This appeal by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals)-2, Mumbai dated 16.12.2016 (‘ld.CIT(A) for short) dated 16.12.2016 and pertains to the assessment year (A.Y.) 2011-12.
2. There are various grounds raised by the assessee but the issue involved pertains to the claim of the assessee regarding the depreciation on goodwill amounting to Rs.23,93,31,090/.
3. Brief facts of the case are that the assessee company filed its original return of income on 29.11.2011 for A.Y. 2011-12 declaring loss of Rs.(35,69,59,530/-), the return was revised on 15.03.2013 which enhanced the total loss to Rs.(55,72,49,353). An assessment order u/s. 143(3) of the Act was passed on 09.03.2015 which determined total loss of Rs.(-)35,69,59,530/- in which the loss in the revised return was restricted to Rs.(-)35,69,59,530/- which was the loss as per the original return filed by the assessee.
4. The Assessing Officer (‘A.O.’ for short) has disallowed the depreciation claimed of Rs. 23,93,31,090/-and thereby restricted the total loss of Rs. 35,69,59,530/- as against the loss provided by the assessee company of Rs.55,72,49,353/- as per the revised return. The AO is also of the opinion that as per Sec. 80 of the I.T. Act no loss is allowed to be carried out or set off if the return of income is filed beyond the due date specified in section 139(1) and it is seen that the assessee company has claimed depreciation on goodwill @ 25% by relying on the Hon’ble Supreme Court decision in the case of Smifs Securities Ltd. and the assessee had stated the reason that the above decision came later on when the original return was filed by the assessee company and that too they filed the revised return and claimed the depreciation and the goodwill which was disallowed by the AO. Further he has also relied on the following case laws:
(i) Areva T & D India Ltd. vs DCIT  20 com29(Delhi)
(ii) Metrex Technologies Ltd. v ACIT (2012) 53 SOT 49 (Chn)
(iii) SKS Micro Finance Ltd. Vs DCIT  37 com192(Hyd ITAT)
(iv) The Cosmos Co-op. Bank Ltd. Vs
5. The A.O. was not satisfied with the claim of the assessee. He made the disallowance holding that the enhanced claim in the revised return cannot be allowed, as the same was in violation of the provision of section 80 and section 139(1). He further noted that the claim of deprecation was also not specified in the tax audit report. Hence, he held that the assessee cannot be allowed any deprecation of goodwill and revised return without the auditors approval.
6. Upon the assessee’s appeal in this regard, the ld. CIT(A) confirmed the action of the A.O. on the ground that the return has been filed beyond the time specified and no condonation has been sought u/s.119(2) of the Act. The order of the ld. CIT(A) in this regard may be gainfully referred as under:
3.3. I have also gone through the Sec. 119(2)(b) where the assessee or the taxpayer file the application for any claim of exemption, deduction, refund or for any other relief after the expiry of the period specified under this Act. Provision is as under :
“119-(2) Without prejudice to the generality of the foregoing power: (b) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorize [any income-tax, authority, not being a Commissioner (Appeals)] to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law;”
3.4. After considering the above fact on record and the remarks of the AO that the revised return was filed beyond the time limit and no revised audit u/s. Sec. 44AB was filed by the appellant. Considering the provision of Sec. 119(2)(b) of the Act, I am of the considered opinion that without filing condonation application before the concerned Pr. Commissioner of Income (Admn) and the relevant approval, the appellant company is not eligible to claim deprecation on the goodwill though the Hon’ble Supreme Court has given a favourable verdict on the above issue in favour of the appellant. Therefore, the action of the A.O. is confirmed. The Ground of appeal is dismissed.
7. Against the above order, the assessee is in appeal before us.
8. We have heard both the counsel and perused the records. At the outset, we note that the revised return was filed on 15.03.2013 and the same was within the due date of filing the revised return in the extant period. There is no dispute about the validity of revised return inasmuch as the A.O. has made the assessment subsequent to the filing of the revised return and the revised return has not been treated as nonest. Moreover, there was no reason to treat the same as nonest as the same was filed within the time mandated u/s. 139(5) of the Act. When the revised return was filed on time as per section 139(1) and 139(5), in our considered opinion, the ld. CIT(A) has erred in holding that the assessee required any condonation u/s. 119(2)(b). We find that there are several case laws for the proposition that the time limit as specified in section 139(1) should be read along with the provision of section 139(5). It is not a case here that no return was filed u/s. 139(1) or that it was belated. The authorities are denying the assessee’s claim by holding that the revised return is to be ignored.
9. In this regard, the ld. Counsel of the assessee has relied upon the decision of the Hon’ble Gujarat High Court in the case of Principal Commissioner of Income Tax vs. Babubhai Ramanbhai Patel  84 com32 (Guj). The Hon’ble High Court’s decision in this regard is summarized as under:
- For the relevant assessment year, the assessee filed the return of income on 30-10-2005 under section 139(1) declaring certain taxable income. In such return, the assessee did not claim speculation loss. Such return was, however, revised under section 139(5) on 29-11-2006.
- The Assessing Officer disallowed carry forward of speculation loss on the ground that the same was not claimed in the original return but in the revised return.
- The Tribunal was of the view that once a return was revised under section 139(5) the original return filed under section 139(1) would not survive. It was found that the revised return was filed within the time prescribed. The Tribunal, thus, did not accept the Assessing Officer’s view that the revised return should be treated as non-est. Accordingly, assessee’s claim for carry forward of speculation loss was allowed.
- The revenue filed instant appeal placing heavy reliance on the provisions contained in sub-section (3) of section 139 to contend that an assessee who wishes to carry forward any loss must file a return under sub-section (3) within the time permitted and only upon which the same would be treated as return under section 139(1) of the Act. It was further submitted that when no return in terms of sub-section (3) of section 139 claiming carry forward or set off of loss was filed, such claim could not be subject matter of a revised return.
- Under sub-section (1) of section 139, every person whose income for the previous year exceeds the maximum amount not chargeable to tax, is required to file a return before the due date. Sub-section (3) of section 139 provides that any person who has sustained a loss and claims that the loss should be carried forward would file a return of loss within the time prescribed under sub-section (1) and thereupon all the provisions of the Act shall apply as if it was a return under sub-section (1) of section 139 of the Act. Under sub-section (4) of section 139, a person who has not furnished a return within the time allowed under sub-section (1), may still furnish a return at any time before the end of the relevant assessment year or before the completion of the assessment whichever is earlier. Sub-section (5) of section 139 provides that any person having furnished a return under sub-section (1) or sub-section (4) discovers any omission or a wrong statement therein, he may furnish a revised return any time before the expiry of one year from the end of relevant assessment year or before the completion of the assessment whichever is earlier.
- Sub-section (5) of section 139, therefore, gives right to an assessee who has furnished a return under sub-section (1) or sub-section (4) to revise such return on discovery of any omission or a wrong statement. Such revised return, however, can be filed before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. This is precisely what the assessee did while exercising the right to revise the return. Sub-section (5) of section 139 does not envisage a situation whereupon revising the return if a case for loss arises which the assessee wishes to carry forward, the same would be impermissible. In terms, sub-section (5) of section 139 allows the assessee to revise the return filed under sub-section (1) or sub-section (4) as long as the time frame provided therein is adhered to and the requirement of the revised return has arisen on discovery of any omission or a wrong statement in the return originally filed. Accepting the contention of the revenue would amount to limiting the scope of revising the return already filed by the assessee flowing from sub-section (5). No such language or intention flows from such provision.
- In view of the above, there is no error in the view of the Tribunal. The revenue’s appeal is, therefore, dismissed.
10. From this decision it emanates that the assessee has an indefeasible right to revise the return filed u/s. 139(1) as per the provisions of section 139(5) on discovery of any omission or wrong statement. The assessee has explained before the authorities below that it has claimed this depreciation pursuant to Hon’ble Apex Court decision in the case of Smifs Securities Ltd. (supra). It is not the case of the Revenue that this Hon’ble Apex Court decision has been wrongly relied upon. Hence, the assessee’s claim in the revised return cannot be denied on a technical ground that it was not claimed in the original return.
11. Furthermore examining the present case, on the touch stone of the above case law, we find that the assessee has duly filed the return u/s. 139(1) within the due date. Thereafter, the assessee claimed the depreciation on goodwill in the revised return u/s. 139(5) which was filed on time. This claim of deprecation in the revised return cannot be denied solely on the ground that it was not claimed in the original return. The issue raised by the ld. CIT(A) for seeking condonation for delay in filing in term of section 119(2)(b) is irrelevant in term of the above discussion and case law. Moreover, even at the cost of repetition, this is not a case of non filing of return but a case of revised return. The reference of the ld. CIT(A) to section 119(2)(b) can have relevance where no return is filed in due time. Hence, the ld. CIT(A)’s order that the return has been filed beyond the time and in absence of any condonation in term of section 119(2)(b), the assessee’s claim cannot be allowed is liable to be rescinded.
12. Apart from the above only other case made out by the A.O. is that the depreciation amount was not quantified in the tax audit report. However, the A.O. has not otherwise disputed the validity of claim made by the assessee for which decisions of the Hon’ble Apex Court has also been cited. The non quantification of the depreciation amount in the tax audit report cannot supersede the Hon’ble Apex Court’s decision on this issue. Be as it may, we note that the ld. CIT(A) while confirming the disallowance has only referred to the time factor involved and he has not made any adverse observation on the validity of assessee’s claim otherwise. He has in fact admitted that on merits the Hon’ble Apex Court’s decision is in favour of the assessee which is an undisputed fact. Accordingly, we set aside the orders of the ld. CIT(A) and decide the issue in favour of the assessee.
13. In the result, the assessee’s appeal is allowed.