2021 (10) TMI 460 - AT - Income Tax

Rectification applications filed u/s 154 - Assessee is a non-resident and hence the income earned outside India - salary earned outside India has been offered wrongly in the return of income and the same is a mistake apparent from record - HELD THAT - There is no dispute with regard to the fact that the assessee is a non-resident. It is the submission of the assessee that the salary income was earned by him abroad and hence the same is not liable to tax under the Act u/s 5(2) of the Act. There is merit in the submission of the assessee that the A.O. could not assess an income, which is not liable to tax under the Income Tax Act even if it was offered by the assessee in its return of income. As rightly pointed out by Ld. A.R., there is no estoppel against law and, in our view, the income erroneously offered in the return of income would constitute mistake apparent from record. Accordingly, we set aside the orders passed by Ld CIT(A) in both the years under consideration and restore them to the file of the AO to examine the claim of the assessee raised in the petitions filed u/s 154 of the Act in accordance with the law. In respect of AY 2010-11, the assessee has filed revised return of income and if the said revised return of income is processed, then the issue would get settled. The AO may take appropriate action which suits him. Appeal of assessee allowed for statistical purposes.

Summary

Issues:
Challenging orders of Ld CIT(A) confirming rejection of rectification applications u/s 154 of the Income-tax Act, 1961 for assessment years 2009-10 and 2010-11.

Analysis:
The appellant, a non-resident, challenged the decision of Ld CIT(A) confirming the rejection of rectification applications filed u/s 154 of the Act for the assessment years 2009-10 and 2010-11. The appellant declared salary earned outside India under "Income from salary" in the return of income, claiming it as deduction under Chapter VIA, resulting in nil taxability. However, the AO restricted the deduction, leading to tax demands. The appellant filed a revised return for AY 2010-11 omitting salary income and deduction, pending processing. The rectification petitions were rejected by the AO and Ld CIT(A) on grounds of no apparent mistake. The appellant argued that the salary earned abroad is not taxable in India under section 5(2) of the Act, emphasizing no estoppel against law. The ITAT found merit in the appellant's submissions, noting the income erroneously offered constitutes a mistake apparent from record.

Regarding the delay in filing the appeal for AY 2009-10, the ITAT referred to a Madras High Court case emphasizing that if an appeal is adjudicated on merits despite delay, refusing to condone the delay is erroneous. Therefore, the ITAT set aside the Ld CIT(A) orders for both years, directing the AO to re-examine the rectification claims. For AY 2010-11, the ITAT suggested resolving the issue through the processed revised return. Ultimately, both appeals were treated as allowed for statistical purposes, providing relief to the appellant.