Ensuing to filing of Tax Return, if any omission of claim, deduction or exemption is discovered then the Tax Payer can file a Revised Return of Income (ROI). The revision window provided under section 139(5) of the Income Tax Act, 1961 (ITA) is open till one year from the end of relevant assessment year or completion of the assessment, whichever is earlier (with effect from Assessment Year 2018-19 the revision window is reduced by 12 months).
Given this, a moot question is whether a Tax Payer is allowed to make fresh claims beyond the due date of revising the return of income?
Various judicial precedents have held that the Appellate Authorities as well as Assessing authorities have the jurisdiction to exercise their discretion whether or not to permit such additional claims raised for the first time. The same are listed hereunder:
Thus, it is clear that the Apex Court’s Decision was based on readings of the section which only mandated determining the sum payable by the Tax Payer as against the current section which also includes refund due to him as well.
In all of the above precedents available on this subject, the courts have unambiguously observed that when a Legitimate and bona fide claim is available to the Tax Payer; it cannot be taxed in the absence of any authority. Article 265 of the Constitution of India lays down that “no tax shall be levied except when authorised by law.”
Moreover, this position is upheld by an old Circular No: 14(XL35) dated 11 April 1955 issued by the Central Board for Direct Taxes (CBDT) in the context of Refunds and Reliefs due to the assesse. In this circular amongst others, it was instructed that the Officers of the Department should not take advantage of ignorance of the Tax Payer with regards to his rights. Rather, the Tax Officer should consider it as their duty to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs. The Officers should take the initiative in guiding a Tax Payer where proceedings or other particulars before them indicate that some refund or relief is due to him. The circulars issued by the CBDT are binding on the Income-tax Authorities under section 119(1) of the ITA, even if the same is inconsistent with the provisions of the law.
Recently, the issue of considering fresh claim made outside of the Return of Income filed has been examined by the Madras High Court in the Case of CIT vs Abhinitha Foundation (P.) Ltd  (83 taxmann.com 100).
Facts before the Madras High Court
a. The Tax Payer filed its return declaring certain taxable income for AY 2011-12 and assessment was completed and the returned income is accepted.
b. In the ROI filed, the Tax Payer failed to claim deduction under section 80-IB (10) of the ITA and the same was claimed during the assessment proceeding in the prescribed format (under Form No. 10CCB). However, the Tax Officer rejected the claim made by the Tax Payer during the assessment proceedings. Although the CIT (A) noted that the deduction under section 80-IB (10) of the ITA was legitimate, he rejected the claim in the assessment year under consideration in the absence of claim made in the ROI.
c. The Income Tax Appellate Tribunal (ITAT) ruled that both the CIT (A) and ITAT have the power to consider the revised claim by the Tax Payer if the same is otherwise entitled to. This is irrespective of whether such claim had been lodged by the Tax Payer in its ROI filed. The ITAT remanded the matter to the Assessing Officer for fresh consideration.
d. Being aggrieved by the ITAT’s Order, the Revenue Department filed an appeal before the Madras High Court.
The Hon’ble Madras High Court upheld that claims made by the Tax Payer which does not form part of the original return or even revised return; can still be considered by the Assessing Officer as well as ITAT if the genuine material is available on record.
The relevant extract of the decision is reproduced hereunder:
The power of entertaining the claim vests with the 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 will set at naught the plenary powers of Appellate Authorities. [Para 12.5]
While upholding the above position, the High Court has considered the judgements in the case of Goetze (India) Ltd (SC) and National Thermal Co. Ltd (SC). In the said decisions, the Apex Court had upheld that under the pre-amended law, the Assessing Officer did not have powers to entertain Tax Payer’s claim for deduction after the ROI was filed, otherwise than by revised return. However, in these cases the Appellate Authorities was not prevented from considering the additional claim although not raised earlier.
Certain claims to be mandatorily made in the ROI
At this juncture, it is highlighted that section 80A of the ITA provides that certain deductions can be made in computing total income only if the same is claimed in the ROI. These deductions are with respect to newly established undertakings in Free Trade Zone (section 10A), Newly established undertakings in Special Economic Zones (Section 10AA), Newly established hundred percent Export-Oriented Undertakings (Section 10B) and Export of certain articles or things (Section 10BA).
Nonetheless, certain legitimate claims can be always made by the Tax Payers either before the Assessing Officer or before the Appellate Authorities. These claims could be in the nature of MAT credits available post favorable precedents, deduction under section 35(2AB) of the ITA after receiving approval for the quantum of expenditure from prescribed authorities, short credit of Tax Deducted at Source (TDS), unabsorbed depreciation allowance after considering order giving effect to the appellate orders of the preceding assessment years.
As law evolves, it enhances the degree of justice available to the tax payers. This Madras High Court decision fortifies that both Assessing and Appellate Authorities are to consider fresh claims even otherwise than by revised return. The importance of the decision is amplified since it has considered the Supreme Court decision in case of Goetze (India) Ltd under the amended provisions as it stands today. The Madras High Court has reinforced that a window to put across legitimate claim / deduction before the Tax Authorities is interminable and a bonafide Tax Payer cannot be denuded of this opportunity.
(Mansi Mehta is a Senior Manager and Latha Sherlekar is an Assessment Manager with Deloitte Haskins & Sells LLP.)