Case Law Details
The assessment proceedings u/s 143(2) of the Act are not meant for the benefit of the assessee but are for the benefit of Revenue only so that the AO is able to ensure that the assessee has not understated the income or has not computed excessive loss or has not under paid the tax in any manner.
Relevant Text of the ITAT Order is as follows:-
(C.2). The second ground of appeal is in respect of the direction of the Ld.CIT(A) in para 6.1 of her appellate order dated 31.10.2012 wherein the Ld.CIT(A) directed the AO to reduce the taxable income by Rs.79,32,289/-. As a result of this direction of the Ld.CIT(A), the assessed income of the assessee becomes even lower than the returned income. In the second ground of appeal, the Revenue has objected to the direction of the Ld.CIT(A) by pointing out that period specified u/s 139(5) of I.T.Act had expired and the assessee had not filed any revised return. The aforesaid amount of Rs.79,32,289/- was shown by the assessee as taxable income in the return filed by the assessee u/s 139(4) of the I.T.Act. The assessee did not plead before the AO till the completion of assessment proceedings, that the aforesaid amount was not Rs.79,32,289/- taxable income. The assessee had not given any intimation to the AO, till finalization of the assessment order, excluding this amount from taxable income; and the aforesaid amount continued to be offered as taxable income by the assessee till the assessment order was passed. In any case, the assessee was not eligible to revise the return u/s 139(5) of I.T.Act as the return filed by the assessee was a belated return u/s 139(4) of the Act. It was for the first time before Ld.CIT(A) that the assessee took the plea that the aforesaid amount of Rs.79,32,289/- was not taxable income. The Ld.CIT(A) directed the AO to reduce the taxable income by aforesaid Rs.79,32,289/-. The relevant portion of the appellate order of Ld.CIT(A) is reproduced as under:–
6.1. “In the course of the appellate proceedings, the appellant inter alia objected the action of the AO for non computing the Income as per latest decision of Apex Court in the case of CIT vs. Ghanshyam Dass HUF, while filing the return of income the appellant included interest income of Rs. 79,32,289 as taxable. The AO accepted the Income declared by the appellant and made an addition of Rs.20,60,810/- which is deleted by me in my this order. The grievance of the appellant is that due to the ignorance of law the appellant offered the exempt income for tax and paid the income tax on exempt interest income, which was received U/s 28 of the land acquisition act, 1894. In the remand report the AO has stated that the appellant voluntarily offered the interest amount for taxation and since the AO was of the view that this is taxable income hence the question of re-computing the income does not arise. I have considered the facts of the case carefully. The Hon’ble Supreme Court of India in the case of Ghanshayam HUF supra has held that the interest received u/s 28 of the Land Acquisition Act is exempt from tax. Admittedly the interest received by appellant is u/s 28 of the Land Acquisition Act, hence is exempt from tax. This is also an admitted fact that the appellant has offered this amount for taxation before the decision of Hon’ble Apex Court in the case of Ghanshyam dass HUF. After this decision the situation has changed and the amendment made in statute by Finance Act, 2010 is applicable from the Assessment year 2010-11. Hence amended provision is not applicable n this case since appeal relates to assessment year 2008-09. It is settled law that the appellant is entitled to raise an additional claim before the AO or the appellate authority which was not raised earlier. Useful reference can be made to the decision of Hon’ble Delhi High Court in the case of CIT vs. Parabolic springs Ltd. 306 ITR 42 (Del). The Hon’ble Apex Court of India, CIT vs. Mahalaxmi Sugar Mill Co. Ltd. (1986) 58 CTR 138 (SC) held that there is duty cast on the AO to apply the relevant provisions of the Income Tax Act 1961 for the purpose of determining the true figure of taxable income and consequential tax liability. That the appellant fails to claim the benefit cannot relieve the AO of his duty to apply the relevant provision of the Act. From the above observation of Hon’ble Apex Court it is clear that the AO is duty bound to determine the correct taxable income irrespective of the facts whether the appellant has claimed the benefit or not. As I held in the earlier part of my order that the interest received by appellant is received U/s 28 of the land Acquisition Act therefore is exempt from tax. The amount of Rs. 79,39,289 was also received U/s 28 of the land Acquisition Act, and is exempt from Tax. Merely not making a claim cannot be basis to deprive the appellant from a legitimate claim. In view of above, the AO is directed to allow the relief to the appellant and reduce the taxable income by Rs. 79,32,289/- which is already included in income assessed by the AO. Accordingly this ground of appeal is allowed.”
(C.2. 1). Before us, at the time of hearing, the Ld. DR supported the second ground of appeal and relied on the assessment order. On the other hand, Ld. Counsel for the assessee strongly supported the order of Ld.CIT(A) and relied on the order of Ld.CIT(A). We have heard both sides patiently. We have also considered all materials on record. We have noticed that the return that was filed u/s 139 of the Act by the assessee was, being a belated return, a return filed u/s 139(4) of the Act. Had the assessee filed the return by due date, it would have been a return filed u/s 139(1) of the Act. Provisions regarding filing of revised return are contained in section 139(5) of the Act and its perusal shows that, while the assessee is permitted to file a revised return, if the original return was filed u/s 139(1) of the Act or was filed in response to notice u/s 142(1) of the I.T.Act. However, there is no permission u/s 139(5) for the assessee to file a revised return if the original return was filed belatedly u/s 139(4) of the Act. Thus, the return filed by the assessee u/s 139(5) of the Act is final qua the assessee, as far as claims beneficial to the assessee are concerned. While Revenue is authorized to scrutinize and examine the claims of the assessee by taking action u/s 143 or 147 of the I.T.Act; the assessee has no authority under law to make a claim before the Assessing Officer beneficial to the assessee subsequent to filing of (belated) return u/s 139(4) of the I.T.Act. As the assessee is barred from making any claims even before the Assessing Officer beneficial to him after filing of (belated) return u/s 139(4) of the Act; right of making any such claims at a later stage such as in appellate proceedings have to be, by necessary implication, interpreted as not available to the assessee. It is to be appreciated that even for the instances when an assessee has been permitted to file revised return u/s 139(5) of the Act; such as when the original return was filed u/s 139(1) of the Act within due date or when it was in response to notice u/s 142(1) of the Act; even then the permission to file a revised return is available to the assessee only upto time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. In the instant case, the claim by the assessee regarding the aforesaid amount of Rs.79,32,289/- was made well after the time prescribed for filing of revised return u/s 139(5) of the Act. This matter was considered by the Hon’ble Supreme Court in the case of Goetze (India) Ltd. V CIT [2006] 157 Taxman 1 (SC) in which the Hon’ble Apex Court held that the assessing authority has no power after filing original return otherwise than by filing revised return. Despite these facts and circumstances, the legal position and the precedent in the case of Goetze (India) Pvt. Ltd. (supra), if the claim of the assessee regarding aforesaid amount of Rs.79,32,289/- is to be considered favourably on merits, as the Ld.CIT(A) has done in the impugned order, it results in an extra-ordinary situation wherein the assessed income (after considering the aforesaid claim of the assessee amounting to Rs.79,32,289/-) turns out to be even less than the returned income. We have given our anxious consideration to this extra-ordinary situation and examined the statutory position whether income can be assessed at an income lower than the returned income. The provisions regarding initiation of assessment proceedings are contained in section 143(2) of the Act. The provisions u/s 143(2) of the Act, as they stood at the relevant time before amendment by Finance Act, 2016 w.e.f 01.06.2016, are reproduced below:-
143(2). “Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the prescribed income-tax authority, as the case may be, if , considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return:
Provided that no notice under this sub-section shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished.”
(C.2.2). From a perusal of the aforesaid provisions of section 143(2) of the Act, it is noticed that the purpose of assessment proceedings is to ensure that the assessee had not understated the income or has not computed excessive loss or has not under paid the tax in any manner. It can be readily inferred that the assessment proceedings are meant for scrutinizing the claims made by the assessee and not for entertaining any claims which have not been made by the assessee. The assessment proceedings are not meant for the benefit of the assessee and cannot be carried out to confer a benefit to the assessee, specially when such claim for benefit was not made by the assessee by due date or even by the time of completion of assessment proceedings. The filing of return by the assessee u/s 139(1) or u/s 139(4) or in response to notice u/s 142(1) of the I.T.Act, is on the basis of “self-assessment” by the assessee in accordance with section 140A of the I.T.Act. The “self-assessment” by the assessee can be altered by the Revenue to the disadvantage of the assessee if the case is selected for scrutiny by issue of notice u/s 143(2) of the Act which results in assessment order u/s 143(3) or u/s 144 of the I.T.Act. Revenue does not select all the returns filed by the assessee for scrutiny by issue of notice u/s 143(2) of I.T.Act. It is common knowledge and a well-known fact that a very small percentage of returns filed by the assessee are selected for scrutiny by issue of notice u/s 143(2) of the Act. Unless the return is selected for scrutiny by issue of notice u/s 143(2) of the Act resulting in an assessment order u/s 143(3) or u/s 144 of the Act, the return filed by the assessee in accordance with “self-assessment” made by the assessee is final (barring exceptional circumstances when notice u/s 148 or u/s 153A or u/s 153C or u/s 158BC or u/s 158BD etc. is issued subsequently). The selection of a case for scrutiny by issue of notice u/s 143(2) of the Act cannot put the assessee in a more advantageous position than had the case not been selected for scrutiny, in which case the “self-assessment” made by the assessee and return filed by the assessee would have become final (barring exceptional circumstances when notice u/s 148 or u/s 153A or u/s 153C or u/s 158BC or u/s 158BD etc. is issued subsequently). In the instant case, the consequence of favourably considering the claim of the assessee regarding aforesaid amount of Rs.79,32,289/-, is that the assessed income of the assessee becomes much lower than the returned income and puts the assessee in a much more advantageous position than had the return of the assessee not been selected for scrutiny in which case the “self-assessment” made by the assessee and return filed by the assessee would have become final. As we have discussed earlier such a situation is not permissible under law on careful perusal of section 143(2) of the I.T.Act. Reference to order of Hon’ble Apex Court in the case of CIT vs Sun Engineering Works (P.) Ltd.[1 992] 198 ITR 297 (SC) is useful wherein Hon’ble Supreme Court held that since the proceedings under section 147 of the Act are for the benefit of the Revenue and not for an assessee, and are aimed at gathering the ‘escaped income’ of an assessee. Though the decision of Hon’ble Supreme Court in the case of CIT vs Sun Engineering Works (P) Ltd. [supra] was in the context of proceedings u/s 147 of the Act, the principle is applicable even for proceedings u/s 143(2) of the Act because, as we have seen before, on perusal of provisions u/s 143(2) of the Act, it can be readily inferred that the assessment proceedings u/s 143(2) of the Act are not meant for the benefit of the assessee but are for the benefit of Revenue only so that the AO is able to ensure that the assessee has not understated the income or has not computed excessive loss or has not under paid the tax in any manner.
(C.2.3). We have already noticed that the aforesaid claim of Rs.79,32,289/-, was made by the assessee after the time limit prescribed u/s 139(5) of the Act for revision of return. We have also noticed that, in any case the assessee was not eligible to revise the return because the return filed by the assessee was not returned filed u/s 139(1) of the Act by prescribed due date but was a belated return under section 139(4) of the Act for which there is no statutory permission u/s 139(5) of the Act to revise the return. We have also noticed that the claim of the assessee for the aforesaid amount of Rs.79,32,289/- having been favouarbly considered by the Ld.CIT(A) has resulted in the extra-ordinary situation, not tenable in law on perusal of section 143(2) of the Act, wherein the assessed income of the assessee turns out to be lower than the returned income thereby placing the assessee in a much advantageous situation, contrary to law, as compared to the likely situation if the return filed by the assessee had not been selected for scrutiny by issue of notice u/s 143(2) of the Act. We are aware of certain precedents wherein it has been held that appellate authorities can admit a legal ground taken by appellant at any stage of appellate proceedings provided all relevant facts are on record and fresh investigation of facts is not necessary. However, in the instant case a fresh investigation of facts on merits of the claim made by the assessee was necessary, the opportunity for which was not given by the Ld. CIT(A) to the AO. In any case, in view of the clear legal position under sections 143(2), 139(1), 139(4) and 139(5) of the Act as discussed earlier in detail; and in view of the facts and circumstances as discussed earlier in detail; and in view of precedents of Hon’ble Supreme Court in the cases of Goetze (India) Pvt. Ltd. [supra] and CIT vs Sun Engineering Works (P) Ltd. [supra], we hold that the Ld.CIT(A) erred in favourably considering the claim of the assessee for the aforesaid amount of Rs.79,32,289/-. Accordingly, we set aside the order of the Ld.CIT(A) on this issue and reverse his direction given to the AO to reduce the taxable income by Rs.79,32,289/-. We direct that this amount of Rs.79,32,289/- will continue to be included as income of the assessee in accordance with return filed by the assessee u/s 139(4) of the I.T.Act. Thus, second ground of appeal filed by the Revenue is allowed.
