Appellate Authorities Can Entertain New Claims As Estoppel Does Not Apply In Tax Proceedings: ITAT Chennai

The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has recently reiterated that the principle of estoppel has no application in tax proceedings and appellate authorities can entertain new claims from taxpayers even if they were not made in the original return.

“the law is well settled to the extent that the decision of Hon'ble Supreme Court in the Goetze India Ltd. Vs. CIT (2006) 284 ITR 323 (SC) is confined to the power of Assessing Officer alone. There are no fetters on the appellate authorities to entertain a new claim, because the principle of estoppel have no application in tax proceedings.”, the tribunal observed.

A coram of Judicial Member S.S. Viswanethra Ravi and Accountant Member Inturi Rama Rao was hearing a Revenue appeal against relief granted to Madras Motor Sports Trust for the assessment year 2018-19.

Madras Motor Sports Trust is registered as a charitable trust and recognised by the Income Tax Department for claiming tax exemption. It conducts motorcar and two-wheeler racing and related activities.

The Assessing Officer had denied exemption under Section 11 by invoking the proviso to Section 2(15), treating its activities as commercial in nature. The officer also taxed Rs 2 crore that had been disclosed as a voluntary donation in the return and disallowed depreciation.

During the proceedings, the trust claimed that the Rs 2 crore represented advances received in earlier years and written back, and should not be taxed as income. The Commissioner of Income Tax (Appeals) accepted this claim and also allowed depreciation.

The tribunal, however, found that the appellate authority had not properly examined the claim.

“the ld.CIT(A) had not examined the true nature of the claim by examining evidence nor the Assessing Officer had given an opportunity to rebut the claim made by the assessee.”

It therefore restored the issue to the Commissioner (Appeals) for fresh adjudication after giving both sides an opportunity to be heard.

On depreciation, the tribunal held that the issue required verification of past assessment records and noted that no such exercise was reflected in the appellate order.

“the claim for allowance of depreciation is totally a factual issue which is required to be verified with reference to the past assessment record.”

The appeal was partly allowed for statistical purposes, with both issues remitted for fresh consideration in accordance with law.