2021 (10) TMI 236 - HC - Income Tax

Revised computation v/s revised return of income- Rectified computation of income submitted during the course of assessment proceedings - Allowance of claim for deduction expenditure made through such revised computation and not through a revised return of income - claim of loss made by the assessee, as against the original loss claimed in the original return could have been entertained by the AO - HELD THAT - Tribunal held that the assessee is only claiming expenditure, which was left out at the time of filing of original income tax return and in any event, the AO has power to make upward or downward adjustments in the income returned filed by the assessee and when the assessee had not claimed certain expenditures clearly evident from the records and it comes to the knowledge of the Assessing Officer at the time of assessment proceedings, the AO should grant relief to the assessee. Tribunal took note of the Circular issued by CBDT dated 11.04.1955, wherein the Board ordered that the officers of the Income Tax should not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist the taxpayers in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard, the officer should take the initiative in guiding a taxpayer, where proceedings or other particulars before them indicate that some refund or relief is due to him. Circular states that department should freely advise the assessee, when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs. Tribunal was convinced that the claim made by the assessee towards expenditure was not a fresh claim. Therefore, the Tribunal had exercised its powers conferred under Section 254 of the Act, which cannot be found fault with. Order passed by the Tribunal dated 18.11.2013 that the assessee's appeal has been allowed and but no consequential direction was issued to the Assessing Officer, which was required to be done. This is because the Assessing Officer non suited the assessee on a technical ground that such a claim for expenditure cannot be entertained, without filing a revised return. Tribunal having held that the claim is not a fresh claim and the computation given by the assessee can be considered, necessarily the matter has to go back to the Assessing Officer to consider the claim on merits. Since the Tribunal has not issued consequential direction, we are inclined to do so. Tax Case Appeal is dismissed and the substantial questions of law are answered as against the Revenue and the matter is remanded to the Assessing Officer to consider the assessee's claim of expenditure on merits

Summary

Issues:
1. Entertaining revised computation of income without a revised return.
2. Power of the Income Tax Appellate Tribunal under Section 254 of the Act.

Issue 1: Entertaining revised computation of income without a revised return

The case involved the question of whether the Assessing Officer could consider a rectified computation of income submitted by the assessee during assessment proceedings without a revised return. The Tribunal allowed the assessee's appeal, contrary to the decision of the Assessing Officer and the Commissioner of Income Tax (Appeals). The Tribunal held that the Assessing Officer could entertain a claim made by the assessee through a revised computation of income, even if not originally claimed. This decision was based on the distinction between the power of the Assessing Officer and that of the Tribunal, as clarified by the Hon'ble Supreme Court in previous cases. The Tribunal also referred to relevant legal precedents and circulars emphasizing the duty of the Income Tax Department to assist taxpayers in claiming reliefs and refunds. Ultimately, the Tribunal concluded that the claim made by the assessee towards expenditure was not a fresh claim, and therefore, it could be considered without the need for a revised return.

Issue 2: Power of the Income Tax Appellate Tribunal under Section 254 of the Act

The Tribunal's decision highlighted the distinction between the powers of the Assessing Officer and the Income Tax Appellate Tribunal under Section 254 of the Income Tax Act. The Tribunal noted that while the Assessing Officer's power to entertain claims not made in the original return was limited, the Tribunal had broader jurisdiction to consider such claims. The Tribunal relied on legal precedents to support its interpretation of the law, emphasizing that the Tribunal's authority to entertain claims not raised before the Assessing Officer had not been negated by previous Supreme Court judgments. The Tribunal's decision underscored the importance of ensuring that taxpayers are not disadvantaged due to procedural technicalities and that the department should adopt an assessee-friendly approach in assisting taxpayers with their rights and liabilities. Ultimately, the Tribunal's decision was to remand the matter back to the Assessing Officer for a reconsideration of the assessee's claim of expenditure on merits and in accordance with the law.

In conclusion, the High Court dismissed the Tax Case Appeal, answered the substantial questions of law against the Revenue, and remanded the matter to the Assessing Officer for a fresh consideration of the assessee's claim of expenditure. The Court emphasized the need for the Assessing Officer to review the claim on its merits and provide the assessee with an opportunity for a personal hearing, ensuring a fair assessment process in accordance with the law.