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In a situation where a deduction is not claimed in the return but claimed by filing a revised computation during assessment proceedings the Assessing Officer may disallow such claim only for reason of not being pressed by filing a revised return of income. He thus takes a technical view on the matter and draw reference to Supreme Court decision in Goetze (India) ltd. v. CIT (2006) 284ITR323. The Courts have often held that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred. The reason why the Courts are forced to take a lenient view is because assessment proceedings are not adversarial. Thus the Courts show up some flexibility and take a pragmatic view by stating that assessment proceedings are not adversarial.

In the matter of allowance of deduction not claimed in return but in revised computation of income the Delhi High Court in Commissioner of Income-tax v. Sam Global Securities Ltd. (2014) 360ITR682 held that Courts have taken a pragmatic view and not a technical view as what is required to be determined is the taxable income of the assessee in accordance with the law and that is so more for the reason that the assessment proceedings are not adversarial in nature.

Then why does the Assessing Officer take a technical view of the subject which causes several hardships to the assessee? Why this that only Courts are expected to take a pragmatic view and remand matters to the Assessing Officer to re-decide a subject?  He (Assessing Officer) who feels that his hands are tied by Goetze case (supra) is wrongly informed. There is a need for taking stock of situation as this narrow thinking is causing enormous amount of litigation which can be avoided in one stroke with CBDT intervention.

It is generally understood because time and again the Courts have stated that the Assessing Officer is only expected to determine the taxable income and tax liability in accordance with the provisions of the Income Tax Act and applicable rules. It is given that the Assessing Officer has no flexibility and that he is bound by the provisions of the Act. In Goetze (India) Ltd. v. Commissioner of Income-tax (2006) 284ITR323 the deduction was disallowed  by the Assessing Officer on the ground that there was no provision under  the Income-tax Act to make amendment in the return of income by modifying an application at the assessment stage without revising the return. It was held that Assessing Officer has no power to entertain claims otherwise than those filed by a revised return. The Supreme Court also held that the Assessing Officer has no power to accept claims otherwise than reported in revised ITR.

Duty of Assessing Officer

Even though it is certain that the Assessing Officer has no power but at the same time he is also thrusted with a duty to have a pragmatic view. In other words a technicality should not prevent him from taking a pragmatic view. Not entertaining a claim only because the same is not preferred by way of a revised return is a mere technicality and the same should not deter the Assessing Officer to reject such claim. The Supreme Court in Commissioner of Income-tax v. Excel Industries Ltd. (2013) 358ITR295 held that the Assessing Officer is required to be pragmatic and not pedantic. The Court almost in certain terms held that it is his duty to take pragmatic view.

In this case the Apex was concerned with the question whether the benefit of an entitlement to make duty free imports of raw materials obtained by the assessee through advance licences and duty entitlement pass book issued against export obligations is income in the year in which the exports are made or in the year in which the duty free imports are made. And the Court held the opinion that the income does not accrue in the year of export but in the year in which the imports are made. The Apex Court held that it is well-settled that income-tax cannot be levied on hypothetical income and that there is no question of taxing hypothetical income. It insisted that only real income could be taxed.

Importantly enough is for the Assessing Officer to understand that a similar situation would crop up when the assessee who is entitled under the law for a legitimate deduction or claim is being denied only for the reason of absence of claim in revised ITR. That would only mean taxing a hypothetical amount of income corresponding to forgotten deduction in the ITR/revised ITR. In other words when the Assessing Officer decline a claim only because it is not pressed by way of a revised ITR that would be in conflict with the well settled law on taxation of hypothetical income. It is thus required of the Assessing Officer to entertain claims for deduction etc. even without a revised ITR.

The Cochin bench of ITAT in Thomas Kurian v. Assistant Commissioner of Income-tax (2008) 303ITR (AT) 110 held that being a quasi-judicial authority, the Assessing Officer is duty bound to determine the correct tax payable by the assessee. In arriving at such correct tax, the Assessing Officer is duty bound to allow the deductions and exemptions available to the assessee in accordance with law.

In all fairness the CBDT may issue an instruction to inform the Assessing Officer the law in this regard to entertain forgotten claims for deductions during assessment proceedings even without revised ITR and adjudicate on the same. This would uphold the image of the department and bring confidence of the taxpayer in the revenue collection machinery. Not to mention that the assessment until completed is open ended and there is nothing in the law that prevents an assessee to bring to the notice of the Assessing Officer any forgotten claims or amounts in the determination of total income or loss.



Gopal Nathani



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