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TMI Blog2022 (2) TMI 1459X X X X Extracts X X X X X X X X Extracts X X X X ..... 139(9) of the 1961 Act, but the said defect stood rectified before assessment is completed. It is admitted position that the AO did not issue any such notice u/s 139(9) to the assessee calling assessee to rectify the aforesaid defect. As admitted position that the audited accounts and tax- audit return was filed by the assessee during the course of assessment proceedings, albeit the assessee did not file revised return of income. Further, as held in the case of CIT v. Pruthvi Brokers Shareholders [ 2012 (7) TMI 158 - BOMBAY HIGH COURT ] assessee can always present its claim before the appellate authorities for the first time even if the said claim is not made in the return of income filed with the Revenue, If the assessee has not got its statutory audit done under Companies Act, 1956(Now Companies Act, 2013) within the prescribed time, or has not got its tax audit done under the provisions of Section 44 AB of the 1961 Act, there are penal provisions provided under the statute for such non-compliances. There could be several reasons for not getting the statutory audit/tax-audit done within prescribed time, but unless there is specific/express provision which stipulates that if the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that the action of the Assessing Officer is without any basis . The Assessing officer has denied the claim of carry forward of loss as per Section 80 of the Income tax Act, by which no loss which has not been determined in pursuance of a return filed in accordance with the provisions of section 139(3) of the Act, shall be carried forwarded and set off .. . 2. The Learned CIT (Appeals), Thiruvananthapuram erred in concluding that since the appellant had filed return on time it is eligible to carry forward the business loss also . The appellant filed the original return in time by claiming the carry forward loss as per the provisional accounts which was likely to undergo change on audit of the accounts. 3. The Ld. CIT(A) ought to have noticed that the appellant had enough time to file the revised return of income by claiming loss as per the audited accounts as the audit was completed on 05.02.2003 and the time limit for filing revised return for AY 2002-03 was 31.03.2004. The assessment was completed only on 28.02.2005. 4. The Hon ble ITAT had set aside the entire issue to the file of Assessing Officer with a direction to assess the income/loss of the assesses on the basis of aud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st round of litigation, and the tribunal was pleased to pass an appellate order in ITA No. 601/Coch/2010 for ay: 2002-03, vide appellate order dated 29.03.2012, wherein tribunal set aside the appellate order passed by ld. CIT(A) and restored the matter to the file of AO with directions to assess the income/loss of the assessee on the basis of audited financial statements and other material in accordance with law, by holding as under: 5. We have heard the rival contentions. Admittedly, the return of income was filed by the assessee with provisional financial statements, since the statutory audit was not completed by that date. It is also undisputed fact that the profit/loss declared in the provisional financial statements might undergo a change during the course of audit. There cannot be any dispute that under the Income tax Act, the income/loss of the assessee has to be determined on the basis of audited financial statements. Hence, in our view, the AO was not right in law in completing the assessment on the basis of provisional statements, particularly in view of the fact that the audited financial statements were available before completion of the assessment. When it was pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time although on the basis of the un- audited accounts,and the directions of the tribunal in the first round, was to allow loss on the basis of audited accounts . The ld. CIT(A)held that the AO has exceeded his mandate to determine the loss as per the audited books of accounts and the action of the AO in denying the carry forward of loss is without any basis 5. Aggrieved, the Revenue has come in appeal before the tribunal. The Ld.Sr.DR submitted that this is the second round of litigation and the AO has again refused to allow carry forward of business loss while loss on account of depreciation was allowed to be carried forward. It was fairly admitted by the Ld.Sr.DR that the assessee has filed return of income within prescribed time although it was not supported by the audited accounts. It was submitted that the accounts of the assessee were audited much later on 05th February 2003. The Ld.Sr.DR rely on the ground Nos. 3 and 5 and also provisions of Section 80 of the Act. 5.2 The Learned Counsel for the assessee submitted that the return of income was filed in time and that the only grievance of the Revenue on which the claim of carry forward of loss was denied to the assesse is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the prescribed manner and setting forth such other particulars as may be prescribed: Provided that a person referred to in clause (b), who is not required to furnish a return under this sub- section and residing in such area as may be specified by the Board in this behalf by notification 4 in the Official Gazette, and who at any time during the previous year fulfils any one of the following conditions, namely: (i) is in occupation of an immovable property exceeding a specified floor area, whether by way of ownership, tenancy or otherwise, as may be specified 5 by the Board in this behalf; or (ii) is the owner or the lessee of a motor vehicle other than a two-wheeled motor vehicle, whether having any detachable side car having extra wheel attached to such two-wheeled motor vehicle or not; or (iii) is a subscriber to a telephone; or (iv) has incurred expenditure for himself or any other person on travel to any foreign country; or (v) is the holder of a credit card 6, not being an add-on card, issued by any bank or institution; or (vi) is a member of a club where entrance fee charged is twenty-five thousand rupees or more, Shall furnish a return, of his income during the previous y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days from the date of such intimation or within such further period which, on an application made in this behalf, the[Assessing] Officer may, in his discretion, allow; and if the defect is not rectified within the said period of fifteen days or, as the case may be, the further period so allowed, then, notwithstanding anything contained in any other provision of this Act, the return shall be treated as an invalid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return : Provided that where the assessee rectifies the defect after the expiry of the said period of fifteen days or the further period allowed, but before the assessment is made, the[Assessing] Officer may condone the delay and treat the return as a valid return. Explanation. For the purposes of this sub-section, a return of income shall be regarded as defective unless all the following conditions are fulfilled, namely: (a) the annexures, statements and columns in the return of income relating to computati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has sustained loss under the head profit and gains of business or profession or under the head capital gains, and it claims to carry forwards and set off such loss under Section 72(1), 73(2), 74(1), 74(3) or 74 A(3), it is required to file its return of income within the prescribed time u/s 139(1) of the 1961 Act which return of income is to be in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, and all the provisions of the 1961 Act shall apply as if it is a return filed u/s 139(1) of the 1961 Act(Ref. Section 139(3)). The provisions of Section 139(1) stipulates that in case of company, the return of income is to be filed on or before 31.10.2002. The provisions of Section 80 stipulates that notwithstanding anything contained in the Chapter VI, no loss which has not been determined in pursuance of return filed u/s 139(3), shall be carried forward and set off u/s 72(1), 73(2), 74(3) and 74 A(3) of the 1961 Act. Thus, Section 80 also refers to the time line provided u/s 139(3), which in turn refers to prescribed time u/s 139(1) for filing of return of income and Section 139(3) also stipulates that all the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee did not file revised return of income. Further, as held by Hon ble Bombay High Court in the case of CIT v. Pruthvi Brokers Shareholders (2012) 23 taxmann.com 23(Bom), the assessee can always present its claim before the appellate authorities for the first time even if the said claim is not made in the return of income filed with the Revenue, wherein Hon ble Bombay High Court held as under: 10. A long line of authorities establish clearly that an assessee is entitled to raise additional grounds not merely in terms of legal submissions, but also additional claims not made in the return filed by it. It is necessary for us to refer to some of these decisions only to deal with two submissions on behalf of the department. The first is with respect to an observation of the Supreme Court in Jute Corpn. of India Ltd. v . CIT [1991] 187 ITR 688/[1990] 53 Taxman 85. The second submission is based on a judgment of the Supreme Court in Goetze (India) Ltd. v. CIT [2006] 157 Taxman 1. 11. (A) In Jute Corpn. of India Ltd. (supra) 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 Taxat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt order on an additional ground even if not raised before the Income Tax Officer. No exception could be taken to this view as the Act does not place any restriction or limitation on the exercise of appellate power. Even otherwise an Appellate Authority while hearing appeal against the order of a subordinate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations if any prescribed by the statutory provisions. In the absence of any statutory provision the Appellate Authority is vested with all the plenary powers which the subordinate authority may have in the matter. There appears to be no good reason and none was placed before us to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income Tax Officer. [Emphasis supplied] (B) It is clear, therefore, that an assessee is entitled 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces or law The appellate authorities, therefore, have jurisdiction to deal not merely with additional grounds, which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed. The first part viz. 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... clearly relate to cases where the ground was available when the return was filed and the assessment order was made but could not have been raised at that stage. The words are could not have been raised and not were not in existence . Grounds which were not in existence when the return was filed or when the assessment order was made fall within the second category viz. where the ground became available on account of change of circumstances or law. 14. The facts in Jute Corpn. of India Ltd. (supra) various judgments referred to therein 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 Corpn. of India Ltd. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed a new claim and additional grounds before the Tribunal in that connection. The Tribunal rejected the same. The second question which was raised in the reference before the Division Bench was as under :- (2) Whether, on the facts and in the circumstances of the case, the Tribunal erred in not allowing the assessee leave to raise in its own appeals additional grounds and in the departmental appeals cross objections regarding the deductibility of the sums transferred to contingency reserve and tariff and dividend control reserve? (B) The Division Bench which heard the reference, finding that there was a conflict of decisions, placed the papers before the Hon'ble Chief Justice for constituting a larger bench to resolve the controversy. The Full Bench answered the reference in the affirmative and in favour of the assessee. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax (Appeals). The assessee filed an appeal before the Tribunal. The inclusion of the amount was not objected to even in the grounds of appeal as originally filed before the Tribunal. Subsequently, the assessee by a letter, raised additional grounds to the effect that the said sum could not be included in the total income. The assessee contended that on a erroneous admission, no income can be included in the total income. It was further contended that the ITO and the Commissioner of Income-tax (Appeals) had erred and failed in their duty in adjudicating the matter correctly and by mechanically including the amount in the total income. It is pertinent to note that the assessee contended that it was entitled to the deduction 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 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any event, clearly established. In the circumstances, the respondent ought not be prejudiced. 19. The orders of the CIT(A) and the Tribunal clearly indicate that both the appellate authorities had exercised their jurisdiction to consider the additional claim as they were entitled to in view of the various judgments on the issue, including the judgment of the Supreme Court in National Thermal Power Corpn. Ltd. (supra) . This is clear from the fact that these judgments have been expressly referred to in detail by the CIT(A) and by the Tribunal. 20. We wish to clarify that both the appellate authorities have themselves considered the additional claim and allowed it. They have not remanded the matter to the Assessing Officer to consider the same. Both the orders expressly direct the Assessing Officer to allow the deduction of Rs. 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 Rs. 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 inad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt did not hold anything contrary to what was held in the previous judgments to the effect that even if a claim is not made before the assessing officer, it can be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim has not been negated by the Supreme Court in this judgment. In fact, the Supreme Court made it clear that the issue in the case was limited to the power of the assessing authority and that the judgment does not impinge on the power of the Tribunal under section 254. 24. A Division Bench of the Delhi High Court dealt with a similar submission in CIT v.Jai Parabolic Springs Ltd. [2008] 306 ITR 42/ 172 Taxman 258. 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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