2015 (9) TMI 1058 - HC - Income Tax

Admission of additional evidence - non disclosure of sale of the joint family property in the return of income - whether the Tribunal was justified in making an allowance for any fresh claim of deduction without the claim being made in the return of income or without filing a revised return of income? - Held that - Failure to disclose the fact of receipt of capital gains on sale of joint family property in the return of income, was deliberate and malafide, also does not stand for scrutiny. This for the reason that the entire amount which would otherwise be chargeable to tax as long term capital gain would be entitled to deduction, in view of the same having been invested in terms of Section 54 and 54EC of the Act. This itself is an indication of the fact that there was nothing to be gained by the respondent-assessee in not disclosing the fact of sale of joint family property. Besides neither the grounds of appeal before us nor in the appeal filed before the Tribunal has the Revenue even taken up the plea that non disclosure of sale of the joint family property in the return of income by the respondent assessee is malafide and therefore, the respondent - assessee is not entitled to deduction under Section 54 and 54EC of the Act. We find that the question of law as proposed by the Revenue stands covered in favour of the respondent - assessee by the decision of the Apex Court in the case Geotez India Ltd. (2006 (3) TMI 75 - SUPREME Court) and the decision of this Court in the case Pruthvi Brokers and Shareholders P. Ltd. (2012 (7) TMI 158 - BOMBAY HIGH COURT) wherein held held that though the Assessing Officer would not be empowered to deal with the claim of deduction which did not find place either in the return of income or in the revised return of income filed before the Assessing Officer, yet it would not fetter the powers of Income Tax Appellate Tribunal under Section 254 of the Income Tax Act, 1961 to consider such a claim. Thus no substantial question of law arises for our consideration. - Decided against revenue.

Summary

Issues:
1. Whether the Tribunal was justified in allowing a fresh claim of deduction without it being made in the return of income or a revised return of income?
2. Whether the respondent-assessee is entitled to deduction under Sections 54 and 54EC of the Income Tax Act for the sale of joint family property not disclosed in the original return of income?

Analysis:
Issue 1:
The appeal challenged an order by the Income Tax Appellate Tribunal (Tribunal) regarding Assessment Year 2008-09. The Revenue questioned the Tribunal's decision to allow a deduction claim not originally made in the return of income or through a revised return. The respondent-assessee had not declared income from the sale of joint family property in the return of income. However, during assessment, it was revealed that the assessee had received Rs. 50 lakhs from the sale, claiming investment under Sections 54 and 54EC of the Act. The Assessing Officer disallowed the claim due to non-disclosure. The Commissioner of Income Tax (Appeals) accepted the claim in principle but directed further assessment. The Tribunal upheld the CIT(A)'s decision, citing the Apex Court's ruling in Goetze (India) Ltd. vs. CIT. The Tribunal held that the assessee could raise the issue before the Appellate Authority despite not initially claiming the deduction.

Issue 2:
The Revenue contended that since the deduction claim was not made in the original or revised return of income, the respondent was not entitled to it. They argued that the claim was not bona fide as it was made only after non-disclosure was discovered. However, the Court referred to the Apex Court's decision in Geotez India Ltd. and other cases, stating that the Appellate Authority could consider claims not in the original return. The Court found no merit in the Revenue's submissions. Additionally, the Court dismissed the Revenue's argument that non-disclosure was deliberate and malafide, noting that the investment under Sections 54 and 54EC indicated no benefit in concealing the sale. The Court concluded that the issues raised by the Revenue were not valid and that no substantial question of law arose for consideration.

In conclusion, the appeal was dismissed, and no costs were awarded. The judgment highlighted the importance of the Appellate Authority's power to consider deduction claims not initially made in the return of income, as established by relevant legal precedents.