Sec. 80-IB deduction couldn’t be allowed subsequently if same wasn’t claimed in ITR filed by assessee
INCOME TAX : Where assessee was engaged in development of housing projects and it in return of income filed for assessment year 2008-09 had not claimed deduction under section 80-IB(10) and subsequent to assessment framed by Assessing Officer it filed an application under section 264 before Commissioner and raised claim of deduction under section 80-IB(10) and Commissioner rejected revision application holding that since assessee had not made a claim under section 80-IB(10) in return of income, by virtue of section 80A(5), claim could not be granted, Commissioner was justified in his view
 107 taxmann.com 220 (Bombay)
HIGH COURT OF BOMBAY
Union of India
AKIL KURESHI AND S.J. KATHAWALLA, JJ.
WRIT PETITION NO. 1415 OF 2019
JUNE 4, 2019
Section 80-IB, read with section 80A, of the Income-tax Act, 1961 – Deductions – Profits and gains from industrial undertakings other than infrastructure development undertakings (Housing Project) – Assessment year 2008-09 – Assessee was engaged in development of housing projects – In return of income filed for assessment year 2008-09, it had not claimed deduction under section 80-IB(10) – Assessing Officer passed assessment order under section 143(3) and no claim for deduction under section 80-IB(10) came up for consideration before him – Subsequently assessee filed an application under section 264 before Commissioner and raised claim of deduction under section 80-IB(10) – Commissioner rejected revision application holding that since assessee had not made a claim under section 80-IB(10) in return of income, by virtue of section 80A(5), claim could not be granted – Whether Commissioner was justified in his view – Held, yes [Paras 5 and 9] [In favour of revenue]
Madhav Construction v. Pr. CIT [IT Appeal Nos. 3271 to 3276 (Mum.) of 2017, dated 7-7-2017] (para 9) dissented from.
Goetze (India) Ltd. v. CIT  157 Taxman 1/284 ITR 323 (SC) (para 10) distinguished.
CASES REFERRED TO
Goetze (India) Ltd. v. CIT  157 Taxman 1/284 ITR 323 SC (para 3.5), K.P.Varghese v. ITO [
Naresh Jain, Ms. Aarti Agarwaland Ms. Neha Anchilia for the Petitioner. N.C. Mohanthy for the Respondent.
1. Petitioners have made following prayers :
“(a) This Hon’ble Court be pleased to issue Writ of Mandamus or a Writ in the nature of Mandamus or any other appropriate Writ, Order or Direction under Article 226 of the Constitution of India, ordering and directing Respondent No. 2 to consider the claim under Section 80-IB (10) of the Income Tax Act,1961 on merits under Section 264 of the Income Tax Act, 1961 and not rejecting the same solely on account of Section 80A(5) of the Income Tax Act, 1961.
(b) This Hon’ble Court be pleased to declare the retrospective introduction of Section 80A (5) of the Income Tax Act, 1961, as unconstitutional”.
2. Brief facts are, as under:
2.1 Petitioner No.1 is an Association of Persons (AOP) and is regularly assessed to tax as such. For the assessment year 2008-09, the said Petitioner had filed a return of income on 30th September, 2008 declaring total income of Rs. 7,57,27,294/-. During the period relevant to the said assessment year the Petitioners had carried out activities of development of housing projects. However, for the income arising out of the said business, the Petitioners had not claimed deduction under Section 80-IB (10) of the Income Tax Act, 1961 (for short ‘the Act’) in the return of income. The return of income was taken in scrutiny by the Assessing Officer, who passed the order of assessment under Section 143 (3) of the Act on 21st December, 2010. Obviously, since the Petitioners had not raised any claim of deduction under Section 80-IB of the Act, no such claim came up for consideration before the Assessing Officer during the scrutiny assessment proceedings.
2.2 The Petitioners filed the Revision Application before the Commissioner of Income Tax (for short ‘CIT’) under Section 264 of the Act against the order of the assessment. In such Revision Application, the Petitioners raised the claim of deduction under Section 80-IB (10) of the Act. Since the Revision Application was filed by the Petitioners beyond the normal period of limitation prescribed under the statue, the Petitioners also prayed for condoning delay in filing the Revision Application. The Commissioner refused to condone delay. Upon which, the Petitioners filed Writ Petition No. 6287 of 2015 and Writ Petition No. 8955 of 2015. These Writ Petitions were disposed off by this Court by an Order dated 6th November, 2017. This Court directed the condonation of delay and ordered the CIT to decide the Revision Application on merits.
2.3 The CIT passed the Order on 20th March, 2018, which is impugned in this Writ Petition. By such Order, the CIT rejected the Revision Application of the Petitioners. He was of the opinion that since the Petitioners had not made a claim under Section 80-IB (10) of the Act in the return of income, by virtue of Section 80-A (5) of the Act, the claim cannot be granted.
3. The prayers made by the Petitioners in the Writ Petition, which have reproduced hereinabove, are in two parts. One part challenges the retrospective operation of Sub Section (5) of Section 80A of the Act. The learned Counsel for the Petitioners at the outset stated that the Petitioners do not press this challenge. We have therefore proceeded on such basis. Second part of the Petitioners’ prayer though worded some what differently, it challenges the Revisional Order of the CIT. In this context, the Counsel for the Petitioners raised the following contentions :
3.1 The restriction imposed by Section 80-A (5) of the Act, would apply only to the powers of the Assessing Officer and not to the CIT in exercise of revisional powers.
3.2 Applying the conditions of Section 80A (5) of the Act in the present case, would amount to expecting the Petitioners to perform the impossible task.
3.3 Counsel submitted that the provisions should be considered in such a manner as to save it from vice of unconstitutionality. Looked from this angle, Sub Section (5) of Section 80-A of the Act, cannot be applied with retrospective effect. The said provision should therefore be suitably read down.
3.4 Counsel submitted that the Petitioners fulfilled all conditions for claiming deduction under Section 80-IB (10) of the Act. Merely because, the Petitioners did not fulfill the conditions contained in Section 80A (5) of the Act, would not destroy the claim. Counsel submitted that this would amount to substantial compliance.
3.5 Counsel placed reliance on the decision of the Supreme Court in the case of Goetze(India) Ltd. v. CIT  157 Taxman 1/284 ITR 323 to contend that even if the claim is not made before the Assessing Officer, can still be sustained before the Appellate authority or the Tribunal.
3.6 Counsel further placed reliance on the decision of the Supreme Court in the case of K.P. Varghese v. ITO  7 Taxman 13/131 ITR 597 to contend that the statutory provisions of taxing statue, should be reasonably interpreted.
3.7 Counsel pointed out that the Bombay Tribunal in case of Madhav Construction v. Pr. CIT IT Appeal Nos. 3271 to 3276/mum/2017, dated 7-7-2017 has held that the restriction contained in Section 80A (5) of the Act would apply to the Assessing Officer and not to the CIT or the Tribunal.
4. As is well-known, under Section 80-IB (10) of the Act, the Legislature has granted deductions in relation to income arising out of development of housing projects to the assessees the fulfilling conditions contained therein. This provision is contained in Chapter – VI – A of the Act. Section 80A of the Act which is also contained in the same Chapter, pertains to deductions to be made in computing total income. Sub Section (5) was inserted in Section 80A of the Act by Finance (No.2) Act, 2009 with retrospective effect from 1st April, 2003. Sub Section (5) of Section 80A of the Act, reads under :
’80A(5) – Where the assessee fails to make a claim in his return of income for any deduction under Section 10A or Section 10AA or Section 10B or Section 10BA or under any provision of this Chapter under the heading “C.-Deduction in respect of certain incomes”, no deduction shall be allowed to him thereunder’.
5. As per this provision, where the assessee fails to make a claim in his return of income for any deduction under Section 10A or Section 10AA or Section 10B or Section 10BA or under any provision of the said Chapter – VI A under the heading “C.-Deduction in respect of certain incomes”, no deduction would be allowed to him under the said provision. In plain terms, this Sub Section (5) of Section 80A of the Act imposes an additional condition for claim of deduction in relation to income under any of the provisions mentioned therein. Apart from the requirement of fulfillment of individual set of respective conditions for the purpose of claiming the concerned deduction, this plenary condition requires that the claim ought to have made in the return of income by the assessee and if the assessee fails to make such claim in the return of income, such deduction shall not allowed to him under the relevant provision. Admittedly, in the present case, the Petitioners had not raised any such claim in the return of income. In plain terms, the claim of the Petitioners under Section 80-IB (10) of the Act would be hit by Sub Section (5) of Section 80A of the act.
6. We are conscious that in absence of the provision contained in Section 80A (5) of the Act, the Petitioners could have maintained the claim of deduction even before the CIT for the first time in Revision Application, though no such claim was made before the Assessing Officer, if from the facts on record, the Petitioners could sustain the said claim in law. This is very clear from the series of Judgments of various High Courts. Reference can be made to the decision of High Court of Gujarat in case of C. Parikh & Co. v. CIT  4 Taxman 224/122 ITR 610 In the said decision, the Court held that:
‘it is clear that under Section 264, the CIT is empowered to exercise revisional powers in favour of the assessee. In exercise of this power, the CIT may, either of his own motion or on an application by the assessee, call for the record of any proceeding under the Act and pass such order thereon not being an order prejudicial to the assessee, as the thinks fit. Sub – ss. (2) and (3) of Section 264 provide for limitation of one year for the exercise of this revisional power, whether suo motu, or at the instance of the assessee. Power is also conferred on the CIT to condone delay in case he is satisfied that the assessee was prevented by sufficient cause from making the application within the prescribed period. Sub-s. (4) provides that the CIT has no power to revise any order under S. 264 (1) : (i) while an appeal against the order is pending before the AAC, and (ii) when the order has been subject to an appeal to the Tribunal. Subject to the above limitation, the revisional powers conferred on the CIT under S. 264 are very wide. He has the discretion to grant or refuse relief and the power to pass such order in revision as he may think fit. The discretion which the CIT has to exercise is undoubtedly to be exercised judicially and not arbitrarily according to his fancy. Therefore, subject to the limitation prescribed in S. 264, the CIT in exercise of his revisional power under the said section may pass such order as he thinks ft which is not prejudicial to the assessee. There is nothing in S. 264 which places any restriction on the CIT’s revisional power to give relief to the assessee in a case where the assessee detects mistakes on account of which he was over assessed after the assessment was completed. We do not read any such embargo in the CIT’s power as read by the CIT in the present case. It is open to the CIT to entertain even a new ground not urged before the lower authorities while exercising revisional powers. Therefore, though the Petitioner had not raised the grounds regarding under-totalling of purchases before the ITO, it was within the power of the CIT to admit such a ground in revision. The CIT was also not right in holding that the over-assessment did not arise from the order the assessment. Once the Petitioner was able to satisfy that there was a mistake in totaling purchases and that there was under- totalling of purchases to the tune of Rs.20,000, it is obvious that there was over-assessment. In other words, the assessment of the total income of the assessee is not correctly made in the assessment order and it has resulted in over-assessment The CIT would not be acting de hors the IT Act, if he gives relief to the assessee in a case where it is proved to his satisfaction that there is over-assessment, whether such over-assessment is due to a mistake detected by the assessee after completion of assessment or otherwise. In our opinion, the CIT has misconstrued the words “subject to the provisions of this Act” in S. 264 (1) and read a restriction on his revisional power which does not exist. The CIT was, therefore, not right in holding that it was not open to him to give relief to the Petitioner on account of the Petitioner ‘s own mistake which it detected after the assessment was completed. Once it is found that there was a mistake in making an assessment, the CIT had power to correct it under S. 264 (1). In our opinion, therefore, the CIT was wrong in not giving relief to the Petitioner in respect of over-assessment as a result of under-totalling of the purchases to the extent of Rs.20,000.’
7. This was reiterated in case of Ramdev Exports v. CIT  120 Taxman 315/ 251 ITR 873 (Guj.) This Court also in case of Danny Denzongpa v. CIT  7 taxmann.com 81/194 Taxman 415  344 ITR 166 has taken a similar view.
8. However, the Petitioners are faced with the statutory provision contained in Sub Section (5) of Section 80A of the Act. The Petitioners’ claim cannot therefore be accepted de hors the said statutory provision and ordinary principle of the wide powers of the CIT exercising revisional jurisdiction under Section 264 of the Act cannot be imported. What Sub Section (5) of Section 80A of the Act mandates is that, if the assessee fails to make a claim in his return of income for any deduction under the provisions specified therein, the same would not be granted to the assessee. This condition or restriction is not relatable to the Assessing Officer or the Income Tax Authority. This condition attaches to the claim of the assessee and has to be implemented by the Assessing Officer, CIT or the Appellate Tribunal as the case may be. There is no indication in Sub Section (5) of Section 80A of the Act as to why the restriction contained therein amounts to limiting the power of Assessing Officer but not that of Commissioner.
9. This issue can be looked from slightly different angle. In absence of the provision contained in Sub Section (5) of Section 80A of the Act has held by various decisions of the High Courts noted above, the CIT could entertain a fresh claim in Revision Application even if the claim was not made previously before the Assessing Officer. Provision contained in sub-section (5) of Section 80A is a statutory interdict which would prevent the CIT from granting any such claim in exercise of his revisional jurisdiction under Section 264 of the Act. As is often times stated, even High Court in exercise of Writ jurisdiction under Article 226 of the Constitution of India would not issue directions contrary to statutory provisions. Width of the powers of the CIT under Section 264 of the Act would not permit him to ignore the requirement of Section 80A(5) of the Act or allow the claim of an assessee in breach of the condition contained therein. We are therefore not in agreement that the expression given by the Income Tax Tribunal in case of Madhav Construction (supra) holding that the restriction contained in Sub Section (5) of Section 80A of the Act is to restrict the power of Assessing Officer and not higher Income Tax Authorities.
10. The Petitioners having given up the challenge to the constitutionality of the retrospectivity to Section 80A (5) of the Act, cannot bring in the concept of the reading down of the provision in order to save if from unconstitutionally. In plain terms, our duty would be to enforce the provision contained in Sub Section (5) of Section 80A of the Act, as it is stands in the statue book. The decision in case of Goetze (India) Ltd. (supra) was rendered in different background. The Supreme Court did not have any occasion to interpret the provision of Section 80A (5) of the Act in the context of the power of the CIT or the Appellate Tribunal.
11. In the result, we do not find any merit in the Writ Petition, the same is therefore dismissed.