Entertainment of Additional Claim - Powers of Assessing & Appellate authorities
NOVEMBER 26, 2012
MANY a times, assessees mistakenly fail to claim certain deductions/exemptions in the Income tax returns filed by them. Also there are situations wherein the assessees realise that additional claim for deductions/exemptions could have been made for a particular deduction/exemption on account of judicial pronouncements delivered after the filing of return of income. In such situations, if the time limit for filing revised returns has already expired, then assessees tend to make additional claim for deductions/exemptions by filing a letter with the assessing authority/appellate authorities during the course of assessment or appeals requesting them to grant the benefit of deductions/exemptions.
The question that arises for consideration in such cases is whether the assessing authority or appellate authorities have powers to entertain additional claim for deductions/exemptions, which are not claimed in the return of income?
Powers of the assessing authority to entertain additional claim:
Hon'ble Supreme Court in the case of Goetze (India) Ltd. vs. Commissioner of Income Tax (2006-TIOL-198-SC-IT) had an occasion to deal this issue. In this case, Hon'ble Supreme Court held that additional claim cannot be made before the assessing officer, as there is no provision under the Income Tax Act to make amendment in the return without filing a revised return. Hon'ble Supreme Court further stated that this decision was limited to the power of assessing authority to entertain claim for deduction other wise than by revised return and it does not impinge on the power of the Tribunal.
Hence based on the above decision of the Hon'ble Supreme Court, Assessing officer does not have a power to entertain additional claim, unless such a claim is made in the revised return filed within the due date for revised return.
Powers of the Commissioner (Appeals) to entertain additional claim:
Powers of the Commissioner (A) are enshrined in Section 251 of the Income Tax Act. Section 251(1) (a) states that the Commissioner (A) in disposing of an appeal against an order of assessment, may confirm, reduce, enhance or annul the assessment.
Three member bench of Hon'ble Supreme Court in the case of CIT vs. Kanpur Coal Syndicate (2002-TIOL-828-SC-IT-LB) discussed the scope of section 31(3) (a) of the Income Tax Act, 1922 [which is almost identical to section 251(1) (a)] and had held as under:
"If an appeal lies, section 31 of the Act describes the powers of the Appellate Assistant Commissioner in such an appeal. Under section 31(3)(a) in disposing of such an appeal the Appellate Assistant Commissioner may, in the case of an order of assessment, confirm, reduce, enhance or annul the assessment; under clause (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 conterminous 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"
Hence the Hon'ble Supreme Court in the case of CIT vs. Kanpur Coal Syndicate (supra) held that the Commissioner (A) has the powers to entertain additional claim.
However, a Two Member bench of Hon'ble Supreme Court in the case of Addl. CIT vs. Gurjargravures P. Ltd. [(1978) 111 ITR 1 SC] took a different view and held that in absence of any claim for deduction made by the assessee before the Income Tax officer, the assessee will not be entitled to claim such deduction before Commissioner (A). In this decision, the Hon'ble Supreme Court further held that:
"The above observations do not rule out a case for raising an additional ground before the Appellate Assistant Commissioner 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 that the ground became available on account of change of circumstances or law. There may be several factors justifying raising of such new plea in appeal, and each case has to be considered on its own facts. If the Appellate Assistant Commissioner is satisfied he would be acting within his jurisdiction in considering the question so raised in all its aspects. Of course, while permitting the assessee to raise an additional ground, the Appellate Assistant Commissioner should exercise his discretion in accordance with law and reason. He must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The satisfaction of the Appellate Assistant Commissioner depends upon the facts and circumstances of each case and no rigid principles or any hard and fast rule can be laid down for this purpose."
Three member bench of Hon'ble Supreme Court in the case of Jute Corporation of India Ltd. Vs. Commissioner of Income Tax and another [(1991) 187 ITR 0688 SC] had an occasion to deal with both the above judgments. After considering the judgement of CIT vs. Kanpur Coal Syndicate (2002-TIOL-828-SC-IT-LB), it held as under :
"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 coterminus 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 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 appears to be no good reason and none was placed before us 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."
Hon'ble Supreme Court in above case also agreed that the view taken by the two member bench in the case of Addl. CIT vs. Gurjargravures P. Ltd. (supra) appeared to be in conflict with the view taken by the three member bench in the case of CIT vs. Kanpur Coal Syndicate (supra). The decision of the three member bench in the case of CIT vs. Kanpur Coal Syndicate was not brought to the notice of the two member bench in the case of Addl. CIT vs. Gurjargravures P. Ltd. (supra). The Hon'ble Supreme Court further held that the decision of the three member bench would prevail and hold good.
Hence the Hon'ble Supreme Court upheld the powers of the Commissioner (A) to entertain additional claims. This judgment has been followed by various high courts. Recently Bombay High Court in case of CIT vs. M/s. Pruthvi Brokers and Shareholders Pvt. Limited (2012-TIOL-489-HC-MUM-IT) relying on the above judgments held that Commissioner (A) has the power to entertain additional claim.
Hence based on the abovementioned judicial pronouncements, Commissioner (A) has powers to entertain additional claim on the issues pertaining to question of facts or law, investigate the correctness of the claim and then at its discretion decide whether to entertain or reject such a claim.
Powers of the Tribunal to entertain additional claim:
Section 254(1) of the Income Tax Act states that the Appellate Tribunal, may after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit.
Hon'ble Supreme Court in the case of National Thermal Power Company Limited (NTPC) vs. Commissioner of Income Tax (2002-TIOL-279-SC-IT) while dealing with this issue, held as under:
"Under section 254 of the Income-tax Act, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. 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. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department has a right to file appeal/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………..…The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner of Income-tax (Appeals) takes too narrow a view of the powers of the Appellate Tribunal. 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"
Hon'ble Supreme Court in the above judgment held that the Tribunal has the discretion to allow or not allow any new ground to be raised. It further held that Tribunal has the right to entertain new grounds, in respect of the matters, wherein the facts are already on records.
This judgment has been followed by various High Courts. Recently Bombay High Court in the case of CIT vs. M/s. Pruthvi Brokers and Shareholders Pvt. Limited = (2012-TIOL-489-HC-MUM-IT) relying on the above judgment held that Tribunal has the power to entertain additional claims.
The powers of the Tribunal to entertain additional claim is discretionary and is only in respect of those issues wherein relevant facts are on record. Hence this would be possible mainly when additional claim is made on account of question of law arising from the facts which are on record in the assessment proceedings.
Conclusion:
Assessing officer does not have powers to entertain additional claim for deductions/exemptions, unless the return of income is revised by the assessee.Commissioner (A) has the powers to entertain additional claim for deductions/exemptions on the issues pertaining to question of facts or law.Tribunal has the powers to entertain additional claim for deductions/exemptions, on the question of law, in respect of issues wherein relevant facts are on record.
INCOME TAX REPORTS (ITR)
Business expenditure --Deduction only on actual payment--Disallowance--Tax, duty, cess or fees not actually paid--Electricity dues--Not fees--Cannot be disallowed--Income-tax Act, 1961, s. 43B-- CIT v . Andhra Ferro Alloys P. Ltd . (AP) . . . 255
----Disallowance--Deduction only on actual payment--Law applicable--Effect of amendment of section 43B by Finance Act, 2003--Amendment retrospective--Provident fund and Employees’ State insurance contributions made after due date but before filing of return--Payments deductible--Income-tax Act, 1961, s. 43B-- CIT v . Manoj Kumar Singh (All) . . . 230
Business loss --Bad debt--Amount disallowed as bad debt under section 36(2)--Claim for deduction could be made as business loss--Income-tax Act, 1961, ss. 28, 36(2)-- Harshad J. Choksi v . CIT (Bom) . . . 250
Capital gains --Computation of capital gains--Valuation of property--Valuation of property by stamp duty authorities higher than declared value--Reference to Departmental Valuation Officer--Report of Departmental Valuation Officer binding on Assessing Officer--Income-tax Act, 1961, s. 50C-- CIT v . Dr. Indra Swaroop Bhatnagar
(All) . . . 210
(All) . . . 210
Charitable purposes --Charitable trust--Trust running educational institution--Trust publishing magazines dealing with education--Ancillary to main object of running educational institution--Trust entitled to exemption--Income-tax Act, 1961, ss. 2(15), 11(5), 13-- CIT v. Vijaya Vani Educational Trust (AP) . . . 280
Exemption --New industrial undertaking in free trade zone--Exemption granted to proprietary concern--Conversion of proprietorship into partnership--Partnership entitled to exemption--Circular No. 7 of 2003, dated 5-9-2003--Income-tax Act, 1961, s. 10A-- CIT v . Bullet International (All) . . . 267
Income from undisclosed sources --Adjustment of entries--No evidence of undisclosed income--Amount misappropriated by cashier but returned later--No evidence of excess consumption of fuel--Additions to income could not be made--Income-tax Act, 1961-- CIT v. Raghuraji Agro Industries Pvt. Ltd . (All) . . . 260
Industrial undertaking --Special deduction--Set off of unabsorbed depreciation of eligible business against income from other non-eligible business--Windmill for power generation--Depreciation--Set off of depreciation loss/income from power generation business against profits of manufacturing of copper wires--Proper--Income-tax Act, 1961, s. 80-IA-- CIT v. Swarnagiri Wire Insulations Pvt. Ltd . (Karn) . . . 245
Interpretation of taxing statutes --Words used in provision--Principles of noscitur a sociis and ejusdem generis-- CIT v. O. R. Distilleries Ltd . (AP) . . . 215
Investment allowance --Machinery used in manufacture of denatured spirit--Denatured spirit not covered by Eleventh Schedule--Assessee entitled to investment allowance--Income-tax Act, 1961, s. 32A, Sch. XI, item 1-- CIT v. O. R. Distilleries Ltd .
(AP) . . . 215
(AP) . . . 215
Non-resident --Shipping--Effect of Circulars dated 2-4-1982 and 20-12-1995--Ship belonging to company in U. A. E.--Profits not assessable in India--Income-tax Act, 1961, s. 172(3)--Circular No. 333, dated 2-4-1982--Circular 732, dated 20-12-1995--Double Taxation Avoidance Agreement between India and the U. A. E., art. 8-- Director of Income-tax (International Taxation) v . Venkatesh Karrier Ltd .
(Guj) . . . 124
(Guj) . . . 124
Penalty --Business expenditure--Disallowance--Payments covered by section 40(a)(ia)--Requirement that tax deducted be deposited with Government within time prescribed--Failure to deposit tax deducted at source--Assessee’s contention that issue is debatable in view of Special Bench decision that amendment in section 40(a)(ia) not retrospective--Tribunal not considering submission--Matter remanded--Income-tax Act, 1961, ss. 40(a)(ia), 271(1)(c)-- CIT v . Shyam Narayan and Bros.
(Bom) . . . 145
(Bom) . . . 145
----Concealment of income--Furnishing inaccurate particulars--Assessing Officer should record in assessment order his satisfaction that assessee had either concealed income or furnished inaccurate particulars of income--No such satisfaction recorded--No penalty leviable--Provision that direction for initiation of penalty proceedings shall be deemed satisfaction--Not to apply to earlier years--Income-tax Act, 1961, ss. 271(1)(c), (1B)-- Chennakesava Pharmaceuticals v. CIT (AP) . . . 196
Precedent --Effect of decision of Supreme Court in CIT v. Alom Extrusions Ltd. [2009] 319 ITR 306 (SC)-- CIT v . Manoj Kumar Singh (All) . . . 230
----Effect of decision of Supreme Court in Yogiraj Charity case [1976] 103 ITR 777-- CIT v . Vijaya Vani Educational Trust (AP) . . . 280
Reassessment --Notice--Exemption--Export of computer software--Deduction granted for four years on basis domain name registration and web hosting services are website services--Determination for subsequent year for which no exemption claimed that such activities not entitled to deduction and claim if made would have been untenable--Assessments reopened on basis of a view taken for subsequent assessment year--Change of opinion--Notices not valid--Income-tax Act, 1961, ss. 10A, 147, 148-- Direct Information Private Limited v . ITO (Bom) . . . 150
----Notice--Validity--Non-resident--Deduction of tax at source--No return filed--Certificate under section 197 for deduction of tax--Reassessment proceedings to increase amount of deduction--Valid--Income-tax Act, 1961, ss. 147, 148, 195, 197-- Areva T & D, SA v . Assistant Director of Income-tax (Delhi) . . . 127
----Valuation of assets--Reference to Valuation Officer--Law applicable--Effect of section 142A inserted by Finance Act, 2004--Reassessment order in March, 1995--Reference to Valuation Officer--Invalid--Income-tax Act, 1961, ss. 142A, 147-- Asst. CIT v . M . I. Builders Pvt. Ltd . (All) . . . 276
Transfer of case --Reassessment--Notice--Validity--Territorial jurisdiction of Assessing Officer--Transfer of case of assessee from Assessing Officer prior to issue of notice--Notice not valid--Income-tax Act, 1961, ss. 127, 148-- CIT v. M. I. Builders Pvt. Ltd . (All) . . . 271
Unexplained investment --Daughter of assessee, a minor and having no earnings of her own, acquiring property and transferring to father after five years for same purchase price--Investment disclosed in her return--Immaterial--Taxability of undisclosed investment in purchase of property in hands of assessee--Matter remanded --Income-tax Act, 1961-- CIT v . A. K. Jain (Delhi) . . . 236
----Purchase and sale of property and declaration of capital gains--Recomputation of purchase and sale price on basis of report of valuation cell--No other material except report of valuation cell to show assessee investing from undisclosed sources--Report of valuation cell not on record--Whether recomputation correct--Question returned unanswered--Income-tax Act, 1961-- CIT v . A. K. Jain (Delhi) . . . 236
Non-resident --Amalgamation of Swiss holding company and Swiss subsidiary by absorption under Swiss law--Gains arising from transfer of shares held in Indian company by transferor company--Not a case of amalgamation as defined under Act and not a case to which exemption under section 47(via) applies--But gains not determinable within scope of sections 45 and 48--Not chargeable to tax in India--No liability to withhold tax--Income-tax Act, 1961, ss. 2(1B), (47), 45, 47(vi), (via), 48, 195-- Credit Suisse (International) Holding AG , In re . . . 161
----Fees for technical services--Provision of mud engineering services in connection with exploration and extraction of mineral oil--Not carrying out of mining or like project--Not covered by exception in Explanation 2 to section 9(1)(vii)--Consideration received from Indian company--Section 44DA or 115A(b) attracted--Income not to be assessed under section 44BB(1)--Income-tax Act, 1961, ss. 9(1)(vii), Expln. 2 , 44BB-- M- 1 Overseas Limited , In re . . . 166
----Taxability in India--Contract for supply, installation and commissioning of 36 manometer gauges for ONGC--Indivisible composite contract for supply and erection at sites within the territory of India--Income therefrom accrues in India--Taxable under section 44BB--Income-tax Act, 1961, s. 44BB-- Roxar Maximum Reservoir Performance WLL , In re . . . 189
----Tender for design, engineering, procurement, construction, installation, commissioning and handing over of plant on lump sum turnkey basis--Two entities bidding together as consortium and work awarded to consortium--Entities taxable as association of persons--Contract indivisible and payment for supplies, spares and materials outside India taxable as part of income from contract--Income-tax Act, 1961, ss. 2(31), 9(1)(vi), (vii), 195--Double Taxation Avoidance Agreement between India and Germany, art. 5(2)(1)-- Linde AG , In re . . . 172
Precedent --Effect of decision of Supreme Court in Vodafone International Holdings B. V . v. Union of India [2012] 341 ITR 1 (SC)-- Roxar Maximum Reservoir Performance WLL , In re . . . 189
----- Forwarded Message -----
From: CA. V.M.V.SUBBA RAO <vmvsrao@gmail.com>
To: Kanigalla <kanigalla@hotmail.com>
Sent: Monday, 26 November 2012 12:28 AM
Subject: RBI on Exports Realisation
From: CA. V.M.V.SUBBA RAO <vmvsrao@gmail.com>
To: Kanigalla <kanigalla@hotmail.com>
Sent: Monday, 26 November 2012 12:28 AM
Subject: RBI on Exports Realisation
Export of Goods and Software – Realisation and Repatriation of export proceeds – Liberalisation
--
Best Wishes
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Best Wishes
CA. V.M.V.SUBBA RAO
Chartered Accountant
Door No.24-2-1885,
I Floor, Flat No.5,
Siddivinayaka Residency, I Cross,
Central Avenue, MSR Nagar,
Magunta Layout,
Nellore-524 003
Andhra Pradesh
India
Mobile:+91 - 0 9390221100
+91 - 0 9440278412
e-Mail: vmvsr@rediffmail.com
vmvsr@yahoo.co.uk
http://pdicai.org/MyPage/203038.aspx
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