TaxTMI 
TaxTMI 
2020 (10) TMI 611
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....sued under section 143(3) of the Act by making an upward adjustment for reversal of provision for diminution in value of investments, amounting to Rs. 81,72,24,557; without considering the detailed submissions made before the CIT(A) by the Appellant. The CIT(A) failed to appreciate that the action of the learned AO resulted in the Appellant being assessed twice on the same amount of Rs. 81,72,24,557, once in AY 2013-14 and once in AY 2017-18. 2. On the facts and circumstances of the case, the learned CIT(A) erred in holding that no addition had been made in the order under section 143(3) of the Act even when the learned AO had agreed, on the merits, with the income processed under section 143(1) of the Act and upheld the income computed in the intimation under section 143(1) of the Act and raised the demand under section 156 of the Act pursuant to order under section 143(3) of the Act. 3. On the facts and circumstances of the case, the learned CIT(A) erroneously held that the Appellant was not aggrieved on account of the order issued under section 143(3) of the Act, even when the learned AO had agreed, on the merits, with the income processed under section 143(1) ....
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....Rs. 81,72,24,557/-) was disallowed by the assessee u/s 37 of the Act. Resultantly, the assessee had in its return of income for A.Y 2013-14 reported an interest income of Rs. 13,16,82,560/- under the head "Ïncome from other sources". Subsequently, the case of the assessee was selected for scrutiny assessment and the A.O vide his order passed u/s 143(3), dated 28.10.2016 assessed its income at Rs. 13,16,82,560/-. 4. During the year in question i.e A.Y 2017-18 the assessee had reversed the aforesaid "Provision for diminution in the value of Investments" of Rs. 81,72,24,557/- in its books of account. As can be gathered from the return of income for A.Y 2017-18, the total of credits in the assessee's profit & loss a/c aggregating to Rs. 89,32,69,817/- comprised of ,viz. (i). interest income :Rs. 7,60,45,260/-; and (ii). reversal of provision for diminution in value of investments :Rs. 81,72,24,557/-. As per Col. A3(c) of the "Schedule BP Computation of Income from business or profession" of the return of income, the assessee had while computing its income under the head "Profits and gains from business or profession" excluded the aforesaid amount of Rs. 89,32,69,817/- credit....
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.... return of income, therefore, there was no reason for him to interfere as regards its income processed u/s 143(1) of the Act. Observing, that no addition was being made in the assessment framed by him, the A.O assessed the income vide his order passed u/s 143(3), dated 26.06.2019 at Rs. 89,30,72,400/- i.e the income processed vide the intimation u/s 143(1), dated 30.03.2019. 7. Aggrieved, the assessee carried the assessment order passed by the A.O u/s 143(3), dated 26.06.2019 in appeal before the CIT(A). The assessee assailed the upward adjustment of its income on account of reversal of the "Provision for diminution in the value of Investments" of Rs. 81,72,24,557/- before the CIT(A). However, the CIT(A) declined to accept the aforesaid claim of the assessee. Holding a conviction that the aforesaid upward addition did not emanate from the impugned order passed by the A.O u/s 143(3) of the Act, dated 26.06.2019, the CIT(A) declined to deal with the same and dismissed the appeal. 8. Being aggrieved with the order of the CIT(A) the assessee has carried the matter in appeal before us. The ld. Authorized representative (for short 'A.R') for the assessee took us through the facts o....
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....count considered under other heads of income i.e "Other sources" of Schedule BP of the return of income for the year under consideration. It is thus for the aforesaid inadvertent clerical mistake that the assessee vide an intimation issued u/s 143(1), dated 30.03.2019 had been saddled with an exorbitant tax liability which though militates against the settled position of law. 9. Our indulgence in the present appeal has been sought by the assessee, to adjudicate, as to whether or not the CIT(A) is correct in concluding that as the addition made on account of reversal of the "Provision for diminution in the value of Investments" of Rs. 81,72,24,557/- did not emerge from the impugned order passed by the A.O u/s 143(3), dated 30.03.2019, the same could not be adjudicated upon by him. As observed by us hereinabove, we have no doubt in our mind insofar principally answering the validity of the addition made in the hands of the assessee is concerned. In our considered view, now when the "Provision for diminution in the value of Investments" of Rs. 81,72,24,557/- was disallowed/added back by the assessee while computing its income for the year in which the said provision was created i.e....
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....essee is vested with a right to raise an additional claim which though might not have been raised in the return of income, and the appellate authorities are entitled to consider and adjudicate the same. We find that the issue as to whether an assessee in the course of the assessment proceedings could be permitted to raise a claim, which would lead to exclusion of an income offered by him in his return of income had been deliberated upon at length by the Hon'ble High Court of Bombay in the case of CIT Vs. Pruthvi Brokers & Shareholders (P) Ltd. (2012) 349 ITR 336 (Bom). In its said judgment, it was held by the Hon'ble High Court that an assessee is entitled to raise additional grounds not merely in terms of legal submissions, but also additional claims to wit claims not made in the return filed by it. The Hon'ble High Court while concluding as hereinabove, had after referring to a long line of judicial pronouncements observed as under: "10. A long line of authorities establish clearly that an assessee is entitled to raise additional grounds not merely in terms of legal submissions, but also additional claims to wit claims not made in the return filed by it. It is necessary ....
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....r to make a fresh assessment. The Appellate Assistant Commissioner has, therefore, plenary powers in disposing of an appeal. The scope of his power is coterminus with that of the Income-tax Officer. He can do what the Income-tax Officer can do and also direct him to do what he has failed to do." (emphasis supplied) 6. The above observations are squarely applicable to the interpretation of Section 251(1)(a) of the Act. The declaration of law is clear that the power of the Appellate Assistant Commissioner is co-terminus with that of the Income Tax Officer, if that be so, there appears to be no reason as to why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the Income Tax Officer. No exception could be taken to this view as the Act does not place any restriction or limitation on the exercise of appellate power. Even otherwise an Appellate Authority while hearing appeal against the order of a subordinate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations if any prescribed by the statutory provisions. In the absence of any s....
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.... fast rule can be laid down for this purpose." [emphasis supplied] 13. The underlined observations in the above passage do not curtail the ambit of the jurisdiction of the appellate authorities stipulated earlier. They do not restrict the new/additional grounds that may be taken by the assessee before the appellate authorities to those that were not available when the return was filed or even when the assessment order was made. The sentence read as a whole entitles an assessee to raise new grounds/make additional claims :- "if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made..." "or" if "the ground became available on account of change of circumstances or law" The appellate authorities, therefore, have jurisdiction to deal not merely with additional grounds, which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed. The first part viz. "if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order w....
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....ch the appellate authorities may consider valid. In other words, the jurisdiction of the appellate authorities to consider a fresh or new ground or claim is not restricted to cases where such a ground did not exist when the return was filed and the assessment order was made. 16(A). A Full Bench of this Court in Ahmedabad Electricity Limited v. Commissioner of Income-tax, (1993) 199 ITR 351 considered a similar situation. In that case, the appellant/assessee did not claim a deduction in respect of the amounts it was required to transfer to contingencies reserve and dividend and tariff reserve either before the Income Tax Officer or before the Appellate Assistant Commissioner in appeal. Subsequently, this Court had, in Amalgamated Electricity Company Limited v. Commissioner of Income-tax, (1974) 97 ITR 334, held that such amounts represented allowable deductions on revenue account. The appellant, therefore, raised a new claim and additional grounds before the Tribunal in that connection. The Tribunal rejected the same. The second question which was raised in the reference before the Division Bench was as under :- "(2) Whether, on the facts and in the circumstances o....
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....o the assessee to claim the deduction and carry the matter higher. The words "could not have been raised", therefore, cannot be read strictly. Neither the Supreme Court nor the Full Bench of this Court meant them to be read strictly. They include cases where the assessee did not raise the claim for a reason found to be reasonable or valid by the appellate authorities in the facts and circumstances of a case. 17. The next judgment to which our attention was invited by Mr. Mistri is the judgment of a Bench of three learned Judges of the Supreme Court in National Thermal Power Company Limited v. Commissioner of Income-tax, (1997) 7 SCC 489 = (1998) 229 ITR 383. In that case, the assessee had deposited its funds not immediately required by it on short term deposits with banks. The interest received on such deposits was offered by the assessee itself for tax and the assessment was completed on that basis. Even before the Commissioner of Income-tax (Appeals), the inclusion of this amount was neither challenged by the assessee nor considered by the Commissioner of Income-tax (Appeals). The assessee filed an appeal before the Tribunal. The inclusion of the amount was not objected ....
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....n before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under Section 254 only to decide the grounds which arise from the order of the Commissioner of Income Tax (Appeals). Both the assessee as well as the Department have a right to file an appea1/cross- objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier." 18. In the case before us, the CIT(A) and the Tribunal have held the omission to claim the deduction of Rs. 40,00,000/- to be inadvertent. Both the appellate authorities held, after considering all the facts, that the assessee had inadvertently claimed a deduction of Rs. 20,00,000/- paid after the end of the year in question. We see no reason to interfere with this finding. We see less reason to interfere with the exercise of discretion by the appellate authorities in permitting the respondent to raise this claim. That the respondent is entitled to the deduction in law is admitted and, in any event, clearly established. In the c....
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.... Act to make an amendment in the return of income by modifying an application at the assessment stage without revising the return. The Commissioner of Income-tax (Appeals) allowed the assessee's appeal. The Tribunal, however, allowed the department's appeal. In the Supreme Court, the assessee relied upon the judgment in National Thermal Power Company Limited contending that it was open to the assessee to raise the points of law even before the Tribunal. The Supreme Court held :- "4. The decision in question is that the power of the Tribunal under section 254 of the Income-tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the Assessing Officer to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the Income-tax Appellate Tribunal under section 254 of the Income- t....
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....m of deduction of Rs. 40 lac. On further appeal by the revenue, the High court while upholding the relief allowed by the lower authorities observed, that even assuming that the Assessing Officer was not entitled to grant a deduction on the basis of a letter requesting an amendment to the return filed, the appellate authorities were entitled to consider the claim and to adjudicate the same. It was further observed by the Hon'ble High Court that an assessee is entitled to raise additional grounds not merely in terms of legal submissions, but also additional claims to wit claims not made in the return filed by it. The Hon'ble High Court while concluding as hereinabove, had observed, that the error in not claiming the deduction in the return of income was inadvertent and could not be inter alia faulted, as there was nothing on record that would suggest that the omission on the part of the assessee as regards raising of the correct claim of deduction u/s 43B was deliberate, mala-fide or otherwise. Accordingly, the Hon'ble High Court observing that the omission was inadvertent upheld the order of the Tribunal that had allowed the assessee's claim of deduction. Insofar the judgment of the....
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.... the assessment proceedings, the ITO should not have rejected it. On further appeal by the revenue, the Tribunal held that the AAC was fully justified in entertaining the claim for deduction under Sec. 80J because the claim was made by the assessee before the assessment was completed, i.e., during the assessment proceedings. On further appeal by the revenue, the Hon'ble High Court while upholding the view taken by the AAC and the Tribunal observed, that as the claim for deduction was raised by the assessee in the course of the assessment proceedings, the ITO was obliged to entertain it and consider the same on merits. In the case before the Hon'ble High Court of Madhya Pradesh in the case of Steel Ingots (P) Ltd. Vs. CIT (1996) 86 Taxman 440 (MP), the High Court while setting aside the order of the Tribunal which had declined to consider the grounds raised by the assessee on the linchpin that the same were not raised before the CIT(A) and had dismissed the appeal observed, that though the question was not raised by the assessee before the first appellate authority, but then, the question was one of law and had material bearing on the order of assessment. It was observed by the Hon'....
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....n every reasonable way, particularly in the matter of claiming and securing reliefs. It was observed by the Hon'ble High Court, as under: "The Central Board of Revenue, however, has issued a circular dated April 11, 1955, being Circular No. 14 (XL-35) of 1955. Under this circular it is stated as follows: "1 . ............ 2 . ............ 3. Officers of the Department must not take advantage of the ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the Department for it would inspire confidence in him that he may be sure of getting a square deal from the Department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessees on whom it is imposed by law, officers should- (a) draw their attention to any refunds or reliefs to which they appear to be clearly en....