2022 (12) TMI 641 - AT - Income Tax

Rectification of mistake u/s 154 - whether rectification application was beyond time? - exemption u/s.5(1)(c) r.w s 6 of the Act treating the status of the appellant as non-resident was not claimed by mistake - whether the assessee was NRI during the relevant point of time and whether he is entitled to the benefit of exemption u/s.5(1)(c) r.w.s 6 - HELD THAT - Admittedly, the assessee individual is a non-resident Indian and the facts clearly show that the return has been filed with mistakes. These mistakes can admittedly be rectified by filing a rectification application. The rectification application admittedly is not being considered on account of the limitation provided u/s.154(7) of the Act. However, in view of the submissions made by both the sides and considering the Circular No.4 of 2012 dated 20.6.2012 issued by the CBDT, the issues in its appeal are restored to the file of the AO for readjudication of the rectification application on merits. The Assessing Officer is at liberty to examine whether the assessee was NRI during the relevant point of time and whether he is entitled to the benefit of exemption u/s.5(1)(c) r.w.s 6 of the Act. If it is found that the claim of the assessee is correct, then, the AO is to proceed to decide the rectification application on merits in accordance with the provisions of section 5(1)(c) r.w.s 6 of the Act. appeal of the assessee is partly allowed for statistical purposes.

Summary

Issues:
Appeal against order of CIT(A) for assessment year 2009-2010 - Delay in filing rectification application under section 154(7) of the Act - Claim of exemption u/s.5(1)(c) r.w.s 6 of the Act - CBDT Circular No.4 of 2012 - Restoration of issues to AO for readjudication on merits.

Analysis:
The appeal was filed by the assessee against the order of the ld CIT(A) for the assessment year 2009-2010. The assessee, an individual deriving income from salary services outside India, filed the return belatedly through a Chartered Accountant Firm. The return did not claim the benefit of exemption u/s.5(1)(c) r.w.s 6 of the Act due to a mistake. A demand was raised on the assessee based on the processed return, leading to the discovery of the error. The rectification application filed by the assessee after a delay of 7 years was rejected by the Assessing Officer citing section 154(7) of the Act. The ld CIT(A) also dismissed the appeal on the same ground.

The assessee argued that as per CBDT Circular No.4 of 2012, the limitation of four years can be condoned for genuine claims beyond the four-year period, subject to merit in the rectification petition. The revenue did not oppose the restoration of the issues to the AO for verification and examination on merits, even though it was beyond the limitation period.

Considering the submissions and the CBDT circular, the ITAT decided to restore the issues to the AO for readjudication of the rectification application on merits. The AO was directed to determine whether the assessee was a non-resident Indian during the relevant period and entitled to the exemption u/s.5(1)(c) r.w.s 6 of the Act. If the claim is found to be valid, the AO was instructed to decide the rectification application on merits in line with the Act.

In conclusion, the appeal of the assessee was partly allowed for statistical purposes, and the order was dictated and pronounced in open court on 13/12/2022.