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2022 (9) TMI 1327 - HC - Income TaxRectification of mistake u/s 154 - Income deemed to accrue or arise in India - substantial questions of law - Whether the subject income could be taken to have accrued in India only for the reason that it was shown in the balance sheet of the assessee? - HELD THAT - Hon ble Supreme Court in Ishwar Dass Jain Vs. Sohan Lal 1999 (11) TMI 863 - SUPREME COURT under Section 100 CPC, after the 1976 Amendment, it is essential for the High Court to formulate a substantial question of law and it is not permissible to reverse the judgement of the First Appellate Court without doing so - there are two situations in which interference with the findings of fact is permissible. The first one is when material or relevant evidence is not considered which, if considered, would have led to an opposite conclusion. The second situation in which interference with findings of fact is permissible is where a finding has been arrived at by the Appellate Court by placing reliance on inadmissible evidence which is it was omitted, an opposite conclusion was possible. In either of the above situations, a substantial question of law can arise. Applying the ratio laid down in the above decision we have no hesitation to hold that substantial questions of law arise for consideration in this case, more particularly when the orders impugned suffer from utter perversity. As pointed out earlier on the date when the Miscellaneous Application was heard and decided by the learned Tribunal, there This issue has been decided by the Hon ble Supreme Court in the case of ACIT vs. Sourashtra Kutch Stock Exchange 2008 (9) TMI 11 - SUPREME COURT wherein the Hon ble Supreme Court has held that an application for rectification was maintainable in such factual situation. The order of rejection of the application under Section 154 issued by the Centralised Processing Centre (CPC), Bangalore are quashed. Consequently, the order passed by the Assessing Officer computed the tax liability as per the intimation under Section 143 (1) and the assessment stands restored to the file of the Assessing Officer who shall review the assessment in terms of the observation made in the preceding paragraphs and also the law on the subject including the circular issued by the CBDT and grant the relief to the assessee by excluding the foreign income received by the assessee excluding the foreign income under Section 10(6)(viii) of the Act and such order shall be passed by the Assessing Officer within six weeks from the date of receipt of the server copy of this order.
Issues Involved:
1. Whether the subject income could be taken to have accrued in India only for the reason that it was shown in the balance sheet of the assessee. 2. Whether the learned tribunal ought to have allowed the rectification application of the appellant for the assessment year 2012-13 based on the CBDT circular no. 13 of 2017. Issue 1: Accrual of Income in India The primary legal issue was whether the income of the assessee could be considered to have accrued in India merely because it was mistakenly shown as such in the balance sheet while filing the return of income on January 11, 2013. The assessee was employed by M/s. MSC Ship Management Hongkong Limited and was thus employed outside Indian territory. The return was processed, and an intimation under Section 143(1) was issued, computing the tax liability. The assessee filed an application for rectification under Section 154, which was rejected by the assessing officer, stating that the tax was correctly computed on the income return by the assessee. The assessing officer rejected the application for rectification on the grounds that it did not constitute a mistake apparent from the record. Issue 2: Rectification Application Based on CBDT Circular No. 13 of 2017 The assessee filed another petition before the Deputy Commissioner of Income Tax (International Taxation), stating that the assessee was an NRI during the relevant period and that the income had been assessed without considering the NRI status. This petition was also rejected. The assessee then appealed to the CIT(A), contending that the assessing officer erred in ignoring the revised return filed on July 15, 2014, which claimed exemption under Section 10(6)(viii) of the Act. The CIT(A) dismissed the appeal, focusing on the scope of interference under Section 154 without addressing the merits. The tribunal also dismissed the appeal, considering the issue debatable and thus not suitable for rectification under Section 154. The assessee's subsequent application for rectification was dismissed by the tribunal. Court's Analysis and Judgment The court found the decisions of the tribunal and CIT(A) to be perverse. On the date of the tribunal's initial decision, there was a binding decision of the High Court in the case of Utanka Roy Vs. Director of Income Tax, International Taxation Transfer Pricing, Kolkata & Ors., which the tribunal ignored. This constituted an error apparent on the face of the record. The tribunal should have exercised its power under Section 154 to rectify this mistake. The court noted that the Department had harshly dealt with the assessee, who had filed the return through a Chartered Accountant. The Department could have taken a more reasonable stand, especially since the law favored the assessee. The court referred to CBDT Circular No. 13/2017, which clarified that salary credited in the NRE account of a non-resident seafarer should not be included in total income merely because it was credited in an Indian bank account. The court also cited Circular No. 14 (XL-35) of 1995, which directed officers to assist taxpayers in claiming reliefs. The court emphasized the duty of the Income Tax Officer to apply relevant provisions to determine the true taxable income, as held by the Supreme Court in Commissioner of Income Tax, Delhi Vs. Mahalaxmi Sugar Mills Co. Ltd. The court found that the assessing officer and CIT(A) had ignored these principles and the circulars issued by the Board. The court also referred to the decision in Smt. Sumana Bandyopadhyay & Anr. Vs. The Deputy Director of Income Tax, (International Taxation), which addressed a similar issue, and the Supreme Court's ruling in ACIT vs. Sourashtra Kutch Stock Exchange, which held that non-consideration of a jurisdictional court's decision constitutes a "mistake apparent from the record." Conclusion The court allowed the appeal, quashing the orders of the tribunal, CIT(A), and DCIT (International Taxation). The court directed the assessing officer to review the assessment, exclude the foreign income under Section 10(6)(viii) of the Act, and grant relief to the assessee within six weeks.
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