2016 (7) TMI 702 - AT - Income Tax

Denial of deduction u/s. 36(1) (viii) - FAA rejected the claim made by the assessee, that in the AY 2012-13, in similar circumstances the CPC had accepted the claim made by the assessee - Held that - FAA is empowered to entertain a new claim, even if a fresh return of income is not filed by the assessee . It is also a fact that for the subsequent year the CPC has allowed the similar claim of deduction made by it. Therefore, we are of the opinion that in the interest of justice, matter should be restored back to the file of the FAA for fresh adjudication, who will decide the issue. Decided in favour of the assessee in part.

Summary

Issues involved:
Appeal challenging denial of deduction u/s. 36(1)(viii) of the Income Tax Act.

Detailed Analysis:
1. Facts and Background: The assessee filed its return of income, which was processed by the Central Processing Center (CPC). Discrepancies arose regarding the income assessed by the CPC and the deductions claimed by the assessee under u/s. 36(1)(viii) and investment depreciation allowance. The Assessing Officer (AO) rejected the claims due to lack of supporting documents.

2. First Appellate Authority (FAA) Decision: The FAA upheld the CPC's decision, stating that the assessee did not specify the deduction u/s. 36(1)(viii) in the original return and failed to file a revised return within the due date. However, relief was granted for double disallowance of investment depreciation allowance.

3. Arguments Before ITAT: The Authorized Representative (AR) argued that the deduction u/s. 36(1)(viii) should be allowed as per the Act's provisions, even though there was no separate column in the e-return for this deduction. The Departmental Representative (DR) contended that the claim was rightly negated as no revised return was filed.

4. ITAT Decision: The ITAT observed that the assessee had filed the e-return and subsequently sought rectification, claiming entitlement to the deduction u/s. 36(1)(viii). The ITAT noted that in a similar situation for the AY 2012-13, the CPC had accepted the assessee's claim. The ITAT emphasized the importance of upholding the spirit of the tax laws and ensuring justice for both taxpayers and the state.

5. Conclusion: The ITAT disagreed with the FAA's decision and referred to the judgment in Pruthvi Brokers case, emphasizing that the appellate authority has the discretion to entertain new claims even without a revised return. The ITAT directed the matter to be reconsidered by the FAA for fresh adjudication, considering the earlier judgment. The effective ground of appeal was partly decided in favor of the assessee, resulting in the appeal being partly allowed.

In conclusion, the ITAT's decision highlights the importance of ensuring justice and upholding the principles of tax laws while addressing discrepancies in income assessment and deductions claimed by taxpayers. The judgment emphasizes the authority of the appellate body to consider new claims and the need for a fair and thorough adjudication process.