2021 (3) TMI 213 - AT - Income Tax

Rectification u/s 154 - gain on sale of agricultural land and income from agriculture - while computing the MAT in the return of income the same was not reduced from the book profit and hence this anomaly has taken place - HELD THAT - We are quite convinced that this is an apparent mistake which the revenue should have rectified on its own. In our view the income which is not taxable under the Act can not be brought to tax on the technicalities of the matter that no exemption was claimed by the assessee. In the present case the gain on sale of agricultural land as well as income from agriculture are exempt from tax under the provisions of section 10(1) of the Act and therefore it has erroneously been included while computing the book profit. On the issue of observation of the Ld. CIT(A) that the AO could not have considered the rectification in view of the decision of Hon ble Supreme Court in the case of Goetz India Ltd. 2006 (3) TMI 75 - SUPREME COURT but certainly the Ld. CIT(A) could have directed the AO to rectify this mistake as there is no bar on the ld CIT(A) to correct the apparent mistake nevertheless the mistake attributed to the assessee . We are therefore not in agreement with the finding of the Ld. CIT(A) and direct the AO to exclude the gain on sale of agriculture and also income from agriculture while computing the book profit under section 115JB of the Act. Consequently the Ld. CIT(A) s order is set aside and AO is directed to exclude the gain on sale of agricultural land and income from agriculture from book profit - Appeal of the assessee is allowed.

Summary

Issues:
1. Rectification of assessment order under section 154 regarding exclusion of gain on sale of agricultural land and agricultural income from book profit for MAT computation.

Analysis:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) relating to the assessment year 2014-15. The primary grounds raised by the assessee were the non-reduction of gain on the sale of agricultural land and agricultural income from the book profit for the purpose of Minimum Alternate Tax (MAT) computation. The only issue raised by the assessee was against the order of the Commissioner of Income Tax (Appeals) upholding the order passed under section 154 of the Income Tax Act, 1961. The facts revealed that the assessee had initially filed the return of income declaring a loss under the normal provisions and MAT. Subsequently, the case was reopened, and the assessment was framed, including the gain on the sale of agricultural land and agricultural income in the book profit. The assessee requested rectification to exclude these amounts, which was rejected by the Assessing Officer (AO) under section 154.

The Tribunal observed that the gain on the sale of agricultural land and income from agriculture are exempt under section 10(1) of the Act. While the assessee had excluded these amounts while computing income under normal provisions, they were not reduced from the book profit for MAT computation, leading to an error. The Tribunal held that this was an apparent mistake that the revenue should have rectified on its own, emphasizing that income not taxable under the Act should not be brought to tax due to technicalities. The Tribunal disagreed with the Commissioner of Income Tax (Appeals) and directed the AO to exclude the gain on the sale of agricultural land and agricultural income from the book profit under section 115JB of the Act. Consequently, the order of the Commissioner of Income Tax (Appeals) was set aside, and the appeal of the assessee was allowed.

In conclusion, the Tribunal's decision favored the assessee, highlighting the importance of correctly applying exemptions to income while computing the book profit for MAT. The judgment emphasized the need to rectify apparent mistakes to ensure accurate tax assessments and prevent the taxation of income that is exempt under the law.