2022 (12) TMI 748 - AT - Income Tax

Rectification of mistake u/s 154 - benefit of exemption u/s.5(1)(c) r.w.s 6 - HELD THAT - 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) - 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. AO 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:
Rectification application beyond time limitation under section 154(7) of the Act.

Analysis:
The appeal was filed by the assessee against the order of the ld CIT(A) for the assessment year. The assessee, an individual earning income from services as an Architect in UAE, mistakenly did not claim the benefit of exemption as a non-resident in the filed return. The rectification application filed after nearly 7 years was rejected by the Assessing Officer as time-barred under section 154(7) of the Act. The ld CIT(A) also dismissed the appeal on the same ground. However, the assessee referred to CBDT Circular No.4 of 2012, allowing condonation of the limitation of four years for genuine claims. The issue was whether the rectification application could be considered beyond the time limit.

The ld Sr. DR did not object to restoring the issues to the AO for verification and examination on merits, even though it was beyond the four-year limitation as per the CBDT Circular. The ITAT considered that the assessee was a non-resident Indian, and the return had mistakes that could be rectified through a rectification application, which was not being considered due to the time limitation under section 154(7) of the Act. Considering 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 verify if the assessee was an NRI during the relevant period and entitled to the exemption under section 5(1)(c) r.w.s 6 of the Act. If the claim was found correct, the AO was instructed to decide the rectification application on merits in accordance with the relevant provisions.

In conclusion, the appeal of the assessee was partly allowed for statistical purposes, with the order being dictated and pronounced in the open court on 15/12/2022.