2019 (12) TMI 409 - AT - Income Tax

Deduction u/s 80IA(4)(iv) - additional claim before the CIT(A) made by filing revised return of income - HELD THAT - CIT(A) refused his indulgence towards the additional claim arose on account of reworking of deduction in the light of prevailing judicial precedents and CBDT Circular No.1 of 2016 dated 15.02.2016 on the ground that the assessee has failed to file the revised return and consequently the additional relief cannot be entertained as it would have the effect of bringing the assessed income below the returned income. We do not find any merit whatsoever in such reasoning propounded by the CIT(A). The rationale adopted by the CIT(A) for refusal of the additional claim is in direct contravention with the judicial precedents cited on behalf of the assessee - We have no hesitation to hold on first principles that the additional claim requires to be entertained when found eligible as per the relevant provisions of the Act in the light of the judicial precedents and CBDT Circular issued in favour of the assessee. It is well settled that the appellate authority is not precluded from adjudicating the additional claims of an assessee regardless of whether the return was revised or not. The Revenue is under duty to assess the true profits of an assessee and cannot take advantage of the ignorance of the assessee on the provisions of the Act. Thus, the action of the CIT(A) to this extent requires to be set aside and additional claim of the assessee requires to be entertained. However, in the same vain, we notice that the quantification aspects of additional claim flowing from notional set off / carry forward of losses of earlier years from eligible profits has not been examined by the authorities below. We set aside the issue to the file of the AO for the limited purposes of determination of correct quantum of deduction to be computed without setting off any notional losses of the windmill power project pertaining to the earlier assessment years as discussed hereinabove. AO shall allow enhanced deduction u/s 80IA(4) as eligible to assessee in accordance with law regardless of claim made by the assessee in this regard in its return of income. Substantial ground of appeal is allowed for statistical purpose.

Summary

Issues Involved:
1. Disallowance of additional claim of deduction under section 80IA(4)(iv) of the Income Tax Act, 1961.
2. Requirement of filing a revised return for additional claims.

Issue-wise Detailed Analysis:

1. Disallowance of additional claim of deduction under section 80IA(4)(iv) of the Income Tax Act, 1961:

The assessee filed its return of income, claiming a deduction under section 80IA(4) amounting to ?4,82,22,557/-. The AO disallowed this claim, invoking sub-section (5) of section 80IA, on the grounds that the assessee had adjusted earlier years' losses against the profits of the windmill business. The assessee appealed to the CIT(A), contending that their computation was consistent with previous ITAT orders in their favor and that the correct deduction should be ?6,84,59,347/-. The CIT(A) accepted the original claim but rejected the additional claim on the grounds that it was not made through a revised return.

2. Requirement of filing a revised return for additional claims:

The CIT(A) rejected the additional claim for deduction under section 80IA(4)(iv) on the basis that it could only be made through a revised return. The assessee argued that this requirement was not necessary, citing previous Tribunal decisions, including their own case for the Asstt.Year 2012-13, where the Tribunal allowed the additional claim without a revised return. The Tribunal in the present case agreed with the assessee, referencing its earlier decision which stated that appellate authorities are not precluded from adjudicating additional claims regardless of whether a revised return was filed.

Tribunal's Findings:

The Tribunal noted that the CIT(A)'s rejection of the additional claim was based on her predecessor's findings for the Asstt.Year 2012-13, which the Tribunal had already set aside. The Tribunal reiterated that appellate authorities can entertain additional claims even if they were not included in a revised return. The Tribunal emphasized that the Revenue must assess the true profits of the assessee and cannot take advantage of the assessee's ignorance of the law.

Conclusion:

The Tribunal allowed the assessee's additional ground of appeal for statistical purposes and remitted the issue back to the AO to determine the correct quantum of deduction under section 80IA(4)(iv) in accordance with the Tribunal's findings for the Asstt.Year 2012-13. The appeal of the assessee was thus allowed for statistical purposes.