Case Law Details
PCIT Vs Gujarat Gas Tranding Company Ltd. (Gujarat High Court)
No Revised Return Needed for Fresh Claim Before Appellate Authorities: Gujarat HC; Commission Expenditure Deletion Upheld as Fresh Claim Permissible Before Appellate Authorities: Gujarat HC
The Gujarat High Court heard the Revenue’s appeal under Section 260A of the Income-tax Act, 1961 against the Income Tax Appellate Tribunal’s order dated 31.08.2020 for Assessment Year 2004-05. The Revenue challenged the Tribunal’s deletion of additions of ₹1,45,04,797 towards commission on performance guarantee and ₹3,20,07,330 towards purchase commission, and also contended that the Assessing Officer had carried out the verification directed by the Tribunal.
The assessee, engaged in the business of transmission and distribution of gas, had claimed expenditure towards commission on performance guarantee and purchase commission. Along with its return of income, the assessee appended a note stating that provisions had been made for the commission amounts, that they had been disallowed in the return, and that they would be claimed at the time of actual payment with necessary documents as per law.
The Assessing Officer completed the assessment after restoring the earlier assessment order. While referring to the Tribunal’s earlier direction to verify the quantum of commission paid and the nature of services received, the Assessing Officer observed that the assessee had not claimed the commission expenditure in its return, had subsequently changed its stand by treating it as a contractual liability, and that neither actual payment had been made nor tax had been deducted at source. The Assessing Officer further noted that the Department had consistently disallowed such commission expenditure in other assessment years and that the issue had not attained finality. Accordingly, the earlier assessment was restored without any change.
The assessee appealed before the CIT(A), who confirmed the Assessing Officer’s order on the ground that the deduction could not be allowed in the absence of the requisite evidence and that the claim had been made through a letter before the Assessing Officer without filing a revised return.
The Tribunal had earlier restored the issue to the Assessing Officer for verification of the quantum of commission paid and the nature of services received. During the remand proceedings, the assessee furnished details supporting the commission expenditure and also submitted, without prejudice, that similar commission expenses paid to BG Energy Holding Company had been allowed by the CIT(A) for Assessment Years 2007-08 to 2012-13. However, the Assessing Officer rejected the claim, observing that similar commission expenditure had consistently been disallowed and that the orders allowing relief in other years had been challenged before the Tribunal.
On further appeal, the CIT(A) deleted the additions by following the order passed in the assessee’s own case for Assessment Year 2011-12. The Revenue’s appeal against that order was dismissed by the Tribunal.
Before the High Court, the Revenue raised a single issue that the assessee could not make the claim without filing a revised return and that the Tribunal erred in entertaining such a claim.
The High Court referred to its earlier judgment in Commissioner of Income-Tax-Gandhinagar v. Gujarat Gas Trading Co. Ltd. decided on 09.06.2016, which involved identical facts. That decision had noted that although the Supreme Court in Goetze (India) Ltd. v. CIT restricted the Assessing Officer from entertaining a fresh claim without a revised return, the same restriction did not apply to appellate authorities. The earlier judgment also relied on Commissioner of Income-tax v. Mitesh Implex and National Thermal Power Company Ltd. v. CIT to hold that the Commissioner (Appeals) and the Tribunal could entertain a new ground, legal contention, or claim when the necessary facts were already on record.
Applying the earlier decision, the High Court observed that the assessee had appended a note to its return stating that the commission expenditure was not being claimed at that stage but would be claimed after actual payment. During assessment proceedings, the assessee changed its position and sought to make the claim. The Assessing Officer had not rejected the claim on the ground that no revised return had been filed. The High Court further observed that the Assessing Officer had been directed to verify the quantum of commission expenses but had not done so despite all details being furnished by the assessee. It also noted that the Revenue had accepted identical expenses incurred by the assessee in Assessment Years 2007-08 to 2012-13.
The High Court held that, in view of the Tribunal’s findings of fact, no question of law, much less any substantial question of law, arose from the Tribunal’s order. Accordingly, the Revenue’s appeal was dismissed without any order as to costs.
Cases Discussed:
- Pr. Commissioner of Income-Tax-Gandhinagar v. Gujarat Gas Trading Co. Ltd., Order dated 09.06.2016 in Tax Appeal No. 207 of 2016 and allied matters.
- Commissioner of Income-tax v. Mitesh Implex, (2014) 367 ITR 85 (Guj).
- Goetz (India) Ltd. v. CIT, (2006) 284 ITR 323 (SC).
- National Thermal Power Company Ltd. v. CIT, (1998) 229 ITR 383.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1.Heard learned advocate Mr. Vishal Davda for learned Senior Standing Standing Counsel Mr.Aditya D. Bhatt for the appellant and learned Senior Advocate Mr. S.N.Soparkar with learned advocate Mr. Jignesh Parikh for the opponent.
2.This appeal under section 260A of the Income Tax Act, 1961 (For short “the Act”) has been preferred by the revenue proposing the following substantial questions of law arising out of order dated 31.08.2020 passed by the Income Tax Appellate Tribunal, D-Bench, Ahmedabad (For short “the Tribunal”) in I.T.A. No. 1998/Ahd/2017 for Assessment Year 2004-2005:
“A] “Whether the Appellate Tribunal has erred in law and on facts in deleting the addition of Rs. 1,45,04,797/- made on account of commission on performance guarantee and addition of Rs.3,20,07,330/- on account of purchase commission?”
[B] “Whether the Appellate Tribunal was justified in holding that the Assessing Officer had not carried out the verification as directed by the Appellate Tribunal without appreciating the fact that the Assessing Officer had verified the fact regarding the commission expenses ‘paid’ and had pointed out in Para 2.2 that no payment was made?”
3. Brief facts of the case are that the assessee is a company engaged in the business of transmission and distribution of Gas. The Assessee had filed return of income for year under consideration and had claimed expenditure of Rs.1,45,04,757/- towards Commission on performance guarantee and Rs. 3,18,96,000/- as payment towards purchase commission. The assessee had however placed a note along with the return which reads as under:
“During the year under review the assessee company has made provision for commission for performance guarantee given to suppliers on behalf of the company of Rs.1,45,04,757/- and has also provided for commission on purchase aggregating to Rs.3,18,96,000/-. The same has been disallowed and will be claimed at the time of actual payment with necessary documents, as per law”.
4. The return of the assessee was taken for scrutiny by the Assessing Officer. The Assessing Officer vide order dated 30.11.2016 restored the order dated 19.12.2006 and income of the assessee was assessed at Rs. 12,96,44,909/- making an addition of Rs. 1,11,330/- to the earlier declared income of Rs. 12,95,33,579/- and held as follows:
“2.1 In para 6.2 of the Hon’ble ITAT’s order, it is stated that ” the AO should verify the evidences placed before him about the quantum of commission paid and also the nature of services received by the assessee”.
2.2 In return of income filed, assessee has not claimed commission expenses and the provision was added back stating that the same would be claimed at the time of actual payment and that stand was of assessment changed during the proceedings by claiming the expenses stating it is a contractual liability. However, neither any actual payment was made nor TDS has been deducted & paid on such claimed commission payments, as per law.
2.3 The Hon’ble High Court of Gujarat in its order observed that “”the courts have recognized the powers of the appellate commissioner and the Tribunal to entertain a new claim for the first time through not made before the AO”.
2.4 The assessee company further stated in its submission that without prejudice to its claim & contentions that commission expenses be allowed, or be allowed at the time of actual payment and that for FY 2007-08(2012-13 corresponding to AY 2008-09 to 2013-14, the AO has disallowed its claim for commission expenses out of which Hon’ble CIT(A) has allowed such claim for AY 200809 to 2012-13 and appeals are pending before Hon’ble CIT (A) for AY 2013-14.
2.5 It is therefore, clear that the Department has consistent view of disallowance of commission expenses, over the years. Though the assessee claimed that the Hon’ble CIT(A) has allowed such claim for AY 2008-09 to 2012-13, the Department has not accepted the same and the matter is pending before the Hon’ble ITAT Forum. In view of the fact that the issue has not attained the stage of finality & still under dispute, assessee’s claim for commission expenses cannot be accepted at this stage.
2.6 Considering the above and since there is no change of facts or situation, the assessment order passed u/s.143(3) dated 19/12/2006 is restored to the file with no change of assessed income.”
5. The assessee carried the matter in appeal. The CIT (Appeals) confirmed the order of the Assessing Officer by holding that such deduction cannot be allowed in the absence of requisite evidences. The learned CIT (Appeals) also observed that claim for the deduction of the aforesaid commission was made by the assessee without filing the revised return of income but merely on the letter filed before the Assessing Officer.
6. Being, aggrieved the assessee preferred an appeal before the Tribunal and the Tribunal restored the issue to the file of the Assessing Officer to verify evidences placed before him about quantum of commission paid and also the nature of services received by the assessee vide order dated 31.07.2015.
7. The assessee in the remand proceedings filed the necessary details in support of his claim for the amount of impugned commission expenses. The assessee without prejudice to the above also submitted that impugned amount of commission expenses paid to BG Energy holding company was allowed by the CIT (A) for the assessment year 2007-08 to 2012-13.
8. However, the Assessing Officer rejected the contention of the assessee by observing that the impugned amount of commission has been disallowed consistently in the other assessment years in the case of the assessee. Furthermore, the orders of the CIT (Appeal) for the Assessment Year 2007-08 to 2012-13 have also been challenged before the Tribunal.
9. Being aggrieved, the assessee preferred an appeal before CIT (Appeals) who deleted the addition made by the Assessing Officer following the order of his predecessor in the own case of the assessee pertaining to the Assessment Year 2011-12.
10. Being aggrieved by the order of the CIT (A) the revenue preferred an appeal before the Tribunal which was dismissed.
11. Learned Counsel for the Revenue has raised a sole issue namely, of the Tribunal entertaining the claim when assessee having made such a claim in the original return and without filing revised return. In other words case of the Revenue was confined to the contention that the assessee without filing a revised return could not have made such a claim and the Tribunal therefore, ought not to have accepted the same.
12. This Court in identical facts in case of Commissioner of Income-Tax-Gandhinagar v. Gujarat Gas Trading Co. Ltd. (Order dated 09.06.2016 rendered in Tax Appeal No. 207 of 2016 and allied matters) held as under:
“5. Before us the Revenue has raised a single issue namely, of the Tribunal entertaining the claim when assessee having made such a claim in the original return and without filing revised return. In short, case of the Revenue was confined to the contention that the assessee without filing a revised return could not have made such a claim and the Tribunal therefore, ought not to have accepted the same.
6. We may recall that the Assessing Officer had not rejected the claim on this ground. It was CIT(Appeals) who along side confirming the view of Assessing Officer on merits had pressed this issue in service referring to the decision of Supreme Court in case of Goetz (India) Ltd. v, CIT reported in (2006) 284 ITR 323(SC). The Tribunal after rejecting such a contention held that the assessee was entitled to claim of expenditure but placed the matter back before the Assessing Officer for verification of records.
7. It is true that in Goetz (India) Ltd.(supra), the Supreme Court held that the Assessing Officer cannot entertain a fresh claim without assessee filing revised return. However, in the same breath, the Supreme Court also held that such limitation would not apply to the appellate Commissioner. This is how judgement of Supreme Court in case of National Thermal Power Company Ltd. v. CIT reported in (1998) 229 ITR 383 was distinguished. Division Bench of this Court in case of Commissioner of Incometax v. Mitesh Implex reported in (2014) 367 ITR 85(Guj) had occasion to consider whether CIT(Appeals) or the Tribunal can entertain a new ground or contention for the first time. In this context, after referring to the decisions of Supreme Court in case of Goetz (India) Ltd.(supra) and National Thermal Power Company Ltd. (supra), it was observed as under :
“38. It thus becomes clear that the decision of the Supreme Court in the case of Goetze (India) Ltd. vs. Commissioner of Incometax (supra) is confined to the powers of the assessing officer and accepting a claim without revised return. This is what Supreme Court observed in the said judgment while distinguishing the judgment in the case of National Thermal Power Co. Ltd. vs. Commissioner of Incometax (supra) and that is how various High Courts have viewed the dictum of the decision in the case of Goetze (India) Ltd. vs. Commissioner of Incometax (supra). When it comes to the power of Appellate Commissioner or the Tribunal, the Courts have recognized their jurisdiction to entertain a new ground or a legal contention. A ground would have a reference to an argument touching a question of fact or a question of law or mixed question of law or facts. A legal contention would ordinarily be a pure question of law without raising any dispute about the facts. Not only such additional ground or contention, the Courts have also, as noted above, recognized the powers of the Appellate Commissioner and the Tribunal to entertain a new claim for the first time though not made before the assessing officer. Income Tax proceedings are not strictly speaking adversarial in nature and the intention of the Revenue would be to tax real income.
39. This is primarily on the premise that if a claim though available in law is not made either inadvertently or on account of erroneous belief of complex legal position, such claim cannot be shut out for all times to come, merely because it is raised for the first time before the appellate authority without resorting to revising the return before the assessing officer.
40. Therefore, any ground, legal contention or even a claim would be permissible to be raised for the first time before the appellate authority or the Tribunal when facts necessary to examine such ground, contention or claim are already on record. In such a case the situation would be akin to allowing a pure question of law to be raised at any stage of the proceedings. This is precisely what has happened in the present case. The Appellate Commissioner and the Tribunal did not need to nor did they travel beyond the materials already on record, in order to examine the claims of the assessees for deductions under section 8016 and 80HHC of the Act.”
8. We may recall in the present case, the assessee had in the returns filed, appended a note suggesting that the commission expenditure is not being currently claimed but would be claimed after actual payment. During the course of assessment, the assessee however, changed its position and sought to raise such a claim. The Assessing Officer did not reject the claim on the ground that no revised return was filed. In any case, when the material was already on record, the CIT(Appeals) and the Tribunal could have entertained such a claim.
9. Under the circumstances, we do not see any reason to interfere with the view of the Tribunal. Tax appeals are dismissed.”
13. The judgment in case of Pr. Commissioner of Income-Tax-Gandhinagar v. Gujarat Gas Trading Co. Ltd.(supra) is squarely applicable to the facts of the present case, as the assessee had in the returns filed, appended a note suggesting that the commission expenditure is not being currently claimed but would be claimed after actual payment. During the course of assessment, the assessee however, changed its position and sought to raise such a claim. The Assessing Officer did not reject the claim on the ground that no revised return was filed. In fact, the Assessing Officer was directed to verify the quantum of commission expenses but he has not done so despite having all the details furnished by the assessee. Thus it appears that the Assessing Officer had accepted the quantum of the commission expenses as claimed by the assessee. It is also pertinent to note that the Revenue has accepted the identical expenses incurred by the assessee in the other assessment years, more particularly, in the assessment years 2007-2008 to 2012-2013.
14. In view of the findings of fact arrived at by the Tribunal, we are of the opinion that no question of law much-less any substantial question of law arises from the impugned judgment and order passed by the Tribunal.
15. The appeal therefore, being devoid of any merit is accordingly dismissed with no order as to costs.
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