Madhav Construction vs. PCIT (Tribunal Mumbai)- July 2017
Question of law : "whether the conclusion reached by the Tribunal that the appellate authorities, (which included the CIT (A) and itself), had the necessary power to consider the claim for deduction, if, the assessee company was otherwise entitled to in law, given the fact that the relevant material was already available on record"Important/ selected fact/ discussions for easy reference-
1) It was observed by the Principal CIT-3, Thane issued a show cause notice dated 16-02-2016 and asked to explain as to why the assessment ordes passed by the AO u/s 143(3) r.w.s. 254 of the Income-tax Act, 1961 shall not be revised under the provisions of section 263 of the Act. The Principal CIT proposed to revise the assessment orders for the reason that on examination of assessment records it was noticed that the AO has allowed deduction claimed u/s 80IB(10) even though the assessee has not made any claim in the original returns filed u/s 139(1) or in the revised returns filed in pursuance to notice u/s 153A of the Act, 1961
2) It was further noted that "as per the provisions of section 80A(5) of the Income-tax Act, 1961, where the assessee fails to make a claim in his return of income for any deduction under any provisions of this Chapter under the head – “C: Deductions in respect of certain incomes no deduction shall be allowed to him thereunder”, no deduction can be allowed"
3) In response to the show cause notice, the assessee submitted that the assessment orders passed by the AO u/s 143(3) r.w.s. 254 neither are erroneous nor prejudicial to the interest of the revenue as the AO has allowed the claim of deduction u/s 80IB(10) as per the specific directions given by the ITAT.
4) In support of his arguments, he relied upon the decision of Hon’ble Bombay High Court in the case of Ranka Jewellers vs ACIT 328 ITR 148 (Bom) and CIT vs K Sera Sera Productions Ltd (2015) 374 ITR 503 (Bom). The assessee further relied upon the decision of Hon’ble Bombay High Court in the case of CIT vs Sheth Developers Pvt Ltd 254 CTR 127 (Bom) to argue that there was no error in the assessment orders passed by the AO in allowing the claim of deduction u/s 80IB(10) without considering the provisions of section 80A(5) of the Income-tax Act, 1961.
5) The deduction provided in section 80IB(10) is allowable only when such claim is made in the return of income. In this case, the assessee did not make any claim either in the original return filed u/s 139(1) or in the return filed u/s 153A of the Act,
6) The Ld.AR referring to the decisions of the Hon’ble jurisdictional High Court in the case of CIT vs K. Sera Sera Productions Ltd (supra) and also Ranka Jewellers vs Addl.CIT (supra) submitted that once the issues which are subject matter of appeals before the higher authorities and which has been adjudicated by higher authorities, then the CIT cannot invoke jurisdiction u/s 263 for re-considering the issue / issues.
7) It was noted that "The Principal CIT has power to revise the assessment order u/s 263 of the Act, but to invoke the provisions of section 263, the twin conditions must be satisfied, i.e. i) the order of the AO should be erroneous; and (ii) it must be prejudicial to the interest of the revenue. Unless both these conditions are satisfied, the Principal CIT cannot assume jurisdiction to revise the assessment order."
8) Learned court observed that "Hence, we are of the view that the Principal CIT was incorrect in observing that the provisions of section 80A(5) are not within the knowledge of the ITAT and the ITAT has not considered such provisions and only admitted additional ground without considering the provisions, is incorrect",
9) Learned court has taken a reference with the Hon’ble Bombay High Court in the case of CIT vs K Sera Sera Productions Ltd (supra) has observed that the CIT has no power to revise the assessment order on the issues which were considered and decided in appeal by the CIT(A).
10) No doubt, any incentive or beneficial provisions has to be interpreted in a manner so as to advance the economic activity of the region or the business and not to deny the benefit of such deduction on technical grounds, i.e. non filing of return or non claiming of such benefit in the returns of income
11) "though the Assessing Officer did not have the power to entertain the claim for deduction made after the r e t u r n w a s f i l e d , o t h e r w i s e t h a n b y f i l i n g a r e v i s e d r e t u r n , i t d i d n o t exclude the power of the Tribunal to consider the claim in exercise of its appellate power under Section 254 of the Act."
12) Learned court further noted that " We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier"
13) "Undoubtedly, the Tribunal will have the discretion to allow or not allow new ground to be raised. But where the Tribunal is only recjuiredtçonsider a question of law arising from the facts which are on record in the assessment proceedings we fail to 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"
14) "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 ta,kcn to this view as the Act does not place any restrictrion or limitation on the exercise of appellate power"
15) The appellate authorities, therefore, have jurisdiction to deal not merely with additional grounds, which became availabIe on account of change of circumstances or law, but with additional. grounds which were available when the return was filed,
16) Even assuming that the Assessing Officer is not entitled to grant a deduction on the basis of a letter requesting an amendment to the return filed, the appellate authorities are entitled to consider the claim and to adjudicate the same. It is not necessary that the deduction be allowed only if a revised return of income would have been filed.”
for reading full text of the judgment please refer - https://www.taxpundit.org/phocadownload/Taxpundit_Reporter/Taxpundit_Reporter_2017/August_2017/817Taxpundit34.pdf
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