The order of the Bench was delivered by
Ashwani Taneja-This appeal is filed by the Revenue against the order of the ld. Commissioner of Income-tax (Appeals)-39, Mumbai (in short referred to as 'CIT(A)') dt. 4.3.2013 u/s. 143(3) of the Income Tax Act, 1961 (in short referred to as 'the Act') for the A.Y 2009-10 on the following grounds:
"1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in directing the Assessing Officer to allow deduction of bad debts of Rs. 1,37,16,718/- as against claim of bad debt of Rs. 96,35,224/- made in the return of income when assessee had failed to claim such deduction by filing revised return of income u/s. 139 of the Income Tax Act.
2. The Appellant craves to leave to add, to amend and/or to alter any of the grounds of appeal, if need be.
3. The appellant, therefore, prays that on the grounds stated above, the order of the CIT(A)-39, Mumbai may be set aside and that of the Assessing Officer restored."
2. During the course of the hearing, it was stated by the learned counsel of the assessee, at the very outset, that the issue involved in this year is covered by the order of the Tribunal for A.Y 2008-09 in ITA No. 7531/Mum/2011 dt. 26.7.2013, wherein an identical issue has been decided in favour of the assessee by allowing revised claim of the assessee on account of bad debts, made by it during the course of the assessment proceedings. On the other hand, the learned Departmental Representative (in short 'the DR') relied upon the order of the Assessing Officer (in short 'the AO').
3. We have gone through the orders of the lower authorities as well as order of the Tribunal for A.Y 2008-09. The solitary issue involved in the Revenue's appeal is that in the return of income the assessee had made claim on account of bad debts written off for Rs. 96,35,224/-. During the course of assessment it was found by the assessee that the assessee had by mistake claimed lesser amount on account of bad debts, and therefore, it made further claim on account of bad debts written off of Rs. 40,81,493/- u/s. 36(1)(vii) of the Act. The additional claim made by the assessee was rejected by the AO in view of the judgment of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. v. CIT, 284 ITR 323. Being aggrieved, the assessee filed an appeal before the Tribunal, wherein the claim of the assessee on account of bad debts made during the course of the assessment proceedings was allowed on the ground that the aforesaid judgment of the Hon'ble Supreme Court was not applicable on the appellate authority. The CIT(A) also relied upon the circular issued by the Central Board of Direct Taxes no. 14 dt. 11.4.1955, wherein it was guided by the Board to the revenue officers of the Income Tax Department that they must not take advantage of the ignorance of the assessee and that it was one of the duties of the officers to assist the tax payers in determination of correct amount of tax payable, as per law. Ld. CIT(A) also followed the judgment of Mumbai Bench of ITAT in Chicago Pneumatic (India) Ltd. v. DCIT, 15 SOT 252, wherein relying upon the said circular the Hon'ble Bench had observed that assessing authorities are bound to compute the correct income, and merely for a procedural lapse on technicalities, the assessee should not be compelled to pay more taxes than what is due from him.
4. It is further noted by us that in A.Y 2008-09 an identical claim was made by the assessee during the course of the assessment proceeding with respect to additional claim on account of bad debts. The AO in that year had had rejected the claim in an identical manner by relying upon the judgement of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. v. CIT (supra) as has been done in this year. The said claim was allowed by the ld. CIT(A) and Department carried the matter in appeal before the Tribunal.
5. The Tribunal in A.Y 2008-09 considered the entire gamut of facts and the position of law on this issue and decided the appeal in favour of the assessee by upholding the order of the ld. CIT(A) in allowing the revised claim made by the assessee during the course of the assessment proceedings. Relevant findings of the order of the Tribunal are reproduced hereunder for the sake of ready reference:
"3. Ld. CIT(A) has stated that the assessee has filed the statement of account of provision for doubtful debts which he has extracted in para 4 of the impugned order. Assessee stated before ld. CIT(A) that actual debts written off in the financial year relevant to the assessment year under consideration is Rs. 1,87,70,011/ and there is a mistake in the return of income. Ld. CIT(A) considered the submissions of the assessee and held that even if the claim is not made in the return of income and it is made before the first appellant authority, the claim can be entertained. The First Appellate Authority referred the decision of the Third Member of Delhi Bench of the Tribunal in the case of JCIT V/s Hero Honda Finlease Ltd reported in 115 TTJ (Del) TM 752, wherein the Tribunal has held as under:
"I have carefully considered the questions, the orders of the IT authorities and the rival contentions. The precise difference between the two learned Members is regarding the question whether the CIT(A) ought to have first decided the question of entertainability of the assessee's higher claim of depreciation by a letter and not by a revised return, before deciding the merits of the claim. In Goetze (India) Ltd. v. CIT (2006) 204 CTR (SC) 182 : (2006) 284 ITR 323 (SC), the Supreme Court held that the assessee can make a claim for deduction, which has not been claimed in the return, only by filing a revised return within the time allowed. In the same decision, it was made clear that the power of the Tribunal to admit an additional ground under s. 254 is not affected by its decision. It was however clarified that the case was concerned with only the power of the assessing authority and not the appellate authority. Under s. 250(5), the CIT(A) has the power to allow the appellant to go into any ground of appeal not specified in the grounds of appeal if he satisfied that the omission of the ground from the form of appeal was not willful and unreasonable. Dealing with such a power, the Bombay High Court in CIT v. Prabhu Steel Industries (P) Ltd. (1988) 171 ITR 530 (Bom), held that where a claim for special deduction was made by the assessee not in his return but in the course of the assessment proceedings and the ITO failed to consider the same, it was open to the AAC to entertain the claim. In CIT v. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC), it was held by the Supreme Court that the powers of the CIT(A) of income and it was merely enlarged to 40 per cent on the footing that the assessee was running the trucks on hire. It cannot be said to be an entirely new claim made for the first time in the letter filed by the assessee in the course of the assessment proceedings. The CIT(A) therefore committed no error in dealing with the assessee's appeal on merits. Moreover, the AO himself has examined the claim on merits though he earlier held that the claim was not entertainable and the letter was non est. A decision having been given by him on merits it was open to the CIT(A) to deal with the merits. I, therefore, agree with the learned AM that the CIT(A) was not precluded from dealing with the assessee's claim for higher depreciation on merits."
4. Ld CIT(A) has stated that the facts in the case before him are similar to the above mentioned decision and accordingly allowed the claim of Rs. 1,87,70,011/- as bad debts amount actually written off by the assessee. Hence department is in appeal before the Tribunal.
5. During the course of hearing ld.DR relied on the order of the AO and whereas ld.AR relied on the order of ld. CIT(A). He further submitted that the assessee actually written of amount of Rs. 1,87,70,011/- as bad debts and the provisions made in the earlier year of the aggregate amount of Rs. 82,91,575/- had been disallowed in the earlier year.
6. The above facts have not been disputed by ld. DR that the assessee has actually written off in the assessment year under consideration as bad debts of Rs. 1,87,70,011/-. The Honble Apex Court in the case of T.R.F. Ltd. V/s CIT (2010) 323 ITR 397 (SC) has held that "w.e.f. 1-4-1989, it is enough if bad debt is written off as irrecoverable in accounts of assessee to satisfy the condition of Section 36(1)(vii) of the Income-tax Act, 1961". In view of the above amendment w.e.f. 1-4-1989 the assessee is entitled to claim deduction as it would satisfy the purpose of the Act. In view of above, in the facts of case, we uphold the order of ld. CIT(A) and reject ground of appeal taken by the department. Hence, appeal of the department is dismissed."
6. We have gone through the aforesaid judgment of the Tribunal and other judgments relied upon by the Tribunal in its order. The claim on account of bad debts written off is now settled on the basis of judgment of the Hon'ble Supreme Court in the case of T.R.F Ltd. v. CIT, 323 ITR 397. There is no dispute on facts that bad debts have been written off. Thus, as per law, the assessee is undisputedly eligible for the claim. The only hurdle created by the AO was that since the claim was not made in the return of income, therefore, the claim could not have been allowed to the assessee. We do not respectfully agree with the views of the AO. In our considered view, if the assessee is entitled for a deduction, as per law and facts, same should not have been denied to itr merely because the claim was not made in the return of income. That would, in our considered opinion, amount to collecting taxes without authority of law. It is further noted by us that it is well settled position of law that assessee can resile from its return of income during the course of assessment proceedings if he is able to show that the return filed was not in accordance with the law or if some income was wrongly offered to tax, which was as per law, not liable to tax, or if the assessee finds that there was omission to make a claim in the return of income. The only precaution to be taken here would be that fresh claim of the assessee should be strictly within the four corners of law. If it is so, the claim made even for the first time during the assessment proceedings should not be rejected.
7. In our view, there are no estoppels on legal issues under the income tax law. Even if, assessee agrees or consents for something contrary to law, the A.O. is obliged under the law, to discharge his duty of making fair assessment of income and to compute amount of tax payable as per law. As per Article 265 of the Constitution of India, "No tax can be collected except by authority of law". Hon'ble Supreme Court in the case of Ramlal vs Rewa Coalfield Ltd (AIR 1962 SC 361), held that the state authorities should not raise technical pleas if the citizens have a lawful right, which is being denied to them merely on technical grounds. The state authorities cannot adopt the attitude which private litigants might adopt. Further, we place our reliance on the judgment of Hon'ble Delhi High Court in the case of CIT vs Bharat General Reinsurance Co Ltd 81 ITR 303 (Del.) Relevant portion is reproduced below:
"It was true that the assessee itself had included that dividend income in its return for the year in question, but there was no estoppel in the Income-tax Act and the assessee having itself challenged the validity of taxing the dividend during the year of assessment in question, it must be taken that it had resiled from the position which it had wrongly taken while filing the return. Quite apart from it, it was incumbent on the income-tax department to find out whether a particular income was assessable in the particular year or not. Merely because the assessee wrongly included the income in its return for a particular year, it could not confer jurisdiction on the department to tax that income in that year even though legally such income did not pertain to that year. Therefore the income from dividend was not assessable during the assessment year 1958-59, but it was assessable in the assessment year 1953-54. It could not, therefore, be taxed in the assessment year 1958-59."
8. Further reliance is placed by us on another judgment of Hon'ble Gujarat High Court, in the case of, S.R. Koshti 276 ITR 165 (Guj) in which relief was granted to assessee with following observations:
"The authorities under the Act are under an obligation to act in accordance with law. Tax can be collected only as provided under the Act. If an assessee, under a mistake, misconception or on not being properly instructed, is over-assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected."
9. In the case of Snehlata 192 CTR 50, Hon'ble J&K High Court held that "when the substantive law confers a benefit on the assessee under a statute, it cannot be taken away by the adjudicatory authority on mere technicalities. It is settled proposition of law that no tax can be levied or recovered without authority of law. Article 265 of the Constitution of India and section 114 of the State (J&K) Constitution imposes an embargo on imposition and collection of tax if the same is without authority of law."
10. Lastly, we find it useful to refer to judgment of Hon'ble Bombay High Court in the case of Central Provinces Manganese Ore 112 ITR 734, holding that, the mere fact that a deduction was not claimed before the Income-tax Officer, was not of much importance, since if the liability arises then a claim can be made in a bonafide manner at any stage before the higher authority, who is competent to grant relief.
11. As far as the judgment of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. v. CIT (supra) is concerned, it is respectfully stated that it has been observed in the said judgment by the Hon'ble Supreme Court that this embargo is not applicable on the appellate authorities. In this regard, the Hon'ble Delhi High Court in the case of CIT v. Jai Parabolic Springs Ltd., 306 ITR 42, explaining the judgment of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. v. CIT (supra), has held that the Tribunal has powers to allow fresh claim made by the assessee during the course of assessment proceedings. The relevant observations of Hon'ble High Court are reproduced below :-
"12. As clear from the abovesaid facts, there is no dispute that customer introduction charges did not (sic) represent revenue expenditure. The principal ground taken by the Revenue in this appeal is that if no claim for deduction of the amount was made in the return of income then deduction would not be allowed.
13. Sec. 254 of the Act says that the Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit.
14. Reference may be made to National Thermal Power Co. Ltd. vs. CIT (1999) 157 CTR (SC) 249 (1998) 229 ITR 383 (SC) , where the Supreme Court observed that:
"The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. We do not see any reason to restrict the power of the Tribunal under s. 254 only to decide the grounds which arise from the order of the CIT(A). Both the assessee as well as the Department have a right to file an appeal/cross-objection before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier."
15. Reference may also be made to Gedore Tools (P) Ltd. vs. CIT (2000) 161 CTR (Del) 472 : (1999) 238 ITR 268 (Del), wherein the apex Court decision in National Thermal Power Co. Ltd. (supra) has been followed.
16. In the case of Jute Corporation of India Ltd. vs. CIT (1990) 88 CTR (SC) 66 : (1991) 187 ITR 688 (SC) while dealing with the powers of the AAC, the Supreme Court observed that :
"An appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the 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. There is no good reason to justify curtailment of the power of the AAC in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the ITO. This Court further observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The AAC must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The AAC should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also."
17. In Goetze (India) Ltd. vs. CIT (2006) 204 CTR (SC) 182 : (2006) 284 ITR 323 (SC), wherein deduction claimed by way of a letter before AO, was disallowed on the ground that there was no provision under the Act to make amendment in the return without filing a revised return. Appeal to the Supreme Court, as the decision was upheld by the Tribunal and the High Court, was dismissed making clear that the decision was limited to the power of assessing authority to entertain claim for deduction otherwise than by revised return, and did not impinge on the power of Tribunal.
18. Further, revenue expenditure which is incurred wholly and exclusively for the purpose of business must be allowed in its entirety in the year in which it is incurred. It cannot be spread over a number of years even if the assessee has written it off in his books over a period of years. Reliance can be placed on Madras Industrial Investment Corporation Ltd. vs. CIT (1997) 139 CTR (SC) 555: (1997) 225 ITR 802 (SC).
19. In view of the above discussion, it is very clear that there is no prohibition on the powers of the Tribunal to entertain an additional ground which according to the Tribunal arises in the matter and for the just decision of the case. Therefore, there is no infirmity in the order of the Tribunal."
12. Further, similar view has been addressed by the Tribunal also in A.Y 2008-09 by relying upon another judgment of coordinate Bench in the case of JCIT v. Hero Honda Finlease Ltd., 115 TTJ 752 (Delhi) (TM). Thus, respectfully following these judgments, and in the given facts of the case, we find that the ld. CIT(A) has rightly allowed the claim made by the assessee during the course of assessment proceedings and that the order passed by him is within the provisions of law, and nothing wrong therein could be pointed out by the ld. DR, and therefore, we uphold the same.
13. As a result, the appeal of the revenue is dismissed.
The order pronounced in the open court on 26.2.2016.