Claim of deprecation in revised return cannot be denied on the ground it was not claimed in original return

Claim of deprecation in revised return cannot be denied on the ground that it was not claimed in original return. Section 119(2)(b) had no applicability to the case- ITAT

ABCAUS Case Law Citation:
ABCAUS 2517 (2018) 09 ITAT

Important Case Laws Cited/relied upon by the parties:
Principal Commissioner of Income Tax vs. Babubhai Ramanbhai Patel [2017] 84 32 (Guj).
Smifs Securities Ltd. 24 222

The appellant assessee had challenged the order passed by the Commissioner of Income Tax (Appeals).

The assessee company had filed its original return of income which was revised enhancing the total loss. An assessment order u/s 143(3) of the Act was passed by the Assessing Officer (AO) in which he disallowed the depreciation claimed on goodwill and restricted the loss in the revised return to the loss as per the original return filed by the assessee.

The AO was also of the opinion that as per Section 80 of the Act no loss is allowed to be carried out or set off if the return of income is filed beyond the due date specified in section 139(1).

The assessee had explained that it had claimed depreciation by relying on the Hon’ble Supreme Court decision which came later on when the original return was filed by the assessee company.

The AO was not satisfied with the claim of the assessee. He made the disallowance holding that the enhanced claim in the revised return cannot be allowed, as the same was in violation of the provision of section 80 and section 139(1). He further noted that the claim of deprecation was also not specified in the tax audit report. Hence, he held that the assessee cannot be allowed any deprecation of goodwill and revised return without the auditors approval.

The CIT(A) confirmed the action of the AO on the ground that the return had been filed beyond the time specified and no condonation had been sought u/s.119(2) of the Act.

The Tribunal noted that hat the revised return was filed within the due date of filing the revised return in the extant period. There was no dispute about the validity of revised return inasmuch as the AO had made the assessment subsequent to the filing of the revised return and the revised return had not been treated as nonest. Moreover, there was no reason to treat the same as nonest as the same was filed within the time mandated u/s. 139(5) of the Act.

The Tribunal opined that when the revised return was filed on time as per section 139(1) and 139(5), in our considered opinion, the CIT(A) had erred in holding that the assessee required any condonation u/s 119(2)(b).

The Tribunal also observed that there are several case laws for the proposition that the time limit as specified in section 139(1) should be read along with the provision of section 139(5). It was not a case here that no return was filed u/s 139(1) or that it was belated. The authorities simply denied the assessee’s claim by holding that the revised return was to be ignored.

The Tribunal observed that from the decision of the Hon’ble High Court relied upon by the assessee it emanates that the assessee has an indefeasible right to revise the return filed u/s 139(1) as per the provisions of section 139(5) on discovery of any omission or wrong statement. In the instant case, the assessee had explained before the authorities below that it had claimed this depreciation pursuant to Hon’ble Apex Court decision. It was not the case of the Revenue that the Hon’ble Apex Court decision had been wrongly relied upon. Hence, the assessee’s claim in the revised return could not be denied on a technical ground that it was not claimed in the original return.

The Tribunal opined that the issue raised by the CIT(A) for seeking condonation for delay in filing in term of section 119(2)(b) was irrelevant in term of the said case law. Moreover, the instant case was not of non filing of return but a case of revised return. The reference of the CIT(A) to section 119(2)(b) could have relevance where no return was filed in due time.

The AO had also objected that the depreciation amount was not quantified in the tax audit report. However, the Tribunal observed that the AO had not otherwise disputed the validity of claim made by the assessee for which decisions of the Hon’ble Apex Court had also been cited. The Tribunal opined that the non quantification of the depreciation amount in the tax audit report cannot supersede the Hon’ble Apex Court’s decision on this issue. The CIT(A) while confirming the disallowance had only referred to the time factor involved and he had not made any adverse observation on the validity of assessee’s claim otherwise. He had in fact admitted that on merits the Hon’ble Apex Court’s decision is in favour of the assessee which was an undisputed fact.

Accordingly, the Tribunal set aside the orders of the CIT(A) and decided the issue in favour of the assessee.

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