Tribunal supports additional bad debts claim, emphasizing tax authorities' duty to assist taxpayers.

Deputy Commissioner of Income Tax Versus M/s CMS Securitas Ltd.

Deputy Commissioner of Income Tax Versus M/s CMS Securitas Ltd. - [2016] 47 ITR (Trib) 378 Issues Involved
1. Deduction of bad debts claimed by the assessee.
2. The procedural requirement for claiming deductions through a revised return.

Detailed Analysis

Deduction of Bad Debts Claimed by the Assessee
The primary issue in this appeal concerns the deduction of bad debts claimed by the assessee. Initially, the assessee claimed a deduction of Rs. 96,35,224/- for bad debts written off in the return of income. During the assessment proceedings, the assessee realized that it had mistakenly claimed a lesser amount and subsequently made an additional claim of Rs. 40,81,493/- under Section 36(1)(vii) of the Income Tax Act, 1961 ("the Act"). The Assessing Officer (AO) rejected this additional claim, citing the Supreme Court judgment in Goetze (India) Ltd. v. CIT, 284 ITR 323, which mandates that any claim for deduction not made in the return of income must be made through a revised return.

The Commissioner of Income-tax (Appeals) [CIT(A)], however, allowed the additional claim, relying on the Central Board of Direct Taxes (CBDT) Circular No. 14 dated 11.4.1955, which instructs revenue officers not to take advantage of an assessee's ignorance and to assist taxpayers in determining the correct amount of tax payable. The CIT(A) also referenced the judgment in Chicago Pneumatic (India) Ltd. v. DCIT, 15 SOT 252, which emphasized that assessing authorities are bound to compute the correct income and should not compel the assessee to pay more taxes due to procedural lapses.

Procedural Requirement for Claiming Deductions Through a Revised Return
The Tribunal noted that a similar issue had arisen in the previous assessment year (A.Y 2008-09), where the assessee made an identical claim during the assessment proceedings. The AO had rejected the claim based on the same Supreme Court judgment. However, the CIT(A) allowed the claim, and the Tribunal upheld this decision, stating that the judgment in Goetze (India) Ltd. v. CIT was not applicable to appellate authorities.

The Tribunal reiterated that the power of the appellate authorities to entertain new claims is well-established. The Tribunal referenced several judgments, including:
- Hero Honda Finlease Ltd., where it was held that the CIT(A) has the power to entertain claims not made in the return of income if they are raised during the assessment proceedings.
- T.R.F. Ltd. v. CIT, 323 ITR 397 (SC), which clarified that it is sufficient if the bad debt is written off as irrecoverable in the accounts of the assessee to satisfy the conditions of Section 36(1)(vii) of the Act.
- CIT v. Bharat General Reinsurance Co Ltd, 81 ITR 303 (Del), which emphasized that there is no estoppel in the Income Tax Act, and the department must assess the correct tax liability irrespective of the claims made in the return.

The Tribunal also highlighted that the AO's duty is to make a fair assessment and compute the correct amount of tax payable as per law, even if the assessee did not make a claim in the return of income. The Tribunal emphasized that denying a legitimate claim merely because it was not made in the return of income would amount to collecting taxes without authority of law, which is against Article 265 of the Constitution of India.

The Tribunal concluded that the CIT(A) had rightly allowed the assessee's claim for additional bad debts during the assessment proceedings. The Tribunal found no merit in the Revenue's appeal and dismissed it, upholding the CIT(A)'s order.

Conclusion
The appeal by the Revenue was dismissed, and the order of the CIT(A) allowing the additional claim for bad debts made by the assessee during the assessment proceedings was upheld. The Tribunal emphasized that legitimate claims should not be denied due to procedural lapses and that the appellate authorities have the power to entertain new claims made during the assessment proceedings. The judgment reinforces the principle that tax authorities must assist taxpayers in determining the correct tax liability and should not take advantage of procedural technicalities to deny legitimate claims.