Sri. Rakesh Singh, Bangalore V. ACIT, Bangalore

ITA 1027/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63627 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 08-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE
• Keywords: Depreciation; Opportunity of being heard; Source of fund; Question of law; Cost of acquisition; Revised return
• Section: 234B; 139(5); 32

Judgement Text

PAGE 1 OF 17 ITA NO.1027 /BANG/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.1027/BANG/2011 (ASST. YEAR 2007-08) SRI RAKESH SINGH, #2, R R CHAMBERS, IV FLOOR, IIND MAIN, VASANTHANAGAR, BANGALORE. PA NO.AFAPS4404D VS THE ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(2). BANGALORE. (APPELLANT) (RESPONDENT) DATE OF HEARING : 16.07.2012 DATE OF PRONOUNCEMENT : 24.08.2012 ASSESSEE BY : SHRI RAGHAVENDRA CHAKRAVARTHY, C.A. REVENUE BY : SMT. SUSAN THOMAS JOSE, JCIT ORDER PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT (A), MYSORE DATED 26/8/2011. THE R ELEVANT ASSESSMENT YEAR IS 2007-08. 2. THE ASSESSEE HAS RAISED SEVEN GROUNDS IN HIS ME MORANDUM OF APPEAL. GROUND NO.1 AND 7 ARE GENERAL IN NATURE AN D NO SPECIFIC ADJUDICATION IS CALLED FOR AND, HENCE, THE SAME ARE DISMISSED. GROUND NO.6 IS NOT MAINTAINABLE AS CHARGING OF INTEREST U/S 234A, 234B AND 234C OF THE ACT IS MANDATORY AND CONSEQUENTIAL IN NATURE AND, THEREFORE , THIS GROUND IS DISMISSED. PAGE 2 OF 17 ITA NO.1027 /BANG/2011 2 3. GROUND NO.2, 3, 4 AND 5 READS AS FOLLOWS:- 2) THE LEARNED CIT(A) IS NOT JUSTIFIED IN HOLDING THAT THE CLAIM MADE BY THE APPELLANT IN THE RETURN OF INCOME FILED IN COURSE OF ASSESSMENT PROCEEDINGS CANNOT BE ALLOW ED AS THE REVISED RETURN OF INCOME CANNOT BE ACTED UPON B Y THE LEARNED AO UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE; 3) THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN NOT CONS IDERING THE INCOME FROM HOUSE PROPERTY AT RS.6,65,710/- AD DECLARED BY THE APPELLANT IN HIS REVISED RETURN OF I NCOME UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE; 4) THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN NOT ALLO WING THE CLAIM OF RS.15,567/- AND RS.6,167/- TOWARDS INTERES T ON CAR LOAN ON ZEN AND FORD FIESTA CAR AND RS.95,665/- TOWARDS DEPRECIATION ON CARS UNDER THE FACTS AND I N THE CIRCUMSTANCES OF THE APPELLANTS CASE; & 5) THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN ASSESSIN G THE APPELLANT ON THE SHORT TERM CAPITAL GAIN OF RS.22,6 6,195/- AS AGAINST THE LOSS OF RS.8,47,805/- CLAIMED BY THE APPELLANT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. 4. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- THE ASSESSEE IS AN INDIVIDUAL. HE IS DERIVING IN COME FROM HOUSE PROPERTY AND FROM THE BUSINESS OF REAL ESTATE. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED THE E-RETURN ON 2 9/2/2008 DECLARING AN INCOME OF RS.29,49,560/-, WHICH CONSISTED OF THE FO LLOWING:- I) INCOME FROM HOUSE PROPERTY RS. 6,82,330/- II) SHORT-TERM CAPITAL GAIN RS.22,66,19 5/- III) INCOME FROM OTHER SOURCES RS. 1,031/- PAGE 3 OF 17 ITA NO.1027 /BANG/2011 3 THE ASSESSMENT WAS TAKEN UP FOR SCRUTINY BY ISSUANCE OF NOTICE UNDER SECTION 143(2) OF THE ACT. DURING THE COURSE OF AS SESSMENT PROCEEDINGS, THE ASSESSEE FILED A REVISED RETURN OF INCOME ON 28 /7/2009 DECLARING A TOTAL INCOME OF RS.27,75,550/- AFTER CLAIMING SOME VARIAT IONS IN THE DEDUCTIONS, COMPUTATION OF SHORT TERM CAPITAL GAINS AND MAKING FRESH CLAIM OF DEPRECIATION ON CAR. THE SCRUTINY ASSESSMENT WAS CO MPLETED VIDE ORDER DATED 31/12/2009 ACCEPTING THE INCOME DECLARED IN T HE ORIGINAL RETURN FILED ON 29/2/2008. THE ASSESSEES PLEA TO CONSIDER THE REVISED RETURN AND THE REVISED BALANCE SHEET WAS NOT ACCEPTED BY THE ASSESS ING OFFICER FOR THE REASONS MENTIONED AT PARA 3 OF THE ASSESSMENT ORDER . 4. THE ASSESSEE BEING AGGRIEVED CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 5. IT WAS SUBMITTED BEFORE THE FIRST APPELLATE AUT HORITY THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS DISCOV ERED THAT THE ASSESSEE HAD OMITTED TO CLAIM CERTAIN LEGITIMATE DEDUCTION A ND THEREFORE, THE REVISED RETURN WAS FILED ON 28/7/2009. IT WAS SUBMITTED TH AT IF FROM THE FACTS INVESTIGATED AT THE TIME OF ASSESSMENT IT EMERGES T HAT THE ASSESSEE IS ENTITLED TO A PARTICULAR RELIEF PROVIDED IN LAW, IT IS OBLIGATORY ON THE PART OF THE ASSESSING OFFICER TO DRAW THE ATTENTION OF THE ASSESSEE TO GIVE THE LAWFUL RELIEF OR DEDUCTION, ALTHOUGH THE ASSESSEE D ID NOT CLAIM IT. FOR THIS PROPOSITION, THE ASSESSEE RELIED ON THE DEPARTMENTA L CIRCULAR NO.14 (XI-35) OF 1955 DATED APRIL 11, 1955. 6. THE CIT (A) HOWEVER REJECTED THE APPEAL OF THE ASSESSEE. THE CIT (A) HELD THAT THE ORIGINAL RETURN WAS FILED BEL ATEDLY; HENCE, NO REVISED PAGE 4 OF 17 ITA NO.1027 /BANG/2011 4 RETURN COULD BE FILED UNDER SECTION 139(5) OF THE A CT. FOR THIS PROPOSITION, THE CIT(A) PLACED RELIANCE ON THE JUDGMENT OF THE H ONBLE APEX COURT IN THE CASE OF KUMAR JAGADISH CHANDRA SINHA V CIT 220 ITR 67. FURTHER, THE CIT(A), RELYING ON THE JUDGMENT OF THE HONBLE SUPRE ME COURT IN THE CASE OF GOETZE (INDIA) LTD. V CIT REPORTED IN 284 ITR 323, HELD THAT THE ASSESSEE COULD NOT MAKE A CLAIM FOR DEDUCTION OTHER THAN BY F ILING REVISED RETURN. THE CIT(A) CONCLUDED THAT IN VIEW OF THE ABOVE SAID JUD GMENTS OF SUPREME COURT, THE ASSESSEE COULD ONLY CLAIM ADDITIONAL EXPE NDITURE BY WAY OF REVISED RETURN UNDER SECTION 139(5) AND WHEN THE ORIGINAL R ETURN IS NOT FILED WITHIN THE TIME PRESCRIBED UNDER SECTION 139(1) OR 139(2), THE ASSESSEE CANNOT FILE A REVISED RETURN UNDER SECTION 139(5) OF THE ACT. 7. THE ASSESSEE BEING AGGRIEVED IS IN APPEAL BEFOR E US. 8. THE SUBMISSION OF THE LEARNED AR ON VARIOUS POI NTS ARE SUMMARIZED AS UNDER: (I) THAT THE ASSESSEE IS A CO-OWNER, HAVING 50% SHA RE AND INTEREST IN THE PROPERTIES AT (I) RR PLAZA, 8 TH MAIN, 3 RD CROSS, VASANTHNAGAR; AND (II) RR CHAMBERS, 11 TH MAIN OF VASANTHNAGAR AND IN HIS ORIGINAL RETURN A SUM OF RS.2,90,500/- B EING HIS SHARE OF CORPORATION TAXES WAS CLAIMED AS DEDUCTION AS AG AINST RS.2,71,423/- AND WITH A VIEW TO RECTIFY THIS ANOMAL Y, A REVISED RETURN OF INCOME WAS FILED; - LIKEWISE, A DEDUCTION OF RS.11,24,300/- WAS CLAI MED IN THE ORIGINAL RETURN AS AGAINST THE CORRECT FIGURE OF R S.11,54,274/- BEING HIS SHARE OF INTEREST ON CAPITAL BORROWED FOR CONSTRUCTION. A CERTIFICATE TO THIS EFFECT FROM TH E KARNATAKA BANK WAS FURNISHED BEFORE THE AO. PAGE 5 OF 17 ITA NO.1027 /BANG/2011 5 - THAT DUE TO THE ABOVE VARIATIONS, THE INCOME FROM HOUSE PROPERTY SHOWN IN THE REVISED RETURN CAME TO RS.6,65 ,710/- AS AGAINST RS.6,82,330/- SHOWN IN THE ORIGINAL RETURN OF INCOME. (II) THAT THE ASSESSEE HAD NOT CLAIMED DEDUCTIONS O F RS.15,567/- AND RS.6,167/- TOWARDS INTEREST ON CAR LOAN ON ZEN AND FORD FIESTA RESPECTIVELY AND DEPRECIATION OF RS.95,665/- IN THE ORIGINAL RETURN OF INCOME ON A WRONG NOTION THAT NO DEDUCTION WAS ALLOWABLE IN THE ABSENCE OF ANY INCOME FROM THIS HEAD. - THAT THE CARS WERE USED ONLY FOR THE PURPOSE OF BU SINESS. IT WAS CONTENDED THAT THE DEPRECIATION IS A SPECIFIC R ELIEF AND ALLOWANCE BE GIVEN TO THE ASSESSEE UNDER SECTION 32 OF THE ACT FOR THE USE OF THE ASSET IN THE BUSINESS. DRAWING REFERENCE TO EXPLANATION 5 TO SECTION 32(1), IT WAS CONTENDED TH AT WHETHER THE ASSESSEE CLAIMED DEPRECIATION OR NOT, THE ASSES SING OFFICER IS DUTY BOUND TO GRANT DEPRECIATION. THE LEARNED AR ALSO STRONGLY RELIED ON THE BOARDS CIRCULAR NO.14 (XI-35 ) OF 1955 DATED APRIL 11, 1955, WHICH IS REPRODUCED AT PARA 3 .2 OF THE IMPUGNED ORDER OF THE CIT (A). (III) THAT THERE WAS VARIATION IN SHORT-TERM CAPITA L GAINS TOO. THE ASSESSEE WAS THE OWNER OF A PROPERTY AT MAHADEVA PURA WHICH WAS ACQUIRED BY THE ASSESSEE AND ONE SRI RAMAK RISHNA GUPTA AND THAT THE ASSESSEE HAD MADE THE INVESTMENT IN THE PURCHASE OF THE PROPERTY AND SHRI GUPTA HAD AGREED T O REIMBURSE A PART OF THE INVESTMENT TO THE EXTENT OF 50% AND THEREAFTER TAKE THE DEED OF CONVEYANCE IN HIS NAME. IT WAS SUBMITTED THAT IN THE MEANWHILE THE SAID PROPERTY CA ME TO BE SOLD BY THE ASSESSEE DURING THE FY 2006-07 TO ONE SR I D KRISHNAREDDY FOR RS.85.76 LAKHS, OUT OF WHICH RS.40 LAKHS WAS PAID BY THE ASSESSEE TO SHRI GUPTA AS HIS SHARE OF P ROFIT ON THE SALE OF THE SUBJECT PROPERTY; - THAT WHILE FILING THE ORIGINAL AND REVISED RETURN S OF INCOME, THE ASSESSEE HAD REPORTED 50% OF THE CONSIDERATION RECEIVED ON THE SALE OF THE PROPERTY AND HAD ALSO DEDUCTED ON LY 50% OF THE COST OF ACQUISITION, PRESUMING THAT THE BALANCE OF 50% OF PAGE 6 OF 17 ITA NO.1027 /BANG/2011 6 THE CAPITAL GAINS HAS TO BE ASSESSED IN THE HANDS O F SHRI GUPTA. HOWEVER, THE ASSESSEE, IT WAS CONTENDED, CAME TO KN OW THAT THE SHRI GUPTA HAD DECLARED THE ENTIRE SUM OF RS.40 LAKHS RECEIVED BY HIM AS OTHER INCOME IN AS MUCH AS HE HAD NEVER BECOME THE OWNER OF THE PROPERTY TO OFFER THE SAME U NDER THE HEAD CAPITAL GAINS. IT WAS, FURTHER, CONTENDED THA T THE LEGAL EFFECT OF THE TRANSACTION WAS THAT OF THE ASSESSEE ALONE AS HE WAS THE OWNER OF THE PROPERTY AND, THUS, HE HAD TO O FFER THE ENTIRE CAPITAL GAIN IN RESPECT OF SALE AFTER CLAIMI NG DEDUCTION OF THE AMOUNT PAID TO SHRI GUPTA TOWARDS HIS SHARE OF SALE PROCEEDS. ACCORDING, THE ASSESSEE HAD REVISED THE COMPUTATION OF SHORT TERM CAPITAL WHICH HAD RESULTED IN A SHORT TERM CAPITAL LOSS OF RS.8,47,805/-; & (IV) THAT THE AO OUGHT NOT TO HAVE REJECTED THE AFO RESAID BONA- FIDE CLAIMS MADE BY THE ASSESSEE; AND THAT THE AO AS WELL AS THE CIT (A)OUGHT TO HAVE CONSIDERED THE REVISED COM PUTATION OF INCOME AND THE REJECTION OF THE SAME ON THE GROU ND THAT THE ASSESSEE WAS NOT COMPETENT TO REVISE THE RETURN OF INCOME WAS UNJUSTIFIED. 9. PER CONTRA, THE LEARNED DR SUBMITTED THAT THE A SSESSEE IS NOT AUTHORIZED TO MAKE CLAIM OF DEDUCTION WITHOUT FILIN G A REVISED RETURN. FOR THIS PROPOSITION, THE LEARNED DR RELIED ON THE JUDG MENT OF THE APEX COURT IN THE CASE OF GOETZE (INDIA) LTD. V CIT REPORTED IN 2 84 ITR 323. IT WAS SUBMITTED THAT THE ORIGINAL RETURN WAS FILED BELATE DLY ON 29/2/2008, HENCE, THE REVISED RETURN WAS FILED ON 28/7/2009 UNDER SEC TION 139(5) OF THE ACT CANNOT BE TAKEN COGNIZANCE OF. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS ON RECORD. IT IS NOT IN DISPUTE THAT IN THE INSTAN T CASE, RETURN UNDER SECTION 139(1) WAS FILED BELATEDLY. HENCE, THE ASSESSEE IS NOT ENTITLED TO FILE A REVISED RETURN UNDER SECTION 139(5) OF THE ACT GOIN G BY THE RATIO LAID DOWN PAGE 7 OF 17 ITA NO.1027 /BANG/2011 7 BY THE HONBLE APEX COURT IN THE CASE OF KUMAR JAGAD ISH CHANDRA SINHA CITED SUPRA. HOWEVER, THE DEPRECIATION ALLOWANCE U NDER EXPLANATION 5 OF SECTION 32 OF THE ACT IS MANDATORY ALLOWABLE IF THE SAID ASSET IS USED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. IN OTHER WORDS, WHETHER THE ASSESSEE MAKES A CLAIM OF DEPRECIATION OR NOT IN HI S RETURN OF INCOME, THE ASSESSING OFFICER IS DUTY BOUND TO GRANT DEPRECIATIO N ALLOWANCE BY VIRTUE OF EXPLANATION 5 TO SECTION 32(1) OF THE ACT (INSERTED BY FINANCE ACT, 2001 W.E.F. 1/4/2002). 10.1. CIRCULAR NO.14 (XI-35) OF 1955, DATED APRIL 11, 1955 PROVIDES THAT THE OFFICERS OF THE DEPARTMENT MUST NOT TAKE A DVANTAGE OF THE IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS AND THAT ALTHOUGH THE RESPONSIBILITY FOR CLAIMING REFUNDS AND RELIEFS RESTS WITH THE ASS ESSEE ON WHOM IT IS IMPOSED BY LAW, YET (A) THE OFFICERS SHOULD DRAW THE ATTENTION OF THE ASSESSEES TO ANY REFUND OR RELIEF TO WHICH THEY ARE E NTITLED TO BUT WHICH THEY HAVE OMITTED TO CLAIM FOR SOME REASON OR OTHER, AND (B) FREELY ADVISE THEM WHEN APPROACHED BY THEM AS TO THEIR RIGHTS AND LIABILITIES AND AS TO THE PROCEDURE TO BE ADOPTED FOR CLAIMING REFUNDS AN D RELIEFS. THE RELEVANT PORTION OF THE CIRCULAR READS AS FOLLOWS:- OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANTAGE OF IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS. IT IS O NE OF THEIR DUTIES TO ASSIST A TAXPAYER IN EVERY REASONABLE WAY PARTICULARLY IN THE MATTER OF CLAIMING AND SECURING RELIEFS AND IN THIS REGARD THE OFFICERS SHOULD TAKE THE INI TIATIVE IN GUIDING A TAXPAYER WHERE THE PROCEEDINGS OR OTHER PARTICULARS BEFORE THEM INDICATE THAT SOME REFUND O R RELIEF IS DUE TO HIM. THIS ATTITUDE WOULD IN THE L ONG RUN, BENEFIT THE DEPARTMENT; FOR IT WOULD INSPIRE CONFID ENCE PAGE 8 OF 17 ITA NO.1027 /BANG/2011 8 IN HIM THAT HE MAY BE SURE OF GETTING A SQUARE DEAL FROM THE DEPARTMENT. ALTHOUGH, THEREFORE, THE RESPONSIB ILITY FOR CLAIMING REFUNDS AND RELIEFS RESTS WITH THE ASS ESSEE ON WHOM IT IS IMPOSED BY THE LAW, OFFICERS SHOULD; (A) DRAW THEIR ATTENTION TO ANY REFUNDS OR RELIEFS TO WHICH THEY APPEAR TO BE CLEARLY ENTITLED BUT WHICH THEY HAVE OMITTED TO CLAIM FOR SOME REASON OR OTHER; (B) FREELY ADVISE THEM WHEN APPROACHED BY THEM AS TO THEIR RIGHTS AND LIABILITIES AND AS TO THE PROCEDUR E TO BE ADOPTED FOR CLAIMING REFUNDS AND RELIEFS. 10.2 IN VIEW OF EXPLANATION 5 TO SECTION 32(1), TH E ASSESSING OFFICER WAS DUTY BOUND TO GRANT DEPRECIATION ALLOWANCE, WHET HER THE SAME IS CLAIMED BY THE ASSESSEE OR NOT, PROVIDED THE CONDITIONS MENT IONED UNDER SECTION 32 ARE SATISFIED. THE CONTROVERSY COULD BE EXAMINED F ROM ANOTHER ANGLE. NO DOUBT, THE REVISED RETURN CANNOT BE TAKEN COGNIZANC E OF SINCE THE ORIGINAL RETURN WAS FILED BELATEDLY. HOWEVER, AN ADDITIONAL C LAIM COULD BE MADE BEFORE THE APPELLATE AUTHORITY AND THE APPELLATE AUT HORITY IS DUTY BOUND TO CONSIDER THE SAME. THERE ARE NUMBER OF JUDGMENTS W HICH CLEARLY ESTABLISH THAT THE ASSESSEE IS ENTITLED TO RAISE ADDITIONAL G ROUNDS, NOT MERELY IN TERMS OF LEGAL SUBMISSIONS BUT IN RESPECT OF NEW CLAIM NO T MADE IN THE RETURN FILED. 10.3 THE HONBLE SUPREME COURT IN THE CASE OF JUTE CORPORATION OF INDIA LIMITED V CIT REPORTED IN 187 ITR 688 WAS CON SIDERING THE FOLLOWING FACTS:- FOR THE ASSESSMENT YEAR 1974-75, THE APPELLANT DI D NOT CLAIM ANY DEDUCTION OF ITS LIABILITY TOWARDS PURCHASE TAX U NDER THE PROVISIONS OF THE BENGAL RAW JUTE TAXATION ACT, 1941, AS IT ENTER TAINED A BELIEF THAT IT PAGE 9 OF 17 ITA NO.1027 /BANG/2011 9 WAS NOT LIABLE TO PAY PURCHASE TAX UNDER THAT ACT. SUBSEQUENTLY, THE APPELLANT WAS ASSESSED TO PURCHASE TAX AND THE ORDE R OF ASSESSMENT WAS RECEIVED BY IT ON 23 RD 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 ADDITION AL DEDUCTION IN RESPECT OF ITS LIABILITY TO PURCHASE TAX. THE APPELLATE ASSIST ANT COMMISSIONER (AAC) PERMITTED IT TO RAISE THE CLAIM AND ALLOWED THE DED UCTION. THE TRIBUNAL HELD THAT THE AAC HAD NO JURISDICTION TO ENTERTAIN THE A DDITIONAL GROUND OR TO GRANT RELIEF ON A GROUND WHICH HAD NOT BEEN RAISED BEFORE THE INCOME TAX OFFICER. THE TRIBUNAL ALSO REFUSED THE APPELLANTS 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 CAS E. IT IS IN THESE CIRCUMSTANCES THAT THE APPELLANT FILED THE APPEAL B EFORE THE SUPREME COURT. THE SUPREME COURT HELD AS UNDER:- 5. IN CIT V KANPUR COAL SYNDICATE, A THREE JUDGE BE NCH OF THIS COURT DISCUSSED THE SCOPE OF SECTION 31(3)( A) OF THE INCOME TAX ACT, 1922 WHICH IS ALMOST IDENTICAL TO SECTION 251(1)(A). THE COURT HELD AS UNDER: (ITR P .229) IF AN APPEAL LIES, SECTION 31 OF THE ACT DESCRIBES THE POWERS OF THE APPELLATE ASSISTANT COMMISSIONER IN SUCH AN APPEAL. UNDER SECTION 31(3)(A) IN DISPOSING OF SUCH AN APPEAL THE AAC MAY, IN THE CASE OF AN ORDER OF ASSESSMENT, CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT; UNDER CLAUSE (B) THEREOF HE MAY SET ASIDE THE ASSESSMENT AND DIRECT THE INCOME TAX OFFICER TO MAKE A FRESH ASSESSMENT, THE AAC HAS, THEREFORE, PLENARY POWERS IN DISPOSING OF AN APPEAL. PAGE 10 OF 17 ITA NO.102 7/BANG/2011 10 THE SCOPE OF HIS POWER IS CO-TERMINUS WITH THAT OF THE ITO. HE CAN DO WHAT THE ITO CAN DO AND ALSO DIRECT HIM TO DO WHAT HE HAS FAILED TO DO. 6. THE ABOVE OBSERVATIONS ARE SQUARELY APPLICABLE TO THE INTERPRETATION OF SECTION 251(1)(A) OF THE ACT. THE DECLARATION OF LAW IS CLEAR THAT THE POWER OF THE APPELLATE ASSISTANT COMMISSIONER IS CO-TERMINUS WITH THAT OF THE ITO, IF THAT BE SO, THERE APPEARS TO BE NO REASON AS TO WHY THE APPELLATE AUTHORITY CANNOT MODIFY THE ASSESSMENT ORDER ON AN ADDITIONAL GROUND EVEN IF NOT RAISED BEFORE THE ITO . 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 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 ITO. (EMPHASIS SUPPLIED). IT IS CLEAR, THEREFORE, THAT AN ASSESSEE IS ENTI TLED TO RAISE NOT MERELY ADDITIONAL LEGAL SUBMISSIONS BEFORE THE APPEL LATE AUTHORITIES, BUT IS ALSO ENTITLED TO RAISE ADDITIONAL CLAIMS BEFORE THE M. THE APPELLATE AUTHORITIES HAVE THE DISCRETION WHETHER OR NOT TO P ERMIT SUCH ADDITIONAL CLAIMS TO BE RAISED. IT CANNOT, HOWEVER, BE SAID T HAT THEY HAVE NO PAGE 11 OF 17 ITA NO.102 7/BANG/2011 11 JURISDICTION TO CONSIDER THE SAME. THEY HAVE THE JU RISDICTION TO ENTERTAIN THE NEW CLAIM. THAT THEY MAY CHOOSE NOT TO EXERCISE THEIR JURISDICTION IN A GIVEN CASE IS ANOTHER MATTER. THE EXERCISE OF DISC RETION IS ENTIRELY DIFFERENT FROM THE EXISTENCE OF JURISDICTION. 10.4 THE FULL BENCH OF THE HONBLE MUMBAI HIGH COU RT IN THE CASE OF AHMEDABAD ELECTRICITY LIMITED V CIT (1993) 199 ITR 3 51 CONSIDERED A SIMILAR SITUATION. IN THAT CASE, THE APPELLANT/ASS ESSEE DID NOT CLAIM A DEDUCTION IN RESPECT OF THE AMOUNTS IT WAS REQUIRED TO TRANSFER TO CONTINGENCIES RESERVE AND DIVIDEND AND TARIFF RESER VE EITHER BEFORE THE INCOME TAX OFFICER OR BEFORE THE APPELLATE ASSISTAN T COMMISSIONER IN APPEAL. SUBSEQUENTLY, THE HONBLE MUMBAI HIGH COURT IN THE CASE OF AMALGAMATED ELECTRICITY COMPANY LIMITED V CIT (1974) 97 ITR 334, HELD THAT SUCH AMOUNTS REPRESENTED ALLOWABLE DEDUCTIONS ON REVENUE ACCOUNT. THE APPELLANT, THEREFORE, RAISED A NEW CLAIM AND AD DITIONAL GROUNDS BEFORE THE TRIBUNAL IN THAT CONNECTION. THE TRIBUNAL REJE CTED THE SAME. THE SECOND QUESTION WHICH WAS RAISED IN THE REFERENCE B EFORE THE HONBLE DIVISION BENCH OF MUMBAI HIGH COURT WAS AS UNDER: (2) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL ERRED IN NOT ALLOWING THE AS SESSEE LEAVE TO RAISE IN ITS OWN APPEALS ADDITIONAL GROUND S AND IN THE DEPARTMENTAL APPEALS CROSS OBJECTIONS REGARDING THE DEDUCTIBILITY OF THE SUMS TRANSFERRED TO CONTINGENCY RESERVE AND TARIFF AND DIVIDEND CONTROL RESERVE? THE DIVISION BENCH WHICH HEARD THE REFERENCE, FIND ING THAT THERE WAS A CONFLICT OF DECISIONS, PLACED THE PAPERS BEFORE T HE HONBLE CHIEF JUSTICE PAGE 12 OF 17 ITA NO.102 7/BANG/2011 12 FOR CONSTITUTING A LARGER BENCH TO RESOLVE THE CONT ROVERSY. THE FULL BENCH ANSWERED THE REFERENCE IN THE AFFIRMATIVE AND IN FA VOUR OF THE ASSESSEE. THE FULL BENCH HELD:- THUS, THE APPELLATE ASSISTANT COMMISSIONER HAS VER Y WIDE POWERS WHILE CONSIDERING AN APPEAL WHICH MAY BE FILED BY THE ASSESSEE. HE MAY CONFIRM, REDUCE, ENHAN CE OR ANNUL THE ASSESSMENT OR REMAND THE CASE TO THE ASSESSING OFFICER. THIS IS BECAUSE, UNLIKE AN ORDI NARY APPEAL, THE BASIC PURPOSE OF A TAX APPEAL IS TO ASC ERTAIN THE CORRECT TAX LIABILITY OF AN ASSESSEE IN ACCORDAN CE WITH LAW. HENCE AN APPELLATE ASSISTANT COMMISSIONE R ALSO HAS THE POWER TO ENHANCE THE TAX LIABILITY OF T HE ASSESSEE ALTHOUGH THE DEPARTMENT DOES NOT HAVE A RI GHT OF APPEAL BEFORE THE APPELLATE ASSISTANT COMMISSION ER. THE EXPLANATION TO SUB-SECTION (2), HOWEVER, MAKES IT CLEAR THAT FOR THE PURPOSE OF ENHANCEMENT, THE APPE LLATE ASSISTANT COMMISSIONER CANNOT TRAVEL BEYOND THE PROCEEDINGS WHICH WERE ORIGINALLY BEFORE THE INCOME TAX OFFICER OR REFER TO NEW SOURCES OF INCOME WHICH WER E NOT BEFORE THE INCOME TAX OFFICER AT ALL. FOR THIS PURPOSE, THERE ARE OTHER SEPARATE REMEDIES PROVIDED UNDER THE INCOME-TAX ACT. 10.5 THE HONBLE SUPREME COURT IN THE CASE OF NATI ONAL THERMAL POWER COMPANY LIMITED V CIT (1998) 229 ITR 383 WAS C ONSIDERING A CASE WHERE THE ASSESSEE HAD DEPOSITED ITS FUNDS NOT IMME DIATELY REQUIRED BY IT ON SHORT TERM DEPOSITS WITH BANKS. THE INTEREST RE CEIVED ON SUCH DEPOSITS WAS OFFERED BY THE ASSESSEE ITSELF FOR TAX AND THE A SSESSMENT WAS COMPLETED ON THAT BASIS. EVEN BEFORE THE COMMISSION ER OF INCOME-TAX (APPEALS), THE INCLUSION OF THIS AMOUNT WAS NEITHER CHALLENGED BY THE ASSESSEE NOR CONSIDERED BY THE COMMISSIONER OF INCOM E-TAX (APPEALS). THE PAGE 13 OF 17 ITA NO.102 7/BANG/2011 13 ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL. THE I NCLUSION OF THE AMOUNT WAS NOT OBJECTED TO EVEN IN THE GROUNDS OF APPEAL A S ORIGINALLY FILED BEFORE THE TRIBUNAL. SUBSEQUENTLY, THE ASSESSEE BY A LETTER RAISED ADDITIONAL GROUNDS TO THE EFFECT THAT THE SAID SUM COULD NOT B E INCLUDED IN THE TOTAL INCOME. THE ASSESSEE CONTENDED THAT ON AN 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 ER RED AND FAILED IN THEIR DUTY IN ADJUDICATING THE MATTER CORRECTLY AND BY MECHA NICALLY 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 FU RTHER STATED THAT IT HAD RAISED THESE ADDITIONAL GROUNDS ON LEARNING ABOUT T HE LEGAL POSITION SUBSEQUENTLY. THE TRIBUNAL DECLINED TO ENTERTAIN TH ESE ADDITIONAL GROUNDS. THE SUPREME COURT DID NOT ANSWER THE QUESTION ON ME RITS, BUT FRAMED THE FOLLOWING QUESTION AND HELD AS UNDER:- 4. THE TRIBUNAL HAS FRAMED AS MANY AS FIVE QUESTION S 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 CONTENTION S. WE REFRAME THE QUESTION WHICH ARISES FOR OUR CONSIDERA TION 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. PAGE 14 OF 17 ITA NO.102 7/BANG/2011 14 UNDER SECTION 254 OF THE INCOME TAX ACT THE APPELLA TE TRIBUNAL MAY, AFTER GIVING BOTH THE PARTIES TO THE A PPEAL AN OPPORTUNITY OF BEING HEARD, PASS SUCH ORDERS THER EON AS IT THINKS FIT. THE POWER OF THE TRIBUNAL IN DEAL ING WITH THE APPEALS IS THUS EXPRESSED IN THE WIDEST POSSIBL E TERMS. THE PURPOSE OF THE ASSESSMENT PROCEEDINGS BEFORE THE TAXING AUTHORITIES IS TO ASSESS CORRECTL Y THE TAX LIABILITY OF AN ASSESSEE IN ACCORDANCE WITH LAW. IF, FOR EXAMPLE, AS A RESULT OF A JUDICIAL DECISION GIVEN W HILE THE APPEAL IS PENDING BEFORE THE TRIBUNAL, IT IS FOUND THAT A NON-TAXABLE ITEM IS TAXED OR A PERMISSIBLE DEDUCTIO N IS DENIED, WE DO NOT SEE ANY REASON WHY THE ASSESSEE SHO ULD BE PREVENTED FROM RAISING THAT QUESTION BEFORE THE TRIBUNAL FOR THE FIRST TIME, SO LONG AS THE RELEVAN T FACTS ARE ON RECORD IN RESPECT OF THAT ITEM. WE DO NOT SE E ANY REASON TO RESTRICT THE POWER OF THE TRIBUNAL UNDER SECTION 254 ONLY TO DECIDE THE GROUNDS WHICH ARISE F ROM THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S). BOTH THE ASSESSEE AS WELL AS THE DEPARTMENT HAS A R IGHT TO FILE AN APPEA1/CROSSOBJECTIONS BEFORE THE TRIBUN AL. WE FAIL TO SEE WHY THE TRIBUNAL SHOULD BE PREVENTED FROM CONSIDERING QUESTIONS OF LAW ARISING IN ASSESS MENT PROCEEDINGS ALTHOUGH NOT RAISED EARLIER. 10.6 THE HONBLE SUPREME COURT IN THE CASE OF GOET ZE (INDIA) LIMITED V. COMMISSIONER OF INCOME-TAX (SUPRA) RELIE D ON BY THE CIT IS DISTINGUISHABLE ON THE FACTS. THE QUESTION BEFORE THE COURT WAS WHETHER THE APPELLANT-ASSESSEE COULD MAKE A CLAIM FOR DEDUC TION, OTHER THAN BY FILING A REVISED RETURN. AFTER THE RETURN WAS FILED, THE A PPELLANT SOUGHT TO CLAIM A DEDUCTION BY WAY OF A LETTER BEFORE THE ASSESSING OFF ICER. THE CLAIM, THEREFORE, WAS NOT BEFORE THE APPELLATE AUTHORITIES . THE DEDUCTION WAS DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND TH AT THERE WAS NO PROVISION UNDER THE ACT TO MAKE AN AMENDMENT IN THE RETURN OF INCOME BY MODIFYING AN APPLICATION AT THE ASSESSMENT STAGE WIT HOUT REVISING THE PAGE 15 OF 17 ITA NO.102 7/BANG/2011 15 RETURN. THE COMMISSIONER OF INCOME-TAX (APPEALS) AL LOWED THE ASSESSEE'S APPEAL. THE TRIBUNAL, HOWEVER, ALLOWED THE DEPARTME NT'S APPEAL. IN THE SUPREME COURT, THE ASSESSEE RELIED UPON THE JUDGMEN T IN NATIONAL THERMAL POWER COMPANY LIMITED CONTENDING THAT IT WAS OPEN TO THE ASSESSEE TO RAISE THE POINTS OF LAW EVEN BEFORE THE TRIBUNAL. THE SUP REME COURT HELD :- 4. THE DECISION IN QUESTION IS THAT THE POWER OF T HE TRIBUNAL UNDER SECTION 254 OF THE INCOME-TAX ACT, 1961, IS TO ENTERTAIN FOR THE FIRST TIME A POINT OF LAW PROVIDED THE FACT ON THE BASIS OF WHICH THE ISSUE O F LAW CAN BE RAISED BEFORE THE TRIBUNAL. THE DECISION DOE S NOT IN ANY WAY RELATE TO THE POWER OF THE ASSESSING OFFICER TO ENTERTAIN A CLAIM FOR DEDUCTION OTHERWIS E THAN BY FILING A REVISED RETURN. IN THE CIRCUMSTANCE S OF THE CASE, WE DISMISS THE CIVIL APPEAL. HOWEVER, WE MAKE IT CLEAR THAT THE ISSUE IN THIS CASE IS LIMITED TO THE POWER OF THE ASSESSING AUTHORITY AND DOES NOT IMPING E ON THE POWER OF THE INCOME-TAX APPELLATE TRIBUNAL UNDER SECTION 254 OF THE INCOME-TAX ACT, 1961. THER E SHALL BE NO ORDER AS TO COSTS. [EMPHASIS SUPPLIED] 10.7 THE HONBLE SUPREME COURT DID NOT HOLD ANYTHI NG CONTRARY TO WHAT WAS HELD IN THE PREVIOUS JUDGMENTS TO THE EFFE CT THAT EVEN IF A CLAIM IS NOT MADE BEFORE THE ASSESSING OFFICER, IT CAN BE MA DE BEFORE THE APPELLATE AUTHORITIES. THE JURISDICTION OF THE APPELLATE AUTH ORITIES TO ENTERTAIN SUCH A CLAIM HAS NOT BEEN NEGATED BY THE SUPREME COURT IN T HIS JUDGMENT. IN FACT, THE SUPREME COURT MADE IT CLEAR THAT THE ISSUE IN T HE CASE WAS LIMITED TO THE POWER OF THE ASSESSING AUTHORITY AND THAT THE JU DGMENT DOES NOT IMPINGE ON THE POWER OF THE APPELLATE AUTHORITIES. PAGE 16 OF 17 ITA NO.102 7/BANG/2011 16 10.8 A DIVISION BENCH OF THE HONBLE DELHI HIGH C OURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. JAI PARABOLIC SPRINGS LIMITED (2008) REPORTED IN 306 ITR 42 HAD DISTINGUISHED THE HONBL E APEX COURT JUDGEMENT IN THE CASE OF GOETZE (INDIA) LTD. (SUPRA ). THE HONBLE DELHI HIGH COURT, IN PARAGRAPH 17 OF THE JUDGMENT HELD THAT TH E SUPREME COURT DISMISSED THE APPEAL MAKING IT CLEAR THAT THE DECIS ION WAS LIMITED TO THE POWER OF THE ASSESSING AUTHORITY TO ENTERTAIN A CLAI M FOR DEDUCTION OTHERWISE THAN BY A REVISED RETURN AND DID NOT IMPIN GE ON THE POWERS OF THE TRIBUNAL. IN PARAGRAPH 19, THE HONBLE HIGH COURT HELD THAT THERE WAS NO PROHIBITION ON THE POWERS OF THE TRIBUNAL TO ENTERT AIN AN ADDITIONAL GROUND WHICH, ACCORDING TO THE TRIBUNAL, ARISES IN THE MAT TER AND FOR THE JUST DECISION OF THE CASE. 10.9 IN THE INSTANT CASE, THE CIT (A) HAS NOT EXA MINED THE ISSUE IN CORRECT PERSPECTIVE TAKING INTO CONSIDERATION THE E XPLANATION 5 TO SECTION 32(1) OF THE ACT AND THE BOARDS CIRCULAR MENTIONED SUPRA. THE CIT (A) IS EMPOWERED TO CONSIDER ADDITIONAL CLAIM MADE BEFORE HIM, THOUGH NOT MADE IN THE RETURN FILED. THEREFORE, IN THE INTEREST OF JU STICE AND EQUITY, THE CASE IS RESTORED TO THE FILE OF THE CIT (A) TO CONSIDER THE ISSUES AFRESH AND TO TAKE APPROPRIATE ACTION IN ACCORDANCE WITH THE PROV ISIONS OF THE ACT. IF SO DESIRED, THE CIT (A) SHALL CALL FOR A COMPREHENSIVE REMAND REPORT AS TO WHETHER THE ASSESSEE WAS ENTITLED TO DEDUCTIONS AS CLAIMED UNDER VARIOUS HEADS AND TO DECIDE THE ISSUES AS DEEM FIT. THE ASS ESSEE SHALL, HOWEVER, BE AFFORDED AN OPPORTUNITY OF BEING HEARD. IT IS ORDER ED ACCORDINGLY. PAGE 17 OF 17 ITA NO.102 7/BANG/2011 17 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH DAY OF AUGUST, 2012 SD/- SD/- (JASON P BOAZ) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNE D. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BANGALORE.