2012 (8) TMI 997 - AT - Income Tax

Allowable expenses under Section 40(a)(ia) - Held that - Commissioner of Income Tax (Appeals) has not erred in allowing relief on account of allowable expenses under Section 40(a)(ia) as Assessing Officer had restrain on power to entertain a claim made otherwise than by filing of a revised return of income.

Summary

Issues:
1. Allowance of expenses under Section 40(a)(ia) without filing a revised return.

Analysis:
The appeal involved a dispute regarding the allowance of expenses under Section 40(a)(ia) without the filing of a revised return. The Revenue contended that the Commissioner of Income Tax (Appeals) erred in allowing relief of a specific amount on account of allowable expenses under Section 40(a)(ia) without the filing of a revised return, contrary to the decision of the Hon'ble Supreme Court in a specific case. The primary issue was whether the claim for deduction of expenses, disallowed in a previous year under Section 40A(i)(a), could be entertained without the submission of a revised return, as required by the Assessing Officer. The Assessing Officer relied on the Supreme Court's decision in a particular case and held that a claim cannot be made through a letter, emphasizing the necessity of a revised return for such claims.

The Commissioner of Income Tax (Appeals) allowed the deduction of expenses, which were disallowed earlier, based on a fresh claim made by the assessee during the proceedings. The Revenue challenged this decision, arguing that the original claim should have been made through a revised return. The Revenue's representative contended that the Commissioner of Income Tax (Appeals) erred in allowing the claim without a revised return, as per the Supreme Court's decision cited by the Assessing Officer.

On the contrary, the assessee's counsel argued that a fresh claim was indeed made before the Commissioner of Income Tax (Appeals), and since all relevant facts were on record, the claim should have been entertained. The assessee emphasized that the Assessing Officer had acknowledged the correctness of the claim, further supporting the justification for allowing the claim without a revised return. The assessee's position was that the claim was valid as per the Income Tax Act, 1961, and should be considered based on the existing records.

The Tribunal examined the provisions of Section 40A(ia), which had been amended to include a proviso regarding deductions for certain payments subject to tax deduction at source. Considering the statutory provisions and the facts of the case, the Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) to allow the deduction of expenses, despite the absence of a revised return. The Tribunal noted that the Supreme Court's decision did not limit the authority of the Appellate Authority to entertain valid claims, as supported by the facts on record and the Assessing Officer's own acknowledgment of the claim's correctness. Consequently, the Tribunal dismissed the appeal of the Revenue, affirming the order of the Commissioner of Income Tax (Appeals) to allow the claimed expenses without requiring a revised return.

In conclusion, the judgment clarified the applicability of statutory provisions, the necessity of a revised return for claims, and the authority of the Appellate Authority to entertain valid claims based on existing records, ultimately leading to the dismissal of the Revenue's appeal.