2021 (3) TMI 694 - HC - Income Tax

Appellate Authority can entertain additional claims not in original return. Assessee's right to claim correct taxable income upheld.

The High Court held that the Appellate Authority has the power to entertain additional claims not made in the original or revised return of income. In ... Claim not made before the AO but before the Appellate Authority - Eligibility of deduction under Section 80P - HELD THAT:- The facts of the case in hand may be examined. In the instant case, the claim for eligibility with regard to deduction under Section 80P of the Act was entertained by the CIT (Appeals) as the assessee did not have the opportunity to raise the contention before the AO as the order of assessment was passed by the CPC and therefore, the assessee had no opportunity to make a fresh claim by way of revised return before the CPC as the process is automated. The claim of the assessee was allowed by the Assessing Officer by placing reliance on the assessee's own case for the Assessment Year 2005 06. It is pertinent to note that in the instant case, we are not required to examine the validity of the claim of the assessee with regard to relief under Section 80P of the Act on merits as the substantial question of law only pertains to power of the Appellate Authority to entertain such a claim in the absence of such a claim being made in the original return or in the revised return. In view of the aforesaid well settled legal principles, which have been referred to in preceding paragraph, we answer the substantial question of law in the affirmative and against the revenue. Issues:1. Entitlement to raise additional claim in appeal without filing revised return of income.2. Validity of the claim for deduction under Section 80P of the Income Tax Act.3. Applicability of taxing provisions and eligibility for exemption under Section 10(23C)(iiib) of the Act.4. Power of the Appellate Authority to entertain additional claims not made in original or revised return.Issue 1: Entitlement to raise additional claim in appeal without filing revised return of income:The appeal pertained to the Assessment Year 2010-11 where the assessee, a Co-operative Society, filed its return of income with typographical errors. The Central Processing Centre (CPC) processed the income and added a sum under 'Business or Profession,' resulting in a demand. The Commissioner of Income Tax (Appeals) directed the deletion of the addition, which the tribunal upheld. The revenue contended that the assessee cannot raise an additional claim in appeal without filing a revised return. However, the assessee argued that the errors in the return should not deny the right to claim correct taxable income. The High Court referred to precedents and held that even if a claim was not made before the Assessing Officer, it could be made before the Appellate Authority. The Appellate Authority's power to entertain such claims was affirmed, and in this case, the claim was entertained due to the automated process and lack of opportunity to file a revised return. The substantial question of law was answered in favor of the assessee, dismissing the appeal.Issue 2: Validity of the claim for deduction under Section 80P of the Income Tax Act:The assessee claimed eligibility for deduction under Section 80P of the Act, which was entertained by the Commissioner of Income Tax (Appeals) as the assessment order was passed by the CPC without providing an opportunity to make a fresh claim. The claim was allowed based on the assessee's previous case. The High Court did not delve into the merits of the claim but focused on the power of the Appellate Authority to consider such claims not made in the original or revised return. Citing legal principles, the Court upheld the authority's power to entertain such claims, ultimately dismissing the appeal.Issue 3: Applicability of taxing provisions and eligibility for exemption under Section 10(23C)(iiib) of the Act:The revenue argued that the assessee was not eligible for deduction under Section 80P and Section 10(23C)(iiib) of the Act, highlighting alleged errors in the orders passed by the Commissioner of Income Tax (Appeals) and the tribunal. The High Court, however, did not delve into the specifics of the eligibility but focused on the procedural aspect of entertaining additional claims in appeal. The Court referred to legal precedents supporting the authority's power to consider such claims, ultimately dismissing the appeal based on the established legal principles.Issue 4: Power of the Appellate Authority to entertain additional claims not made in original or revised return:The core issue revolved around whether the Appellate Authority could entertain additional claims not made in the original or revised return of income. The revenue contended that such claims should only be made through a revised return, while the assessee argued that the right to claim correct taxable income should not be denied due to errors in the initial return. The High Court, after considering legal precedents, affirmed the authority's power to entertain such claims, especially in cases where the automated process hindered the opportunity to file a revised return. The Court dismissed the appeal, emphasizing the importance of ensuring the correct assessment of taxable income based on established legal principles.