To ensure compliance with the latest judicial rulings, it is advisable to claim expenses incurred on clinical items that are permissible under the MCI and UCMP guidelines. This is particularly important considering the Honourable Apex Court decisions in Goetze (India) Ltd. v. CIT [2006] 284 ITR 323 (SC) and Shriram Investments v. CIT [2024] 468 ITR 372 (SC). These rulings emphasize that the Assessing Officer (AO) is justified in rejecting any additional or fresh claims made during assessment proceedings if they are not substantiated through a validly filed revised return under section 139(5) of the Income Tax Act. Court distinguished various decisions by holding that these decisions were about additional grounds before the tribunal and not a case of filing a revised return and making a fresh claim based on a time barred revised return.
Although it is well established that the Appellate authorities have the power to adjudicate such claims, as seen in Jute Corpn. of India Ltd. v. CIT [1991] 187 ITR 688 (SC); National Thermal Power Company Ltd. v. CIT [1998] 229 ITR 383 (SC); CIT v. Jai Parabolic Springs Ltd. [2008] 306 ITR 42 ( Del); CIT v. Pruthvi Brokers and Shareholders P. Ltd. [2012] 349 ITR 336 (Bom); Wipro Finance Ltd. v. CIT [2022] 443 ITR 250 (SC), etc., it is prudent to avoid any complications by adhering strictly to the prescribed procedures.
In the case of PCIT v. Wipro Ltd [2022] 446 ITR 1 (SC)/TS-544-SC-2022, the assessee, a 100% export-oriented unit (EOU), filed its 2001-02 return claiming sec 10B exemption and noted no loss would be carried forward. Later, it withdrew this claim via declaration on 24/10/2002 (after the deadline) and sought to carry forward losses in a revised return filed on 23/12/2002 wherein exemption under sec 10B was withdrawn in terms of S.10B(8). The AO rejected this claim citing late submission of declaration in writing after the due date for filing of the return (31/10/2001); CIT(Appeals) agreed, but the Tribunal allowed the assessee’ s appeal. Karnataka HC in PCIT v. Wipro Ltd. [2021] 17 ITR-OL 253 (Karn) dismissed the Department’s appeal, observing S.10B(8) requirement as procedural.
The Supreme Court allowed the Department’s appeal, stating that an assessee filed a revised return under sec 139(5) on 23/12/2002 with a declaration under sec 10B(8) after the original return due date under sec 139(1), i.e., 31/10/2001, which was not valid for claiming carry-forward loss or set-off. The assessee had filed return under sec 139(1), not under sec 139(3). A revised return filed under sec 139(5) replaces the original submission under sec 139(1) and is not substitute for a return under sec 139(3) for claiming loss carry-forward or set-off as per sec 80. The language in S.10B(8) is explicit and straightforward. For claiming benefit under section 10B(8), the twin conditions require submitting written declaration to the AO and such declaration must be furnished before the due date for filing the original return under sec 139(1); these conditions are mandatory and cannot be considered merely directory. Thus, a declaration under sec 10B(8) in a revised return filed after the original due date under section 139(1) does not meet the required condition. According to the SC, a revised return under sec 139(5) cannot convert a section 139(1) return into a loss return under sec 139(3).
The Supreme Court observed that Exemption provisions are to be strictly and literally complied with, and they cannot be construed as procedural requirements. In a taxing statute the provisions are to be read as they are and they are to be literally construed, more particularly in the case of an exemption sought by an assessee. An assessee claiming exemption must strictly and literally comply with the exemption provisions.
The SC held that revised return of income under sec 139(5) can be filed only in cases of “omission” or “wrong statement” and the same cannot be filed for withdrawing a claim made under original return of income and making altogether a new claim. Also, a revised return of income can only substitute the original return and cannot transform it into a loss return to avail carry forward and set off of loss. If the claim made on submission of an Exemption Certificate is permitted to be withdrawn post return of income filing date, the Exemption Certificate would become falsified and stand to be nullified. Accordingly, the taxpayer’s submission that the Withdrawal Declaration may be filed even during assessment proceedings without filing revised return of income has no substance. The Supreme Court also observed that a fresh claim of tax losses cannot be made in a revised return if the same is not made in the original return even if the original return is filed within the statutory time limits.
Further, distinguishing its earlier ruling CIT v. G. M. Knitting Industries Pvt. Ltd [2015] 376 ITR 456 (SC) as well as other rulings rendered in the context of Chapter VI-A, the Supreme Court held that Chapter III and Chapter VIA of the Act operate in different realms and principles of Chapter III, which deals with “incomes which do not form a part of total income”, cannot be equated with mechanism provided for deductions in Chapter VIA, which deals with “deductions to be made in computing total income”, and thus, none of the decisions relied upon on behalf of Wipro on interpretation of Chapter VIA shall be applicable while considering the claim under section 10B(8) (Para 11). The Supreme Court in this ruling has held section 10B to be an exemption section. It must be noted that the Supreme Court in an earlier ruling in the case of Yokogawa (supra), in the context of section 10A of the Act, has held that section 10A is in the nature of a ‘deduction’ although the section is placed in Chapter III (exemption provisions) of the Act. Interestingly, the current ruling does not provide any basis or justification for departing with its earlier decision while holding section 10B to be an exemption provision. In the present case, the Supreme Court also held that claim for exemption under Chapter III of the Act needs to be made as per the prescribed timelines, and it is not correct to suggest that time limits prescribed for exemption claims are not mandatory, but only directory. The Supreme Court in its earlier ruling in the case of Dilip Kumar and Company & Others has held that an exemption notification should be interpreted strictly and any ambiguity in such exemption notification should be interpreted in favour of the Revenue. It must be noted that this decision was rendered in the context of Customs law. Interestingly, in the context of income-tax law, the Supreme Court in the case of Bajaj Tempo Ltd v. CIT [1992] 196 ITR 188 (SC) had held that the provision of a taxing statute granting incentive for promoting growth and development should be construed liberally. In Supreme Court’s view, its earlier ruling considering timelines as directory is restricted to cases of deductions under Chapter VIA of the Act.
Tax can be levied only if it is authorized by law and the taxing authority cannot collect or retain tax that is not authorized. Any retention of tax collected, which is not otherwise payable, would be illegal and unconstitutional [CIT v. Shelly Products [2003] 261 ITR 367 (SC)]. In view of Article 265 of India,’ acquiescence’ cannot deprive a party of rightful relief when taxes are levied or collected without legal authority [Nirmala L. Mehta v. A. Bala Subramaniam, CIT [2004] 139 Taxman 394 (Bom) and Madanlal Mohanlal Sakhala v. Addl. CIT [2023] 154 taxmann.com 178/202 ITD 751 (Mum. – Trib.)]. Further in Balmukund Acharya v. DCIT [2009] 310 ITR 310 (Bom.) the assessee filed return after mistakenly including certain sum which was not liable to tax. The High Court set aside the ITAT’s order and restored the matter to CIT (A) holding as under:
1. If any assessee, under a mistake, misconception or on not being properly instructed, is over-assessed, the authorities under the Act are required to assist him and ensure that only due legitimate taxes are collected.
2. If a particular levy is not permitted under the Act, tax cannot be levied by applying the doctrine of estoppel.
3. Acquiescence cannot take away from a party the relief that he is entitled to where the tax is levied or collected without authority of law.
With due respect, it is submitted that, principally, these views appear to be of doubtful legal validity. In the context of withdrawal of claim for depreciation under sec 32, it is settled by a plethora of High Court and Supreme Court decisions that depreciation claimed in the original return can be withdrawn by filing a revised return. It has been consistently held that if the revised return is a valid return and the assessee has withdrawn the claim of depreciation, it cannot be granted relying on the original return when the assessment is based on the revised return[See, for example, CIT v. Mahendra Mills [2000] 243 ITR 56, 80 (SC)].
It is submitted that the above observations of SC ought to be confined to the facts of the case, particularly with regard to procedural requirement of S. 10B(8) for filing declaration before the due date for filing return under sec 139(1), but they cannot be construed to be unsettling the general principle settled for ages that an exemption provision is to be construed liberally and reasonably and not strictly.
It is submitted with due respect that it is settled law that once the original return is substituted by a valid revised return under section 139(5), the natural consequence is that the earlier return is effaced or obliterated for all purposes under the Act: it is then not open for the AO to advert to the original return or the statement filed with the original return. See Kanga and Palkhivala’s -The Law and Practice of Income Tax, 11th edition, page 2448. Also see, inter alia, CIT v. Mangalore Chemicals and Fertilizers Ltd. [1991] 191 ITR 156, 164 (Karn) ; CIT v. Machine Tool Corporation of India Ltd. [1993] 201 ITR 101 (Karn) and Beco Engineering Co. Ltd. v. CIT [1984] 148 ITR 478 (P & H) [approved in CIT v. Mahendra Mills Ltd. [2000] 243 ITR 56 (SC)]. In fact, for this principle, support can also be drawn from CIT v. Mahendra Mills (supra). In view of this principle, when profit is converted into loss by filing a revised return under sec 139(5), the revised return steps into the shoes of the original return filed under sec 139(1), and as such the loss claimed in the revised return should be allowed to be carried forward and it cannot be denied by holding that the revised return under sec 139(5) cannot transform the return under sec 139(1) into a return under sec 139(3), nor can it be held that since the revised return is filed after the time specified under sec 139(1) it violates the condition of S. 80 because the original return was filed within the time specified under sec 139(1) and the revised return under sec 139(5) substitutes, or steps into the shoes of, the original return filed under sec 139(1) for all purposes of the Act. This is more so as S. 139(3) conceptually, treats a return thereunder to be on par with a return under sec 139(1) by expressly providing that “and all the provisions of the Act shall apply as if it were a return under sub-section (1)”.
Chapter III and Chapter VI-A operate in different realms and the principles of Chapter III, which deal with ” incomes which do not form part of total income“, cannot be equated with the mechanism provided for deductions in Chapter VI-A, which deals with ” deductions to be made in computing total income”. Therefore, rulings on the interpretation of Chapter VI-A will not be applicable while considering the claim under section 10B(8). These were the observations in PCIT v. Wipro Ltd. [supra]; Neenopal Intelligent Solutions Pvt. Ltd v. ITO 2025 SCC OnLine ITAT 11027 (Bang); Star Wire (India) Vidyut Private Limited v. DCIT 2025 SCC OnLine ITAT 10660 (Del).
The observations of the Supreme Court that a revised return of income can be filed only for any error or omission and cannot be filed for making a fresh claim or withdrawing of a claim made in the original return of income would have a direct bearing on taxpayers making such additional claims/ withdrawing claims by way of a revised return. However, the position of allowability of additional/ fresh claim before the appellate authorities remains unaffected by this ruling, for example, the Supreme Court in case of National Thermal Power Co Ltd v. CIT [1998] 229 ITR 383 (SC) and Bombay High Court in case of CIT v. Pruthvi Stock Brokers & Shareholders [2012] 349 ITR 336 (Bom) and several other precedents have held that the taxpayer has a right to make an additional claim by way of additional grounds not pressed earlier at the time of appellate proceedings. Further, the Supreme Court distinguishing Goetze (India) Ltd. v. CIT [2006] 284 ITR 323 (SC) held in the case of Wipro Finance Ltd v. CIT (2022) 443 ITR 250 (SC) held that the limitation on accepting new claims would apply to the “assessing authority” but would not impinge upon the plenary powers of the Tribunal bestowed under sec 254 of the Act. In this case, for the first time before the Tribunal the taxpayer made a fresh claim in respect of revenue expenses, erroneously capitalized in the return, which the Tribunal entertained under its plenary powers under section 254 and recorded in its order that the Department’s representative had no objection in that regard. The Tribunal adverted to the decision in National Thermal Power Co. Ltd v. CIT (1998) 229 ITR 383 (SC) for entertaining this fresh claim. The Supreme Court upheld the action of the Tribunal. Accordingly, the earlier judicial decisions permitting submission of a fresh claim in respect of deduction provisions of the Act during assessment, or appellate proceedings may not be regarded as getting diluted.
For AY 1989-1990 the assessee filed its return of income on 19/11/1989 and a revised return under sec 139(5) in CIT v. Shriram Investments [2024] 468 ITR 368 (Mad). During assessment proceedings, the assessee filed another revised return on 29/10/1991 and claimed deduction of deferred revenue expenditure. The AO treated the second revised return as non-est and completed the assessment, which the CIT(Appeals) confirmed. The Tribunal held that under the scheme of the Act the assessee was entitled to make a claim, which otherwise was omitted to be claimed in the return during assessment proceedings and reversed the CIT(Appeals)’s order. Dismissing the assessee’s appeal in Shriram Investments v. CIT [2024] 468 ITR 372 (SC), the Supreme Court after considering the its own decisions in the case of PCIT v. Wipro Ltd. [2022] 140 taxmann.com 223/446 ITR 1 (SC) and Wipro Finance Ltd. v. CIT [2022] 137 taxmann.com 230/443 ITR 250 (SC) held that this court did not consider the question of power of the AO to consider a claim made after a revised return was filed beyond the time limit. The Court considered only the powers of the tribunal under sec 254 and there was no objection for enabling the assessee to set up a fresh claim. In Goetze (India) Ltd. v. CIT [2006] 157 Taxman 1/284 ITR 323 (SC)it was held that the AO cannot entertain any claim made by the assessee otherwise than by following the provisions of the Act. Since the revised return in which a fresh claim was made was barred by limitation in terms of S. 139(5), such claim cannot be entertained by the AO. It made a reference to its own decision in the case of Wipro Ltd. (Supra) where a revised return was filed to withdraw the claim and have the benefit of carrying forward and setting off loss. It held that filing a revised return and taking a contrary stand or claiming exemption, which was not claimed earlier while filing the original return, is not permissible in law. The SC observed that “the Tribunal has not exercised its power under sec 254 of the Income-tax Act to consider the claim. Instead, the Tribunal directed the AO to consider the appellant’s claim. The AO had no jurisdiction to consider the claim made by the assessee in the revised return filed after the time prescribed by S. 139(5) for filing a revised return had already expired“.
It is settled now by countless judicial decisions that the Tribunal has vast powers under section 254 to entertain a claim made for the first time by the assessee. Accordingly, the Tribunal, in terms of the vast powers conferred upon it under section 254, could have admitted the claim for deferred revenue expenditure in this case as made for the first time by the assessee. But the Tribunal had not exercised its power under section 254 to consider the claim. Instead, the Tribunal directed the AO to consider the assessee’s claim. The AO had no jurisdiction to consider the claim made by the assessee in the revised return filed after the time prescribed by section 139(5) for filing a revised return had already expired.
In the case of Coromondel Cabeles (P.) Ltd. [2025] 175 taxmann.com 587 (Mad) the court held that where the assessee did not claim deduction under sec 80-IB(10) in the return filed under sec 139(1), denial of such deduction for AYs 2007-08 to 2011-12 was justified in view of bar under sec 80AC.
1. 139(5)states that if any person, having furnished a return under sec 139(1) or sec 139(4), discovers any omission or any wrong statement therein, may furnish a revised return at any time 3 months prior to the end of the relevant assessment year or before the completion of assessment, whichever is earlier. In other words, the time limit for filing a revised return is available up to 31stday of December of the assessment year so also the belated return contained in S.139(4). S. 139(4) says that any person who has not furnished a return within the time allowed under sec 139(1), may furnish the same at any time before 3 months prior to the end of the relevant assessment year or before the completion of assessment, whichever is earlier. S. 139(1) mandates filing of return of income by a firm or company for every assessment year on mandatory basis since there is no threshold limit for tax exemption which is applicable in the case of individuals / HUFs. In the case of any other taxpayer other than a company or firm, ITR is required to be filed where the income assessable under the Act exceeded the maximum amount which is not chargeable to income tax.
2. 139(8A) says that any person whether or not has furnished a return under section 139(1) or S. 139(4) or S. 139(5), for an assessment year, may furnish an updated return of his income or the income of any other person in respect of which he is assessable under the Act at any time within 24 months from the end of the relevant assessment year. Thus, a taxpayer cannot file an updated return reducing the income as against the ITR filed earlier or admitting loss by filing an updated return.
Thus, applicability of the Supreme Court rulings therefore needs fact-specific analysis. The taxpayer hence can file a revised return which is provided in S. 139(5). This also has a rigid timeline. Recently, updated return prescribed under sec 139(8A) provides yet another option to the taxpayer to set right his tax records. However, it has its own limitations, and the provision is more skewed in favour of the Revenue. Thus, if a taxpayer misses the deadline for a claim, he can seek relief from CBDT, which has the authority to accept late claims for exemption, deduction, or relief under the Act. Where the return of income filed by the assessee, admitting taxable income on the higher side because of some error of either fact or of law, is only processed u/s 143(1) and by the time the relevant error is found out the time for filing the revised return u./s 139(5) has lapsed, the assessee can approach the CBDT for the relaxation of the time limit u/s 119(2)(b) for filing the revised return subject to the conditions that (i) no assessment u/s.143(3) or u/s.147 has taken place in the intervening period and (ii) there is a sufficient cause for seeking such relaxation within the time limit specified in s.139(5) . Delays in such cases must be considered in accordance with the principles laid by the Court in several cases dealing with condonation of delay in filing appeals /writ petitions.
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