2012 (4) TMI 329 - AT - Income Tax

Addition to the regular income as performance incentive received from employer claiming tax deducted at source - reason for the demand is non availability for TDS credit claim - same performance incentive was admitted both in the assessment year 2007-08 and 2008-09, whereas TDS credit is available only for the assessment year 2008-09 appeal on ground that amount of performance incentive has been taxed twice by the Income Tax Department assessee submitted that he had aggregated with salary amount, performance incentive of Rs. 4,28,750/- which was given by the said company to him in financial year 2007-08 relevant to the assessment year 2008-09, by mistake as shown in Form 16 issued by the said company Held that - If the Income-tax Act authorizes a designated authority to collect tax for State, the same Act always permits the said authority to rectify any proceedings, which has resulted in double taxation - the assessment of Rs. 4,28,750/- to income-tax for the assessment year 2007-08 is against law - direction to the assessing authority to delete the said amount from the assessment relating to the - the appeal of the assessee is to be allowed

Issues Involved:
1. Double taxation of performance incentive.
2. Denial of TDS credit.
3. Maintainability of appeal before CIT(A).
4. Applicability of the Goetze (India) Ltd. decision.
5. Rectification of assessment errors.

Detailed Analysis:

1. Double Taxation of Performance Incentive:
The appellant admitted a performance incentive of Rs. 4,28,750/- in the assessment year (AY) 2007-08, which was also included in AY 2008-09. The mistake led to the same amount being taxed twice. The appellant realized this error upon reviewing Form 16 provided by the employer for AY 2008-09, which confirmed the inclusion of the performance incentive for that year. The Tribunal found that the performance incentive was indeed taxed twice, once in AY 2007-08 and again in AY 2008-09, which was unjust.

2. Denial of TDS Credit:
The appellant claimed TDS credit of Rs. 1,28,625/- for the performance incentive in AY 2007-08. However, the Assessing Officer (AO) denied this credit, as the TDS certificate was issued for AY 2008-09. The Tribunal noted that the AO should have excluded the performance incentive from the income of AY 2007-08 since the corresponding TDS credit was not given for that year. The Tribunal emphasized that tax should be collected as per law, neither more nor less, and the AO's failure to give TDS credit indicated awareness that the income was taxable in the subsequent year.

3. Maintainability of Appeal Before CIT(A):
The CIT(A) dismissed the appeal on the grounds that an appeal could only be entertained if the assessee denied his liability to be assessed. The CIT(A) argued that since the AO accepted the returned income, the case became infructuous. However, the Tribunal disagreed, citing a precedent that appeals are maintainable even if the returned income is accepted but subsequently found to be non-taxable due to a mistake. The Tribunal asserted that the primary duty of any Tribunal is to render substantial justice without being bogged down by technicalities.

4. Applicability of the Goetze (India) Ltd. Decision:
The Judicial Member relied on the Supreme Court decision in Goetze (India) Ltd. v. CIT, which held that claims for deductions must be made through a revised return and not by mere letters to the AO. The Tribunal found this decision inapplicable, as the issue was not about claiming a deduction but correcting a double taxation error. The Tribunal emphasized that the Income-tax Act does not permit the same income to be taxed twice, and the AO should have rectified the mistake.

5. Rectification of Assessment Errors:
The Tribunal highlighted the constitutional mandate under Article 265, which states that no tax shall be levied or collected except by authority of law. The Tribunal referred to CBDT Circular No. 14(XL-35) dated 11-4-1955, which instructs officers not to take advantage of an assessee's ignorance and to assist in securing reliefs. The Tribunal concluded that the AO should have excluded the performance incentive from AY 2007-08, considering it was taxed in AY 2008-09. The Tribunal directed the AO to delete the performance incentive from the total income of AY 2007-08 to prevent double taxation.

Conclusion:
In conclusion, the Tribunal allowed the appeal, directing the exclusion of Rs. 4,28,750/- from the total income of AY 2007-08 to rectify the double taxation error. The Tribunal emphasized the importance of substantial justice over procedural technicalities, ensuring that the appellant was not taxed twice on the same income.

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