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M/s.Perlos Telecommunication and Electronic Components India (P) Ltd., Vs. Asst. Commissioner of Income Tax, Company Circle-V(1), CHENNAI
November, 21st 2013
          IN THE INCOME TAX APPELLATE TRIBUNAL
                    `A' BENCH : CHENNAI

       BEFORE Dr. O.K. NARAYANAN, VICE PRESIDENT &
          SHRI VIKAS AWASTHY, JUDICIAL MEMBER

                       I.T.A. No. 1037/Mds/2013
                      Assessment Year : 2008-09

M/s.Perlos Telecommunication           Asst.   Commissioner       of
and Electronic Components India        Income Tax,
(P) Ltd.,                           Vs Company Circle-V(1),
Plot No. 1A, Nokia Telecom             CHENNAI
Special Electronic Zone,
SIPCOT Indl. Park,
Phase-III, Sriperumbudur,
CHENNAI ­ 602 105.

[PAN: AADCP 9246 K]

  (Appellant)                                (Respondent)

              Appellant by : Shri Pawan Kumar Chakrapani, CA
            Respondent by : Shri Shaji P. Jacob, Addl.CIT

            Date of Hearing : 28-10-2013
    Date of Pronouncement : 18-11-2013


                             ORDER


 PER VIKAS AWASTHY, JUDICIAL MEMBER:


       The appeal of the assessee is against the order of the

 Commissioner    of    Income     Tax(Appeals)-V,   Chennai   dated

 28-02-2013 relevant to the Assessment Year (AY) 2008-09.
                                 2                  I.T.A. No. 1037/Mds/2013




2.   The assessee is a company incorporated under the

provisions of the Companies Act, 1956 and is in the business of

manufacture   and   sale   of   plastic   moulded    and      electronic

components for use in telecommunication industry.               For the

assessment year under reference, the assessee filed its return of

income on 29-09-2008 declaring loss of `22,06,78,103/-.               The

assessee's return of the income was selected for scrutiny and

notice u/s. 143(2) of the Income Tax Act, 1961 (herein after

referred to as `the Act') was issued to the assessee on 13-08-

2009. During the course of assessment, the assessee claimed

further expenses to the tune of `10,40,85,702/- which were

erroneously dis-allowed u/s.37(7) of the Act by the assessee.

Thus, the assessee claimed loss of `32,47,63,805/- against the

loss claimed in the original return of income.        The Assessing

Officer vide order dated 23-12-2011 passed u/s.143(3) r.w.s.

144C(3), did not consider the additional expenses claimed by the

assessee.



     Aggrieved against the assessment order, the assessee

preferred an appeal before the CIT(Appeals). The CIT(Appeals)

vide impugned order dated 28-02-2013, dismissed the appeal of

the assessee on the ground that, for additional claim of expenses
                                  3                 I.T.A. No. 1037/Mds/2013







filing of revised return is mandatory. In the absence of revised

return, the Assessing Officer has rightly dis-allowed the claim of

the assessee.    The assessee has come in second appeal before

the Tribunal assailing the order of the CIT(Appeals).



3.    Shri Pawan Kumar Chakrapani, appearing on behalf of the

assessee submitted that the assessee had suffered a loss of

`32.47 Crores, at the time of filing of return of income, the staff of

the assessee-company while            preparing computation sheet,

erroneously mentioned the loss as `22,06,78,103/- . The error

came to the notice of the assessee during the course of scrutiny

assessment proceedings. The AR of the assessee immediately

pointed the error to the Assessing Officer and filed the revised

computation of income claiming additional loss of `10,40,85,702/-.

However, the Assessing Officer dis-allowed the claim of the

assessee on the ground that such claim can be considered only by

way of filing of revised return of income within the due date as

provided under the provisions of the Act. The ld. AR submitted

that the assessee has not raised any fresh claim, it was in the

course of preparing computation of income certain expenditures

were erroneously left out.     The error was rectified during the

course   of   assessment     proceedings     by   preparing       correct
                                  4                 I.T.A. No. 1037/Mds/2013




computation and that the same was furnished to the Assessing

Officer.   The ld. AR further submitted that rectification in

computation of income can be done without filing of revised return

of income. In order to support his contentions, ld. AR relied on the

judgment of the Hon'ble Bombay High Court in Income Tax Appeal

No. 3908 in the case of CIT Vs. M/s. Pruthvi Brokers &

Shareholders Pvt. Ltd., decided on 21-06-2012.



4.    On the other hand, Shri Shaji P. Jacob appearing on behalf

of the Revenue submitted that no additional claim can be

entertained by the Assessing Officer by way of filing simple letter.

If there was any error in the return of income, the assessee could

have rectified it by filing revised return of income within the period

specified under the provisions of the Act. However, the assessee

failed to file revised return, to claim alleged additional loss. The

claim of the assessee cannot be entertained merely on the basis

for simple letter. In order to support his contentions, the DR relied

on the judgment of Hon'ble Madras High Court in Tax Case Appeal

No. 344 of 2005 in the case of CIT Vs. M/s. Shriram Investments

decided on 16-06-2011.
                                  5                 I.T.A. No. 1037/Mds/2013




5.    Both sides heard.      We have perused the order of the

authorities below as well as the decisions relied on by the

representatives of both the sides. It is an admitted fact that the

assessee has not filed revised return of income to claim additional

loss of `10,40,85702/- which was alleged to be erroneously not

claimed at the time of filing of original return of income. During the

course of assessment proceedings, the assessee filed revised

computation of income to claim aforesaid additional loss.             The

contention of the Revenue is that without filing revised return of

income within due date as prescribed under the Act, the assessee

cannot claim any expenses/deduction. In support of this view, the

CIT(Appeals) has relied on the judgment of the Hon'ble Apex

Court in the case of Goetze India Limited Vs. CIT reported as 284

ITR 323 (SC) and the DR has relied on the judgment of the

Hon'ble Madras High Court in the case of CIT Vs. M/s. Shriram

Investments (supra). In the case of Goetze India Limited Vs. CIT

(supra), the Hon'ble Apex Court has held that the assessing

authority is not entitled to entertain a claim for deduction otherwise

then by filing a revised return. The Hon'ble Madras High Court in

the case of CIT Vs. M/s. Shriram Investments (supra) was dealing

with the issue relating to the claim raised through a revised return

filed after the expiry of the time given u/s.139(5) of the Act.
                                  6                  I.T.A. No. 1037/Mds/2013




Aforesaid both the judgments were dealing with a different issue.

In the instant case, the assessee had not made any fresh claim.

The assessee had claimed certain expenditure allowable u/s.37

which were erroneously left out while filing the original return of

income.    For claiming these expenditure the assessee had

submitted fresh computation of income before Assessing Officer

during assessment proceedings. Thus, the decisions relied upon

by the Revenue are distinguishable from the issue in hand.



6.   The ld. AR of the assessee relied on the judgment of the

Hon'ble Bombay High Court in the case of CIT Vs. M/s. Pruthvi

Brokers & Shareholders Pvt. Ltd., (supra).         In the said case

following questions of law were raised before the Hon'ble High

Court for consideration:



     "(A) Whether an assessee can amend a return filed by him for
     making additional claim for deduction other than filing a
     revised return ?


     (B) Whether, on the facts and circumstances of the case, the
     hon'ble Income-tax Appellate Tribunal, in law, was right in
     holding that a claim of deduction not made in the original
     return and not supported by a revised return, is admissible ?
                                   7                  I.T.A. No. 1037/Mds/2013



     (C) Whether, on the facts and in the circumstances of the
     case, the hon'ble Tribunal, in law, was right in not appreciating
     the fact that the Assessing Officer has no power to entertain a
     claim made by an assessee after filing a original return
     otherwise than by filing a revised return ?"



The Hon'ble High Court answered the questions in affirmative.

While answering these questions, the Hon'ble Court took into

consideration the judgments of the Hon'ble Supreme Court of India

in the case of Goetze India Limited Vs. CIT (supra) and the

judgment in the case of National Thermal Power Co. Ltd., Vs., CIT

reported as 229 ITR 383 and various other judgments.                    The

findings of the Hon'ble High Court on the issue are as under :


      "18. In the case before us, the Commissioner of Income-tax
     (Appeals) and the Tribunal have held the omission to claim the
     deduction of Rs. 40 lakhs to be inadvertent. Both the appellate
     authorities held, after considering all the facts, that the
     assessee had inadvertently claimed a deduction of Rs. 20
     lakhs 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.
                                8               I.T.A. No. 1037/Mds/2013



19. The orders of the Commissioner of Income-tax (Appeals)
and the Tribunal clearly indicate that both the appellate
authorities had exercised their juris-diction to consider the
additional claim as they were entitled to in view of the various
judgments on the issue, including the judgment of the
Supreme Court in National Thermal Power Co. Ltd. v. CIT
[1998] 229 ITR 383 (SC). This is clear from the fact that these
judgments have been expressly referred to in detail by the
Commissioner of Income-tax (Appeals) and by the Tribunal.


20. We wish to clarify that both the appellate authorities have
themselves considered the additional claim and allowed it.
They have not remanded the matter to the Assessing Officer
to consider the same. Both the orders expressly direct the
Assessing Officer to allow the deduction of Rs. 40 lakhs under
section 43B of the Act. The Assessing Officer is, therefore,
now only to compute the respondent's tax liability which he
must do in accordance with the orders allowing the
respondent a deduction of Rs. 40 lakhs under section 43B of
the Act.


21. The conclusion that the error in not claiming the deduction
in the return of income was inadvertent cannot be faulted for
more than one reason. It is a finding of fact which cannot be
termed perverse. There is nothing on record that militates
against the finding. The appellant has not suggested, much
less established that the omission was deliberate, mala fide or
even otherwise. The inference that the omission was
inadvertent is, therefore, irresistible.
                             9                  I.T.A. No. 1037/Mds/2013



22. It was then submitted by Mr. Gupta that the Supreme
Court had taken a different view in Goetze (India) Ltd. v. CIT
[2006] 284 ITR 323 (SC) ; [2006] 157 Taxman 1. We are
unable to agree. The decision was rendered by a Bench of
two learned judges and expressly refers to the judgment of the
Bench of three learned judges in National Thermal Power Co.
Ltd. v. CIT [1998] 229 ITR 383 (SC). The question before the
court was whether the appellant-assessee could make a claim
for deduction, other than by filing a revised return. After the
return was filed, the appellant sought to claim a deduction by
way of a letter before the Assessing Officer. The claim,
therefore, was not before the appellate authorities. The
deduction was disallowed by the Assessing Officer on the
ground that there was no provision under the Act to make an
amendment in the return of income by modifying an
application at the assessment stage without revising the
return. The Com-missioner 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 Co. Ltd.
v. CIT [1998] 229 ITR 383 (SC) contending that it was open to
the assessee to raise the points of law even before the
Tribunal. The Supreme Court held (page 324 of 284 ITR) :





      "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
                              10                  I.T.A. No. 1037/Mds/2013



        revised return. In the circum-stances 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 Appel-late 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, the Supreme Court made it
clear that the issue in the case was limited to the power of the
assessing authority and that the judgment does not impinge
on the power of the Tribunal under section 254.


24. A Division Bench of the Delhi High Court dealt with a
similar submission in CIT v. Jai Parabolic Springs Ltd. [2008]
306 ITR 42 (Delhi). The Division Bench, in paragraph 17 of the
judgment held that the Supreme Court dismissed the appeal
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. In paragraph 19, the Division Bench
held that there was no prohibition on the powers of the
Tribunal to entertain an additional ground, according to the
Tribunal, arises in the matter and for the just decision of the
case.
                                   11                  I.T.A. No. 1037/Mds/2013



     25. In the circumstances, it is not necessary to decide the
     other questions raised by Mr. Mistri.


     26. The appeal is, therefore, dismissed".


7.   At the time of assessment proceedings, the Assessing

Officer is duty bound to make additions/dis-allowances in the

income returned by the assessee in case the assessee has

claimed excessive expenditure or wrong deduction or has

suppressed his income.        Similarly, where it is apparent from

records that certain expenses have not been claimed by the

assessee which the assessee is legally entitled to claim, it is the

duty of the Assessing Officer to guide the assessee accordingly.

The CBDT vide Circular dated April 11,1955 has directed the

Assessing Officer not to take advantage of the assessee's

ignorance and/or mistake. The relevant extract of the circular is

reproduced herein below:


     "3. Officers of the Department must not take advantage of
     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
                                  12                 I.T.A. No. 1037/Mds/2013



     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
     assessee 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 entitled but which they have omitted to
     claim for some reason or other ;


     (b) freely advise them when approached by them as to their
     rights and liabilities and as to the procedure to be adopted for
     claiming refunds and reliefs."



In the instant case, the assessee had filed revised computation of

income before the Assessing Officer at the time of assessment

proceedings claiming expenditure which were erroneously dis-

allowed u/s.37(7) while filing the return of income.               In our

considered opinion, the assessee has not filed any fresh claim. It

is not the case where the assessee is claiming additional

deduction or exemption. In the Income Tax Act, deductions and

exemptions are dealt with in separate chapters of the Act and have

different connotation. The assessee is only claiming expenditure

which was left out at the time of filing of original return. During

assessment proceedings, the Assessing Officer has power to

make upward and downward adjustment in the income returned by
                                13               I.T.A. No. 1037/Mds/2013




the assessee.     Where the assessee has not claimed certain

expenditures clearly evident from records and it comes to the

knowledge of Assessing Officer at the time of assessment

proceedings, the Assessing Officer should grant relief to the

assessee.



8.     In view of the facts and circumstances of the case and the

judgment of the Hon'ble Bombay High Court in the case of CIT Vs.

M/s. Pruthvi Brokers & Shareholders Pvt. Ltd., (supra), we are of

the considered opinion, that the Assessing Officer would have

acted well within his jurisdiction by taking into consideration the

rectified computation of income submitted by the assessee at the

time of assessment proceedings. The impugned order is set aside

and the appeal of the assessee is allowed.



     Order pronounced on Monday, the 18th November, 2013
at Chennai.



           Sd/-                                      Sd/-
(Dr. O.K. NARAYANAN)                         (VIKAS AWASTHY)
  VICE PRESIDENT                             JUDICIAL MEMBER

Dated: 18th November, 2013
TNMM


Copy to: Appellant/Respondent/CIT(A)/CIT/DR

 
 
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