2020 (7) TMI 496 - AT - Income Tax

Tribunal allows appeal for deduction claim under section 80JJAA, citing COVID-19 delay

M/s. Hexaware Technologies Ltd. Versus Dy. Commissioner of Income Tax-10 (1) (1) Mumbai.

The Tribunal allowed the appeal of the assessee for statistical purposes, directing the Assessing Officer to reconsider the deduction claim under section ... Rectification u/s 154 - claim of deduction u/s 80JJAA denied - Claim made at the time of assessment proceedings - HELD THAT:- In the present case assessee did not make claim of deduction u/s 80JJAA in the return of income or revised return of income. The fresh claim was allegedly made at the time of assessment proceedings. In the assessment order dated 27/03/2015, the Assessing Officer has not made any note of assessee’s said claim. In fact the AO had no occasion to consider assessee’s fresh claim as the same was filed on 28/3/2015 i.e. one day after the passing of the assessment order. The assessee filed petition u/s 154 for considering assessee’s claim of deduction u/s 80JJAA. Appellate authorities are not precluded from entertaining assessee’s fresh claim not made in the return of income. The Hon’ble Jurisdictional High Court in the case of CIT vs. Pruthvi Brokers & Shareholders [1997 (4) TMI 39 - RAJASTHAN HIGH COURT] has held that an assessee is entitled to raise before appellate authorities additional claims not made in the return of income. Taking into consideration entirety of facts we are of considered view that asessee’s claim of deduction under section 80JJAA of the Act deserves to be admitted for consideration. Since, legality and quantum of the claim were not examined by any of the lower authorities, without commenting on merit of claim, we deem it appropriate to restore the issue back to the file of Assessing Officer for consideration of same. While examining assessee’s claim, the Assessing Officer shall allow reasonable opportunity of hearing to the asseesee, in accordance with law. Appeal of the assessee is allowed for statistical purpose. Issues Involved:1. Denial of benefit of deduction under section 80JJAA of the Income Tax Act.2. Rejection of rectification petition under section 154.3. Jurisdiction of appellate authorities to entertain claims not made in the return of income.Detailed Analysis:1. Denial of Benefit of Deduction under Section 80JJAA:The appellant (assessee) is engaged in providing software solutions and IT-enabled services. For the assessment year 2011-12, the assessee filed a return of income but failed to claim the deduction under section 80JJAA of the Income Tax Act. The assessee later made the claim during assessment proceedings and submitted the mandatory Form DA. However, the Assessing Officer (AO) did not consider this claim in the assessment order dated 27/03/2015. The assessee argued that the deduction under section 80JJAA was allowed in previous and subsequent years, thus questioning the denial for the impugned year.2. Rejection of Rectification Petition under Section 154:The assessee filed a rectification petition under section 154 to consider the deduction claim, which the AO rejected based on the Supreme Court decision in Goetze (India) Ltd. vs. CIT. The AO's rejection was not on the grounds of maintainability but on the basis that the claim was not made in the original or revised return of income. The CIT(A) dismissed the appeal against the order under section 154, stating that the appropriate remedy was to appeal against the assessment order under section 143(3).3. Jurisdiction of Appellate Authorities to Entertain Claims Not Made in the Return of Income:The assessee contended that the appellate authority has the inherent power to consider claims not made in the return of income, supported by the Bombay High Court decision in CIT vs. Pruthvi Brokers and Share Holders. The assessee argued that the rejection of a genuine claim due to technicalities constitutes a mistake apparent from the record. The Department countered that the AO had no occasion to consider the claim as it was made after the assessment order was passed, and fresh claims cannot be entertained under section 154.Tribunal's Findings:- The Tribunal acknowledged that the assessee did not make the deduction claim in the return or revised return but allegedly made it during assessment proceedings.- The AO did not note the claim in the assessment order as it was received after the order was passed.- The Tribunal disagreed with the CIT(A)'s hyper-technical approach of rejecting the claim on procedural grounds.- The Tribunal held that while the AO was justified in rejecting the claim based on the Goetze (India) Ltd. decision, appellate authorities are not precluded from entertaining fresh claims not made in the return of income.Conclusion:- The Tribunal restored the issue to the AO for reconsideration of the deduction claim under section 80JJAA, without commenting on its merits.- The AO is directed to allow a reasonable opportunity of hearing to the assessee and to examine the claim in accordance with the law.Additional Note on Pronouncement Delay:The order was pronounced beyond the 90-day period due to the COVID-19 lockdown, which the Tribunal justified by referencing the extraordinary circumstances and relevant judicial precedents.Final Order:The appeal of the assessee is allowed for statistical purposes.