2015 (6) TMI 1064 - AT - Income Tax

Powers of the appellate authorities to entertain claim by way of additional ground - Claim of bad debts written off - Held that - Hon ble Bombay High Court in the case of Pruthvi Brokers & Shareholders Pvt. Ltd. (2012 (7) TMI 158 - BOMBAY HIGH COURT ), wherein the Hon ble Bombay High Court, while relying upon the various decisions of the Hon ble Supreme Court and other Hon ble High Courts, has held that even if a claim is not made before the AO it can be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim is not barred. 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. An assessee is entitled to raise not merely additional legal submissions before the appellate authorities but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised. It cannot, however, be said that they have no jurisdiction to consider the same. The appellate authorities have jurisdiction to deal not merely with additional grounds which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed but could not have been raised at that stage or the grounds which became available on account of change of circumstances or law. The words could not have been raised must be construed liberally and not strictly. It is open to the assessee to claim a deduction before the appellate authority which could not have been claimed before the AO - Decided against revenue

Summary

Issues: Revenue's appeal against CIT(A)'s decision on bad debts written off.

Analysis:
1. Claim of Bad Debts Written Off: The appeal pertains to the Revenue contesting the decision of the CIT(A) in allowing the claim of bad debts written off by the assessee. The assessee, engaged in the business of Cable Operator and ISP service provider, had debited provisions for doubtful debts in the P&L account in previous years. In the relevant assessment year, the assessee debited a certain amount as provision for doubtful debts but did not disallow it while filing the return of income. The bad debts of a specific amount were written off during the year, which the Assessing Officer disallowed as the assessee had not filed any revised return. However, the CIT(A) allowed the claim of the assessee, citing the Supreme Court decision in T.R.F. Ltd. vs. CIT 323 ITR 397, and the Bombay High Court case of CIT vs. Pruthvi Brokers & Shareholders P. Ltd. 349 ITR 336. The CIT(A) held that if bad debts are written off in the books of account, the assessee is eligible to claim a deduction under section 36(1)(vii), even if not claimed while filing the return.

2. Legal Precedents and Observations: The CIT(A) based his decision on the Pruthvi Brokers case, where it was established that even if a claim was not made before the Assessing Officer, it could be presented before the appellate authorities. The Bombay High Court emphasized that the powers of the appellate authorities are not restricted and they can entertain additional claims. The High Court clarified that the decision in Goetze (India) Limited v. CIT regarding the restriction of claims through a revised return only applied to the Assessing Authority and did not limit the powers of appellate authorities. The appellate authorities have the jurisdiction to consider claims that could not have been raised before the AO, and the assessee can claim deductions before the appellate authority that were not claimed initially. The High Court highlighted that the words "could not have been" raised should be interpreted liberally, allowing for claims not previously made to be presented during appellate proceedings.

3. Decision and Dismissal of Appeal: The ITAT, Mumbai, pronounced the order on 30.06.2015, dismissing the Revenue's appeal. The Tribunal upheld the CIT(A)'s decision, stating that the Revenue failed to provide any contradictory legal precedents to challenge the Bombay High Court's proposition. As a result, the appeal was found to be without merit and was consequently dismissed.