Income Tax Dept warns public against cash dealings of Rs 2 lakh or more saying that the receiver of the amount will have to cough up an equal amount as penalty.

Missed the claim in the income tax return, check out the possible remedies!

Recently, the government introduced several measures to move towards a tax compliant regime and to widen the tax base. Timely filing of income tax returns has been one of the top priorities on the radar of the government. To align with this stance, the government has introduced various provisions in the Income tax Act (the Act), such as denying the carry forward of losses on belated return, late filing fees for belated return, and similar such measures.

As per section 80A(5) of the Act, if the claim for deductions under section 10A or section 10AA or section 10B or section 10BA or under any provisions of Chapter C – "Deduction in respect of certain incomes" is not made in the income tax return, no deduction shall be allowed to the taxpayer. The Finance Act, 2018 has substituted section 80AC of the Income-tax Act with effect from 1 April 2018 (assessment year 2018-19) which provides that no deduction under Chapter C – "Deduction in respect of certain incomes" shall be allowed unless the income tax return is filed on or before the due date.

Therefore, it is extremely important that income tax return is filed on or before the due date for claiming incentive deductions under the Act. However, situations may arise where a taxpayer may end up not claiming eligible deduction in the return or may claim incorrect amount of deduction in the income tax return. In such a situation, the taxpayer may want to make fresh claim or modify its claim respectively. In such an event, the possible remedies could be as under:

Revised Return

The most feasible option before the taxpayer is to make fresh claim or modify the claim by filing a revised return. Revised return can be filed if taxpayer has made either any omission or any wrong statement in the original return. The time limit for filing revised return is before the end of the relevant assessment year or the completion of assessment, whichever is earlier.

Claim during the assessment proceedings

In a situation where claim is not made by filing revised return, taxpayer may make claim during the course of the assessment proceedings. However, the tax officer may not admit fresh claim made during the course of the assessment proceedings by relying on the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. v. CIT [2006] 157 Taxman 1/284 ITR 323 (SC). The apex court in Goetze (India) Limited had held that the taxpayer cannot make a claim for deduction during the course of the assessment proceedings except by way of filing a revised return.

In this connection, reference may be made to the CBDT Circular No.14-XL (35) dated 11 April 1955. In the aforesaid Circular, CBDT has clarified that the officers of the department must not take advantage of the ignorance of taxpayer as to his right. The officers should draw attention of taxpayers to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other.

Reference is also made to Article 265 of the Constitution of India, which states that revenue department can collect only legitimate taxes due from the taxpayer.

In cases, where a taxpayer wants to modify a claim already made in the return, the decision of Goetze India Limited may not apply based on various judicial precedents Pr. CIT v. Oracle (OFSS) BPO Services Ltd. [2019] 102 taxmann.com 396 (Delhi High Court); Solaris Bio Chemicals Ltd. v. Dy. CIT [2012] 25 taxmann.com 182/53 SOT 195 (URO) (Delhi Tribunal); CITv. Natraj Stationery Products (P.) Ltd. [2009] 177 Taxman 168/312 ITR 22 (Delhi High Court).

Reference can also be made to the judicial precedents Manohar Reddy Basani v. ITO [2018] 94 taxmann.com 321/171 ITD 279 (Hyderabad - Tribunal); CIT v. Abhinitha Foundation (P.) Ltd. [2017] 83 taxmann.com 100/249 Taxman 37/396 ITR 251 (Madras High Court) wherein it was held that deduction cannot be denied to the taxpayer merely because it was not claimed in the income tax return.

Claim during the appellate proceedings
It is pertinent to note that the Hon'ble Supreme Court in the case of Goetze (India) Ltd. has observed that its decision is limited to the power of the assessing authority to admit new claim made during the course of the assessment proceedings and does not impinge on the power of the Income-tax Appellate Tribunal. The courts in various judicial precedents have held that a taxpayer may raise additional claims before the appellate authorities i.e. Commissioner of Income tax (Appeals) CIT v. Pruthvi Brokers & Shareholders (P.) Ltd. [2012] 23 taxmann.com 23/208 Taxman 498/349 ITR 336 (Bombay High court); CIT v. Gokuldass & Co. [2002] 122 Taxman 849/253 ITR 633 (Rajasthan High Court) or Income tax Appellate Tribunal National Thermal Power Company Ltd. v. CIT [1998] 229 ITR 383 (Supreme Court); Jute Corpn. of India Ltd. v. CIT [1990] 53 Taxman 85/187 ITR 688 (Supreme Court); Pruthvi Brokers & Shareholders (P.) Ltd. (supra); Orissa Cement Ltd. v. CIT [2001] 117 Taxman 625/250 ITR 856 (Delhi High Court); Ooppootil Kurien & Co. (P.) Ltd. v. CIT [2003] 132 Taxman 530/[2004] 266 ITR 409 (Kerala High Court) and these appellate authorities have the powers to consider the claim raised by the taxpayer.

From the above discussions, it may be observed that even if a taxpayer fails to make claim in the return, the same may be made by filing a revised return or during the course of assessment/appellate proceedings. The best alternative may be to file the revised return, wherever possible, as other alternatives may lead to prolonged litigation.

Refer:[2019] 104 taxmann.com 262 (Article)

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