[2011] 15 taxmann.com 356 (Article)

Deduction claimed in revised return filed belatedly

GOPAL NATHANI

CA

In view of important ruling of the Supreme Court in the case of Goetze (India) Ltd. v. CIT [2006] 284 ITR 323, if a deduction is not claimed in original returns, the assessee can claim it only by filing a revised return. In relation to question as to whether the Assessing Officer can consider a deduction claimed in the revised return filed after the due date specified in section 139(5), the author has opined that the revised return filed belatedly cannot be ignored at any cost, though it may be subjected to penal provisions.

INTRODUCTION

1. Sub-section (5) of section 139 provide for a way out for carrying out revision in the original return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of an assessment, whichever is earlier. Often, at the time of assessment proceedings, an assessee comes forward with several claims and revisions in the computation of his income. Such revisions are informed by way of submission of a letter without submitting the revised return and when the period of one year is over. The Assessing Officer in such cases generally holds that no additional claim could be made without filing the return of income, following the ratio of decision by the Supreme Court in the case of Goetze (India) Ltd. v. CIT [2006] 284 ITR 323 which was as under:

FACTS OF THE GOETZE'S CASE

2. The main issue raised in this case related to whether the appellant - assessee could make a claim for deduction other than by filing a revised return. The assessment year in question was 1995-96 for which the return was filed by the appellant on November 30, 1995. On January 12, 1998, the appellant sought to claim a deduction by way of a letter to the Assessing Officer. The deduction was disallowed by the Assessing Officer on the ground that there was no provision under the Income-tax Act to make amendment to the return of income by modifying an application at the assessment stage without revising the return.

The appellant's appeal before the Commissioner of Income-tax (Appeals) was allowed. However, the order of the further appeal of the Department before the Income-tax Appellate Tribunal was also allowed. The appellant approached the Apex Court and submitted that the Tribunal was wrong in upholding the Assessing Officer's order. He relied upon the decision of the Apex Court in National Thermal Power Company Ltd. v. CIT [1998] 229 ITR 383, to contend that it was open to the assessee to raise the points of law even before the Appellate Tribunal.

THE SUPREME COURT'S RULING IN GOETZE'S CASE

3. The decision of the Apex Court in this case was that the power of the Tribunal under section 254 of the Income-tax Act, 1961, is to entertain for the first time a point of law raised in a case on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the Assessing Officer to entertain a claim for deduction, otherwise than by filing a revised return. In the circumstances of the case, the civil appeal was dismissed by the Apex Court. However, it was made clear that the issue in this case was limited to the power of the assessing authority and did not impinge on the power of the Income-tax Appellate Tribunal under section 254 of the Income-tax Act, 1961.

In the Goetze's case (supra) the assessee only sought to claim a deduction by way of a letter before the Assessing Officer. The deduction was disallowed by the Assessing Officer on the ground that there was no provision under the Income-tax Act to make amendment to the return of income by modifying an application at the assessment stage without revising the return. However, when the assessee placed reliance upon the decision in National Thermal Power Company Ltd. v. CIT [1998] 229 ITR 383 the Apex Court clarified that such a decision had relevance vis-a-vis powers of the appellate authorities so that it was made clear that the decision did not in any way relate to the power of the Assessing Officer to entertain a claim for deduction otherwise than by filing a revised return. Now that the Act only provides for furnishing a revised return the assessees' have necessarily to file a claim only by way of a revised return. And what would be the position if the period for filing of revised return expires?

4. DECISIONS TAKEN AFTER GOETZE'S CASE

4.1 Enactment of section 80AC in the Finance Act, 2006 -Taking a cue from the Apex Court's decision in the above case and further, to enforce compliance the Finance Act, 2006 brought out a new section 80AC was inserted in the Income-tax law that no statutory deductions shall be allowed to an assessee who does not furnish a return of his income on or before the due date specified in sub-section (1) of section 139, meaning thereby that to be eligible for any claim at any subsequent stage it is desirable that the assessee must have filed a return in the first instance by the original due date. In other words, it would not be significant that the claim is made by way of a revised return but whether the original return is furnished before the due date.

4.2 The Ahmedabad Bench of the ITAT in Parmeshwar Cold Storage (P.) Ltd. v. Asstt. CIT [2011] 8 ITR (Trib.) 172 held that according to section 80AC of the Act, the original return should be filed in time for claiming deduction under section 80-IB of the Act but the claim need not be made in the original return. The claim could be made subsequently. In this case the revised return was not filed within the time allowed under section 139(5) of the Act, so it was treated as a invalid return. As a consequence the Bench directed the Commissioner (Appeals) to adjudicate the matter on merits in view of decision in Goetze's case (supra).

4.3 In the case of Ceolric Services v. CST [Final Order No. 134/2011 and Stay Order No. 197/2011, dated 14-2-2011] the Bangalore Bench of the CESTAT in the context of liability under service tax regulations held that a revised return cannot be ignored simply because same has been filed after the statutory period. In this case the applicant filed return under rule 7 of the applicable rules. When the revenue pointed out certain discrepancies in it, the applicant filed a revised return after a lapse of 11 months. Since as per the rules, the revised return is to be filed within 60 days the revenue insisted on that the demand was sustainable. The Bench in the natural perspective held the revised return could not be simply ignored and further called for application of the penal provisions for delayed filing of return and at the same time, directed the adjudicating authority to decide the issue afresh after offering an opportunity of hearing to the assessee.

CONCLUSION

5. The Supreme Court's decision in Goetze's case (supra) is partly assessee friendly in the sense that it only advocated the course of filing of the revised return to make an amendment to the return of income but did not comment on whether a revised return filed belatedly was to be ignored by the Assessing Officer or not. The revised return filed belatedly also has to be subject to penal provisions under the Act but at the same time it cannot be ignored at any cost. The Assessing Officer cannot ignore this fact. However, the Government acted hurriedly in bringing about a law such as in section 80AC and amendment provisions in sections 10A and 10B thinking that the Supreme Court's decision may have non-compliance effect on belated claims/filings. Hence, a revised return even if filed belatedly must be considered at the time of completion of assessment proceedings. It would be wise for every assessee also to file a revised return at the assessment stage in addition to a simple claim through letter to comply with the pith and substance of the Supreme Court's decision in Goetze's case (supra). At the same time it would not appropriate to treat section 80AC and amendment in section 10A/10B to the same effect. One can only fervently hope that such provisions will not travel to the DTC format.

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