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TMI Blog2020 (10) TMI 611X X X X Extracts X X X X X X X X Extracts X X X X ..... w is prohibited as per Article 265 of the Constitution of India. See M/S. DILIP KUMAR AND COMPANY ORS. [ 2018 (7) TMI 1826 - SUPREME COURT] We find ourselves to be in agreement with the claim of the assessee that as the Provision for diminution in the value of Investments was disallowed/added back by the assessee while computing its income for the year in which it was created i.e A.Y 2013-14, the same thus could not have been included in its income for the year under consideration i.e A.Y 2017-18 in which it was reversed. We thus in terms of our aforesaid observations set aside the order of the CIT(A) who as observed by us hereinabove had declined to deal with the aforesaid claim of the assessee, and direct the A.O to vacate the impugned addition - Decided in favour of assessee. - ITA No.1496/Mum/2020 - - - Dated:- 12-10-2020 - Shri Pramod Kumar, Vice President And Shri Ravish Sood, Judicial Member For the Assessee : Shri Farrokh V. Irani , AR For the Revenue : Shri Rahul Raman, CIT-DR ORDER PER RAVISH SOOD, J.M: The captioned appeal filed by the assessee is directed against the order passed by the CIT(A)-22 Mumbai, dated 15.01.2020, which in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f BNP Paribas SA and operates as a non-banking financial company of the BNP Paribas group in India. The assessee had filed its return of income for A.Y 2017-18 on 30.11.2017, declaring its total taxable income at ₹ 7,58,47,850/-. The gross total income of the assessee comprised of Interest income of ₹ 7,60,45,260/- against which it had claimed deduction under Chapter VIA of ₹ 1,97,415/-. The return of income filed by the assessee was processed by the Central Processing Center, Bangalore (for short CPC ) and an intimation under Sec. 143(1)(a) of the Act was issued on 02/10/2018, wherein an upward adjustment of ₹ 81,72,24,557/- was proposed to be made. In response to the said intimation the assessee submitted an online response dated 01.11.2018, objecting to the aforesaid adjustment. Subsequently, an intimation u/s 143(1) of the Act was issued by the CPC on 30.03.2019, wherein an upward adjustment of income on account of reversal of Provision for diminution in the value of Investments of ₹ 81,72,24,557/- was made under the head Profits and gains from Business or profession . Accordingly, an additional demand of ₹ 36,61,35,993/- was determined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or profession , the same was however not offered by the assessee for tax under any head of income in its return of income, for the reason, that it was already disallowed in A.Y 2013-14. 5. On receipt of the intimation u/s 143(1) of the Act, dated 30.03.2019 from the CPC, Bangalore, wherein an upward adjustment of income on account of reversal of Provision for diminution in the value of Investments of ₹ 81,72,24,557/- was made under the head Profits and gains from Business or profession , the assessee filed a rectification application, dated 24.04.2019. It was therein stated by the assessee that as the Provision for diminution in the value of Investments of ₹ 81,72,24,557/- created in the F.Y 2012-13 was disallowed/added back in its return of income for A.Y 2013-14, therefore, the reversal of the said provision during the year under consideration was rightly reduced from the assessee s total income. As the application filed by the assessee seeking rectification of mistake was not disposed off by the A.O, the same was thereafter followed by reminder letters dated 30.05.2019, 11.08.2019, 17.08.2020 and 18.08.2020, but to no avail. As had been brought to our notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y 2013-14. The aforesaid facts are clearly discernible from the assessee s return of income for A.Y 2013-14, wherein in Schedule BP-A(15) [i.e as per (7h of Part-OI)] an amount aggregating to ₹ 82,27,73,590 (including Provision for diminution in the value of Investments of ₹ 81,72,24,557/-) was suo motto disallowed by the assessee u/s 37 of the Act. In sum and substance, the Provision for diminution in the value of Investments of ₹ 81,72,24,557/- created by the assessee during the year ended 31.03.2013 was disallowed u/s 37 and therein offered for tax during A.Y 2013-14. The said factual position has not been controverted by the department. In fact, the concerned A.O who had appeared in the course of the proceedings before us had admitted the said factual position. In the backdrop of the aforesaid facts, now when the Provision for diminution in the value of Investments of ₹ 81,72,24,557/- was disallowed/added back by the assessee while computing its income for the year in which it was created i.e A.Y 2013-14, the same thereafter could not have been included in its income for the year in question in which it was reversed. To sum up, a provision whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee while computing its income for the year in which it was created i.e A.Y 2013-14, the inclusion of the same on its reversal in the books of account during the year in question i.e A.Y 2017-18 would lead to double taxation in its hands. However, the controversy involved in the present appeal hinges around the aspect that as whether an adjustment made vide an intimation u/s 143(1) can thereafter be dislodged by the A.O while framing the assessment u/s 143(3) of the Act. Admittedly, the assessee had not accepted the impugned adjustment to its returned income on account of reversal of the Provision for diminution in the value of Investments of ₹ 81,72,24,557/- as carried out by the CPC, Bangalore, vide its intimation u/s 143(1), dated 30.03.1999, and had assailed the same by way of an application filed with the A.O u/s 154 of the Act. Before proceeding any further, we may herein observe that as the intimation u/s 143(1) was issued to the assessee company on 30.03.2019 i.e subsequent to the issuance of the Notice u/s 143(2), dated 21.08.2018, the same would thus not be valid in the eyes of law. Our aforesaid view is fortified by the judgment of the Hon ble Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessment year 1974-75 the appellant did not claim any deduction of its liability towards purchase tax under the provisions of the Bengal Raw Jute Taxation Act, 1941, as it entertained a belief that it was not liable to pay purchase tax under that Act. Subsequently, the appellant was assessed to purchase tax and the order of assessment was received by it on 23rd November, 1973. The appellant challenged the same and obtained a stay order. The appellant also filed an appeal from the assessment order under the Income Tax Act. It was only during the hearing of the appeal that the assessee claimed an additional deduction in respect of its liability to purchase tax. The Appellate Assistant Commissioner (AAC) permitted it to raise the claim and allowed the deduction. The Tribunal held that the AAC had no jurisdiction to entertain the additional ground or to grant relief on a ground which had not been raised before the Income Tax Officer. The Tribunal also refused the appellant's application for making a reference to the High Court. The High Court upheld the decision of the Tribunal and refused to call for a statement of case. It is in these circumstances that the appellant f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised. It cannot, however, be said that they have no jurisdiction to consider the same. They have the jurisdiction to entertain the new claim. That they may choose not to exercise their jurisdiction in a given case is another matter. The exercise of discretion is entirely different from the existence of jurisdiction. 12. At page 694, after referring to certain observations of the Supreme Court in Additional Commissioner of Income-tax v. Gurjargravures P. Ltd., (1978) 111 ITR 1, the Supreme Court observed at Page 694 as under :- The above observations do not rule out a case for raising an additional ground before the Appellate Assistant Commissioner if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made, or that the ground became available on account of change of circumstances or law. There may be several factors justifying raising of such new ple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein as well as in subsequent cases, which we will refer to, establishes this beyond doubt. In many of the cases, the grounds were, in fact, available when the return was filed and/or the assessment order was made. In Jute Corporation of India Ltd., the ground was available when the return was filed. The assessee did not claim any deduction of its liability to pay purchase tax as it entertained a belief that it was not liable to pay purchase tax under the Bengal Raw Jute Taxation Act, 1941 . Thus, the ground existed when the return was filed. The assessment order was even made and received by the assessee. It is only after the appeal was filed that the assessee claimed a deduction in respect of the amount paid towards the purchase tax under the said Act. It is also significant to note that the assessee's entitlement to claim deduction had been held to be valid in view of an earlier judgment of the Supreme Court in Kedarnath Jute Manufacturing Company Limited v. Commissioner of Income-tax, (1971) 82 ITR 363. This was, therefore, a case of error in perception/judgment. Despite the same, the Supreme Court upheld the decision of the Appellate Assistant Commissioner in allowing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. The Full Bench held :- Thus, the Appellate Assistant Commissioner has very wide powers while considering an appeal which may be filed by the assessee. He may confirm, reduce, enhance or annul the assessment or remand the case to the Assessing Officer. This is because, unlike an ordinary appeal, the basic purpose of a tax appeal is to ascertain the correct tax liability of an assessee in accordance with law. Hence an Appellate Assistant Commissioner also has the power to enhance the tax liability of the assessee although the Department does not have a right of appeal before the Appellate Assistant Commissioner. The Explanation to subsection (2), however, makes it clear that for the purpose of enhancement, the Appellate Assistant Commissioner cannot travel beyond the proceedings which were originally before the Income-tax Officer or refer to new sources of income which were not before the Income-tax Officer at all. For this purpose, there are other separate remedies provided under the Income-tax Act. (C). It is unnecessary to refer to all the judgments that the Full Bench referred to while answering the reference. The Full Bench referred to the observations of the Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction in view of two orders of the Special Benches of the Tribunal and the assessee further stated that it had raised these additional grounds on learning about the legal position subsequently. The Tribunal declined to entertain these additional grounds. The Supreme Court did not answer the question on merits, but framed the following question and held as under :- 4. The Tribunal has framed as many as five questions while making a reference to us. Since the Tribunal has not examined the additional grounds raised by the assessee on merit, we do not propose to answer the questions relating to the merit of those contentions. We reframe the question which arises for our consideration in order to bring out the point which requires determination more clearly. It is as follows: Where on the facts found by the authorities below a question of law arises (though not raised before the authorities) which bears on the tax liability of the assessee, whether the Tribunal has jurisdiction to examine the same. Under Section 254 of the Income Tax Act the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manded the matter to the Assessing Officer to consider the same. Both the orders expressly direct the Assessing Officer to allow the deduction of ₹ 40,00,000/- under section 43B of the Act. The Assessing Officer is, therefore, now only to compute the respondent's tax liability which he must do in accordance with the orders allowing the respondent a deduction of ₹ 40,00,000/- under section 43B of the Act. 21. The conclusion that the error in not claiming the deduction in the return of income was inadvertent cannot be faulted for more than one reason. It is a finding of fact which cannot be termed perverse. There is nothing on record that militates against the finding. The appellant has not suggested, much less established that the omission was deliberate, mala-fide or even otherwise. The inference that the omission was inadvertent is, therefore, irresistible. 22. It was then submitted by Mr. Gupta that the Supreme Court had taken a different view in Goetze (India) Limited v. Commissioner of Income-tax. We are unable to agree. The decision was rendered by a Bench of two learned Judges and expressly refers to the judgment of the Bench of three learned Judge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt dealt with a similar submission in Commissioner of Income-tax v. Jai Parabolic Springs Limited, (2008) 306 ITR 42. The Division Bench, in paragraph 17 of the judgment held that the Supreme Court dismissed the appeal making it clear that the decision was limited to the power of the assessing authority to entertain a claim for deduction otherwise than by a revised return and did not impinge on the powers of the Tribunal. In paragraph 19, the Division Bench held that there was no prohibition on the powers of the Tribunal to entertain an additional ground which, according to the Tribunal, arises in the matter and for the just decision of the case. In the aforesaid case of Pruthvi Broker Shareholders (Pvt.) Ltd. (supra), the facts before the Hon ble jurisdictional High Court were that the assessee company had made a payment of SEBI fees of ₹ 40 lac on 09.5.2003 (pertaining to F.Y. 2001-02) that was allowable as a deduction on payment basis u/s 43B of the Act. However, during the assessment year 2004-05, by way of an inadvertence the assessee company in its return of income had claimed a deduction of ₹ 20 lac only as against the correct claim of deduction of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing authority in entertaining a fresh claim raised by an assessee otherwise than by filing of a revised return of income, and the same did not impinge on the powers of the Tribunal. In the case before the Full Bench of the Hon ble High Court of Bombay in Ahmedabad Electricity Limited v. Commissioner of Income-tax, (1993) 199 ITR 351 (Bom)(FB), the assessee had not claimed deduction in respect of the amounts it was required to transfer to contingencies reserve and dividend and tariff reserve either before the Income Tax Officer or before the Appellate Assistant Commissioner. On further appeal, the assessee raised a new claim and additional grounds before the Tribunal, which however declined to admit the same. On further appeal, the full bench of the Hon ble High Court observed, that the Tribunal had jurisdiction to permit additional grounds to be raised before it even though these may not arise from the order of AAC so long as these grounds are in respect of the subjectmatter of the entire tax proceedings. While concluding as hereinabove, it was observed by the Hon ble High court that unlike an ordinary appeal, the basic purpose of a tax appeal is to ascertain the correct tax li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year in question i.e A.Y 2017-18 in which it was reversed. As observed by us hereinabove, we are of a strong conviction that as no deduction for the aforesaid provision was claimed by the assessee while computing its income for the year in which it was created i.e A.Y 2013-14, the inclusion of the same on its reversal in the books of account during the year in question i.e A.Y 2017-18 would undoubtedly lead to a double taxation in its hands. Such extraction of tax from an assessee without the authority of law is prohibited as per Article 265 of the Constitution of India. Our aforesaid view is fortified by the judgment of the Constitutional bench of the Hon ble Supreme Court in the case of Commissioner of Customs (Imports), Mumbai Vs. M/s Dilip Kumar and Company Ors. [Civil Appeal No. 3327 of 2007; dated 30.07.2018, wherein the Hon ble Apex Court had observed that insofar the taxation statutes are concerned, Article 265 of the Constitution prohibits the State from extracting tax from the citizens without authority of law. Also, as observed by the ITAT, Rajkot Bench in the case of ACIT, Circle 1, Jamnagar Vs. Rupam Impex. (2016) 157 ITD 360 (Rajkot) , tax cannot be levi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that tax due should not be charged or that any favour should be shown to anybody in the matter of assessment, or that where investigations are called for, they should not be made. Whatever be the legitimate tax, it must be assessed and must be collected. The purpose of this Circular is merely to emphasise that we should not take advantage of an assessee's ignorance to collect more tax out of him than is legitimately due from him. 9. It is now well-settled that even if the contents of a circular may amount to a deviation on a point of law, a circular of the Central Board of Revenue which confers some benefit on the assessee is binding on all officers concerned with the execution of the I. T. Act; and they must carry out their duties in the light of the circular. In the present case, therefore, it was, in the first place, the duty of the ITO to have drawn the attention of the assessee-firm to the defect in the application for renewal of registration. The ITO, however, granted registration to the firm. In such a situation it was equally the duty of the CIT to have given an opportunity to the assessee-firm to remedy the defect in their application. The CIT, in view of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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