Additional Claims under Income Tax- ITAT Rajkot

In the realm of Income Tax, taxpayers often encounter situations where they inadvertently omitted certain claims or deductions in their original return of income. The dilemma arises as to whether they can rectify such omissions during the course of assessment proceedings or if a revised return of income is mandatory for making such additional claims. This case delves into the intricacies and complexities of this issue. In a recent ruling of ITAT Rajkot, the significance of additional claims in Income Tax Assessments is explored. The case draws parallels from judicial precedents on the subject, and based on the facts of the assessee’s case, the court ruled in favor of the assessee in the open court on 19-07-2023.

In the case of Shri Rajkot District Cooperative Bank Ltd. Versus The ACIT, Circle-1(2), Rajkot, the appellant is a cooperative bank dealing in the business of banking and operating within Rajkot. The assessee filed its return of income for Assessment Year 2014-15, contemplating a net income of 17.04 crores INR. Initially, the assessee had claimed a deduction of 2,40,00,000 INR under section 36(1)(viii) in its return of income. However, during the course of assessment proceedings, the assessee realized that it was eligible for a higher deduction of 2,62,50,000 INR as per the provisions of the act. The assessee then sought to modify its deduction claim to the higher amount of 2,62,50,000 INR through a letter addressed to the assessing officer.

However, the Assessing Officer did not allow the additional claim, citing that it should have been made through a revised return, and not during the assessment proceedings. Subsequently, the appellant appealed to CIT(Appeals), who also rejected the claim based on the same reasoning and citing a decision of Supreme Court in the case of Gozete (India) Limited – 2006(3) to support their rejection. Dejected by the rejection, the appellant approached the ITAT Rajkot.

After comprehensively perusing the matters, facts of the case, and judicial legal precedents, the ITAT Rajkot upheld the assessee’s contention that it was entitled to raise an additional claim before the appellate authorities. The Tribunal referred to various judicial precedents, such as Pruthvi Brokers & Shareholders [2012], Sesa Goa Ltd. [2020], and B.G. Shirke Construction Technology Pvt. Ltd. [2017], which have all reinforced the principle that taxpayers are entitled to raise additional claims or grounds before the appellate authorities, even if not initially made in the original or revised return.

The Tribunal further stated that the assessing authority’s power to entertain additional claims or deductions during the assessment proceedings was not limited to the power of the appellate authority. Moreover, it emphasized that the appeal proceedings are a continuation of the assessment proceedings and that a legal claim can be made at any stage, provided the relevant facts are on record. Additionally, the ITAT observed that the Department had not challenged the veracity of the assessee’s claim, and the only reason for disallowance was the claim should have been made through a revised return.

In light of these legal precedents and the facts of the appellant's case, the ITAT Rajkot ruled in favor of the assessee, allowing the additional claim of Rs. 22.50 Lakhs under Section 36(1)(viii) of the Income Tax Act.?Consequently, the ITAT Rajkot allowed the appeal of assessee and directed the assessing officer to allow the enhanced deduction of Rs. 22.50 Lakhs. This decision granted the assessee relief on the additional claim.?