2023 (11) TMI 1114 - AT - Income Tax

Power of the appellate authority to allow the claim of deduction which was not claimed in the return of income - whether AO erred in not allowing the deduction u/s 24(b), 80C and 80D merely for the reason of clerical error in the return of income? - revenue cannot take advantage of mistake/ignorance of the assessee by placing reference to the Circular No. 14 of 1955 dated 11.04.1955 issued by the CBDT in which stated that the officers of the department must not take advantage of the ignorance of the assessee about his rights and it is their duty to assist the tax payer in every reasonable way particularly in the matter of claiming and securing relief - HELD THAT - Since the assessee has failed to claim sum for interest of housing loan u/s 24(b), u/s 80C and u/s 80D respectively and the assessee in order to substantiate its claim placed before the ld. CIT(A) as well as before the Tribunal. The copy of Form No.16 showing of deduction u/s 24(b), 80C and 80D respectively, certificate from Axiz Bank in support of payment of interest of housing loan (deduction restricted upto and principal payment of housing loan as per certificate from the bank in support of deduction u/s 24(b) - We, therefore, direct the revenue to allow the claim of assessee as stated above. We respectfully consider the order of Goetz India Ltd, 2006 (3) TMI 75 - SUPREME COURT Here, two issues are formulated, weather the unclaimed deduction can be claim before the assessing authority without filing the revised return and weather the power of the appellate authority can allow the claim of deduction which was not claimed in the return of income. We adjudicate the second issue. In our opinion the appellate authority has coterminous power to accept the deduction which was not claimed in ITR. So, the entire claim u/s 80C is eligible claim of deduction. During the hearing the assessee had submitted all relevant documents which are also considered by the appellate authority. We accept the claim of assessee related to deduction u/s 24(b), 80C 80D of the Act. Accordingly, we set aside the order of the ld CIT(A) with a direction to allow the deduction, claimed by the assessee. Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Legality of the order passed u/s 154/143(1).
2. Denial of deductions u/s 24(b), 80C, and 80D due to clerical error.
3. Non-compliance with CBDT Circular No. 14(XL-35) of 1955.
4. Maintainability of the CIT(A)'s order.

Summary:

1. Legality of the Order Passed u/s 154/143(1):
The assessee challenged the order passed by the AO u/s 154/143(1), which was confirmed by the CIT(A), arguing that it was "bad in law." The Tribunal noted that the assessee filed a rectification petition u/s 154 after realizing the omission of certain deductions in the original return. However, the AO rejected the petition on the grounds that such claims must be made through a revised return.

2. Denial of Deductions u/s 24(b), 80C, and 80D Due to Clerical Error:
The assessee failed to claim deductions for interest on housing loan u/s 24(b), and amounts u/s 80C and 80D in the original return. Despite submitting necessary evidence in support of these claims during the rectification petition, the AO ignored the evidence and rejected the claims. The Tribunal highlighted that the AO should not have dismissed the rectification petition merely because the claims were not made in the original return.

3. Non-Compliance with CBDT Circular No. 14(XL-35) of 1955:
The assessee argued that the AO and CIT(A) did not adhere to CBDT Circular No. 14(XL-35) of 1955, which mandates that tax officers should assist taxpayers in claiming and securing reliefs. The Tribunal emphasized that the revenue should not take advantage of the assessee's ignorance and must help in securing legitimate claims.

4. Maintainability of the CIT(A)'s Order:
The Tribunal observed that the appellate authority has the power to entertain additional grounds and claims not made in the original return. Citing various judgments, including those from the Supreme Court and High Courts, the Tribunal concluded that the appellate authority has coterminous power to accept deductions not claimed in the original return.

Conclusion:
The Tribunal directed the revenue to allow the assessee's claims for deductions u/s 24(b), 80C, and 80D, setting aside the order of the CIT(A). The appeal of the assessee was allowed, and the Tribunal emphasized the duty of tax authorities to assist taxpayers in claiming rightful deductions, as per CBDT Circular No. 14(XL-35) of 1955.