THE PR COMMISSIONER OF INCOME-TAX vs. M/S KARNATAKA STATE CO OPERATIVE

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 3RD DAY OF MARCH 2021 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE ASHOK S. KINAGI I.T.A. NO.466 OF 2016 BETWEEN: 1. THE PR. COMMISSIONER OF INCOME-TAX

5TH FLOOR, BMTC BUILDING

80 FEET ROAD, KORMANGALA

BENGALURU-560095. 2. THE INCOME-TAX OFFICER

WARD-6(2), PRESENT ADDRESS

ACIT, C-1(2)(1), 2ND FLOOR

BMTC BUILDING, 80 FEET ROAD

KORMANGALA, BENGALURU-560095. ... APPELLANTS (BY SRI. ARAVIND K.V. ADV.,) AND: M/S. KARNATAKA STATE CO-OPERATIVE FEDERATION LTD., NO.32, 3RD FLOOR D. DEVRAJ URS ROAD, RACE COURSE ROAD BENGALURU-560001 PAN:AAAJK0471H. ... RESPONDENT (BY SRI. A. SHANKAR, SR. COUNSEL FOR SRI. JAYACHANDRAN, ADV.) - - - THIS I.T.A. IS FILED UNDER SEC. 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 29.04.2016 PASSED

2 IN ITA NO.922/BANG/2014 FOR THE ASSESSMENT YEAR 2010-11, PRAYING TO: (i) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. (ii) ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE ITAT, BENGALURU IN ITA NO.922/BANG/2014 DATED 29-04-2016 CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD-6(2), BENGALURU & ETC. THIS I.T.A. COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the revenue. The subject matter of the appeal pertains to the Assessment year 2010-11. The appeal was admitted by a bench of this Court vide order dated 29.11.2017 on the following substantial question of law: Whether on the facts and circumstances of the case, the Tribunal is right in law in holding that the assessee's fresh claim before CIT(A) is entertain able even when the same is not claimed in original return of income nor the assessee

3 had filed revised return of income to make such claim? 2. Facts leading to filing of this appeal briefly stated are that the assessee is a Co-operative Society established by the Government of Karnataka and registered with the Registrar of Co-operative Societies under the Karnataka Co-operative Societies Registration Act, 1959. The assessee filed its return of income for the Assessment Year 2010-11 on 28.03.2011. The return was processed under Section 143(1)(a)(ii) of the Act vide intimation dated 10.05.2011. In the intimation, the Central Processing Centre (hereinafter referred to as 'the CPCt' for short) processed the income under Section 143(1) of the Act and added a sum of Rs.2,95,98,463/- under the head income from 'Business or Profession' and assessed the total income at Rs.6,17,46,120/-. Consequent to the addition, a demand of Rs.2,35,69,278/- was raised. Aggrieved by the said intimation issued by CPC under Section 143(1) of the

4 Act, assessee filed an appeal before the Commissioner of Income Tax (Appeals) on the ground that there was a typographical error with respect to the entries with regard to entries made in the Schedule BP, the figure is wrongly at part-A1 was wrongly mentioned as ‘NIL’, whereas, the same ought to have been mentioned as Rs.2,52,18,534/-. The Commissioner of Income Tax (Appeals) by an order dated 03.03.2014 directed deletion of the addition and allowed the appeal. Being aggrieved, the revenue approached the Income Tax Appellate Tribunal (hereinafter referred to as 'the tribunal' for short). The tribunal vide order dated 29.04.2016 inter alia held that the Commissioner of Income Tax (Appeals) has already issued a remand order giving opportunity to the Assessing Officer for examination of the claim. The tribunal further held that in the absence of any claim of the revenue that assessee is not entitled for the exemption under Section 80P and Section 23C of the Act. It was further held that no

5 ground is made out to interfere with the order passed by the Commissioner of Income Tax (Appeals). Accordingly dismissed the appeal of the revenue. In the aforesaid factual background, the revenue has filed this appeal. 3. Learned counsel for the revenue submitted that the assessee is not entitled to raise an additional claim in appeal other than by way of filing the revised return of income as provided in Section 138(5) of the Act. It is further submitted that without prejudice to the aforesaid submissions, if it is held that the Commissioner of Income Tax (Appeals) and the tribunal have power to entertain additional claim in appeal, the appellate authority as well as the tribunal ought to have examined question the applicability of taxing provision instead of drawing an inference, it is also urged that the assessee is not eligible for deduction under Section 80P of the Act as well as under Section 10(23C)(iiib) of the Act. It is further pointed out that there is no such provision in the Act such as Section 10(23C)(iiib) of the

6 Act. The order passed by the Commissioner of Income Tax (Appeals) as well as the tribunal suffers from the vice of non application of mind. Therefore, the same deserves to be set aside. It is also pointed out that the finding of the Commissioner of Income Tax (Appeals) in allowing the claim and thereafter permitting the Assessing Officer to take action in accordance with law is an exercise in futility as the Assessing Officer is bound by the order passed by the Commissioner of Income Tax (Appeals). Alternatively it is submitted that the mater be remanded to the Assessing Officer or Commissioner of Income Tax (Appeals) to consider the claim afresh on merits. In support of his submissions, learned counsel has placed reliance on decision in KVAVERNER JOHN BROWN ENGG. (INDIA) (P.)LTD. VS. ASSISTANT COMMISSIONER OF INCOME-TAX, BANGALORE', (2008) 170 TAXMAN 304 (SC), 'GOETZE (INIDA) LTD. VS. CIT', (2006) 284 ITR 323 (SC), 4. On the other hand, learned Senior counsel for

7 the assessee submitted that the assessee filed the original return of income on 28.03.2011 which contained certain typographical errors in Schedule-BP. The assessee had entered ‘NIL’ in item No.1 instead of Rs.2,52,18,534/-. It is further submitted that against this item, the assessee was eligible to claim exemption under Section 10 (23C)(iiib) of the Act or deduction under Section 80P of the Act and the exemption was to be filled in item No.5 of Schedule-BP. It is further submitted that the CPC while processing the return of income made an addition of Rs.2,95,98,463/- under the head 'income from business or profession'. 5. It is also pointed out that the CPC has only considered the item in lieu of ‘NIL’ in item No.1 of Schedule BP and has not considered the exemption under Section 10(23C)(iiib) or deduction under Section 80P, for which the assessee is eligible. It is further submitted that for the first time, the revenue has raised a contention with regard to eligibility of the assessee to

8 claim exemption/deduction as the same was not claimed in the original return of income and assessee had not filed a revised return of income to make such a claim. It is also argued that the addition was made by the CPC and not by the Assessing Officer during the course of assessment proceeding. It is also pointed out that the processis automated and assessee was not provided with any opportunity to make a fresh claim by way of revised return before CPC. Therefore, the assessee claimed the same in an appeal and contended that there was a typographical error in the return of income. It is submitted that without prejudice to the aforesaid submissions, the assessee is eligible to make a claim before the appellate authority even if the same is not claimed in the original return of income or a revised return of income. 6. It is also contended that the error committed in filling in the columns in the return of income cannot deny the right of the assessee to be assessed on correct

9 taxable income on which it is actually eligible to pay tax and tax can be collected only in consonance with Article 265 of the Constitution of India. It is also contended that revenue in fact is supposed to assist the taxpayer in computing the income of the assessee and not take advantage of the errors committed by the assessee. In support of his submissions, reliance has been placed on decisions in 'GOETZE (INIDA) LTD. VS. CIT', (2006) 284 ITR 323 (SC), 'SANCHIT SOFTWARE AND SOLUTIONS P. LTD. VS. CIT', (2021) 349 ITR 404 (BOM.), 'NIRMALA L. MEHTA VS. A.BALASUBRAMANIAM, CIT AND OTHERS', (2004) 269 ITR 1 (BOM.), 'CIT VS. PRUTHV BROKERS AND SHAREHOLDES LTD.', (2012) 349 ITR 336 (BOMBAY), 'CIT VS. JAI PARABOLIC SPRINGS LTD.', (2008) 306 ITR 42 (DEL), 'CIT VS. JINDAL SAW PIPES LTD.', (2010) 328 ITR 338 (DEL.), 'CIT VS. SAM GLOBAL SECURITIES LTD.', (2014) 360 ITR 682 (DEL.), 'NATIONAL THERMAL POWER CO.

10 LTD. VS. CIT', (1998) 229 ITR 383 (SC), 'RAJESHWARI COTTON GINNING & PRESSING INDUSTRIES VS. ACIT', (2017) 88 TAXMANN.COM 463 (KAR.). 7. We have considered the submissions made by learned counsel for the parties and have perused the record. The Supreme Court in 'GOETZE (INIDA) LTD. Supra has held that even if a claim is not made before the Assessing Officer it can be made before the Appellate Authority. A division bench of High Court of Bombay in PRUTHVI BROKERS AND SHAREHOLDES LTD supra, has dealt with the powers of the Appellate Authorities. The division bench of the High Court after noticing the decision of the Supreme Court in NATIONAL THERMAL POWER CO. LTD vs. CIT, 299 ITR 383 (SC) has held that in the aforesaid decision the Supreme Court has not held anything contrary to what was held in Goetze (India) Ltd. and has reaffirmed the legal position that even if the claim is not

11 made before the Assessing Officer, it can be made before the Appellate Authorities and jurisdiction of the Appellate Authorities to entertain such a claim has not been negatived in NATIONAL THERMAL POWER CO. LTD. supra. A division bench of Delhi High Court in CIT VS. JAI PARABOLIC SPRINGS LTD., 306 ITR 42 (DEL) has held that there was no prohibition on the powers of tribunal to entertain an additional ground, which according to the tribunal arises in the matter and is necessary for just decision of the case. 8. In the backdrop of aforesaid well settled principles, the facts of the case in hand may be examined. In the instant case, the claim for eligibility with regard to deduction under Section 80P of the Act was entertained by the Commissioner of Income Tax (Appeals) as the assessee did not have the opportunity to raise the contention before the Assessing Officer as the order of assessment was passed by the CPC and therefore, the assessee had no opportunity to make a

12 fresh claim by way of revised return before the CPC as the process is automated. The claim of the assessee was allowed by the Assessing Officer by placing reliance on the assessee's own case for the Assessment Year 2005- 06. It is pertinent to note that in the instant case, we are not required to examine the validity of the claim of the assessee with regard to relief under Section 80P of the Act on merits as the substantial question of law only pertains to power of the Appellate Authority to entertain such a claim in the absence of such a claim being made in the original return or in the revised return. In view of the aforesaid well settled legal principles, which have been referred to in preceding paragraph, we answer the substantial question of law in the affirmative and against the revenue.

13 In the result, we do not find any merit in this appeal, the same fails and is hereby dismissed. Sd/- JUDGE Sd/- JUDGE ss