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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI VIKAS AWASTHY
आदेश/ ORDER
These two appeals by two different assessees have similar facts and hence, are take up together for adjudication and are decided vide this common order. For the sake of convenience facts are narrated from for assessment year 2014-15.
ITA No.3946/Mum/2019, A.Y. 2014-15:
2. This appeal by the assessee is directed against order of Commissioner of Income Tax (Appeals)-44, Mumbai [ in short the ‘CIT(A)’] dated 29/03/2019 for the assessment year 2014-15. The assessee in appeal has raised primary ground assailing disallowance of assessee’s claim of deduction under section 80P(2)(d) of the Income Tax Act,1961 ( in short 'the Act') in respect of interest income received from Co-operative Bank. The assessee has also raised another ground against rejection of assessee’s claim of deduction under section 80P(2)(c) of the Act.
The facts of the case as emanating from records are : The assessee is a Co-operative Housing society. The assessee had deposit accounts with M/s. Shamrao Vithall Co-Operative Bank Ltd. During the period relevant to assessment year under appeal, the assessee had received interest income of Rs.3,79,520/- from the deposits with the aforesaid Bank. In the return of income the assessee did not disclose the aforesaid interest income. On the basis of AIR information, in scrutiny assessment proceedings the Assessing Officer proposed to make addition of the aforesaid interest income. The assessee objected to it on the ground that the interest income from a Co- operative Bank is eligible for deduction under section 80P(2)(d) of the Act. To support its claim the assessee placed reliance on the decision of Tribunal in the case of Lands End Co-operative Housing Society vs. ITO decided on 15/01/2016 in for assessment year 2009-10. The Assessing Officer rejected the claim of assessee inter-alia on the ground that since, the assessee has not disclosed the interest income in the computation of income nor the claim of deduction under section 80P was made in the return of income, the claim of assessee cannot be accepted. Aggrieved by the assessment order dated 30/11/2016, the assessee filed appeal before the CIT(A). The First Appellate Authority after examining facts of the case, submissions of the assessee and various decisions cited by the assessee to buttress its claim upheld the assessment order. The CIT(A) concluded that since the provisions of section 80A(5) of the Act are not satisfied, the claim made under section 80P(2)(d) of the Act made by the assessee cannot be accepted. Hence, the present appeal by the assessee.
Shri Ravinder Naik appearing on behalf of the assessee submitted that the assessee is a Co-operative Housing Society. Since its inception the assessee is following the practice of transferring collection received from its members to deposit accounts maintained with Co-operative Bank. As per the past practice, the entire interest received by the assessee on investments is transferred to respective fund accounts i.e. Sinking Fund investment account, Maintenance Fund investment account and Society Welfare fund investment account. The interest is reflected in Balance Sheet. The ld. Authorized Representative of the assessee referred to Balance Sheet as on 31/03/2014 at page 30 of the Paper Book. The interest is not shown in Income and Expenditure account, hence, the same was not offered to tax. The ld. Authorized Representative of the assessee submitted that in any case, the aforesaid interest income is eligible for deduction under section 80P(2)(d) of the Act.
4.1 The ld. Authorized Representative of the assessee further submitted that even though the deduction was not claimed by the assessee in the return of income, the assessee can make fresh claim of deduction before the appellate authorities. The ld. Authorized Representative of the assessee asserted that that the assessee is entitled to raise new claim/legal claim before the appellate authorities as additional ground in respect of claims not made in the return of income. The ld. Authorized Representative of the assessee further contended that the assessee could not make claim of deduction under section 80P(2)(d) of the Act by filing revised return as the original return was filed belatedly. Nevertheless the claim was made by filing fresh computation at the time of assessment proceedings and subsequently by way of additional ground before the CIT(A) To support his arguments the ld. Authorized Representative of the assessee placed reliance on the following decisions:
1. Goetze (India) Ltd. vs. CIT, 284 ITR 323 2. National Thermal Power Company Ltd.Vs. CIT, 229 ITR 383 (SC) 3. CIT vs.Pruthvi Brokers & Share Holders, 349 ITR 336(Bom) 4. CIT vs. Dhampur Sugar Ltd. 90 ITR 236 (All) 5. Solaris Bio-Chemicals vs. DCIT, TS-5929-ITAT-2012(Del)
4.2 On merits of allowability of assessee’s claim of deduction under section 80P(2)(d) of the Act in respect of interest income earned from Co-operative bank, the ld. Authorized Representative of the assessee submitted that the Tribunal in various decisions has held that interest received from Co-operative Bank qualifies for deduction under section 80P(2)(d) of the Act . In support of his contention the ld. Authorized Representative of the assessee placed reliance on following decisions:
ITO Vs. Kulswamy Co-operative Society in assessment year 2009-10 decided on 21/08/2015.
Parijat Co-operative Credit Society vs. CIT in ITA No.3496/Mum/2013 assessment year 2009-10 decided on 21/03/2016
Per contra Shri Sanjay Sethi representing the Department vehemently defended the impugned order and prayed for dismissing the appeal of assessee. The ld. Departmental Representative submitted that claim of deduction made by assessee under section 80P of the Act cannot be entertained in view of the provisions of section 80A(5) of the Act. The provisions of section 80A(5) at the outset bars to entertain any claim of deduction made under Chapter VI-C if the claim is not made in the return of income. Undisputedly, the assessee has not made claim of deduction under section 80P in the return of income. In the light of the provisions of section 80A(5), the assessee is estopped from making claim under section 80P of the Act.
Submissions made by rival sides heard, orders of authorities below examined. The assessee is in appeal against the order of CIT(A) wherein assessee’s claim of deduction under section 80P(2)(d) of the Act has been denied. Before proceeding further to adjudicate the ground raised by the assessee against disallowance of claim of deduction under section 80P(2)(d) of the Act, it would be imperative to reiterate vital facts. The assessee filed its return of income for the impugned assessment year on 23/03/2016. In the return of income admittedly the assessee had not made claim of deduction under section 80P(2)(d) of the Act. The said claim of deduction was made by the assessee by way of note during scrutiny assessment proceedings. The said claim of the assessee was rejected inter-alia on the ground that since, no claim of deduction was made in the return of income, the same cannot be accepted. In first appellate proceedings the CIT(A) referring to the provisions of section 80A(5) of the Act upheld the assessment order rejecting assessee’s claim of deduction made during the course of scrutiny assessment.
The provisions of sub-section (5) to section 80A of the Act are reproduced here under for ready reference:
“(5) Where the assessee fails to make a claim in his return of income for any deduction under section 10A or section 10AA or section 10B or section 10BA or under any provision of this Chapter under the heading "C.- Deductions in respect of certain incomes", no deduction shall be allowed to him thereunder.” A plain reading of the above sub-section would show that where claim of deduction under section 10A/10AA/10B/10BA or any provisions of Chapter VI- C is not made in the return of income, the deduction shall not be allowed to the assessee. In the present case the assessee has claimed deduction under section 80P(2)(d) of the Act in respect of interest income from Co-operative Bank by way of note during assessment proceedings. Section 80P falls under Chapter VI-C, therefore, the provisions of section 80A(5) precludes the assessee to make claim of deduction under section 80P from any other mode other than the return of income.
8. It would be relevant to mention here that this appeal was refixed for hearing especially to give an opportunity to the ld.Authorized Representative of the assessee to make his submissions to counter the provisions of section 80A(5) of the Act. The ld.Authorized Representative of the assessee filed a Paper Book giving written submissions and giving list of case laws primarily on admission of additional ground and new claim legally admissible during appellate proceedings.
9. There is no denying the fact that the assessee has right to raise additional ground to make fresh claim before the appellate authorities and the appellate authorities are competent to admit the additional ground if the facts are already on record and no fresh evidence is required to be adduced to substantiate the claim made by way of additional ground. This position has been settled by the Hon’ble Apex Court in the case of Goetze India Ltd. (Supra) and National Thermal power Company Ltd. (supra) and thereafter reiterated by Hon'ble Jurisdictional High Court in the case of M/s. Pruthvi Brokers and Share Holders Pvt. Ltd. (supra) and catena of judgments.
However, it would be relevant to mention here that none of the aforesaid judgments can be interpreted in a manner to say that even if a claim otherwise impermissible under the scheme of the Act has to be admitted by way of additional ground. The Hon'ble Supreme Court of India in the case of Jute Corporation of India Ltd. vs. CIT, 187 ITR 668 while dealing with the powers of AAC observed that an appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restriction or limitation if any prescribed by the statutory provisions. In the present case even though the assessee’s claim of deduction under section 80P(2)(d) of the Act is allowable, however, since the assessee has failed to qualify the additional condition imposed by section 80A(5), the assessee would not be entitled to claim said deduction, even if, otherwise the assesssee is eligible for deduction under section 80P(2)(d) of the Act .
The provisions of section 80A(5) were inserted by the Finance Act 2009 with retrospective effect from 01/04/2003. The judgment on which reliance has been placed by the ld. Authorized Representative for the assessee were rendered prior to insertion of sub-section(5) to Section 80A of the Act hence, the provisions of section 80A(5) of the Act were not considered. The constitutional validity of section 80A(5) was challenged in Writ Petition in the case of Nath Brothers Exim International Ltd. vs. Union of India before the Hon'ble Delhi High Court reported as 394 ITR 577 (Del). The Hon’ble High Court upheld the validity of section 80A(5) inserted by the Finance Act, 2009 with retrospective effect from 01/04/2003.
The Hon'ble Bombay High Court in the case of EBR Enterprises vs. Union of India reported as 415 ITR 139 in somewhat similar issue wherein assessee’s claim of deduction under section 80IB(10) was rejected by invoking the provisions of section 80A(5) of the Act as the said claim was not made in the return of income dismissed the writ petition by observing as under:-
“6. We are conscious that in absence of the provision contained in Section 80A (5) of the Act, the Petitioners could have maintained the claim of deduction even before the CIT for the first time in Revision Application, though no such claim was made before the Assessing Officer, if from the facts on record, the Petitioners could sustain the said claim in law. This is very clear from the series of Judgments of various High Courts. Reference can be made to the decision of High Court of Gujarat in case of C. Parikh & Co. v. CIT [1980] 4 Taxman 224/122 ITR 610 In the said decision, the Court held that: 'it is clear that under Section 264, the CIT is empowered to exercise revisional powers in favour of the assessee. In exercise of this power, the CIT may, either of his own motion or on an application by the assessee, call for the record of any proceeding under the Act and pass such order thereon not being an order prejudicial to the assessee, as the thinks fit. Sub - ss. (2) and (3) of Section 264 provide for limitation of one year for the exercise of this revisional power, whether suo motu, or at the instance of the assessee. Power is also conferred on the CIT to condone delay in case he is satisfied that the assessee was prevented by sufficient cause from making the application within the prescribed period. Sub-s. (4) provides that the CIT has no power to revise any order under S. 264 (1) : (i) while an appeal against the order is pending before the AAC, and (ii) when the order has been subject to an appeal to the Tribunal. Subject to the above limitation, the revisional powers conferred on the CIT under S. 264 are very wide. He has the discretion to grant or refuse relief and the power to pass such order in revision as he may think fit. The discretion which the CIT has to exercise is undoubtedly to be exercised judicially and not arbitrarily according to his fancy. Therefore, subject to the limitation prescribed in S. 264, the CIT in exercise of his revisional power under the said section may pass such order as he thinks ft which is not prejudicial to the assessee. There is nothing in S. 264 which places any restriction on the CIT's revisional power to give relief to the assessee in a case where the assessee detects mistakes on account of which he was over assessed after the assessment was completed. We do not read any such embargo in the CIT's power as read by the CIT in the present case. It is open to the CIT to entertain even a new ground not urged before the lower authorities while exercising revisional powers. Therefore, though the Petitioner had not raised the grounds regarding under-totalling of purchases before the ITO, it was within the power of the CIT to admit such a ground in revision. The CIT was also not right in holding that the over-assessment did not arise from the order the assessment. Once the Petitioner was able to satisfy that there was a mistake in totaling purchases and that there was under- totalling of purchases to the tune of Rs.20,000, it is obvious that there was over-assessment. In other words, the assessment of the total income of the assessee is not correctly made in the assessment order and it has resulted in over-assessment The CIT would not be acting de hors the IT Act, if he gives relief to the assessee in a case where it is proved to his satisfaction that there is over-assessment, whether such over- assessment is due to a mistake detected by the assessee after completion of assessment or otherwise. In our opinion, the CIT has misconstrued the words "subject to the provisions of this Act" in S. 264 (1) and read a restriction on his revisional power which does not exist. The CIT was, therefore, not right in holding that it was not open to him to give relief to the Petitioner on account of the Petitioner 's own mistake which it detected after the assessment was completed. Once it is found that there was a mistake in making an assessment, the CIT had power to correct it under S. 264 (1). In our opinion, therefore, the CIT was wrong in not giving relief to the Petitioner in respect of over-assessment as a result of under-totalling of the purchases to the extent of Rs.20,000.' 7. This was reiterated in case of Ramdev Exports v. CIT [2002] 120 Taxman 315/[2001] 251 ITR 873 (Guj.) This Court also in case of Danny Denzongpa v. CIT [2010] 7 taxmann.com 81/194 Taxman 415 [2012] 344 ITR 166 has taken a similar view.
However, the Petitioners are faced with the statutory provision contained in Sub Section (5) of Section 80A of the Act. The Petitioners' claim cannot therefore be accepted de hors the said statutory provision and ordinary principle of the wide powers of the CIT exercising revisional jurisdiction under Section 264 of the Act cannot be imported. What Sub Section (5) of Section 80A of the Act mandates is that, if the assessee fails to make a claim in his return of income for any deduction under the provisions specified therein, the same would not be granted to the assessee. This condition or restriction is not relatable to the Assessing Officer or the Income Tax Authority. This condition attaches to the claim of the assessee and has to be implemented by the Assessing Officer, CIT or the Appellate Tribunal as the case may be. There is no indication in Sub Section (5) of Section 80A of the Act as to why the restriction contained therein amounts to limiting the power of Assessing Officer but not that of Commissioner.
This issue can be looked from slightly different angle. In absence of the provision contained in Sub Section (5) of Section 80A of the Act has held by various decisions of the High Courts noted above, the CIT could entertain a fresh claim in Revision Application even if the claim was not made previously before the Assessing Officer. Provision contained in sub-section (5) of Section 80A is a statutory interdict which would prevent the CIT from granting any such claim in exercise of his revisional jurisdiction under Section 264 of the Act. As is often times stated, even High Court in exercise of Writ jurisdiction under Article 226 of the Constitution of India would not issue directions contrary to statutory provisions. Width of the powers of the CIT under Section 264 of the Act would not permit him to ignore the requirement of Section 80A(5) of the Act or allow the claim of an assessee in breach of the condition contained therein. We are therefore not in agreement that the expression given by the Income Tax Tribunal in case of Madhav Construction (supra) holding that the restriction contained in Sub Section (5) of Section 80A of the Act is to restrict the power of Assessing Officer and not higher Income Tax Authorities. 10. The Petitioners having given up the challenge to the constitutionality of the retrospectivity to Section 80A (5) of the Act, cannot bring in the concept of the reading down of the provision in order to save if from unconstitutionally. In plain terms, our duty would be to enforce the provision contained in Sub Section (5) of Section 80A of the Act, as it is stands in the statue book. The decision in case of Goetze (India) Ltd. (supra) was rendered in different background. The Supreme Court did not have any occasion to interpret the provision of Section 80A (5) of the Act in the context of the power of the CIT or the Appellate Tribunal. [Emphasized now] From literal interpretation of provisions of Section 80A(5) it is explicitly clear that for claiming deduction under Chapter VIC, the precondition is making claim of deduction in the return of income. The Hon'ble Bombay High Court in the above mentioned decision has in an unequivocal manner has explained that to avail the benefit of deduction available under Chapter VI-C, making its claim in the return of income is sine-qua-non. The Income Tax Authorities, Appellate Tribunal or even the High Court in writ jurisdiction cannot issue directions/allow claim contrary to statutory provisions.
Thus, in view of the facts of the case and decisions referred, the appeal of the assessee is dismissed.
The ld. Authorized Representative for the assessee submitted that the facts in this appeal are similar to the facts in appeal (supra), therefore, the submission made to defend the aforesaid appeal would equally apply to the present appeal.
Since, the facts in both the appeals are similar, the detailed findings given while adjudicating appeal in would mutatis mutandis apply to the present appeal. Accordingly, appeal of the assessee is dismissed for parity of reasons.
To sum up, both appeals by the assessees are dismissed.
Order pronounced in the open Court on Monday the 20th day of September, 2021.