2021 (3) TMI 946 - AT - Income Tax

Rectification of mistake - assessee contends that the Capital Gain only should be considered as part of total income instead of gross receipt as done by the CPC - rectification being mistake apparent from record therefore, the claim made in the return should be allowed - HELD THAT - It is a fact on record that the assessee has applied for rectification and filed revised return thereby changing the head of this particular transaction from capital gain to income from other sources but the amount and the actual net gain remains the same. The rectification might not be correct under the statute as there is a change of head but when we go by the original return it clearly set outs that the net gain of ₹ 99,125/- has to be taken into account by the CPC. In the present case, the assessee Trust has accumulated and set apart an amount of ₹ 5,96,00,000/- for financial year ended on 31/03/2016 and furnished the said information to Assessing Officer by filing Form 10 on 29/09/2014 i.e. before the time specified u/s 139(1) of the income Tax Act and invested the said amount into fixed deposits. The assessee has also claimed accumulation u/s 11(2) of ₹ 5,96,00,000/-/in the return of income. Thus, the assessee satisfied all the conditions as specified in section 11(2) and the accumulation should be allowed - the assessee reported the gain on sale of Birla Sun life mutual fund of ₹ 99,125 as income in return of income which should be considered as declared by the assessee instead of ₹ 2,06,00,000/. Therefore, the demand raised of ₹ 2,58,88,130/- and interest u/s 234B and 234C are hereby rejected and the benefit u/s 11 should be allowed to the assessee. Therefore, we are allowing the appeal of the assessee to this extent and the claim made in the return which was originally filed should be taken into account. Hence, the appeal of the assessee is allowed.

Summary

Issues:
1. Capital gain computation discrepancy
2. Rectification request denial
3. Assessment of total income and demands
4. Application of funds and accumulation claim

Capital Gain Computation Discrepancy:
The appeal was filed against an order assessing the total income for the Assessment Year 2014-15. The assessee, a Trust, contended that only a capital gain of ?99,125 should be considered as part of the total income, instead of the gross receipt of ?2,06,00,000 as done by the CPC. The original return reflected the net gain at ?99,125, but the Assessing Officer considered the gross sale proceeds without a substantive reason. The Tribunal noted that the rectification application and revised return changed the head of the transaction from capital gain to income from other sources, but the actual net gain remained the same. The Tribunal held that the net gain of ?99,125 should be considered, and the demand raised based on the gross consideration was rejected.

Rectification Request Denial:
The assessee filed a rectification request under section 154 of the Income Tax Act, which was denied by the CPC, stating that fresh claims or removal of income cannot be made in the rectification request. The Tribunal observed that the rectification might not be correct under the statute due to the change of head, but the original return clearly indicated the net gain of ?99,125, which should be taken into account.

Assessment of Total Income and Demands:
The Assessing Officer had assessed the total gross receipt instead of the net capital gain, leading to a dispute. The Tribunal noted that the assessee had complied with the provisions of section 11 & 12 of the Income Tax Act as a charitable Trust. The Tribunal found that the demand raised and interest charged under sections 234B and 234C were wrong and not leviable. The benefit under section 11 was allowed to the assessee, and the appeal was allowed to the extent that the claim made in the original return should be considered.

Application of Funds and Accumulation Claim:
The Trust had accumulated and set apart an amount for the financial year and invested it in fixed deposits, satisfying the conditions of section 11(2). The Tribunal held that the gain on the sale of Birla Sun Life Mutual Fund should be considered as declared by the assessee, rather than the gross amount. Consequently, the demand raised and interest charged were rejected, and the benefit under section 11 was granted to the assessee.

In conclusion, the appeal of the assessee was allowed, and the original return's claim was upheld, considering the net gain of ?99,125 as part of the total income.