CIT (A) & Tribunal can allow deduction towards additional claim even if assessee fails to claim deduction in its return
ITO Vs Uma Dnyanoba Bhintade
Whether when an assessee mistakenly fails to claim deduction in its return, the same can be allowed as additional claim by the CIT(A) and the Tribunal in exercise of discretion – YES: ITAT
– Revenue’s appeal dismissed: PUNE ITAT
THE assessee an individual had furnished return for the relevant AY. During the assessment proceedings, the AO noted that the assessee had shown profit on sale of agricultural land and claimed it as exempt. Further on verification of sale deed, it was noted that the lands were situated at Akhatpur Village, near Saswad therefore, the AO sought an information from Saswad Municipal Corporation to provide the distance of Akhatpur from the municipal limits of Saswad. In reply, the Chief Officer confirmed the distance is 7 km. In view thereof, the assessee was show caused as to why sale consideration received of Rs.1.39 crores offered for LTCG purpose was not offered for LTCG/STCG purpose. In addition, the assessee claimed that it had purchased agricultural land within time prescribed and would be entitled to the claim of exemption u/s 54B. However, the AO held that any claim could be allowed only when the assessee files revised return. Therefore, the claim of assessee was disallowed and brought to tax under the head ‘Income from capital gains’. On appeal, the CIT(A) held that exemption u/s 54B claimed should be allowed. However, in order to verify whether the assessee had fulfilled all the conditions as prescribed in section 54B the issue for examination was restored back to the AO and it was held that in case the conditions are not satisfied, then exemption u/s 54B shall be denied to the assessee.
On appeal, the Tribunal held that,
Whether when an assessee mistakenly fails to claim deduction in its return, the same can be allowed as additional claim by the CIT(A) and Tribunal in exercise of discretion – YES: ITAT
++ the claim of assessee in allowing the benefit of deduction u/s 54B on account of investment in new agricultural land was denied to the assessee on the ground he has made no such claim in the return and hence, not allowable as per the ratio laid down by the Supreme Court in M/s. Goetze India Pvt. Ltd. Vs. CIT. The CIT(A) allowed the claim of assessee by relying on the ratio laid down by the Bombay High Court in CIT Vs. Pruthvi Brokers & Shareholders. In this regard, Tribunal find no error in the order of CIT(A). The decision of Jurisdictional High Court is squarely binding and in view of the ratio laid down, the CIT(A) was duty bound to allow the claim of assessee though not made in the return. It may be pointed herein itself that even the income from sale of agricultural land as either LTCG/STCG which was never offered by assessee in its return. In such circumstances, when the AO computing income from capital gains in the hands of any assessee, then it is his duty not only to compute income under the respective heads but also to allow exemptions which are duly allowable to the assessee. The CIT(A) had in all fairness directed the AO to verify whether the assessee has fulfilled the conditions laid down in section 54B and had further observed that in case they are not so fulfilled, then no deduction u/s 54B is to be allowed to the assessee. Therefore, this Tribunal find no error in the order of CIT(A) in this regard.