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2021 (10) TMI 1047 - AT - Income TaxNon addition of additional grounds of appeal in revised return - Deduction u/s 36(1)(viia) - additional claim was not accepted by the AO on the ground that he is not empowered to accept additional claim in absence of revised return - HELD THAT - AO is not entitled to entertain fresh claim, however, these restriction is not applicable on the first appellate authority or on the Tribunal. We find that before the AO assessee claimed that due to calculation mistake the assessee claimed deduction u/s 36(1)(viia) however, they are entitled @7.5% of interest earned on the advances on rural loan. In our view it was not a fresh claim. AO should have examined the fact instead of rejecting the claim by raising legal objection. To avoid any further objection by the lower authority, we admit the additional claim of the assessee and restore the issue back to the file of AO to examine the facts as to how much interest earned by the assessee on rural advances and allow relief to the assessee in accordance with law. Ground of appeal raised by the assessee is allowed for statistical purpose.
Issues Involved:
1. Deduction under section 36(1)(viia) of the Income Tax Act. 2. The authority of the Assessing Officer (AO) to accept revised claims without a revised return. 3. The appellate powers of the Commissioner of Income Tax (Appeals) [CIT(A)] and the Income Tax Appellate Tribunal (ITAT). Issue-wise Detailed Analysis: 1. Deduction under section 36(1)(viia) of the Income Tax Act: The assessee, a Regional Rural Bank, claimed a deduction of ?1.18 crore under section 36(1)(viia) of the Income Tax Act for the assessment year 2012-13. The AO disallowed this deduction, stating that the assessee failed to furnish supporting evidence for the enhanced claim and did not file a revised return. The assessee argued that they were entitled to a deduction of ?4.35 crore, which is 7.5% of the interest earned on advances amounting to ?58.09 crore. The CIT(A) allowed the original claim of ?1.18 crore but rejected the enhanced claim, stating that it would create a large Non-Performing Asset (NPA) without justification. The ITAT found that the AO should have examined the facts instead of rejecting the claim based on a legal objection. The Tribunal admitted the additional claim and restored the issue to the AO for examination, directing that relief be granted in accordance with the law. 2. The authority of the Assessing Officer (AO) to accept revised claims without a revised return: The AO disallowed the revised claim of ?4.35 crore on the grounds that the assessee did not file a revised return, citing the Supreme Court decision in Goetze India Ltd. vs. CIT, which restricts the AO from accepting new claims without a revised return. However, the ITAT noted that this restriction does not apply to appellate authorities, which have broader powers to entertain new claims. 3. The appellate powers of the Commissioner of Income Tax (Appeals) [CIT(A)] and the Income Tax Appellate Tribunal (ITAT): The ITAT referenced several judgments, including those from the Supreme Court and High Courts, to establish that appellate authorities like the CIT(A) and ITAT have plenary powers to entertain new grounds, legal contentions, or claims even if they were not raised before the AO. The Tribunal emphasized that the appellate authorities are vested with the same powers as the AO and can modify assessment orders based on additional grounds or claims, provided the necessary facts are on record. Conclusion: The ITAT concluded that the AO should have examined the revised claim of the assessee instead of rejecting it on legal grounds. The Tribunal restored the issue to the AO to verify the interest earned on rural advances and grant relief according to the law. The ITAT also highlighted the broad powers of appellate authorities to entertain new claims, ensuring that the real income is taxed. Order: The appeal by the assessee was allowed for statistical purposes, and the AO was directed to re-examine the claim with an opportunity for the assessee to be heard. The order was announced on October 1, 2021, during a virtual court hearing.
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