2009 (5) TMI 839 - AT - Income Tax

Summary

Issues Involved:

1. Exclusion of arrears of rental income from total income for the assessment year 1999-2000.
2. Applicability of Section 25B of the Income-tax Act.
3. Rectification of intimation u/s 143(1) under Section 154 of the Act.
4. Legal precedents and judgments overlooked by lower authorities.

Summary:

1. Exclusion of Arrears of Rental Income:
The assessee contended that the lower authorities erred in not excluding the arrears of rental income of Rs. 15,57,084 received from Syndicate Bank for the period from August 1, 1988, to March 31, 1998, from the total income for the assessment year 1999-2000. The assessee argued that the arrears of rent should not be taxed in the year of receipt as per the provisions of Section 25B of the Act, which was effective from the assessment year 2001-02.

2. Applicability of Section 25B:
The assessee argued that Section 25B, inserted by the Finance Act, 2000, stipulates that arrears of rent are assessable in the year of receipt starting from the assessment year 2001-02. The lower authorities failed to appreciate that the arrears of rental income could only be legally chargeable to tax in the year of receipt under Section 25B from the assessment year 2001-02 onwards, and thus, should not be assessed for the assessment year 1999-2000.

3. Rectification of Intimation u/s 143(1) under Section 154:
The assessee filed an application u/s 154 to rectify the intimation issued u/s 143(1), claiming that the assessment of arrears of rental income was a mistake apparent from the record. The Assessing Officer rejected this application, stating that there was no mistake apparent on record as the assessee had included the arrears of rental income in the original return. The Assessing Officer also noted that the return should have been revised u/s 139(5) if there was any omission or wrong statement, and since no revised return was filed by March 31, 2001, the application for rectification was liable to be rejected.

4. Legal Precedents and Judgments Overlooked:
The assessee cited several Supreme Court judgments, including Nalinikant Ambalal Mody v. Narayan Row, CIT v. Express Newspapers Ltd., CIT v. Ajax Products Ltd., and National Thermal Power Co. Ltd. v. CIT, arguing that the lower authorities overlooked these judgments. The assessee contended that the assessment of arrears of rental income for the assessment year 1999-2000 was an apparent mistake rectifiable under the precedent set by Venkatachalam (M. K.), ITO v. Bombay Dyeing and Manufacturing Co. Ltd.

Tribunal's Decision:
The Tribunal upheld the order of the learned Commissioner of Income-tax (Appeals), agreeing that the Assessing Officer did not have the authority to rectify the intimation u/s 143(1) to exclude the arrears of rent included by the assessee in the returned income. The Tribunal emphasized that Section 143(1), effective from June 1, 1999, does not allow for any adjustment to the returned income except for arithmetical calculations. Consequently, the power of rectification under Section 154(1)(b) is limited to the scope of Section 143(1) and cannot be used to redetermine the income shown by the assessee in the return of income.

Conclusion:
The appeal filed by the assessee was dismissed, and the order of the learned Commissioner of Income-tax (Appeals) was upheld. The Tribunal concluded that the Assessing Officer had no authority to rectify the intimation u/s 143(1) to exclude the arrears of rent from the returned income.