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2014 (4) TMI 21 - AT - Income TaxEligibility for deduction u/s 80P(2)(d) of the Act- Interest receipts from deposits Held that - The assessee has neither offered to tax the interest income and therefore, there is no question of the assessee claiming deduction u/s 80P(2) - If interest income is offered for taxation and then deduction is not claimed, section 80A(5) would have application - The AO had added the interest income which otherwise would have been allowed as a deduction thus, on the principles of equity, the Assessing Officer was duty bound to give the assessee a change to claim deduction u/s 80P(2). In CIT vs. Mahindra Mills 2000 (3) TMI 3 - SUPREME Court it has been held that the Department should not take advantage of ignorance of an assessee and every assessee should be made known of his/its tax liability as well as benefits, reliefs and deduction available under the statute - also in Goetze (India) Limited Versus Commissioner of Income-Tax 2006 (3) TMI 75 - SUPREME Court the provision of Income Tax Act, 1962 restricted the power of the assessing authority to entertain a claim of deduction otherwise than by way of filing a revised return - such restriction did not extend/impinge on the power of the Appellate Tribunal u/s 254 of the Act thus, the matter is remitted back to the AO for fresh adjudication Decided in favour of Assessee.
Issues:
1. Claim of deduction under section 80P(2)(d) of the Income Tax Act. 2. Validity of the Assessing Officer's decision to deny deduction. 3. Application of principles of equity and justice in tax assessments. Issue 1: Claim of deduction under section 80P(2)(d) of the Income Tax Act: The assessee, a cooperative society, filed a return of income for the assessment year 2009-10, declaring Nil income. During scrutiny assessment, it was found that interest income of Rs.1,51,31,155/- was not reflected in the Profit and Loss Account but was shown in the balance sheet. The assessee later revised the return to include this interest income and claimed deduction under section 80P(2). However, the Assessing Officer rejected the revised return as it was filed outside the prescribed time limit under section 139(5). The Assessing Officer added the interest income to the total income and denied the deduction under section 80P(2)(d) citing section 80A(5) of the Act. Issue 2: Validity of the Assessing Officer's decision to deny deduction: The CIT (A) initially allowed the assessee's appeal, assuming the revised return was filed within the time limit. However, upon realizing the error, the CIT (A) rectified the order based on the Assessing Officer's findings. The assessee contended that the interest income could have been allowed as a deduction under section 80P(2)(d) if it had been offered for taxation, and cited relevant case law emphasizing the duty of tax authorities to inform taxpayers of their rights and benefits. The Appellate Tribunal noted that the Assessing Officer should have given the assessee an opportunity to claim the deduction under section 80P(2) considering principles of equity and justice. Issue 3: Application of principles of equity and justice in tax assessments: The Appellate Tribunal referred to the duty of tax authorities to assist taxpayers in claiming reliefs and benefits, as per a circular from the CBDT. It highlighted that the assessee's failure to offer the interest income for taxation initially prevented them from claiming the deduction under section 80P(2). However, based on principles of equity and justice, the Tribunal directed the matter back to the Assessing Officer to examine the assessee's eligibility for the deduction under section 80P(2) on its merits. The Tribunal's decision was influenced by the Supreme Court's ruling that the power of the Appellate Tribunal was not restricted in such cases, unlike the assessing authority's limitations on entertaining new claims without a revised return. In conclusion, the Appellate Tribunal allowed the assessee's appeal for statistical purposes, emphasizing the importance of ensuring fairness and justice in tax assessments and directing a reevaluation of the eligibility for deduction under section 80P(2) based on the principles of equity and applicable legal provisions.
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