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This appeal by the Revenue against the order dated 31.03.2015 passed by the Ld. CIT(A)-Jalpaiguri for assessment year 2005-06.
2. The only issue to be decided in this appeal is as to whether the Ld. CIT(A) is justified in directing the AO to allow the deduction us/ 80P of the Act in the facts and circumstances of the case.
The brief facts of this case are that the assessee is a company which is deemed as co-operative society by the AO and engaged in banking activity as defined u/s 5(b) of the Banking Regulation Act, 1949. The assessee filed its return of income along with tax audit report by declaring a total loss of Rs. 63,51,25,732/-. The said return was processed u/s 143(1) of the act. Thereafter the said assessment was reopened by issuing a notice u/s 148 of the Act and subsequently notices u/s 143(2) and 142(1) were issued in response to which, the assessee filed necessary documents and papers as requested under questionnaire.
4. During the course of said proceedings, the AO held the net loss of Rs. 63,51,25,732/- declared by the assessee in its return of income represents accumulated loss of the assessee bank and that the income for this year has to be independently computed. The AO determined the total income of the assessee for the assessment year 2005-06 at Rs. 8,52,42,840/- vide his order dated 24.12.2007 us/ 147/143(3) of the act after disallowing expenditure claimed by the assessee to the tune of Rs. 5,00,86,494.35/-. The income of the assessee as per profit and loss account was Rs. 3,51,56,351.77/-.
Aggrieved the assessee challenged the order of the AO before the CIT(A). The CIT(A) vide order dated 16.03.2012 confirmed the said order of AO, but however, directed the AO to consider the allowability of deduction u/s 80P of the Act while giving appeal effect to his order. In pursuance the M/s Uttar Banga Kshetriya Gramin Bank 2 AO passed an order giving effect to the orders of the CIT(A) dated 16.03.2012 in Appeal No. 586/JAL/CIT(A)/JAL/2007-08 on 05.06.2012. In this order giving effect, the gross total income computed at Rs. 8,52,42,840/-, was set off against carried forward losses of earlier years. Later as the AO found out that such set off of carried forward losses of earlier years was wrongly given, for the reason that no such loss remained to be set off, he issued a notice u/s 154 to rectify the order giving effect to the CIT(A) order. In these rectification proceedings the assessee made a claim for deduction u/s 80P of the Act. The AO rejected the same on the ground that no such claim was made in the return of income by the assessee. Aggrieved the assessee filed an appeal before the CIT(A) against the order passed by the AO u/s 154 on 02.12.2014. The CIT(A) directed the AO to allow deduction u/s 80P of the Act.
Aggrieved with this order of the CIT(A) the revenue before us contending that the CIT(A) has no jurisdiction to direct the AO to allow deduction u/s 80P of the Act. The Ld. DR submits that the assessee did not claim the deduction u/s 80P of the Act in the return of income originally filed on 30.07.2005 and without there being revised return, the AO rightly denied the deduction u/s 80P of the Act. The Ld. DR further submits that the CIT(A) has no power to direct the AO to consider the allowability of a fresh claim and placed reliance in the case of Goetz (I) Pvt. Ltd. reported in [2006] 204 CTR 182 (SC). The ld. AR submits that the Hon’ble Supreme Court in the case of Goetz (I) Pvt. Ltd. supra has held that any legal issue can be raised before the appellate authority wherein the said authorities can direct the AO to consider the same in the absence of any revised return and supported the order of CIT(A). He relied on the judgment of the Hon'ble Supreme Court in the case of NTPC Ltd. reported in 229 ITR 383 (SC). M/s Uttar Banga Kshetriya Gramin Bank 3
Heard the rival submissions and perused the material available on record. We find the fact remains admitted that there is no claim by the assessee regarding allowability of deduction u/s 80P of the Act in the return of income filed by it. This might possibly be so, as there was no positive income declared by the assessee in its return of income originally filed. In the first round of appellate proceedings the CIT(A) directed the AO to examine the issue of allowability of deduction u/s 80P of the Act, in view of positive income determined by the AO, in the order giving effect to the order of the Ld. CIT(A). The AO in the order giving effect to the order of the Ld. CIT(A) passed u/s 153(5) of the Act (sic u/s 251) as on 05.06.2012 the income was computed as under :
“In pursuance of the Order of Ld. CIT(A), Jalpaiguri, dated 16.03.2012 in Appeal No. 586/JAL/CIT(A)/JAL/2007-08 dated 20.02.2008, the Assessment order u/s 147/143(3) dated 24.12.2007 of this office is revised as per calculation of total income and tax thereon given hereunder: Total income as per order u/s 147/143(3) dated 24.12.2007 Rs. 8,52,42,840/- Less: Relief allowed by Ld. CIT(A), Jalpaiguri Rs. NIL Total Revised income Rs. 8,52,42,840/- Less: Total loss from A.Y. 1997-98 to 2004-05 (-) Rs. 32,23,84,000/- Remaining Loss (-) Rs. 23,71,41,160/- Tax payable Rs. NIL
Loss to be carried forward and set off in the subsequent Assessment Year Deduction u/s 80P is being disallowed since the assessee has not claimed deduction u/s 80P in the return of income.”
He disallowed the claim of deduction u/s 80P on the ground that the assessee has not claimed he same in its return of income. Later the AO realized that set off of carry forward losses of Rs. 32,23,84,000/- was wrongly allowed in this order dated 05.06.2012 to the assessee. He initiated rectification proceeding u/s 154 of the Act. In these proceeding u/s 154 the assessee has once again claimed deduction u/s 80P of the Act. This was M/s Uttar Banga Kshetriya Gramin Bank 4 again denied by the AO by reiterating his stand that this deduction cannot be allowed as the assessee has not claimed the same in its return of income. On appeal the Ld. CIT(A) in the second round of appeal proceedings directed the AO to allow this claim of the assessee. In our view, the Ld. CIT(A) was wrong in his above decision for various reasons which we discuss below. We find that Hon’ble Supreme Court in the case of Goetz (I) Ltd. reported in [2006] 204 CTR 182 (SC) : 2006 284 ITR 323 (SC) has held as under:
The question raised in this appeal relates to whether the appellant assessee could make a claim for deduction other than by filing a revised return. The assessment year in question was 1995-96. The return was filed on 30-11-1995, by the appellant for the assessment year in question. On 12-1-1998, the appellant sought to claim a deduction by way of a letter before the assessing officer. The deduction was disallowed by the assessing officer on the ground that there was no provision under the Income Tax Act to make amendment in the return of income by modifying an application at the assessment stage without revising the return.
3. This appellant's appeal before the Commissioner (Appeals) was allowed. However, the order of the further appeal of the department before the Income Tax Appellate Tribunal was allowed. The appellant has approached this court and has submitted that the Tribunal was wrong in upholding the assessing officer's order. He has relied upon the decision of this court in National Thermal Power Company Ltd. v. CIT (1998) 229 ITR 383, to contend that it was open to the assessee to raise the points of law even before the Appellate Tribunal.
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. 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.
In the aforementioned decision, the Hon’ble Supreme Court made it clear that the power of assessing authority is limited in entertaining a new claim, in the absence of a claim in original return of income. The AO has power to entertain the same only through a revised return of income. In the present case, the Ld. CIT(A) in the first round of appellate proceedings has directed the AO to consider the fresh claim of the assessee for deduction u/s 80P in the order giving effect to his appellate order. In our view, a fresh claim u/s 80P cannot be considered in an order giving effect to the order of ITA No. 706/Kol/2015
M/s Uttar Banga Kshetriya Gramin Bank 5 the Ld. CIT(A). An order u/s 153(5) is not a fresh assessment order. It is to be passed mechanically and there is no scope for fresh adjudication and framing an assessment order. Grant of deduction u/s 80P is a fresh exercise and requires examination and adjudication. This cannot be done in proceeding giving effect to the order of the Ld. CIT(A) in an order to be passed u/s 153(5) of the Act. In this order the AO held as follows:
“Deduction u/s 80P is being disallowed since, the assessee has not claimed deduction u/s 80P in the return of income.” This decision of the AO in his order dated 05.06.2012 was not challenged by the assessee. Be as it may, the assessee seeks grant of deduction u/s 80P in a proceeding u/s 154 which was initiated to rectify the mistake apparent on record in the order of the AO dated 05.06.2012. This fresh claim cannot be entertained in a proceeding u/s 154. Only mistakes apparent on record can be rectified. Thus, the direction of the Ld. CIT(A) in the impugned order is erroneous and bad in law. Hence, we allow this ground of appeal of the revenue.
In the result, the appeal of the Revenue is allowed.
Order pronounced in the open Court on 19-01-2018.