INCOME TAX OFFICER -31(2) (1), MUMBAI vs. JOHNSON & JOHNSON PVT. LTD GRATUITY FUND, MUMBAI

This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short ‘ the CIT(A) ] dated 28/12/2021 for the Assessment Year 2018-19.

Ms. Vranda U Matkarni representing the Department submitted that in the First Appellate proceedings, the CIT(A) allowed assessee’s claim of deduction of Rs.8.44 crores. The ld. Departmental Representative submits that the CIT(A) failed to appreciate the fact that the said claim was not made by the assessee in the return of income or in the revised return of income. The ld. Departmental Representative further pointed that the CIT(A) has erred in admitting fresh claim of the assessee without making enquries and restored the same to the Assessing Officer with a direction to verify the same.

Per contra, Shri M.P.Lohia appearing on behalf of the assessee vehemently defended the impugned order and prayed for dismissing the appeal of Revenue.

Both sides heard , orders of authorities below examined. The assessee is an approved Gratuity Fund Trust. The assessee during the period relevant to assessment year under appeal earned net income of Rs.8,44,48,363/-. The assessee filed its return of income for Assessment Year 2018-19 on 30/08/2018 declaring the aforesaid amount under the head “ profits and gains from business or profession”. In the return of income the assessee did not claim the aforesaid amount as exempt under “Schedule EI – Details of Exempt Income (Income not to be included in Total Income).” The return of the assessee was processed under section 143(1) of the Act. The CPC held the aforesaid income as taxable as it was not claimed as exempt in the return of income. Aggrieved by the order dated 09/02/2020 passed u/s. 143(1) of the Act, the assessee filed appeal before the CIT(A) claiming income of Gratuity Fund Rs.8,44,48,383/- as exempt u/s. 10(25)(iv) of the Act. The claim was made by the assessee for the first time before the CIT(A). The CIT(A) admitted fresh claim and restored the issue back to the file of Assessing Officer.

The provisions of Income Tax Act, 1961 (in short ‘ the Act’) vests CIT(A) powers co-terminus and co-extensive with that of the Assessing Officer, Hence, the CIT(A) in an appeal against the assessment order may confirm, reduce, enhance or annul the assessment. Section 250 of the Act mandates that the CIT(A) may before disposing of any appeal make such further enquiry as he think fit or may direct the Assessing Officer to make further enquiry and report the result of the same to the CIT(A). Thus, the CIT(A) has to pass the order on the appeal by the assessee either confirming, reducing, enhancing or annulling the assessment. The CIT(A) was not justified to restore the issue to the file of Assessing Officer to pass fresh assessment order after admitting fresh claim. The CIT(A) has to pass a speaking order adjudicating the claim of assessee raised in the appeal by way of ground/additional grounds of appeal. In the instant case the CIT(A) has simply restored the issue back to the Assessing Officer with certain direction after admitting the fresh claim. In the light of the provisions of the Act and the settled law, we set aside the impugned order and direct the CIT(A) to decide the appeal denovo accepting/rejecting the claim of assessee by passing a speaking order, in accordance with the law. Needless to say, the CIT(A) shall allow the assessee reasonable opportunity of hearing / opportunity to make submissions before deciding the appeal afresh.