Can one raise a claim before the appellate authorities which has not been raised before the AO?
The Income Tax Appellate Tribunal, Bangalore in Sri Lakhan Singh vs. Asst. Commissioner of income Tax (ITA No.1025/Bang/2011) has held that the claim of the assessee which has been raised before the appellate authorities but was not raised before the Assessing Officer can be allowed.
It was held that the appellate authority is entitled to consider a claim made before him, though the assessee did not raise a claim before the Assessing Officer.
Brief facts of the case:
The assessee was a real estate broker and agent. The assessee filed his return on 29.2.2008 where he declared an income of Rs.38, 02,406/-, consisting of the following:
a) Income from house property amounting to Rs.58, 500/-;
b) Income from bank interest amounting to Rs.2, 03,606/-;
c) Income from Commission amounting to Rs.35, 40,000/-
The assessment was picked up for scrutiny after serving a notice under section 143(2) of the Income Tax Act. During the assessment proceedings, the assessee filed a revised return on 28.7.2009 declaring a total income of Rs.34,15,470/- where he claimed a deduction of Rs.3,86,934/- on the car. The claim of the deduction was not made in the original return filed by the assesee. The scrutiny assessment was completed on 31.12.2009 by accepting the income declared in the original return. The assessee’s plea to consider the revised return was not accepted by the Assessing Officer. The assessee being aggrieved by the order of the AO preferred an appeal before the first appellate authority.
It was argued before the first appellate authority that during assessment proceedings, it was revealed that the assessee did not raise any claim regarding some deduction for which revised return was filed. It was further submitted that the assessee is entitled to a particular relief for which the Assessing Officer should give the lawful deduction though the assessee did not claim it.
The CIT (A) rejected the appeal of the assessee and held that the original return was filed after due time, as such, no revised return can be allowed under section 139(5) of the Act.
The assessee being aggrieved is in appeal before the second appellate authority.
It was held that even if a claim which has not been made before the AO can be made before the appellate authorities. The jurisdiction of the appellate authorities to allow the claim has not been contradicted by the Apex Court in any of its judgments. The Supreme Court has made it clear that the power of the appellate authorities is not limited regarding entertaining a claim for deduction. It has held that an assessee can rightly raise additional legal submissions before the appellate authorities and is also entitled to raise additional claims too. The appellate authorities have the discretion whether or not to allow the additional claims so raised. It cannot be said that the appellate authorities have no jurisdiction to consider such new claims. Accordingly the appeal filed by the assessee was allowed.
The Hon’ble Mumbai High Court in Ahmadabad Electricity Limited vs. CIT (1993) 199 ITR 351 adjudicated a similar situation. In that case, the appellant being an assessee did not claim a deduction for an the amount it was required to transfer to contingencies reserve and dividend and tariff reserve either before the AO or before the First Appellate authority in appeal. The Tribunal rejected the claim as it was a new claim and additional grounds were placed before the Tribunal.
The Hon’ble Division Bench of Mumbai High Court allowed the appeal filed by the assessee after holding that the assessee is entitled to raise new claims.