2024 (1) TMI 1527 - AT - Income Tax

Power of appellate authority to entertain new deduction claims during assessment and remit matter for AO examination, appeal allowed

Appellate authorities may entertain a new claim for deduction raised for the first time during assessment proceedings, including pure legal contentions or ... Power of appellate authority to entertain an additional claim for deduction made for the first time during assessment proceedings - denial of entertaining the claim of the appellant for deduction of service tax u/s 37 on the ground that the said claim was not made in the return of income. Whether or not there is bar to entertain the additional claim made by the assessee during the course of assessment proceedings? - HELD THAT:- The said issue stands covered by the decision of M/s. Bilcare Limited [2023 (6) TMI 210 - ITAT PUNE] as held when it comes to the power of Appellate Commissioner or the Tribunal, the Courts have recognized their jurisdiction to entertain a new ground or a legal contention. A ground would have a reference to an argument touching a question of fact or a question of law or mixed question of law or facts. A legal contention would ordinarily be a pure question of law without raising any dispute about the facts. Not only such additional ground or contention, the Courts have also, as noted above, recognized the powers of the Appellate Commissioner and the Tribunal to entertain a new claim for the first time though not made before the assessing officer. Income-tax proceedings are not strictly speaking adversarial in nature and the intention of the Revenue would be to tax real income. In view of the above settled position of law, we are of the considered opinion that the NFAC had fell in serious error in not directing the AO to examine the additional claim made during the course of assessment proceedings. Accordingly, the orders of the lower authorities are set-aside and we direct the AO to examine the allowability of claim for deduction of service tax having regard to the evidence on record. Appeal allowed for statistical purposes Issues: (i) Whether an appellate authority may entertain an additional claim for deduction (service tax) made for the first time during assessment proceedings and, if so, whether the claim for deduction under section 37 of the Income-tax Act, 1961 of Rs.40,82,852/- should be examined on merits.Analysis: The issue turns on the distinction between the power of the assessing officer to accept a claim without a revised return and the power of appellate authorities to admit and decide new claims or grounds arising in the matter. Coordinate judicial authorities have recognised that Goetze (India) Ltd. is confined to the power of the assessing officer and does not prohibit appellate authorities from entertaining additional claims; appellate discretion extends to permitting new factual or legal claims within the contours of the subject matter of the appeal. Where there is no statutory bar, an additional claim made during assessment proceedings can be remitted for examination on the evidence before the assessing authority. The matter was therefore remitted to the assessing authority for examination of the allowability of the service tax deduction in light of the evidence on record.Conclusion: Issue (i) decided partly in favour of the assessee; the claim for deduction under section 37 is to be examined by the Assessing Officer on the merits after remand.