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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