The Income Tax Appellate Tribunal ( ITAT ) of Bangalore in a recent case ordered rectification of the revised return filed by the assessee, observing that misadvice by the assessee’s tax auditor led him to pay excess income tax.
The assessee /appellant, Ramalingaiah, a semi-literate individual engaged in the business of tailoring and trading in textile fabrics, hails from an agricultural family with considerable agricultural income. The assessee had declared a gross total income of Rs. 2,45,000 for A.Y. 2016-17.
The Assessing Officer (AO) issued a notice dated November 30, 2017, under Section 142(1) of the Income Tax Act, 1961 (ITA), directing the appellant to prepare and file a true and correct return of income for A.Y. 2016-17 and A.Y. 2017-18.
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Consequently, under the guidance of the assessee’s auditor, a revised return was filed on January 3, 2018, declaring an income of Rs. 3,29,560, and tax of Rs. 10,820 was paid under acknowledgment number 354891220030118.
However, due to an error on the part of the auditor, additional sums of Rs. 3,89,850 on March 28, 2018, and Rs. 4,13,550 on July 2, 2018, were erroneously deposited. It later emerged that these payments were meant for another client of the auditor, but were mistakenly deposited under the appellant’s Permanent Account Number (PAN).
The auditor assured the assessee that the excess amount would be refunded after assessment. However, no order under income tax section 143(1) was received by the assessee, and no additions or deletions were made to the returned income. The assessee was unaware that the auditor had failed to claim the refund of the excess amount in the revised return filed for A.Y. 2016-17, nor had the auditor filed Form 30 to claim the refund.
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Years later, when the refund was still not credited to the assessee’s account, the assessee sought advice from another tax consultant. Upon verifying the records, the new consultant advised the assessee to apply for rectification of the mistake, as the refund had not been claimed in the regular or revised return filed. Since there was no provision to apply for rectification online for A.Y. 2016-17, the assessee submitted a physical application dated April 7, 2023, to the Income Tax Officer ( ITO ) in Mandya, seeking rectification of the mistake and issuance of a refund amounting to Rs. 4,13,550, Rs. 10,820, and Rs. 3,89,850.
Subsequently, the assessee received an email dated May 2, 2023, informing that the revised return had not been accepted as it was filed after the expiry of one year from the end of the assessment year or before the completion of assessment, whichever was earlier. The email further stated that the appellant had paid self-assessed tax amounts of Rs. 3,89,850 and Rs. 4,13,550 for A.Y. 2016-17, which were not claimed in the original or revised return, and therefore, the refund could not be granted.
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Upon receiving this email, the assessee consulted the representative, who advised filing an appeal against the rejection. The assessee waited for a formal order, but none was served. After visiting the income tax office in Mandya, the assessee was informed by the ITO that no formal order would be issued.
Aggrieved by the rejection of the rectification application, the appellant filed an appeal before the CIT(A) based on the letter dated May 2, 2023. However, the CIT(A) rejected the appeal on the grounds that the appeal was time-barred. Aggrieved by this, the assessee appealed before the ITAT.
After reviewing the facts of the case, in the interest of justice, the bench of Beena Pillai and Laxmi Prasad Sahu opined that the assessee should file a rectification application before the AO, which should be considered without applying any limitation issues.
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The Tribunal recognized the bona fides of the assessee, who had been misled into depositing taxes that were not in line with the income for the year under consideration. Emphasizing the principle that no tax can be collected without the authority of law, the Tribunal directed the AO to consider the rectification petition filed by the assessee..
The AO was further instructed to verify the returns filed by the assessee and compute the income in accordance with the law. The assessee was also directed to furnish all relevant evidence to support the claim. The Tribunal also stressed that the petition filed by the assessee should not be dismissed on the grounds of limitation and that the return should be processed in accordance with the law.
Accordingly, the appeal filed by the appellant was allowed.
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