Income Tax Appellate Tribunal - Mumbai
Madhav Construction, Ulhasnagar vs Pr Cit 3, Thane on 7 July, 2017
1
Madhav Construction
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "B"MUMBAI
Before Shri D.T. Garasia (JUDICIAL MEMBER)
AND
Shri G Manjunatha (ACCOUNTANT MEMBER)
ITA No.3271 to 3276/Mum/2017
(Assessmnt years 2003-04 to 2008-09)
Madhav Construction vs Principal CIT-3, Thane
Shop No.2, C/13, Room No.25
& 26, Netaji Chowk,
Ulhasnagar
PAN : AAGFM6690L
APPELLANT RESPONDENT
Appellant by Shri Dr P Daniel / Shri S.M. Makhija
Respondent by Shri Santanu Saikia
Date of hearing 22 -06-2017
Date of pronouncement 06-2017
ORDER
Per Bench :
These are six appeals filed by the assesse directed against the separate but identical orders of Principal Commissioner of Inocme-tax-3, Thane u/s 263 of the Income-tax Act, 1961 for the assessment years 2003-04 to 2008-09.
Since common facts are involved and the issues are identical, for the sake of convenience, these appeals were heard together and are disposed of by this common order.
2. The brief facts of the case are that the assessee is a partnership firm 2 Madhav Construction engaged in the business of builders and developers and government contractors. The assessee has filed its return of income for the assessment years 2003-04 to 2008-09 u/s 139(1) of the Income-tax Act, 1961. The assessments for the assessment years 2003-04 to 2008-09 were completed u/s 143(3) making certain additions which were accepted by the assessee. Subsequently, a search & seizure operation u/s 132 of the Income-tax Act, 1961 was carried out at the residential premises of the main person of the group and survey u/s 133A was carried out at assessee's business premises on 16-10-2008. Consequent to search, notices 153A of the Act were issued calling for return of income for the assessment years 2003-04 to 2008-09. The assessee has filed returns of income in response to notices u/s 153A of the Act. Thereafter, the AO completed the assessments u/s 143(3) r.w.s. 153A of the Income-tax Act, 1961 for all the six assessment years under consideration by making certain additions. The assessee preferred appeals before the CIT(A) against the additions made by the AO.
3. The assessee is in the business of builders and developers. The assessee has developed a housing project called, 'Madhav Srushti', Phase-I. The assessee did not claim any deduction u/s 80IB(10) for all these assessment years either in the original returns of income filed u/s 139(1) or in the returns filed in pursuance to notice u/s 153A of the Income-tax Act, 1961. The 3 Madhav Construction assessee did not raise a claim for deduction u/s 80IB(10) before the AO either during the original assessment proceedings or during the assessment proceedings u/s 153A of the Income-tax Act, 1961. The assessee has made a claim of deduction u/s 80IB(10) for the first time before the CIT(A)-I, by way of additional ground of appeal raised on the basis of judgement of Hon'ble Bombay High Court in the case of Brahma Associates 333 ITR 389 (Bom) on the ground that a housing project approved prior to 01-04-2005 is eligible to claim exemption u/s 80IB(10) even with a total commercial area in the project exceeding 5% of the total built up area or 2,000 sq.ft. of the total constructed area, whichever is less. Before the CIT(A), the assessee contended that it was entitled to get a deduction u/s 80IB(10) in respect of its housing project, M/s 'Madhav Srushti', Phase-I. The CIT(A), while deciding the appeal did not admit the additional ground raised by the assessee and rejected the claim of the assessee towards deduction claimed u/s 80IB(10) on the ground that the assessee did not make any claim either in the original returns of income filed u/s 139(1) or in the revised returns filed u/s 153A of the Act.
4. The assessee preferred appeals against the orders of the CIT(A) before ITAT. The ITAT, B-Bench, Mumbai, vide its consolidated order dated 13-03- 2013 for the assessment years 2003-04 to 2008-09 restored the matter to the file of the AO and directed the AO to verify the claim of the assessee in the 4 Madhav Construction light of provisions of section 80IB(10) by observing that the housing project developed by the assessee by name 'Madhav Srushti', Phase-I may be entitled for deduction u/s 80IB(10) in view of the decision of the jurisdictional High Court in the case of Brahma Associates (supra).
5. Thereafter, in pursuance to the order passed by the ITAT, the AO issued a letter to the assessee calling upon it to furnish various details in respect of deduction claimed u/s 80IB(10) especially with reference to the observations of the ITAT with regard to the eligibility of the assessee for such claim. In response to the AOs notices, the assessee furnished details in respect of the project 'Madhav Srushti', Phase-I including copy of agreement for acquisition of land, copies of building plans, copy of completion certificate and copy of certificate from architect surveying the built up area of each of the residential houses to prove that each unit's built up area is less than 1,500 sq.ft. so as to prove the eligibility of the assessee for deduction claimed u/s 80IB(10) of the Act. The AO, after considering the details furnished by the assessee and also taking into account the directions given by the ITAT in the light of decision of Hon'ble Bombay High Court in the case of M/s Brahma Associates allowed the deduction claimed u/s 80IB(10) of the Income-tax Act, 1961 for the assessment years 2003-04 to 2008-09.
6. Subsequent to that, the Principal CIT-3, Thane issued a show cause notice 5 Madhav Construction dated 16-02-2016 and asked to explain as to why the assessment ordes passed by the AO u/s 143(3) r.w.s. 254 of the Income-tax Act, 1961 shall not be revised under the provisions of section 263 of the Act. The Principal CIT proposed to revise the assessment orders for the reason that on examination of assessment records it was noticed that the AO has allowed deduction claimed u/s 80IB(10) even though the assessee has not made any claim in the original returns filed u/s 139(1) or in the revised returns filed in pursuance to notice u/s 153A of the Act, 1961. The Principal CIT further observed that as per the provisions of section 80A(5) of the Income-tax Act, 1961, where the assessee fails to make a claim in his return of income for any deduction under any provisions of this Chapter under the head - "C: Deductions in respect of certain incomes no deduction shall be allowed to him thereunder", no deduction can be allowed. The CIT(A) further observed that the provisions of section 80A(5) were inserted by the Finance Act, 2009 with retrospective effect from 01-04-2003 and accordingly, it is applicable from the A.Y. 2003-04 and onwards. The AO has allowed deduction claimed by the assessee u/s 80IB(10) in contravention of the specific provisions provided by way of section 80A(5) which mandates the assessee to claim any deduction in the return of income. Though assessee has not made any claim in the return of income, the AO has allowed the benefit of deduction which caused prejudice to the interest of the revenue. Therefore, 6 Madhav Construction he opined that the assessment order passed by the AO u/s 143(3) r.w.s. 254 is erroneous insofar as it is prejudicial to the interest of the revenue and accordingly issued a notice to the assessee.
7. In response to the show cause notice, the assessee submitted that the assessment orders passed by the AO u/s 143(3) r.w.s. 254 neither are erroneous nor prejudicial to the interest of the revenue as the AO has allowed the claim of deduction u/s 80IB(10) as per the specific directions given by the ITAT. The assessee further submitted that once the AO has passed the assessment order as per the directions of the ITAT, the order of ITAT is merged in the assessment orders and, therefore, it is beyond the scope of the jurisdiction of Principal CIT u/s 263 of the Act. The assessee further submitted that the department has filed further appeals against the order of the ITAT before the Hon'ble Bombay High Court and has taken a specific ground in regard to section 80A(5). The Hon'ble Bombay High Court has not entertained the appeals of the department in respect of the provisions of section 80A(5). Therefore, it is incorrect to say that the AO has ignored the provisions of section 80A(5) before allowing the claim of the assessee u/s 80IB(10) of the Act. In support of his arguments, he relied upon the decision of Hon'ble Bombay High Court in the case of Ranka Jewellers vs ACIT 328 ITR 148 (Bom) and CIT vs K Sera Sera Productions Ltd (2015) 374 ITR 503 (Bom). The assessee 7 Madhav Construction further relied upon the decision of Hon'ble Bombay High Court in the case of CIT vs Sheth Developers Pvt Ltd 254 CTR 127 (Bom) to argue that there was no error in the assessment orders passed by the AO in allowing the claim of deduction u/s 80IB(10) without considering the provisions of section 80A(5) of the Income-tax Act, 1961.
8. The Principal CIT, after considering the submissions of the assessee held that the assessment order passed by the AO U/S 143(3) r.w.s. 254 of the Act is erroneous and prejudicial to the interest of the revenue as the AO has not considered the provisions of section 80A(5) before allowing the claim of deduction u/s 80IB(10). The AO was duty bound to take into account the provisions of section 80A(5) while considering the provisions of seciton 80IB(10). The AO allowed the claim of the assessee even though the same was not claimed in the return of income by misinterpreting the order of the ITAT. The ITAT has not given any finding as to the allowability of deduction claimed u/s 80IB(10), but only restored the matter to the file of the AO for further enquiries with reference to the provisions of section 80IB(10). The deduction provided in section 80IB(10) is allowable only when such claim is made in the return of income. In this case, the assessee did not make any claim either in the original return filed u/s 139(1) or in the return filed u/s 153A of the Act. The AO without considering the provisions of section 80A(5) which mandates 8 Madhav Construction the assessee to be eligible for claiming deduction u/s 80IB(10) only when such claim is made in the return of income, allowed the deduction which caused prejudice to the interest of the revenue, therefore, the Principal CIT set aside the order passed by the AO and directed the AO to redo the assessment after considering the provisions of section 80A(5) of the Income-tax Act, 1961. Aggrieved by the order of Principal CIT, the assessee is in appal before us.
9. The Ld.AR for the assessee submitted that the Ld. Principal CIT was erred in invoking jurisdiction u/s 263 to revise the assessment orders passed by the AO u/s 143(3) r.w.s 254 without appreciating the fact that the said orders were neither erroneous nor prejudicial to the interest of the revenue but was passed in accordance with the directions of the ITAT and as such, it was beyond the purview of section 263 of the Income-tax Act, 1961. The Ld.AR further submitted that the orders passed by the AO had merged in the order of ITAT giving specific directions to the AO to verify the claim of the assessee in the light of provisions of section 80IB(10) and thus, the AO was bound to follow the said directions. The AR further submitted that the Ld.Principal CIT was erred in simultaneously filing review petitions before Hon'ble High Court as well as invoking the provisions of section 263 in respect of the same point being agitated which makes it clear that the order passed by the Tribunal was in the knowledge of the Principal Commissioner, therefore, the invocation of 9 Madhav Construction jurisdiction u/s 263 by the Principal Commissioner is not sustainable in the eyes of law. The Ld.AR referring to the decisions of the Hon'ble jurisdictional High Court in the case of CIT vs K. Sera Sera Productions Ltd (supra) and also Ranka Jewellers vs Addl.CIT (supra) submitted that once the issues which are subject matter of appeals before the higher authorities and which has been adjudicated by higher authorities, then the CIT cannot invoke jurisdiction u/s 263 for re-considering the issue / issues. In this case, the issue of claim of deduction u/s 80IB(10) was subject matter of appeal before the CIT(A) as well as the Hon'ble ITAT have considered the issue and after taking into account the facts of the case and also the provisions of section 80A(5) has directed the AO to examine the issue of deduction claimed u/s 80IB(10). Therefore, the Principal CIT cannot revise the assessment orders on this issue. In support of his arguments, he relied upon certain judicial precedents including the decision of Hon'ble High Court of Madras in the case of CIT vs Abhinita Foundation Pvt Ltd in TCA No. 811 of 2016 dated 06-06-2017.
10. On the other hand, the Ld.DR strongly submitted that the orders passed by the AO are erroneous insofar as they are prejudicial to the interest of the revenue because the AO has not conducted required enquiry before allowing the deduction claimed u/s 80IB(10) of the Act which caused prejudice to the interest of the revenue. The Ld.DR further submitted that the provisions of 10 Madhav Construction section 80A(5) makes it mandatory for the assessee to claim the deduction in the return itself to be eligible for any deduction claimed. However, the AO allowed the claim even though no such claim has been made either in the original return filed or revised return filed in pursuance to notice u/s 153A of the Act. The order passed by the AO is erroneous insofar as it is prejudicial to the interest of the revenue and hence the Principal CIT has rightly assumed jurisdiction to revise the assessment orders and his order should be upheld.
11. We have heard both the parties, perused the materials available on record and gone through the orders of authorities below. The Principal CIT assumed jurisdiction to revise the assessment orders on the ground that the AO has not conducted proper enquiry before completion of assessments, thereby the assessment orders passed by the AO u/s 143(3) r.w.s. 153A are erroneous insofar as they are prejudicial to the interest of the revenue. The Principal CIT revised the assessment order on the ground that the AO has allowed deduction u/s 80IB(10) which is otherwise not allowable to the assessee because the assessee has not made any claim for deduction in the returns of income filed u/s 139(1) or in the revised returns filed u/s 153A of the Act. According to the Principal CIT, the AO misconstrued the order of ITAT to understand that ITAT has given any specific finding as to the allowability of deduction claimed u/s 80IB(10). But, the ITAT has only set aside the issue to 11 Madhav Construction the file of the AO for further verification with reference to the provisions of section 80IB(10) of the Act, therefore, he opined that the orders passed by the AO are erroneous insofar as they are prejudicial to the interest of the revenue.
12. The Principal CIT has power to revise the assessment order u/s 263 of the Act, but to invoke the provisions of section 263, the twin conditions must be satisfied, i.e. i) the order of the AO should be erroneous; and (ii) it must be prejudicial to the interest of the revenue. Unless both these conditions are satisfied, the Principal CIT cannot assume jurisdiction to revise the assessment order. It is not necessary that every order which is erroneous may be prejudicial to the interest of the revenue or vice versa. In some cases, the order passed by the AO may be erroneous but it may not be prejudicial to the interest of the revenue or vice versa. Unless the order passed by the AO is erroneous and also prejudicial to the interest of the revenue, the Principal CIT cannot assume jurisdiction to revise the assessment order, this is because the twin conditions i.e. i) the order of the AO should be erroneous; and (ii) it must be prejudicial to the interest of the revenue are co-exist.
13. In this factual background, let us examine whether the assessment order passed by the AO is erroneous. The Principal CIT was of the opinion that the assessment order passed by the AO is erroneous as the AO ought to have conducted certain enquiries before allowing deduction u/s 80IB(10) which he 12 Madhav Construction did not do with reference to the provisions of section 80A(5) and 80IB(10) of the Act. We do not find any merit in the findings of the Principal CIT for the reason that the AO has passed the assessment orders by giving effect to the order of ITAT, and has passed the orders on the issue of additional ground raised by the assessee making a fresh claim of deduction u/s 80IB(10) which was admitted and adjudicated in the light of decision of Hon'ble jurisdictional High Court in the case of CIT vs Brahma Associates (supra) wherein the Hon'ble High Court held that as far as deduction u/s 80IB(10) in respect of housing project which has been approved by the appropriate authority before 01-04-2005, the limit of 5% of the total built up area or 2000 sq.ft. whichever is less, is not applicable and irrespective of the commercial area of housing project assessee was entitled to deduction u/s 80IB(10) of the Act. The ITAT by following the decision of jurisdictional High Court admitted the additional ground raised by the assessee and restored the issue to the file of the AO for further verification of other conditions prescribed u/s 80IB(10). Therefore, we are of the considered view that once the additional ground raised by the assessee has been admitted for adjudication, it is presumed that the provisions of section 80A(5) is within the knowledge of the ITAT and also it has considered such provisions before allowing the claim of the assessee. Hence, we are of the view that the Principal CIT was incorrect in observing that the provisions of 13 Madhav Construction section 80A(5) are not within the knowledge of the ITAT and the ITAT has not considered such provisions and only admitted additional ground without considering the provisions, is incorrect.
14. The AO has passed assessment orders u/s 143(3) r.w.s. 254 as per the specific directions given by the ITAT with reference to the eligibility of deduction u/s 80IB(10) of the Act. The AO, after satisfying with the other conditions prescribed u/s 80IB(10) has allowed the claim of deduction. Therefore, the Principal CIT cannot say that the AO has not considered the provisions of section 80A(5) before allowing the deduction claimed u/s 80IB(10) of the Act. We further observe that the Hon'ble Bombay High Court in the case of CIT vs K Sera Sera Productions Ltd (supra) has observed that the CIT has no power to revise the assessment order on the issues which were considered and decided in appeal by the CIT(A). A similar view has been expressed by the Hon'ble Bombay High Court in the case of Ranka Jewellers (supra) wherein it has been categorically held that subject matter which has been decided in appeal cannot be subject matter of revision u/s 263 of the Act. The Hon'ble Gujarat High Court in the case of Garden Silk Mills vs CIT 221 ITR 861 (Guj) observed that the CIT cannot set aside the assessment order passed by the AO giving effect to the directions of the Tribunals. In this case, on the issue of deduction u/s 80IB10), the ITAT has already given a direction to the AO 14 Madhav Construction to consider the claim of the assessee with reference to the provisions of section 80IB(10) and hence, we are of the considered view that it is not within the scope and powers of the Commissioners u/s 263 of the Act. Therefore, we are of the view that the order passed by the AO is not erroneous within the meaning of section 263 of the Act.
15. Having said so, let us examine whether the order passed by the AO is prejudicial to the interest of the revenue. The Principal CIT was of the opinion that the assessment order passed by the AO is prejudicial to the interest of the revenue as the AO has allowed deduction claimed u/s 80IB(10) even though such claim was not made u/s 139 or in the revised returns filed u/s 153A of the Act. The Principal CIT further was of the opinion that any deduction claimed u/s 80IB(10) is only allowed when such claim is made in the return of income as per the provisions of section 80A(5) of the Act. In this background, let us examine whether the assessee is eligible for deduction u/s 80IB(10) or not. There is no dispute with regard to the entitlement of deduction u/s 80IB(10) as the assessee has satisfied all the conditions prescribed u/s 80IB(10) except making a claim in the return of income. Therefore, one has to examine whether deduction u/s 80IB(10) can be allowed even though such claim is not made in the return of income. No doubt, the provisions of section 80IB(10) r.w.s. 80A(5) makes it mandatory to make such claims in the return of income 15 Madhav Construction to be eligible for deduction u/s 80IB(10) of the Act. Section 80IB(10) is an incentive provision which provides for deduction for profits and gains derived from eligible housing projects on fulfillment of certain conditions prescribed. In this case, the assessee has fulfilled all the conditions prescribed u/s 80IB(10) which is proved from the fact that neither the AO nor the Principal CIT has not disputed the fact that the assessee is not eligible for claiming deduction u/s 80IB(10) of the Act. The only dispute is with regard to non making of such claims in the returns of income. No doubt, any incentive or beneficial provisions has to be interpreted in a manner so as to advance the economic activity of the region or the business and not to deny the benefit of such deduction on technical grounds, i.e. non filing of return or non claiming of such benefit in the returns of income. The assessee claims that when original returns of income filed u/s 139(1) or revised return filed u/s 153A, the assessee was not eligible to claim deduction u/s 80IB(10) because the commercial area in the housing project is more than the prescribed limit provided u/s 80IB(10) of the Act. But while the appeals were pending before the CIT(A), the Hon'ble High Court has rendered judgement wherein it has been held that so far as deduction u/s 80IB(10) in respect of housing project which has been approved by the appropriate authority before 01-04-2005, the limit of 5% of the built up area or 2000 sq.ft. whichever is less is not applicable and the assessee is 16 Madhav Construction entitled for deduction u/s 80IB of the Act. Relying upon the judgement of the jurisdictional High Court, the assessee filed an additional ground of appeal making the claim before the Ld.CIT(A). Though the Ld.CIT(A) did not allow the claim of the assessee, the ITAT has admitted the additional ground filed by the assessee and directed the AO to examine the other conditions prescribed u/s 80IB(10). The AO, after satisfying with the other conditions, has allowed the claim of the assessee towards deduction u/s 80IB(10) of the Act. Therefore, we are of the view that the claim made by the assessee u/s 80IB(10) is in accordance with law and the AO has rightly allowed the claim made by the assessee. Accordingly, the order passed by the AO is not prejudicial to the interest of the revenue.
16. Now it is pertinent to discuss the case laws relied upon by the assessee. The assessee relied upon the decision of Hon'ble High Court of Madras in the case of CIT vs M/s Abhinita Foundation Pvt Ltd in TCA No.811 of 2016 dated 06-06-2017. The Hon'ble High Court of Madras under similar circumstances, while answering the question raised by the revenue with regard to the claim made u/s 80IB even though the assessee did not make any such claim in the return of income after considering the judgements rendered by the Supreme Court in Goetz India Ltd's case and National Thermal Power Co Ltd's case held that the assessee is eligible for deduction u/s 80IB(10) even if the claim made 17 Madhav Construction by the assessee does not form part of the original return or even in the revised return. It could still be considered if the relevant material was available on record either by the appellate authority. The relevant portion of the order is extracted below:-
"W have heard the learned counsel for the parties and perused e record.
9.According to us, what clearly emerges upon perusal of the cord and, in particular, the impugned judgment and order of the ibunal, is as follows:
I. That, in the original return as filed by the assessee company, no claim for deduction under Section 80 lB (10) of the Act had been made.
ii. That the assessee company, as observed in paragraph 3 of the impugned judgment and order of the Tribunal, had made a claim for deduction under Section 80 lB (10) of the Act at the stage, when, the assessment proceedings were on. At t ha t po int i n time , de t ai ls w it h re ga r d to t he p r oj ec t , qu a w h i c h , c l a i m w a s m a d e , w e r e f i l e d a l o n g w i t h r e q u i s i t e information, in the prescribed format, i.e., Form 1OCCB.
iii. The CIT(A), even while recognizing the fact that the claim 80 lB (10) of the Act had been allowed both in the preceding and succeeding years, rejected the same, solely, on the ground that it did not form part of the original return.
10.Having regard to the aforesaid facts, what is required to be considered is : whether the conclusion reached by the Tribunal that the appellate authorities, (which included the CIT (A) and itself), had the necessary power to consider the claim for deduction, if, the assessee company was otherwise entitled to in law, given the fact that the relevant material was already available on record. 18
Madhav Construction
11.Mr.Ravikumar, in support of the appeal, contended to the contrary and in this behalf, placed great emphasis on the judgment of the Supreme Court in GOETZE's case. A perusal of the said judgment would show that the issue which arose for consideration before the Supreme Court, was, as to whether a claim for deduction could be made by way of a letter before the Assessing Officer, if, it did not form part of the original return. The Supreme Court ruled and, while doing so, to our minds, carefully noted that, though the Assessing Officer did not have the power to entertain the claim for deduction made after the r e t u r n w a s f i l e d , otherwise than by filing a revised return, it did n o t exclude the power of the Tribunal to consider the claim in exercise of its appellate power under Section 254 of the Act. This aspect of the matter is quite clearly brought to light in the operative paragraph of the judgment, i.e., paragraph 4.
11.1.For the sake of convenience, the said observations are extracted hereafter:
"4. The decision in question is that the power of the Tribunal under S.254 of the IT 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 re/ate to the power of the AG to entertain a claim for deduction otherwise than by fl/mg 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 Tribunal under s.254 of the IT Act, 1961. There shall be no order as to costs."
(Emphasis is ours)
12.To be noted, the Supreme Court, while rendering i t s judgment in t he case of Goetz e, had no ticed it s own judgment i n National Termal Co. Ltd. Vs C IT, (19 9 8) 229 ITR 38 3 (SC ). In the said case, the Supreme Court was called upon to adjudicate as to whether a claim made by way of a letter before the Tribunal for the first time could 19 Madhav Construction have been entertained by the Tribunal. Briefly, th facts which obtained in the said case are as follows:
12.1.The assessee, in that case, had available with it surplus funds, which it chose to deposit with banks on a short term basis. Qu the said short term deposits, the assessee earned interest during th relevant previous year amounting to Rs 22,84,994/-. The said interest was offered for levy tax by the assessee, based on which, asscssmer.:
proceedings were completed. The assessee, however, challenged the assessment order b efore the C IT (A) qu a grounds o ther th an the inclusion of the interest earned on short term deposits in the total income. Consequently this aspect of the matter was not considered by the CIT (A) The assessee, however, carried the matter in appeal to the Tribunal. The appeal, as originally filed with the Tribunal, did not object to the inclusion of interest in the sum of Rs.22,84,994/-. The assessee, however, as indicated above, for the first time, by way of a l e t t e r d a t e d 1 6 . 0 7 . 1 9 8 3 , r a i s e d a d d i t i o n a l g r o u n d s , w h e r e b y , a challenge was laid to the inclusion of interest in the total income. The basis of the challenge was that, since, the sum of Rs.22,84,994/- had been deducted from the expenditure incurred during construction period, it could not have been included in the total income.
12.2.The Supreme Court, after examining the m a t t e r threadbare, made the following observations:
"Under Section 254 of the Income-tax Act, the Appellate Tribunal may after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment before the taxig authorities is to assess. correctly the tax liability of an assessee in accordance with law. If for example, as a result of a judicial decision given while the appeal is pending before the Tribunal it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to 20 Madhav Construction restrict the power of the Tribunal under section 254. only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to. file an appeal/cross-objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier."
In the case of Jute Corporation of_India Ltd V. CIT (191). 187 ITR 688, this court, while dealing with the powers of the Appellate Assistant Commissioner observed that an appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations. if any, prescribed by the statutory provisions. In the absence of any statutory provision the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income-tax Officer. This court further observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The Appellate Assistant Commissioner must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The Appellate Assistant Commissioner should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also. The view that the Tribunal is confined only to issues arising out of the appeal before the commissioner of Income-tax (Appeals) takes too narrow a view of the powers of the Appellate Tribunal (vide, e.g., CIT v. Anand Prasad (1981) 128 ITR 388 (Delhi), CIT v. Karamchand Premchand P. Ltd. (1969) 74 ITR 254 (Guj) and CIT v. Cellulose Products of India Ltd. (1985) 151 ITR 499 (Guj) (FB). Undoubtedly, the Tribunal will have the discretion to allow or not allow new ground to be raised. But where the Tribunal is only recjuiredtçonsider a question 21 Madhav Construction of law arising from the facts which are on record in the assessment proceedings we fail to to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee." (Emphasis is ours) 12.3.In the said judgment, the Supreme Court also noticed its own judgment in the case of Jute Corporation of India Ltd. V. CIT (1991) 181 ITR 688. This view has been adopted by two Division Benches of this Court in the matter of Ramco Cements Ltd. vs. DOT (2015) 55 taxmann.com 79 (Madras) and, in the judgment rendered in: T.C. (A) No.878 of 2014 dated 18.11.2014, titled CIT vs. Malind Laboratories P. Ltd. As a matter of fact, the Delhi High Court has also, in two separate judgments, come to the same conclusion. These judgments are rendered in: CIT vs. Sam Global Securities Ltd., (2013) 38 taxmann.com 129 (Delhi) and CIT vs. Jai Parabolic Springs Ltd., (2008) 306 ITR 42 (Delhi).
12.4.Furtherrnore, a Division Bench of the Bombay High Court has also taken the same view in the judgment rendered in CIT vs. Pruthvi Brokers & Shareholders P. Ltd., (2012) 349 ITR 336 16 (Bom.). The issue, with which, the Bombay High Court was grappling was, that a claim for deduction under Section 43B of the Act had not been made qua the relevant assessment year in the original return but was made via a letter. The Division Bench of the Bombay High Court held even while assuming and, in that sense, accepting the argument of the Revenue, that though, an amendment to the original return could not be made by filing a letter - it would be open to the appellate authorities to consider the claim and adjudicate upon the s ame. In t his beh a lf , th e Bom b ay H ig h Co u rt m ad e t he f ol Iowi n g observations:
"14. A long line of authorities establish clearly that an assessee is entitled to raise additional grounds not merely in terms of legal submissions, but also additional claims not made in the return filed by it. It is necessary for us to refer to some of these decisions only to deal with two submissions on behalf of the department. The first is with respect to an 22 Madhav Construction observation of the Supreme Court in Jute Corporation of India Limited v. Commissioner of Income Tax, 1991 Supp (2) SCC 744 = (1991) 187 ITR 688. The second submission is based on a judgment of the Supreme court in Goetze (India) Limited v.
Commissioner of Income Tax, (2006) 157 Taxman 1.
(A). In Jute Corporation of India Limited v. CIT, for the assessment year 1974-75 the appellant did not claim any deduction of its liability towards purchase tax under the provisions of the Bengal Raw Jute Taxation Act, 1941, as it entertained a belief that it was not liable to pay purchase tax under that Act. Subsequently, the appellant was assessed to purchase tax and the order of assessment was received by it on 23rd November, 1973. The appellant challenged the same and obtained a stay order. The appellant also filed an appeal from the assessment order under the Income Tax Act. It was only during the hearing of the appeal that the assessee claimed an additional deduction in respect of its liability to purchase tax. The Appellate Assistant Commissioner (AAC) permitted it to raise the claim and allowed the deduction. The Tribunal held that the AAC had no jurisdiction to entertain the additional ground or to grant relief on a ground which had not been raised before the Income Tax Officer. The Tribunal also refused the appellant application for making a reference to the High? Court. The High court upheld the decision of the Tribunal and refused to call for a statement of case. It is in these circumstances that the appellant filed the appeal before the Supreme Court.
15. The Supreme Court held as under (page 693) :-
"In CIT v. Kanpur Coal Syndicate, a three Judge bench of this Court discussed the scope of Section 31(3)(a) of the Income Tax Act 1922 which is almost identical to Section 251(1)(a). The C01111 held as under : (1TR p. 229) "If an appeal lies, Section 31 of the Act describes the powers of the Appellate Assistant Commissioner may, in the case of an 23 Madhav Construction order of assessment, confirm, reduce, enhance or annul the assessment; under clause (b) thereof he may set aside the assessment and direct the Income Tax Officer to make a fresh assessment. Under 5ectiuii 31 ( 3 )( a ) in disposing of such an appeal the Appellate Assistant Commissioner may, in the case of an order of assessment, confirm, reduce, enhance or annul the assessment; under clause (b) thereof he may set aside the assessment and direct the Income Tax Officer to make fresh assessment. The Appellate Assistant Commissioner has, therefore, plenary powers in disposing an appeal. The scope of his power is co-terminus with that of the Income-tax Officer. He can do what the Income-tax Officer can do and a/so direct him to do what he has failed to do. "(emphasis supplied)"
The above observations are squarely applicable to the interpretation of Section 251(1)(a ) of the Act. The declaration of law is c/ear that the power of the Appellate Assistant Commissioner is co-terminus with that of the Income-tax Officer, if that be so. There appears to be no reason as to why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the Income Tax Officer. No exception could be ta,kcn to this view as the Act does not place any restrictrion or limitation on the exercise of appellate power. Even otherwise an Appellate Authority, while hearing appeal against the order of a subordinate authority has all the powers which the original authority may have in deciding question before it subject to the restrictions or limitations, if any prescribed by the statutory provisions. In the absence of any statutory provision the Appellate Authority is vested with all the plenary powers which the subordinate authority may have in the matter. There appears to be no good reason and none was placed before us to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assewssment passed by the Income Tax Officer." [emphasis supplied]"
B) It is clear, therefore, 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 24 Madhav Construction 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. They have the jurisdiction to entertain the new claim. That they may choose not to exercise their jurisdiction in a given case is another matter. The execise of discretion is entirely different from the existence o jurisdiction.
16. At page 694, after referring to certain observations of the Supreme court in Additional commissioner of Income-tax v. Gutjargravures P. Ltd., (1978) 111 ITR 1, the Supreme court observed at Page 694 as under.-
"77, The above observation do not rule out a case or raising an additional ground before the Appellate Assistant Commissioner if the ground so raised could not have been raised at the particular stage when the return was filed or when the assessment order was made, or that the additional ground became available on account of change of circumstances or law. There may be several factors justifying raising of such new plea in appeal, and each case has to be considered on its own facts. If the Appellate Assistant Commissioner is satisfied he would be acting within his jurisdiction in considering the question so raised in all its aspects. Of course, while permitting the assessee to raise an additional ground, the Appellate Assistant Commissioner should exercise his discretion in accordance with law and reason. He must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The satisfaction of the Appellate Assistant Commissioner depends upon the facts and circumstances of each case and no rigid principles or any hard and fast rule can be laid down for this purpose."[emphasis supplied]
17. The underlined observations in the above passage do not curtail the ambit of the jurisdiction of the appellate authorities stipulated earlier. They do not restrict the new / additional grounds that may be taken by the assessee before the appellate authorities to those that were not available when the return was filed or even when the assessment order was made. The sentence read as a whole entitles an assessee to raise new grounds/make additional 25 Madhav Construction claims:-
"if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made....." "or"if ''the ground became available on account of change of circumstances or law."
18. The appellate authorities, therefore, have jurisdiction to deal not merely with additional grounds, which became availabIe on account of change of circumstances or law, but with additional. grounds which were available when the return was filed. The first part viz. "if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made..." clearly relate to cases where the ground was available when the return was filed and the assessment order was made but "could not have been raised" at that stage. The words are "could not have been raised" and not 'were not in existence". Grounds which were not in existence when the return was filed or when the assessment order was made fall wit/i/ti the second category viz, where "the ground became available on account of change of circumstances or law."
(Emphasis is ours) 1 2 . 5. A r ea d in g o f t he af o res ai d o bs er v at io ns wou l d c k establish that the arguments advanced by Mr. Ravi that the asse company could only raise an additional ground and not make a c l a im o r a d d i t i o n a l c l a i m i s n o t s u s t a in a b l e . A s i n d i c a t e d by u s h e r e i n a b o v e , t h i s p o we r o f e n t e r t a i n i n g t h e c l a i m v e s ts w i t h t h e appellate authorities based on the facts and circumstances of the case. The power of the appellate authorities to consider claims made based on material already on record is co-terminus with the power of the Assessing Officer. The failure to advert to the claim in the original return or the revised return cannot denude the appellate authorities of their power to consider the claim, if, the relevant material is available on record and is otherwise tenable in law. Any other view, in our opinion, will set at naught the plenary powers of appellate 26 Madhav Construction authorities.
13.The judgment of the Division Bench of this Court rendered in T . C . ( A ) N o . 3 4 4 o f 2 0 0 5 , d a t e d 1 6 . 0 6 . 2 0 1 1 , t i t l ed C I T v s . M/s.Shrirarn Investments, which is relied upon by the learned counsel for the Revenue, is clearly distinguishable, as in that case, the assessee had sought assessment of tax by disclosing a lower taxable income, albeit by filing a second revised return. It is in that context that the Division Bench came to the conclusion that the second revised return, which was filed beyond the period of limitation, being non est in law, would not be considered for the purposes of ascertaining the taxable income.
14.In so far as the judgment of the Supreme Court in the matter of Stepwell is concerned, according to US, it has no applicability to the issue raised in the instant appeal. In that case, the Tribunal appears to have allowed the claim of the assessee for deduction under S 35B of the Act without examining the facts of the case. The assessee evidently, had neither made a claim before the ITO nor the AAC nor had he, furnished particulars of the expenditure incurred by it. It is in this context that the Supreme Court observed that the onus of proving facts and obtaining the benefit of a deduction lay on the assessee. It was further observed that since the assessee failed to prove its claim before the ITO or the AAC, the Tribunal could not have allowed the claim on assumption of facts.
15. As indicated above, the ratio on the said judgment is entirely different and therefore, has no applicability to the facts of the instant case.
16.Similarly, the judgment of the Allahabad High Court in matter of G.S. Rice Mills is distinguishable, inasmuch as the asses had neither made a claim before the ITO nor was any material place on record in support of the claim. The High Court, in this context, he that the Tribunal was not justified in entertaining the claim made under Section 8OG of the Act and thereupon, issuing a consequent direction to the ITO to examine the same on merits.
27
Madhav Construction 16.1,As would he evident from the narration of facts set out a b ov e , i n t he p rese n t c ase , th e T r ib u na l h as n o te d t h a t re le va n t material was placed by the assessee company before the Assessing Officer during the course of the assessment proceedings. Therefore, in our view, the said judgment is also distinguishable.
17. A similar situation arose in the case of ACIT v s . Gurjargravures P. Ltd. In this case as well, it was noticed that neither was any claim made before the ITO nor was any supporting material placed on record. It is in this background that no relief was granted. T h e S up r eme C o ur t , in t his ca se , dis ag re e d w it h th e H ig h C o ur t , inasmuch as it sustained the direction of the Tribunal issued to the ITO to grant appropriate relief qua claim made under Section 84 of the Act.
18.In sum, wha t emerges from a perusal of the ra tio of the judgments cited above, in particular, the judgments rendered by the Supreme Court in GOETZL-'s case and National Thermal Power Co. Ltd's case, and those, rendered by the Division Bench of this Court in Ramco Cements Ltd. and CIT vs Malind Laboratories P. Ltd., as the judgments of the Del hi Hig h C ourt in Sam Global Secu rit Ltd.'s case and Jai Parabolic Springs Ltd.'s case, that, even if, the c l a i m m a d e b y t h e a s s e s se e c o m p a n y d o e s n o t f o r m p a r t o f original return or even the revised return, it could still be considered i f , t h e r e l e v a n t m a t e r i a l w a s a v a i l a b l e o n r e c o r d , e i t h e r b y a p p e l l a t e a u t h o r i t i e s , (w h i c h i n c l u d e s b o t h t h e C I T (A ) a n d Tribunal) by themselves, or on remand, by the Assessing Officer. In the instant case, the Tribunal, on perusal of the record, found that relevant material qua the claim made by the assessee cornpany under Section 80 lB (10) of the Act was placed on record by the assessee company during the assessment proceedings and therefore, it deemed it fit to direct its reexamination by the 28 Madhav Construction Assessing Officer."
17. The assessee also relied upon the decision of Hon'ble Bombay High Court in the case of CIT vs Prithvi Brokers and Shareholders Pvt Ltd (supra). The Hon'ble High Court under similar set of facts and circumstances held that even assuming that the AO is not entitled to grant a deduction on the basis of a letter requesting an amendment to the return filed, the appellate authorities are entitled to consider the claim and adjudicate the same. It is not necessary that the deduction be allowed only if the revised return of income would have been filed. The relevant portion of the judgement is extracted below:-
"Even assuming that the Assessing Officer is not entitled to grant a deduction on the basis of a letter requesting an amendment to the return flied, the appellate authorities are entitled to consider the claim and to adjudicate the same. A long line of authorities establish clearly that an assessee is entitled to raise additional grounds not merely iii terms of legal submissions, but also additional claims to wit claims not made in the return filed by it. It is necessary to refer to some of these decisions only to deal with submissions on behalf of the department. The first is with respect to an observations of the Supreme Court ill Jute Corporation of India Limited v. Commissioner of Income Tax. In many of the cases, the grown /s were, in fact, available when the return was filed and/or the assessment order was made. In Jute Corporation of India Lid, case for instance, the ground was available when the return was filed. The assessee did not claim any deduction of its liability to pay purchase tax as "it entertained a belief that it was not liable to pay purchase tax under the Bengal Raw Jute Taxation Act, 1941 ". Thus, the ground existed when the return was filed. The assessment order was even made, and received by the assessee. It is only after the appeal was filed that 29 Madhav Construction the assessee claimed a deduction in respect of the amount paid towards the purchase tax under the said Act. The Supreme Court upheld the decision of the Appellate Assistant Commissioner in allowing the deduction.
(para 7, 10, 11 & 14) It is indeed a question of exercise of discretion whether or not to allow an assessee to raise a clam; which was not raised when the return was filed or the assessment order was made. As held by the Supreme Court there may be several factors justifying the raising of a new plea in appeal and each case must be considered on its own facts. However such cases include those, where the ground though available when the return was filed or the assessment order was made, u' is not taken or raised for reasons which the appellate authorities may consider valid. In other words, the jurisdiction of i/u appellate authorities to consider afresh or new ground or claim is not restricted to cases where such a ground did not exist when the return was filed and the assessment order was made.
(par 15) In the present case, the CIT(A) and the Tribunal have held that the omission to claim the deduction of Rs.40,00,0001- to be inadvertent. Both the appellate authorities held, after considering all the facts, that the assessee had inadvertently claimed a deduction of Rs.20,00,0001- paid after the end of the year in question. There is no reason to interfere with this finding. There is less reason to interfere with the exercise of discretion by the appellate authorities in permitting the respondent to raise this claim. That the respondent is entitled to the deduction in law is admitted and, in any event, clearly established. The conclusion that the error in not claiming the deduction in the return of income was inadvertent cannot be faulted for more than one reason. It is a finding of fact which cannot be termed perverse. There is nothing on record that militates against the finding.
(par 20 &.21) It was submitted by counsel for the appellant that the Supreme Court had taken a different view in Goetze (India) Limited v. Commissioner of Income-tax. However this Court is unable to agree. The decision was rendered by a Bench of two learned Judges and expressly referred to the judgment of the Bench of three learned Judges in National Thermal Power Company Limited vs. Commissioner of 30 Madhav Construction Income-tax. The question before the Court was whether the appellant-assessee could make a claim for deduction, other than by filing a revised return. After the return was filed, the appellant sought to claim a deduction by way of a letter before the Assessing Officer. The claim, therefore, was not before the appellate authorities. The deduction was disallowed by the Assessing Officer on the ground that there was no provision under the Act to make an amendment in the return of income by modifying an application at the assessment stage wit/lout revising the return. The Commissioner of Income Tax (Appeals) allowed the assessee's appeal. The Tribunal, however, allowed the department's appeal. In the Supreme Court, the assessee relied upon the judgment in National Thermal Power Company Limited contending that it was open to the assessee to raise the points of law even before the Tribunal. Thus, it is clear that the Supreme Court did not hold anything contrary to what was held in the previous judgments to the effect that even if a claim is not made before the assessing officer, it can 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. In fact, the Supreme Court made it clear that the issue in the case was limited to the power of the assessing authority and that the judgment does not impinge on the power of the Tribunal under s
254. The appeal is, therefore, dismissed--Jute Corporation of India Ltd. vs. CIT (1990) 88 CT!? (SC) 66 : 1991 Supp (2) SCC 744 : (1991) 187 ITR 688 (SC), Ahmedabad Electricity Co. Ltd. vs. CIT (1992) 106 CT!? (Bom)(FB) 78 . (1993) 199 ITR 351 (Bom)(FB) and National Thermal Power Co. Ltd. vs. CIT (1999) 157 CTR (SC) 249: (1997) 7SCC 489: (1998) 229 1TR 383 (SC) relied on; Goetze ('India) Ltd. vs. CIT (2006) 204 CTR (SC) 182 distinguished (para 22, 23) Conclusion Even assuming that the Assessing Officer is not entitled to grant a deduction on the basis of a letter requesting an amendment to the return filed, the appellate authorities are entitled to consider the claim and to adjudicate the same. It is not necessary that the deduction be allowed only if a revised return of income would have been filed."31
Madhav Construction
18. In this view of the matter and considering the ratios of the case laws discussed above, we are of the view that the assessment order passed by the AO u/s 143(3) r.w.s. 254 of the Income-tax Act, 1961 is neither erroneous nor prejudicial to the interest of the revenue. Therefore, we set aside the order passed by the Principal CIT u/s 263 of the Act and restore the assessment order passed by the AO for AYs 2003-04 to 2008-09.
19. In the result, the appeals filed by the assessee are allowed. Order pronounced in the open court on 07th July, 2017.
Sd/- sd/-
(D.T. Garasia) (G Manjunatha)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dt : 07th July, 2017
Copy to :
1. Appellant
2. Respondent
3. CIT(A)
4. CIT
5. DR
/True copy/ By order
Asstt. Registrar, ITAT, Mumbai