It is the duty of AO to allow all lawful deductions, even if not expressly claimed by the assessee: SC

There are numerous rights which are there with the Taxpayer and also various duties assigned on the Assessing Officer. Vice versa is also true. Taxpayers do also have a duty and Assessing Officer also have a right conferred on them by the statue.

In Indian tax jurisprudence, it is a well-established principle that the Assessing Officer (AO), acting in a quasi-judicial capacity, must not take advantage of a taxpayer’s ignorance or inadvertent mistakes. The AO’s duty is to ensure that the correct amount of tax is assessed and collected – no more and no less – strictly in accordance with law.

This principle has been consistently upheld by Indian courts. Key decisions include:

CIT v. Bharat General Reinsurance Co. Ltd. [(1971) 81 ITR 303 (Delhi HC)] – where it was held that the AO should not capitalize on a taxpayer’s ignorance.

CIT v. Mahalakshmi Textile Mills Ltd. [(1967) 66 ITR 710 (SC)] – emphasizing that it is the AO’s duty to allow all lawful deductions, even if not expressly claimed by the assessee.

Further reinforcing this principle is CBDT Circular No. 14(XL-35) dated 11.04.1955, which clearly states:

“The officers of the Department must not take advantage of the ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in ensuring that the taxpayer pays only the correct amount of tax and no more.”

In practice, however, while the legal and administrative standards are unequivocal, the ground reality can vary significantly. Therefore, notwithstanding the duties imposed on the Assessing Officer, taxpayers are well-advised to remain vigilant, informed, and proactive in asserting their lawful claims to safeguard their rights and avoid any unintended disadvantage.