2023 (3) TMI 99 - AT - Income Tax

Rectification of mistake u/s 154 - relief claimed under section 89(1) - inclusion of tax exempt income in the total income returned to tax by the assessee could be said to be any error apparent from record for allowing its rectification or not? - HELD THAT - Clearly while on the one hand the income from salary reflected in the return of income far exceeded that reflected in the TDS certificate at the same time there was no basis for claiming relief u/s 89(1) - On records itself the information pertaining to income of the assessee was incorrectly returned. Therefore when the assessee explained that incomes which were actually exempt from tax had been included in the income returned and the relief claimed u/s 89(1) of the Act had been inadvertently so claimed, it tantamounted to nothing but seeking rectification of mistakes apparent from record. Having found, there were apparent and obvious mistakes in the return filed by the assessee, from the record itself, which was brought to the notice of the AO immediately on receiving intimation, and which mistake on merits the AO admitted to also, we find no reason for rejecting the assessee s claim of rectification under section 154 of the Act. Even otherwise, CBDT vide its Circular No.014(XL-35)/1955 dated 11.4.1955 has long back laid down the duty of its officer to compute correct income in law and even advise the assessee as to its benefit. In the present case, it appears that the Revenue officers have not acted in accordance with their duty so laid down by the CBDT. We direct that rectification sought by the assessee of excluding the exempt income from its computation of income be done by the AO and necessary relief to that extent be granted to the assessee. Appeal of assessee allowed.

Summary

Issues:
Rectification of intimation under section 143(1) of the Income Tax Act for including tax-exempt income in the total income returned by the assessee.

Analysis:
The appeal was filed against the order passed by the Commissioner of Income-Tax (Appeals) regarding the rectification application filed by the assessee. The issue arose when the intimation made under section 143(1) of the Act raised a tax demand, denying relief under section 89(1) of the Act. The assessee had disclosed income from salary, claimed relief under section 89(1), and subsequently filed a rectification application seeking to exclude exempt income inadvertently included in the return. The AO rejected the rectification request, stating that a revised return needed to be filed within the allowed time. The ld.CIT(A) upheld this decision.

The main issue was whether the inclusion of tax-exempt income in the total income returned by the assessee could be rectified under section 154 of the Act. The AO accepted that the exempt income had been included in the return. The error was deemed apparent from the record, as the income declared far exceeded the salary reflected in Form No.16, and there was no basis for claiming relief under section 89(1) of the Act. The assessee's explanation of the inadvertent inclusion of exempt income and relief claimed constituted rectification of apparent mistakes.

The Tribunal found that there were clear mistakes in the return filed by the assessee, evident from the record and admitted by the AO. The rectification sought by the assessee to exclude exempt income from the income computation was deemed valid. Referring to a CBDT circular, the Tribunal highlighted the duty of Revenue officers to compute correct income and advise the assessee accordingly. The Tribunal directed the AO to rectify the computation by excluding the exempt income and granting necessary relief to the assessee. Consequently, the appeal of the assessee was allowed.

The judgment was pronounced in the Court on 28th February 2023 at Ahmedabad.