[Opinion] Additional and New Claims After Filing Income Tax Returns

P.V.R. Prabhakar – [2025] 173 taxmann.com 896 (Article)

1. Introduction

Sometimes, while preparing and filing the returns of income under Income Tax Act, errors of omission or commission would creep in. Also, because of frequent changes in law and several judicial decisions which might not have been noticed quickly enough, the returns are not prepared perfectly. Such omissions may come to light after the expiry of time limit for filing revised return u/s.139(5) The law in this regard is well settled vide two decisions of the Honourable Apex Court in Goetze (India) Ltd. v. CIT [2006] 157 Taxman 1 (SC) and Shriram Investments v. CIT [2024] 167 taxmann.com 139 (SC), that the AO would be justified in declining any additional claim or fresh claim made in assessment proceedings otherwise than through a validly filed revised return u/s 139(5). It is also well settled that the Appellate authorities have the power to adjudicate such claims vide Jute Corporation of India Ltd. v. CIT [1991] 187. ITR. 688 (SC) and National Thermal Power Company Ltd. v. CIT [1998] 229 ITR 383 (SC). The object of this write up is to discuss the options available to the assessees for the redressal of such issues.

2. Decisions in Goetze India (Supra) and Shriram Investments (Supra)

In Goetze (India) Ltd. v. CIT (supra) the assessee made a new claim for deduction through a letter during the assessment proceedings . The Assessing Officer ( referred to as AO hereinafter ) declined to grant the claim on the ground that there was no provision in law for making a new claim otherwise than through a revised return . The issue went up to the Honourable Apex Court which upheld the decision of the AO. The decision in NTPC Ltd’s case (supra) was distinguished on the ground that it dealt with the powers of the ITAT u/s 254 whereas the case of Goetze (India) Ltd dealt with the powers of the AO and the decision does not impinge on the powers of the ITAT to entertain new claims

In Shriram Investments v. CIT (supra), the assessee filed its return u/s 139 (1) and also filed a revised return u.s 139(5) . It filed the second revised return beyond time limit stipulated in s. 139(5) claiming deduction of deferred revenue expenditure. The AO, without taking cognisance of the second revised return, completed the assessment. The issue was taken to the ITAT which directed the AO to take cognisance of the second return . The High Court set aside the ITAT’s order for the reasons that (A) there was no provision to consider the claim made by the assessee through the second revised return which was invalid as filed beyond the time limit specified in s.139(5) and (B) the ITAT, in stead of exercising its power u/s.254 to consider the claim as additional claim, simply directed the AO to consider the assessee’s claim made through the invalid revised return which the AO could not do. The Honourable Apex Court upheld the High Court’s decision finding no reason to interfere with the same.

3. Decisions in Jute Corporation of India (supra ) and NTPC Ltd (supra)

In Jute Corporation of India Ltd. v. CIT (supra), during the appeal proceedings before the first appellate authority ( hereinafter referred to as FAA or CIT(A) ), the assessee raised an additional ground for some deduction. The FAA allowed the claim after hearing the AO. The Hon’ble Apex Court upheld the FAA’s decision following the ratio laid down in CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225 (SC) to the effect that the appellate authority has plenary powers in disposing of an appeal and the scope of his power is coterminous with that of the AO and that he can do what the AO can do and also direct him to do what the AO has failed to do.

In NTPC Ltd’s case (supra), the assessee offered to tax interest on deposits with banks earned during the construction period in its return of income and the assessment was made on that basis. Neither before the FAA nor in the original grounds of appeal before the ITAT the issue was raised by the assessee. For the first time the relevant claim for exemption of such interest from tax was raised through additional grounds of appeal filed before the ITAT. The ITAT declined to entertain the additional grounds of appeal. On a direct reference, the Hon’ble Apex Court held that the ITAT has the jurisdiction to examine the claim made by the assessee observing that the power of the ITAT in dealing with appeals is expressed in the statute in the widest possible terms.

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