The Income Tax Appellate Tribunal (ITAT) Rajkot Bench, has recently, in an appeal filed before it, by relying on the CBDT circular, held that rectification application cannot be rejected in case of apparent and obvious mistakes in ITR.
The aforesaid observation was made by theRajkotITAT, when an appeal was filed before it by the assessee, as againstthe order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)], dated 11.5.2022, under section 250(6) of the Income Tax Act, 1961, pertaining to Asst.Year2014-15.
The present appeal being arising on account of rectification application filed by the assessee seeking rectification in the intimation made by the Department under section 143(1) of the Income Tax Act, on the return of income filed for theimpugned year, the rectification sought u/s 154 of the Income Tax Act to the intimation, was rejected both by the AO and the CIT(A).
As transpires, the assessee had filed his return of income for the impugned assessment year i.e., Asst.Year 2014-15, disclosing the income from salary of Rs.34,07,604/- and the tax payable on the same to be Rs.8,77,664/-, against which he had claimed relief under section 89(1) of the Income Tax Act, of Rs.30,43,597/-, thus reflecting NIL taxes payable for the impugned year.
Thereafter, an intimation was made u/s 143(1) of the Income Tax Act, on the assessee, for the impugned return filed, raising a tax demand of Rs.8,77,664/, thereby denying the grant of relief under section 89(1) of the Income Tax Act. The interest under sections 234A/B/C was included therein amounting to Rs.1,02,679/- resulting in an aggregate tax liability raised on the assessee of Rs.9,80,342/, and the said intimation was made on 17.11.2014.
Thereafter on 31.8.2018, the assessee filed rectification application before the AO stating that his income returned for tax had been wrongly returned by including therein, exempt income to the extent of Rs.30,83,039/-. The assessee contended that he wasan Asstt. Teacher in a Girls’ School and had retired in the impugned year; that on retirement he was given tax free retirement benefits being gratuity of Rs.6,37,131/-, commuted pension of Rs.4,51,029/-, general provident fund of Rs.16,39,240/-, leave salary of Rs.2,78,829/-, insurance contribution of Rs.16,788- and Insurance Savings of Rs.60,022/-; in all total of Rs.30,83,039/-, and that all these amounts were tax free, but were inadvertently included inhis income from salary returned to tax.
Subsequently, all evidence proving the aforesaid facts were filed to the AO by the assessee, along witha copy of his Form No.16 being furnished, reflecting the salary received during the year, only to the extent of Rs.1,66,956/.
However, the AO rejected the assessee’s request for rectification of intimation, stating that the exempt income had not been returned as such in the return of income filed; that the assessee needed to file a revised return within the time allowed by law for revising this original return and that in the absence of such a revised return, the assessee’s application for rectification of intimation could not be entertained.
Aggrieved by the same, the assessee preferred an appeal before the CIT(A), but the same was upheld by the CIT(A), thus leaving the assessee aggrieved to prefer the instant appeal before the Rajkot ITAT.
Hearing the opposing contentions of either sides as submitted by Shri D.M. Rindani, the AR and by Shri B.D.Gupta, the Sr.DR , as well as perusing the materials available on record, the ITAT observed:
“The issue for consideration before us is whether the inclusion of tax-exempt income of Rs.34,07,004/- in the total income returned to tax by the assessee could be said to be any error apparent from record for allowing its rectification u/s 154 of the Act as sought by the assessee. The fact that income to the said extent of Rs.34,07,004/- being exempt is not disputed being accepted by the AO in remand proceedings. The facts on record reveal that the error was patent.”
“The income reflected in the return filed by the assessee was of Rs.34,07,604/-. Form No.16, being TDS certificate pertaining to salary income, reflected salary income of Rs.1,66,956/- received by the assessee during the year. Coupled with this is the fact that the assessee claimed relief in the ITR filed of Rs.30,43,597/- under section 89(1) of the Act which was denied while making intimation under section 143(1) of the Act for the lack of any basis for making the claim. Clearly while on the one hand the income from salary reflected in the return of income far exceeded that reflected in the TDS certificate at the same time there was no basis for claiming relief u/s 89(1) of the Act. On records itself the information pertaining to income of the assessee was incorrectly returned. Therefore, when the assessee explained that incomes which were actually exempt from tax had been included in the income returned and the relief claimed under section 89(1) of the Act had been inadvertently so claimed, it tantamounted to nothing but seeking rectification of mistakes apparent from record.”, the ITAT further added.
Rendering its observation, the ITAT Coram comprising of Madhumita Roy, the Judicial Member, along with Annapurna Gupta, the Accountant Member commented:
“Having found, as above, that there were apparent and obvious mistakes in the return filed by the assessee, from the record itself, which was brought to the notice of the AO immediately on receiving intimation, and which mistake on merits the AO admitted to also, we find no reason for rejecting the assessee’s claim of rectification under section 154 of the Act. Even otherwise, CBDT vide its Circular No.014(XL-35)/1955 dated 11.4.1955 has long back laid down the duty of its officer to compute correct income in law and even advise the assessee as to its benefit. In the present case, it appears that the Revenue officers have not acted in accordance with their duty so laid down by the CBDT.”
Thus, allowing the assessee’s appeal, the Rajkot ITAT held:
“In view of the above, we direct that rectification sought by the assessee of excluding the exempt income from its computation of income be done by the AO and necessary relief to that extent be granted to the assessee. In view of the above, the appeal of the assessee is allowed.”
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