Loading judgment…
Facts
The assessee's income was assessed under Section 143(3) with an addition of Rs.55,000/-, on which the AO's order was silent. Separately, the assessee claimed a deduction of Rs.11,80,000/- for club entrance fees during assessment proceedings, which the AO ignored. The CIT(A) deleted the Rs.55,000/- addition but dismissed the club entrance fees claim, leading to the present appeal before the Tribunal.
Held
The Tribunal held that the club entrance fees of Rs.11,80,000/- were a legitimate business expenditure and should be allowed. Relying on Supreme Court precedent (Mahalaxmi Sugar Mills Ltd.), it affirmed that tax authorities must grant relief if facts justify, even if no specific claim was initially made, and directed the AO to allow the deduction and recompute the total income.
Key Issues
The key issues were the allowability of club entrance fees as a business expenditure and whether tax authorities are bound to consider claims made during assessment proceedings, especially when supporting facts are available on record.
Sections Cited
250, 143(3), 147
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH KOLKATA
Before: Shri Sonjoy Sarma & Shri Rakesh Mishra
order
: April 29, 2025 ORDER
Per Sonjoy Sarma, Judicial Member:
The present appeal has been preferred by the assessee against an order dated 16.12.2024 of the Commissioner of Income Tax (Appeal) ADDL/JCIT-12, Mumbai [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’).
Brief facts of the case are that the assessee filed its return of income declaring a total income of Rs.3,56,95,240/-. However, in the assessment framed u/s 143(3) of the Act, the income of the assessee assessed at Rs.3,57,50,240/- resulting in an addition of Rs.55,000/- to the declared income. While framing the assessment order, no specific issue was discussed by the Assessing Officer regarding the addition of Rs.55,000/- added to the total income of the assessee. In fact, the assessment order is silent on disallowance relating to Rs.55,000/- as made by the Assessing Officer. During the course of assessment proceedings, the assessee stated by a letter dated 22.12.2019 that Assessment Year: 2018-19 M/s Jamshedpur Transport Co. Ltd expenditure on account of club entrance fees of Rs.11,80,000/- had been added back to the computation to the income at the time of filing of the return whereas such expenditure was to be allowed and thereby, the assessee made a fresh claim and pleaded before the Assessing Officer to allow the expenditure to the extent of Rs.11,80,000/- by reducing the total income to that extent. However, the Assessing Officer ignored this submission of the assessee and no fact has been mentioned in the assessment order and the assessment was completed without considering the claim of the assessee.
Aggrieved by the above order, the assessee filed appeal before the ld. CIT(A) and the ld. CIT(A) granted partial relief by deleting the addition of Rs.55,000/- observing that the Assessing Officer made the said addition without application of mind. However, regarding the claim of deduction of club entrance fees of Rs.11,80,000/-, the ld. CIT(A) granted no relief by simply dismissing the ground taken by the assessee.
Dissatisfied with the above order, the assessee is in appeal before this Tribunal contending that the said club entrance fees amounting to Rs.11,80,000/- was duly debited in the books of accounts and genuinely incurred by the assessee, therefore, this ought to have been allowed by the Assessing Officer. The ld. AR further stated that the said club entrance fees was incurred purely for the purpose of improving its business and he therefore, relied on the various judicial pronouncement including the decision of Hon’ble Apex Court in the case of CIT vs. United Glass Mfg. Co. Ltd. reported in (2012) 28 taxmann.com 429 (SC). The ld. AR also argued that the duty of the Assessing Officer is not only to assess but also to determine the correct income of the assessee on the basis of books of account of the assessee, hence, the disallowance was unjustified.
Assessment Year: 2018-19 M/s Jamshedpur Transport Co. Ltd
On the other hand, the ld. DR supported the decisions of the Assessing Officer as well as ld. CIT(A). The ld. DR relied on the decision of Goetze (India) Ltd. vs. CIT (2006) 284 ITR 323 (SC) and stated that no new claim cannot be entertained by Assessing Officer without a revised return. However, the ld. AR objected to such submission made by the ld. DR stating that appellate authority can entertain such claim.
We, after hearing the rival submissions and perusing the materials available on record, find that during the course of assessment proceedings, the assessee claimed deduction of Rs.11,80,000/- towards club entrance fees by filing an application dated 22.12.2019, however, the Assessing Officer neither considered nor discussed the same which is against the principles of natural justice. Similarly, the ld. CIT(A) also did not record any findings on the issue but simply dismissed the appeal of the assessee. We also note that the said club entrance fees were incurred for the promotion of the business interest and hence the same is an allowable expenditure. The Hon’ble Supreme Court in the case of Mahalaxmi Sugar Mills Ltd. reported in (1986) 160 ITR 920 (SC) has clearly held that the income tax authorities must grant relief to the assessee if the facts and materials available on record justify such relief, even if the assessee has not made a specific claim before the Assessing Officer. In the present case, the facts relating to club entrance fees was very much available on record. The assessee had submitted its claim before the Assessing Officer along with supporting documents and the expenditure was duly reflected in books of accounts. We further note that the duty of the Assessing Officer is to assess correct income and the legitimate tax must be assessed and collected. Considering the submissions made by the assessee and in the light of the discussion above, we find it just and proper to allow the claim of the assessee and we direct the Assessing Officer to allow the claim of club entrance fees Assessment Year: 2018-19 M/s Jamshedpur Transport Co. Ltd amounting to Rs.11,80,000/- as debited by the assessee in books of accounts and recompute the total income of the assessee.
In terms of the above, the appeal of the assessee is allowed. Kolkata, the 29th April, 2025.