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I-T - In absence of claim in original return, AO has power to entertain new claim only through a revised return: ITAT

By TIOL News Service

KOLKATA, FEB 09, 2018: THE issue is - Whether in the absence of a claim in original return of income, the AO has power to entertain a new claim only through a revised return. YES is the verdict.

Facts of the case

The Assessee-company, engaged in banking activity as defined u/s 5(b) of the Banking Regulation Act, 1949. The Assessee had filed its return for the relevant AY along with tax audit report declaring losses. The said return was processed u/s 143(1). Later, the AO deemed the Assessee as a co-operative society and therefore, the said assessment was reopened by issuing a notice u/s 148. Subsequently notices u/s 143(2) and 142(1) were issued. In reply, the Assessee had filed necessary documents and papers. During the reassessment proceeding, the AO held that the total loss declared by the Assessee in its return represented its an accumulated loss and hence, the income for the relevant year had to be independently computed. Accordingly, after disallowing the expenditure claimed by the Assessee, the AO determined the Assessee's total income for the AY 2005-06. On appeal, the CIT(A) confirmed the AO's action but, directed the AO to consider the allowability of deduction u/s 80P.

In pursuance, the AO passed an order wherein, the Assessee's gross total income was set off against carried forward losses of earlier years. Later, as the AO found out that such set off of carried forward losses of earlier years was wrongly given, for the reason that no such loss remained to be set off, he issued a notice u/s 154. During the rectification proceedings, the Assessee made a claim for deduction u/s 80P which was rejected by the AO rejected on the ground that no such claim was made by the Assessee in its return. In the second round of appeal proceedings, the CIT(A) directed the AO to allow deduction u/s 80P.

On appeal, the Tribunal held that,

++ there is no claim by the Assessee regarding allowability of deduction u/s 80P in the return of income filed by it. This might possibly be so, as there was no positive income declared by the Assessee in its return of income originally filed. In the first round of appellate proceedings the CIT(A) directed the AO to examine the issue of allowability of deduction u/s 80P, in view of positive income determined by the AO, in the order giving effect to the order of the CIT(A). The AO in the order giving effect to the order of the CIT(A) passed u/s 153(5) (sic u/s 251) as on 05.06.2012 the Assessee's income was computed;

++ he disallowed the claim of deduction u/s 80P on the ground that the Assessee has not claimed he same in its return of income. Later, the AO realized that set off of carry forward losses of Rs. 32,23,84,000/- was wrongly allowed in this order dated 05.06.2012 to the Assessee. He initiated rectification proceeding u/s 154. In these proceeding u/s 154 the Assessee has once again claimed deduction u/s 80P. This was again denied by the AO by reiterating his stand that this deduction cannot be allowed as the Assessee has not claimed the same in its return of income. On appeal the CIT(A) in the second round of appeal proceedings directed the AO to allow this claim of the Assessee. In our view, the CIT(A) was wrong in his decision;

++ this Tribunal find that Supreme Court in the case of Goetz (I) Ltd., wherein it was made clear that the power of assessing authority is limited in entertaining a new claim, in the absence of a claim in original return of income. The AO has power to entertain the same only through a revised return of income. In the present case, the CIT(A) in the first round of appellate proceedings has directed the AO to consider the fresh claim of the Assessee for deduction u/s 80P in the order giving effect to his appellate order. In our view, a fresh claim u/s 80P cannot be considered in an order giving effect to the order of the CIT(A). An order u/s 153(5) is not a fresh assessment order. It is to be passed mechanically and there is no scope for fresh adjudication and framing an assessment order. Grant of deduction u/s 80P is a fresh exercise and requires examination and adjudication. This cannot be done in proceeding giving effect to the order of the CIT(A) in an order to be passed u/s 153(5);

++ this decision of the AO in his order dated 05.06.2012 was not challenged by the Assessee. Be as it may, the Assessee seeks grant of deduction u/s 80P in a proceeding u/s 154 which was initiated to rectify the mistake apparent on record in the order of the AO dated 05.06.2012. This fresh claim cannot be entertained in a proceeding u/s 154. Only mistakes apparent on record can be rectified. Thus, the direction of the CIT(A) in the order so challenged is erroneous and bad in law. Hence, the Revenue's appeal is allowed.

(See 2018-TIOL-226-ITAT-KOL)



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