An assessee can revise its return of income under section 139(5) on discovery of any omission or wrong statement therein. The revised return replaces and substitutes the original return. Since revised returns takes place of original return, the A.O is bound to take cognizance of the revised return.
The return can be revised at any time before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. As such, if the omission or wrong statement is discovered before the time to revise return is over, assessee can definitely be benefitted by this provision. However, where it is discovered after the expiry of the time to revise the return, there is no provision in the act to set the omission or error right.
During scrutiny assessment, when assessee comes across such omission or wrong statement, they generally claim the expenditure or the benefit right at the stage of assessment proceedings. However, there is no provision in the act, which authorizes the assessing officer to entertain additional claim which were not claimed in the return. Therefore, the claim is rejected by the assessing officer.
The question which arises is, whether assessee can raise the question of claiming such unclaimed deduction during assessment or appellate proceedings.
The issue came before the Hon’ble Supreme Court in the case of Goetze (India) Ltd. v. Commissioner of Income-tax [2006] 157 Taxman 1 (SC). In this case, the return was filed on 30-11-1995 by the company. On 12-1-1998, company sought to claim a deduction by way of a letter before the Assessing Officer. The deduction was disallowed by the Assessing Officer on the ground that there was no provision under the Income-tax Act to make amendment in the return of income by moving an application at the assessment stage without revising the return. Commissioner (Appeals) decided in favour of the assessee, whereas ITAT decided in favour of the revenue.
Before Supreme Court, the question raised was whether the assessee could make a claim for deduction other than by filing a revised return. Court held in favour of revenue holding that to claim any deduction, revision of the return is required.
Similar issue was raised earlier before the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383. The issue in the case was that the assessee company had deposited its funds in short-term deposits with banks. Interest received on such deposits was offered by the assessee for tax assessment and the assessment was completed on that basis. Before the Commissioner (Appeals), number of grounds were taken by the assessee challenging the assessment. However, the inclusion of the interest amount was neither challenged by assessee nor considered by the Commissioner (Appeals). The inclusion of aforesaid amount was not challenged in the grounds of appeal as originally filed before the Tribunal. However, the assessee challenged the same in a forwarding letter. The Tribunal declined to entertain the additional grounds.
The question reframed by the Hon’ble Supreme Court was as below:
“Where on the facts found by the authorities below a question of law arises (though not raised before the authorities) which bears on the tax liability of the assessee, whether the Tribunal has jurisdiction to examine the same?”
Court decided in favour of the assessee holding that “The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law……… we do not see any reason why the assessee should be prevented from raising a question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised…………………… But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. The reframed question, therefore, is answered in the affirmative, i.e., the Tribunal has jurisdiction to examine a question of law which arises from the facts as found by the authorities below and having a bearing on the tax liability of the assessee.
Decision in National Thermal Power Co. Ltd. and Goetze (India) Ltd. distinguished
The facts of both the cases were almost similar. However, in National Thermal Power Co. Ltd. the decision was in favour of assessee, whereas in other it was in favour of revenue.
In National Thermal Power Co. Ltd., the question raised was “whether the Tribunal has jurisdiction to examine an issue raised before it for the first time”. The decision was affirmative.
In Goetze (India) Ltd., the question was whether the assessee could make a claim for deduction before the assessing officer other than by filing a revised return. The decision was negative and was restricted to the examination of the authority of the assessing officer. The question of examination of the issue was not at all raised before the court.
Hon’ble Delhi High Court dealt with a similar submission in CIT v. Jai Parabolic Springs Ltd. [2008] 306 ITR 42. The court, held that the Supreme Court dismissed the appeal in Goetze India Limited, making it clear that the decision was limited to the power of the assessing authority to entertain a claim for deduction otherwise than by a revised return and did not impinge on the powers of the Tribunal. It was also held that there was no prohibition on the powers of the Tribunal to entertain an additional ground which, according to the Tribunal, arises in the matter and for the just decision of the case.
Conclusion:
Though the assessing officer has not been conferred with any power to entertain any deduction or benefit which has not been claimed by the assessee in its income tax return but if these deduction or benefit arising out of the facts on records are claimed at appellate level these claim can be entertained.
Hon’ble Supreme Court in the case of Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688, while dealing with the powers of the Appellate Assistant Commissioner observed that an appellate 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 statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income-tax Officer. This court further observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The Appellate Assistant Commissioner must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The Appellate Assistant Commissioner should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also.