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Income Tax Appellate Tribunal (ITAT) Mumbai in a recent judgment while allowing higher deduction u/s 54(1) than claimed in return, held that even if a claim is not made in return of income or before the Assessing Officer, it can be made before the appellate authorities including CIT(Appeals).

Case Details:
ITA Nos.5329 & 6293/M/2012 Assessment Years: 2008-09 & 2009-10
Dr. Ashwin Balchand Mehta (Appellant) vs Joint Commissioner of Income Tax (Respondent)
Date of Order: 06-11-2015

Brief facts of the Case:
The appellant assessee had sold one residential flat on 17.12.07 for a sale consideration of Rs.1.65 crores on which the capital gains had been computed at Rs.61,38,810/-. The assessee claimed deduction of Rs. 16,81,790/- under section 54(1) and deduction of Rs. 35 lakhs under section 54E of the Act. Regarding the deduction u/s 54(1), the assessee submitted that he had entered into an agreement with M/s. Ideal Hights Pvt. Ltd. for purchase of a flat at Kolkata. The assessee also furnished a copy of allotment letter dated 20.03.07. The amount of Rs. 16,81,790/- was paid as an advance for the purchase of the said flat and the total amount of sale consideration was settled at Rs.43,35,850/-. The Assessing Officer (AO) noticed that the assessee had neither executed any agreement of purchase of the flat nor had furnished any certification of completion or occupation of the said flat. Also the assessee had not taken the possession of the said flat till December 2010. Considering the above facts, AO rejected the claim of deduction under section 54(1).

In appeal before the CIT(A), the assessee submitted that although, in the return of income the assessee had claimed deduction of Rs.16,81,790/- only. However, the assessee had made investment of Rs.25,46,760/- till the due date of filing of return of income for the year under consideration.

CIT(A) held that the assessee had not made the claim in the return of income of Rs.25,46,760/-under section 54(1), rather the claim of deduction of Rs.16,81,790/- only was made. He held that the assessee, since, had not revised the claim by way of filing a revised return of income, hence the claim of the assessee could not be considered in this respect.

Important Excerpt from ITAT Judgment:
So far as the contention that the assessee in the return of income had not claimed the amount of Rs.25,46,760/- but of Rs.16,81,790/- is concerned, we find that the powers and jurisdiction of the Ld. CIT(A) are coterminous with that of AO. The Hon’ble Bombay High Court, in the case of “CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd.” (2012) 349 ITR 336 (Bom.) while relying upon the various decisions of the Hon’ble Supreme Court and other Hon’ble High Courts, has held that even if a claim is not made before the AO, it can be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim is not barred. The Hon’ble Bombay High Court while relying upon the decision of the Hon’ble Supreme Court in the case of ‘Jute Corporation of India Limited vs. CIT’ 1991 Supp (2) SCC 744 = (1991) 187 ITR 688 has further observed that the power of the Appellate Commissioner is coterminous with that of the Income Tax Officer and an appellate authority while hearing appeal against the order of the subordinate authority, has all the powers which the original authority may have in deciding the questions before it, subject to the restrictions or limitations, if any, prescribed by statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. An assessee is entitled to raise not merely additional legal submissions before the appellate authorities but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised. It cannot, however, be said that they have no jurisdiction to consider the same. The appellate authorities have jurisdiction to deal not merely with additional grounds which become available on account of change of circumstances or law, but with additional grounds which were available when the return was filed but could not have been raised at that stage. The words ‘could not have been’ raised must be construed liberally and not strictly. It is open to the assessee to claim a deduction before the appellate authority which could not have been claimed before the AO. The Hon’ble Bombay High Court has further observed that the decision of Hon’ble Supreme Court in the case of ‘Goetze (India) Limited v. CIT’ (2006) 157 Taxman 1, regarding the restriction of making the claim through a revised return was limited to the powers of the Assessing Authority and the said judgment does not impinge on the power or negate the powers of the appellate authorities to entertain such claim by way of additional ground.

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Deduction even if not claimed in return of income tax or before assessing officer, can be made before appellate authorities including CIT(Appeals)-ITAT | 27-12-2015 |