Assessee entitled to raise Additional claims in Appeal when not made in Returns filed: ITAT [Read Order]

In a recent ruling, the Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) held that the assessee is entitled to raise additional claims in appeal that were not made when the returns were filed.

In this case, the assessee, Bharuch Dist. Central Co-op. Bank Ltd., which is a co-operative bank, filed its Income Tax Returns (ITR) for the  Assessment Year 2015-16, declaring a total income of Rs. 16,56,42,050 on 23-09-2015. The assessee had claimed a deduction of Rs. 2,88,40,841 under Section 36(1)(viia) of the Income Tax Act, 1961, for bad and doubtful debts.

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 However, the Assessing Officer (AO) limited the allowable deduction to Rs. 1,00,00,000, disallowing Rs. 1.88 crore. This disallowance was based on the AO’s interpretation that the deduction was not properly reflected in the bank’s books and that cooperative banks were not eligible for certain deductions related to rural advances.

The assessee approached the Commissioner of Income Tax (Appeals) [CIT(A)] for relief.

The CIT(A)  ruled in favor of the assessee, noting that the AO had misinterpreted the provisions related to cooperative banks. CIT(A) directed the AO to delete the disallowance and allowed the assessee’s claim for deduction under Section 36(1)(viia) of the Income Tax Act,1961.

One of the main issues in the case was the claim for an additional deduction of Rs. 45 lakh, which was not originally included in the ITR but was raised during the assessment proceedings.

The assessee submitted before CIT(A) that if the AO accepted the deduction for Rs. 1 crore, the same logic should apply to the Rs. 45 lakh provision, which was also recorded in the Profit and Loss Account but accidentally omitted from the return.

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 The CIT(A) allowed the deduction, referring to several judicial precedents that permit taxpayers to raise additional claims during appellate proceedings.

The ITAT held that the bank was entitled to raise the additional claim during the appeal, even though it was not included in the original return.

The ITAT bench, comprising of Mr. Makarand V. Mahadeokar and Mr. Siddhartha Nautiyal, dismissed the department’s appeal and confirmed that the assessee’s additional claim for the deduction of Rs. 45 lakh is valid.

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