Appellate allowance of omitted deduction claim upheld, with remand for verification; recomputation challenge for lack of incriminating material failed.

A bona fide statutory deduction claim under section 80IA may be entertained in appellate proceedings even if it was omitted from the original and section 153A returns, because tax must be assessed on the correct income. The appellate authority may direct allowance of the claim, but the quantum of deduction and compliance requirements, including supporting audit evidence, remain subject to verification by the Assessing Officer. A separate challenge that recomputation under section 143(3) read with section 153A required incriminating material failed, because the exercise was treated as a correction of computation rather than a fresh search-based addition.

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Issues: (i) Whether the assessee was entitled to claim deduction under section 80IA despite not having claimed it in the original return and the return filed in response to notice under section 153A, and whether the appellate authority could direct allowance of such claim subject to verification of quantum and compliance. (ii) Whether the additional ground alleging that the recomputation of income under section 143(3) read with section 153A was unsustainable for want of incriminating material was maintainable.

Issue (i): Whether the assessee was entitled to claim deduction under section 80IA despite not having claimed it in the original return and the return filed in response to notice under section 153A, and whether the appellate authority could direct allowance of such claim subject to verification of quantum and compliance.

Analysis: The return originally filed within time had been followed by a return in response to the search notice, but the deduction was not claimed because the computation reflected nil taxable income. When the mistake in computation was noticed during assessment, the assessee made a fresh claim supported by documents. The statutory framework of section 80IA was treated as allowing the deduction for the eligible block period, and the omission in the return did not, by itself, defeat a bona fide statutory claim. The appellate authority was held competent to entertain such a claim, and the principle that tax should be levied only on correct income was applied. At the same time, the quantum of deduction and the requisite compliance, including audit evidence, required verification by the Assessing Officer.

Conclusion: The assessee was held entitled to deduction under section 80IA, and the matter was remitted to the Assessing Officer for limited verification of quantum and supporting compliance.

Issue (ii): Whether the additional ground alleging that the recomputation of income under section 143(3) read with section 153A was unsustainable for want of incriminating material was maintainable.

Analysis: The challenged exercise was treated as a correction of computation rather than the making of a fresh addition based on search material. Since no separate addition had been made and the Assessing Officer had only recomputed the income after noticing the incorrect calculation, the absence of incriminating material was held not to assist the assessee. On that footing, the additional ground did not survive.

Conclusion: The additional ground was rejected.

Final Conclusion: The appeal succeeded only to the extent of recognition of the assessee's eligibility for the section 80IA claim, while the relief was confined by remand for verification and the separate challenge on incriminating material failed.

Ratio Decidendi: A bona fide statutory deduction claim may be entertained in appellate proceedings even if omitted from the return, but the Assessing Officer may verify the quantum and compliance before granting the deduction; a mere correction of computation without a fresh addition based on search material does not require incriminating material.

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