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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: Shri Annapurna Gupta & Shri Siddhartha Nautiyal
आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-
This assessee’s appeal for A.Y. 2014-15, arises from order of the ld. CIT (A)-1, Rajkot dated 23-05-2018, in proceedings under section 250 of the Income Tax Act, 1961; in short “the Act”.
Page No 2 Shri Rajkot Distt. Co-op. Bank Ltd. vs. ACIT
The assessee has taken the following grounds of appeal:
“1. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals), Rajkot 1 as erred in confirming action of the Assessing Officer of disallowing additional claim of deduction of Rs 22,50,000/- u/s 30(1)(viii) on the ground that the modification in deduction claim was made otherwise than by filing a revised return 2. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax Appeals), Rajkot 3 has erred in not exercising his discretionary powers u/s 250 of the IT. Act and Rule 46A(6) of the T Rules of modification of deduction claim despite the fact that a plea to modify the legitimate claim u/s 36(1)(viii) to Rs 2,62,50,000 instead of Rs. 240,00,000 claimed in the return of income and all the facts of the deduction claim were on record. The learned CITAY's action being erroneous on facts and in law, the appellant prays that the ACIT, Cirde-1, Rajkot be directed to allow enhanced claim of deduction of Rs 22,50,000 3. On the facts and in the circumstances of the case, in rejecting the appellant's plea for modification of claim for enhanced deduction u/s 36(1)(vi), the learned CIT(Appeal) has failed to appreciate that 3.1 Admission of modification of claim falls within the exception mentioned in Rule 46A(1) as also within discretionary powers of CITIA) u/s 250 of the T Act and Rule 46A(4) of 1. T. Rules. In wake of specific prayer made by the appellant for allowing modification in deduction claim u/s 35(1)(viii), in the interest of justice, he ought have allowed the same. 3.2 Appeal proceedings are continuation of assessment proceedings and a legal claim can be made at any stage of the assessment or appellate proceedings if the facts relevant are on record; 3.3 The issue in the case of Goetze (India) Ltd. was limited to the power of the assessing authority and does not impinge on the power of the appellate authority and therefore has only limited application. Accordingly, the judgement, as relied upon by the learned CIT(A) does not preclude the appellant from seeking modification in claim for deduction before the appellate authorities. Your Appellant craves the right to add to or alter, amend, substitute, delete or modify all or any of the above grounds of appeal. Your Appellant craves the right to add to or alter, amend, substitute, delete or modify all or any of the above grounds of appeal.”
Page No 3 Shri Rajkot Distt. Co-op. Bank Ltd. vs. ACIT
The brief facts of the case are that the assessee is a cooperative Bank engaged in the business of banking and operates within Rajkot. The return of income for the impugned assessment year was filed on 09-09-2014 showing a net income of � 17.04 crores. The assessee’s income included a profit of � 36.37 crores derived from provision of long-term finance for construction or purchase of houses in India and for industrial or agricultural development etc. Section 36(1)(viii) of the Act provides that an amount not exceeding 20% of such profit carried to special reserve created and maintained by the assessee is allowed as deduction from the income, subject to certain conditions. In assessee’s case, 20% of profits from eligible business worked out to � 7.27 crores and amount carried to special was � 2,62,50,000/-. However, in the return of income, the assessee had claimed deduction of � 2,40,00,000/- u/s 36(1)(viii) of the Act, which was sought to be revised vide letter dated 07-10-2016, addressed to the assessing officer, during the course of assessment proceedings. However, the assessing officer did not allow the above claim of the assessee, during the course of assessment proceedings.
In appeal, Ld. CIT(Appeals) dismissed the appeal of the assessee with the following observations:
“The ground of appeal no.
3. In this ground the assessee has contended that Assessing Officer ought to have accepted the claim of assessee made during the assessment that the deduction allowable to assessee u/s.36(1)(viii) should be Rs.2,62,50,000/- in place of Rs.2,40,00,000/- claimed in the return of Income. The assessee has contended that even though he had claimed deduction of Rs.2,40,00,000/- In the return of Income the actual amount carried to special reserve was of Rs. 2,62,50,000/- and therefore he should be allowed deduction of the amount actually taken to the special reserve.
Page No 4 Shri Rajkot Distt. Co-op. Bank Ltd. vs. ACIT
I do not find any merit in the contention of the assessee because the claim of 20% of the profits is the upper limit of claiming deduction u/s. 36(1)(viii). It was for assessee to make a claim of deduction in the return of Income. In the Instant case of assessee claimed deduction of only Rs.2, 10,00,000/-. He cannot be allowed the deduction higher than claim of assessee in the return of income. The assessee could claim higher deduction only through revised return of Income which he has not done. In view of the decision of Honable Apex court in the case of Goetze India Limited 284 ITR 323 the claim of additional deduction is not tenable. The judgments cited by assessee do not help the case of assessee In view of the decision of Honable Supreme Court In case of Goetze Indla. Wherein the Honable Supreme Court held that Assessing Officer has no power to entertain to claim of deduction otherwise when by filing the revised return of Income The Honable court has distinguished the National Thermal Power Co. Ltd. vs CIT(229 ITR 383) cited by the assessee, The Ground of appeal is therefore rejected.”
5. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals). The counsel for the assessee submitted that in the instant facts Ld. CIT(Appeals) has not challenged the veracity of the claim made by the assessee, however, the only reason why this additional claim amounting to � 22.5 lakhs was not allowed was on the basis that this claim should have been made by way of filing of revised return of income, and not by way of additional claim during the course of assessment proceedings. In response, the Ld. DR placed reliance on the observations made by Ld. CIT(Appeals) in the appellate order.
We have heard the rival contentions and perused the material on record. We observe that Ld. CIT(Appeals) has not stated in the order that the claim made by the assessee is incorrect, but only reason for disallowance is that this additional claim under section 36(1)(viii) of the Act should have been made by way of filing of revised return of income. In our considered view, the appellate authorities are vested with the authority to allow such claim of the assessee, in case the same is tenable in law. In the case of Page No 5 Shri Rajkot Distt. Co-op. Bank Ltd. vs. ACIT Pruthvi Brokers & Shareholders[2012] 23 taxmann.com 23 (Bom.), the High Court held that an assessee is entitled to raise before appellate authorities additional grounds in terms of additional claims not made in return filed by it. Again the Bombay High Court in the case of Sesa Goa Ltd.[2020] 117 taxmann.com 548 (Bombay) held that where assessee inadvertently omitted to make claim for deduction under section 10B in respect of two 100 per cent Export Oriented Undertakings, however, all necessary facts for claiming deduction under section 10B were already on record, Commissioner (Appeals) in exercise of his plenary/co-terminus powers, as well as Tribunal, ought to have entertained claim. The Karnataka High Court in the case of Karnataka State Co-operative Federation Ltd.[2021] 128 taxmann.com 1 (Karnataka) held that assessee's fresh claim before appellate authority is entertainable even when same is not claimed in original return of income nor assessee has filed revised return of income to make such claim. The Bombay High Court in the case of B. G. Shirke Construction Technology (P.) Ltd.[2017] 79 taxmann.com 306 (Bombay) has held that an assessee is entitled to make a claim before Tribunal which was not raised before Assessing Officer at time of filing return of income or by filing a revised return of income.
We observe that in the instant facts, the Department has not challenged the genuineness of the claim. The only reason for disallowance is that claim can be admitted only if it is by way of filing of revised return of income. Accordingly, in light of the above judicial precedents on the subject and the facts of assessee’s case, we are of the considered view that the Page No 6 Shri Rajkot Distt. Co-op. Bank Ltd. vs. ACIT assessee is eligible for this additional claim of � 22.50 lakhs under section 36(1)(viii) of the Act.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 19-07-2023