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Income Tax Appellate Tribunal, DELHI BENCH “G”: NEW DELHI
Before: SHRI N.K. BILLAIYA & SHRI SUDHANSHU SRIVASTAVA
This appeal is preferred by the assessee against order dated 20.12.2016 passed by the Ld. Commissioner of Income Tax (Appeals)-43, New Delhi {CIT (A)}. The appeal pertains to assessment year 2011-12.
Sony Mobile Communications vs DCIT 2.0 The brief facts of the case are that the assessee is the Indian branch office of Sony Ericsson Mobile Communications International AB, a company incorporated under the laws of Sweden. The Sweden entity is the wholly owned subsidiary of Sony Ericsson Mobile Communications AB.
2.1 During the financial year 2007-08, Sony Ericsson Mobile Communication International AB had set up a branch office (Research and Development centre) in the Special Economic Zone (SEZ) in Chennai pursuant to the approval of the Reserve Bank of India with the objective of entering into research and development activity in the information technology industry. During financial year 2008-09 and financial year 2009-10, the assessee provided information technology and information technology enabled services from its research and development centre situated in the Special Economic Zone at Chennai. Thereafter, during the year ending 31st March, 2010, the branch office decided to close its operations and no operations were carried out during the year under consideration by the branch office.
2.2 The return of income was filed on 30.3.2013 u/s 139(4) of the Income Tax Act 1961 (hereinafter called ‘the Act’) declaring
Sony Mobile Communications vs DCIT total income of Rs. 64,731,097/-. The case was selected for scrutiny. During the course of assessment proceedings, the assessee furnished a revised computation of income and requested that the same be considered. It was the assessee’s submission before the Assessing Officer (AO) that the original return had been submitted on the basis of unaudited financial statement under the Companies Act and, thereafter, after the audit was completed, the assessee came to realise that it had disclosed higher taxable income and had also paid excess taxes. The AO was of the opinion that since the original return was filed belatedly, the assesee was not eligible to file revised return u/s 139 (5) of the Act. The assessee was asked to show cause as to why the revised computation of income should be considered since the original return was not filed within the time prescribed under the Act. The assessee submitted before the AO that since the operations had closed after 2010, the return had to be filed on the basis of unaudited financial results. It was further submitted that, subsequently, when the financial statements were audited, the taxable income was determined at Rs. 41,301,488/- whereas in the return filed u/s 139(4) of the Act the income had been disclosed at Rs. 64,731,097/-. The assessee also submitted before
Sony Mobile Communications vs DCIT the AO that where the tax payer has, out of ignorance or otherwise, failed to make a claim which he is legally entitled to make, it would be the duty of the AO to draw attention of the tax payers to such omission and further when the tax payers itself makes a claim in the assessment proceedings, such claim ought to be considered in determining the taxable income. However, the AO did not accept the assessee’s contention and completed the assessment at the income of Rs. 64,731,097/- i.e. at the income at which the return had been filed u/s 139 (4) of the Income Tax Act.
2.3 The assessee’s appeal before the Ld. CIT (A) was also unsuccessful wherein the Ld. CIT (A) held that the claim for expense/deduction and refund could not have been made before the AO except by filing a revised return and since the assessee had filed a belated return, the action of the AO in rejecting the assessee’s claim was fully justified.
2.4 Now the assessee is before the Tribunal challenging the dismissal of assessee’s appeal by him.
3.0 The Ld. Authorised Representative (AR) vehemently argued that the assessee’s claim itself was not examined by the AO as the Sony Mobile Communications vs DCIT AO was of the belief that he was not entitled to accept the claim. The Ld. AR submitted that it is settled law that only correct income is to be assessed and correct tax is to be levied. It was submitted that here in the present case there was a reduction in the realised foreign exchange gain as a result of which refund had became due to the assessee which was not granted by the AO for the reason that the assessee had not filed the return within the prescribed time u/s 139(1) of the Act. The Ld. AR drew our attention to the following chart which depicted the income as per the return of income filed and the income as per revised computation of income:
Particulars As per return of income As per revised filed computation of income (Rs.) (Rs.) Income under head PGBP -Realised Foreign 3,27,85,618 99,48,655 Exchange gain -Provision no 1,29,70,130 1,23,77,484 longer required back Total (A) 4,57,55,748 2,23,26,139 Income under head 1,89,75,349 1,89,75,349 Capital Gain (B) Total Income (A) + 6,47,31,097 4,13,01,488 (B)
Sony Mobile Communications vs DCIT
The Ld. AR also sought to distinguish between the 3.1 provisions of section 239 and 240 of the Act pertaining to refunds and submitted that a refund which is validly due to the assessee should not be denied. The Ld. AR also submitted that omissions committed by the assessee should not result in incorrect income being taxed or incorrect tax being levied. It was also submitted that there were genuine causes for filing the return belatedly i.e. the operations of the assessee having been closed and audited financial statements not being available at the time of filing of return.
4.0 In response, the Ld. CIT (DR) submitted that this was the case where the assessee himself had filed a belated return and it was only during the course of scrutiny assessment proceedings that a claim for refund was made before the AO by filing revised computation of income. It was further submitted that provisions for filing the revised return were amply clear in section 139 of the Act and that a belated return is not eligible for any kind of revision. It was also submitted that a fresh claim cannot be accepted by the AO during the course of assessment proceedings as laid down by the Hon’ble Apex Court in the case
Sony Mobile Communications vs DCIT of Goetze India Ltd. vs. CIT reported in 284 ITR 323 (SC). The Ld. CIT (DR) also submitted that as per the provisions of section 119(2)(b) of the Act, it was only the Central Board of Direct Taxes that can allow the claim of refund in such cases. The Ld. CIT (DR) prayed for upholding the order of the Ld. CIT (A).
5.0 We have heard the rival submissions and have also perused the material on record. The facts of the case are not in dispute. Undisputedly, the assessee did not file its return of income in time but belatedly just before the end of the assessment year. It is also undisputed that it was only during the course of scrutiny proceedings that the assessee chose to file revised computation of income asking the AO to consider the same. The questions arising for our consideration are: (i) whether the AO had the power to consider the revised computation of the assessee when a revised return of income could not be filed due to the reason of the original return of income being filed belatedly; and (ii) whether there can be any redressal to the grievance of the assessee at this stage. As far as the first question is concerned, the judgment of Hon’ble Apex Court in the case of Goetze India Ltd. vs. CIT (supra) is clear on the point that a fresh claim cannot be accepted by the AO during the course of 7
Sony Mobile Communications vs DCIT assessment proceedings and we have no reason to hold the view that the AO did not exercise his powers in the correct manner. The Ld. CIT (A), while dismissing the assesse’s appeal also accepted the stand of the AO. The AO was bound by the judgment of Hon’ble Apex Court in the case of Goetze India Ltd. vs. CIT (Supra). As far as the second question is concerned i.e. whether there can be any redressal to the grievance of the assessee at this stage, we do find that judgement of the Hon’ble Bombay High Court in the case of CIT vs. Pruthvi Brokers & Shareholders Pvt. Ltd. reported in 349 ITR 336 (Bombay) comes to the aid of the assessee. In this case the asseseee had filed the return of income in which he had omitted to make a claim for payment to SEBI. The claim was made by a letter during the course of assessment proceedings. The AO rejected the claim on the ground that he had no authority to allow any deduction which had not been claimed in the return of income. The assessee raised the claim before the Ld. First Appellate Authority who allowed the claim and this was also confirmed by the ITAT. The Department filed an appeal before the Hon’ble Bombay High Court claiming that as per the judgment of the Hon’ble Apex Court in the case of Goetze India (supra), the assessee was not Sony Mobile Communications vs DCIT entitled to make an additional claim for deduction other than the filing of revised return. The Hon’ble Bombay High Court, dismissing the departmental appeal, held as under:-
"It is well settled that an assessee is entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised. It cannot, however, be said that they have no jurisdiction to consider the same. That they may choose not to exercise their jurisdiction in a given case is another matter. The exercise of discretion is entirely different from the existence of jurisdiction. Goetze was confined to a case where the claim was made only before the AO and not before the appellate authorities. The Court did not lay down that a claim not made before the AO cannot be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim has not been negated by the Supreme Court in this judgment.”
5.1 We further note that the Hon’ble Apex Court in the case of Goetze India (Supra) itself has clearly stated that the said case only dealt with the issue of a fresh claim before the AO and does not cover in this ambit the powers of the ITAT to entertain a fresh claim. The Hon’ble Apex Court in this regard has observed as under:-
“4. The decision in question is that the power of the 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 of law can be raised before the Tribunal. 9
Sony Mobile Communications vs DCIT
The decision does not in any way relate to the power of the Assessing Officer to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances 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 impinge on the power of the Income-tax Appellate Tribunal under section 254 of the Income-tax Act, 1961. There shall be no order as to costs.”
5.2 Thus, on a combined reading of the judgments of the Hon’ble Apex Court in the case of Goetze India (supra) and of the Hon’ble Bombay High Court in the case of CIT vs. Pruthvi Brokers & Shareholders Pvt. Ltd. (supra), it is our considered opinion that although the AO cannot be held in error for not admitting the assessee’s claim through revised computation, the ITAT can entertain such a claim. Therefore, it is our considered opinion that interest of justice would be served if this issue is restored to the file of the AO with a direction to accept the assesee’s claim which has been filed by filing a revised computation after proper examination and verification. We are also guided by the spirit of CBDT Circular No. 14 (XL-35) of 1955 dated 11th April 1955 wherein the CBDT has laid down administrative instruction for guidance of income tax officers on matters pertaining to assessment. The Board has in the above said instruction stated that it is one of the duties of the officers of 10
Sony Mobile Communications vs DCIT the department to assist a tax payer in every reasonable way, particularly in the matter of claiming and securing reliefs. Therefore, in view of the above cited reasons and in interest of justice we restore this issue to the file of the AO with the direction to admit the claim of the assessee and allow the same if after proper verification and examination it is found to be correct and as per law. Needless to say, the AO shall give appropriate opportunity to the assessee to present its case.
In the final result the appeal of the assessee stands allowed for statistical purposes.