Unclaimed relief can be sought only through a revised return and not through a letter or representation, rules Supreme Court.
Imagine a salaried assessee omitting to claim deduction towards profession tax or relief admissible on contribution to LIC. Or, take the case of an assessee deriving income from house property omitting to claim deduction of interest paid on the money borrowed for construction of the house. Naturally, the assessee can be expected to write to the income-tax authorities seeking relief not claimed in the return already filed. Usually, the Income-Tax Officer will grant appropriate deduction based on such requests. Not any more.
Goetze India case
The Supreme Court has said that such relief can be claimed only through a revised return and not by way of a letter or representation Goetze (India) Ltd. vs. CIT (2006; 284 ITR 323; SC). In this case, for the assessment year 1995-96, the company filed a return on November 30, 1995. It sent a letter to the I-T Department on January 12, 1998 seeking deduction which was not claimed in the return. The Assessing Officer disallowed the deduction on the ground that there was no provision under the Income-Tax Act to make the amendment in the return of income by filing an application at the assessment stage without revising the return.
The Court distinguished its earlier ruling in National Thermal Power Company Ltd. vs CIT (229 ITR 383), wherein it had upheld the power of the Income-Tax Appellate Tribunal to admit claims for deduction for the first time based on material on record.
A Full Bench of three judges of the Supreme Court rendered the earlier decision. The latest ruling is by a Division Bench. It implies that the Tribunal has wider powers than the Assessing Officer in the matter of admitting grounds for relief not claimed in the return of income.
Section 139 of the Income-Tax Act, 1961 permits the filing of a revised return if the taxpayer discovers any omission or wrong statement. Such revised return may be filed any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. This provision is meant to cover cases of omission to declare incomes in the original return. It is the rare taxpayer who resorts to the filing of revised return for claiming relief when it can always be claimed through a letter.
The present Section 143 was brought in by the Finance Act, 1999 with effect from June 1, 1999. Before its substitution, the old Section 143 (1)(a) had the following Proviso: "Provided that in computing the tax or interest payable by or refundable to the assessee, the following adjustment shall be made in the income or loss declared in the return, namely;
(ii) any loss carried forward, deduction, allowance or relief, which, on the basis of the information available in such return, accounts or documents, is prima facie admissible but which is not claimed in the return, shall be allowed." The above provision in the law was omitted when Section 143 was recast. Does this mean that the Assessing Officer can make an assessment and include items of income wrongly declared by a bona fide mistake or by denying a due relief just because the taxpayer is not aware of his rights? Is the taxpayer going to be compelled to seek a relief by filing a revised return?
`Assist the assessee'
There is an old Circular issued by the Central Board of Direct Taxes Circular No: 14 (XL-35) dated April 11, 1955. It states: "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 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."
The above circular was quoted with approval by the Kerala High Court in Parekh Bros. vs CIT (150 ITR 105), the Bombay High Court in Dattatraya Gopal Shette vs CIT (150 ITR 460) and by the Delhi Tribunal in Smt Gopi Devi. vs ITO (1989; Taxation 92 (4) - 101).
The Board should reiterate the above instructions once again.
T. C. A. Ramanujam
(The author is a former Chief Commissioner of Income-Tax.)