lack of application of mind. His order being appealable, which could be on more than one grounds, the ld. CIT(A) shall decide this issue, i.e., independent of the other claims of both the sides, as well.

6 ITA No. 1893/Mum/2012 (A.Y. 2006-07) Asia Pacific Marbles Pvt. Ltd. vs. Asst. CIT

4. The impugned order is accordingly set aside, for being passed afresh in accordance with law, including as to procedure, allowing reasonable opportunity of hearing to both the sides. We decide accordingly.

5. In the result, the assessee's appeal is allowed for statistical purposes.

Order pronounced in the open court on March 27, 2015

Sd/- Sd/- (D. Manmohan) (Sanjay Arora) उपा य / Vice President लेखा सद य / Accountant Member मंब ु ई Mumbai; 2दनांक Dated : 27.03.2015 व.3न.स./Roshani, Sr. PS

आदे श क" # त%ल&प अ'े&षत/Copy of the Order forwarded to :

1. अपीलाथ# / The Appellant

2. $%यथ# / The Respondent

3. आयकर आयु4त(अपील) / The CIT(A)

4. आयकर आय4 ु त / CIT - concerned

5. 7वभागीय $3त3न:ध, आयकर अपील,य अ:धकरण, मंब ु ई / DR, ITAT, Mumbai

6. गाड< फाईल / Guard File आदे शानस ु ार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मंब ु ई / ITAT, Mumbai