TaxTMI 
TaxTMI 
2022 (2) TMI 1459
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....tter to the file of the AO with direction to assess the income/loss of the assesses on the basis of audited financial statements and other material in accordance with law, vide appellate order dated 29.03.2012 in ITA No. 601/Coch/2010 for ay: 2002-03. We have heard this appeal in open court. 2. The Revenue has raised the following grounds of appeal in memo of appeal filed with the tribunal, in ITA No. 742/Coch/2019 for ay: 2002-03, which is a second round of litigation before tribunal, as reproduced hereunder: "1. The Learned CIT (Appeals), Thiruvananthapuram erred in concluding that "the action of the Assessing Officer is without any basis". The Assessing officer has denied the claim of carry forward of loss as per Section 80 of the Income tax Act, by which "no loss which has not been determined in pursuance of a return filed in accordance with the provisions of section 139(3) of the Act, shall be carried forwarded and set off .....". 2. The Learned CIT (Appeals), Thiruvananthapuram erred in concluding that" since the appellant had filed return on time it is eligible to carry forward the business loss also". The appellant filed the original return in time by claiming the carr....
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....gs against the assessee for infringement of provisions of Section 44 AB of the 1961 Act, for not getting tax-audit done within the prescribed time. The AO completed assessment vide assessment order dated 28.02.2005 in first round of litigation by accepting returned loss but with the rider that the loss returned cannot be allowed to be carried forward on the ground that the same was arrived provisionally without audit. The assessee being aggrieved filed first appeal, the ld. CIT(A) was pleased to allow the appeal of the assessee. Thereafter, the matter reached tribunal at behest of Revenue in the first round of litigation, and the tribunal was pleased to pass an appellate order in ITA No. 601/Coch/2010 for ay: 2002-03, vide appellate order dated 29.03.2012, wherein tribunal set aside the appellate order passed by ld. CIT(A) and restored the matter to the file of AO with directions to assess the income/loss of the assessee on the basis of audited financial statements and other material in accordance with law, by holding as under: "5. We have heard the rival contentions. Admittedly, the return of income was filed by the assessee with provisional financial statements, since the statu....
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..... 1,62,04,983/- was allowed by the AO, in the second round of litigation . The matter again travelled to Ld. CIT(A) at the behest of the assessee, who was pleased to hold vide appellate order dated 10.10.2019 in second round of litigation, that the assessee has filed return of income in time and hence the assessee will be eligible to carry forward business loss also. The Ld. CIT(A) observed that the ITAT directed the AO to assess the loss of the assessee on the basis of the audited financial statements and other material in accordance with law. The assessee having filed the return of income within prescribed time although on the basis of the un- audited accounts,and the directions of the tribunal in the first round, was to allow loss on the basis of audited accounts . The ld. CIT(A)held that the AO has exceeded his mandate to determine the loss as per the audited books of accounts and the action of the AO in denying the carry forward of loss is without any basis 5. Aggrieved, the Revenue has come in appeal before the tribunal. The Ld.Sr.DR submitted that this is the second round of litigation and the AO has again refused to allow carry forward of business loss while loss on accoun....
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....nder sub- section (1) of section 72 or sub-section (2) of section 73 or sub-section (1)[or sub- section (3)] of section 74 [or sub-section (3) of section 74 A]." "139. 1[(1) Every person 2,- (a) being a company; or (b) being a person other than a company, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form 3 and verified in the prescribed manner and setting forth such other particulars as may be prescribed: Provided that a person referred to in clause (b), who is not required to furnish a return under this sub- section and residing in such area as may be specified by the Board in this behalf by notification 4 in the Official Gazette, and who at any time during the previous year fulfils any one of the following conditions, namely:- (i) is in occupation of an immovable property exceeding a specified floor area, whether by way of ownership, tenancy or otherwise, as may be speci....
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....r under the head "Profits and gains of business or profession" or under the head "Capital gains" and claims that the loss or any part thereof should be carried forward under sub-section (1) of section 72, or sub-section (2) of section 73, or sub-section (1) [or sub-section (3)] of section 74,[or sub-section (3) of section 74 A], he may furnish, within the time allowed under sub-section (1)[***], a return of loss in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, and all the provisions of this Act shall apply as if it were a return under sub-section (1). ***** ***** [(9) Where the[Assessing] Officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days from the date of such intimation or within such further period which, on an application made in this behalf, the[Assessing] Officer may, in his discretion, allow; and if the defect is not rectified within the said period of fifteen days or, as the case may be, the further period so allowed, then, notwithstanding any....
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....rt 59[and, where an audit of cost accounts of the assessee has been conducted, under section 233B60 of the Companies Act, 1956 (1 of 1956), also the report under that section]; (f) where regular books of account are not maintained by the assessee, the return is accompanied by a statement indicating the amounts of turnover or, as the case may be, gross receipts, gross profit, expenses and net profit of the business or profession and the basis on which such amounts have been computed, and also disclosing the amounts of total sundry debtors, sundry creditors, stock-in-trade and cash balance as at the end of the previous year.] The perusal and conjoint reading of aforesaid provisions reveal that if the taxpayer claims that it has sustained loss under the head profit and gains of business or profession or under the head capital gains, and it claims to carry forwards and set off such loss under Section 72(1), 73(2), 74(1), 74(3) or 74 A(3), it is required to file its return of income within the prescribed time u/s 139(1) of the 1961 Act which return of income is to be in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribe....
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....in stipulated time, then the return will be treated as invalid return and it will be deemed that the assessee has never filed return of income. The Section 139(9) further grants power to AO to condone the delay and treat the return as valid, even if the said defect is not rectified within the period stipulated by AO in its notice u/s 139(9) of the 1961 Act, but the said defect stood rectified before assessment is completed. It is admitted position that the AO did not issue any such notice u/s 139(9) to the assessee calling assessee to rectify the aforesaid defect. It is also an admitted position that the audited accounts and tax- audit return was filed by the assessee during the course of assessment proceedings, albeit the assessee did not file revised return of income. Further, as held by Hon'ble Bombay High Court in the case of CIT v. Pruthvi Brokers & Shareholders (2012) 23 taxmann.com 23(Bom), the assessee can always present its claim before the appellate authorities for the first time even if the said claim is not made in the return of income filed with the Revenue, wherein Hon'ble Bombay High Court held as under: "10. A long line of authorities establish clearly that an ass....
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....lause (b) thereof he may set aside the assessment and direct the Income Tax Officer to make a fresh assessment. The Appellate Assistant Commissioner has, therefore, plenary powers in disposing of an appeal. The scope of his power is co-terminus 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 limita....
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....ples or any hard and 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 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 was made..." c....
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....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 Ltd. v. CIT [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 Co. Ltd. v. CIT [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 of the case, the Tribunal erred in not allowing the assessee leave to raise in its own appeals additional grounds and in the departmental....
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....em 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 Co. Ltd. v. CIT [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 to even in the grounds of appeal as originally filed before the Tribunal. Subsequently, the assessee by a letter, raised additional grounds to the effect that the said sum could not be included in the total income. The assessee contended that on a erroneous admissio....
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....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 circumstances, the respondent ought not be prejudiced. 19. The orders of the CIT(A) and the Tribunal clearly indicate that both the appellate authorities had exercised their jurisdiction to consider the additional claim as they were entitled to in view of the various judgments on the issue, including the judgment of the....
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....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-tax Act, 1961. There shall be no order as to costs." [Emphasis supplied] 23. It is clear to us that the Supreme Court did not hold anything contrary to what was held in the previous judgments to the effect that even if a claim is not made before the assessing officer, it can be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim has not been negated by the Supreme Court in this judgment. In fact, th....