2023 (9) TMI 101 - AT - Income Tax

Rectification of mistake u/s 154 - MAT computation u/s 115JB - inclusion of the agriculture income for the purpose of MAT - refund on account of taxes inadvertently wrongly calculated under MAT - Whether CIT (A) has erred in confirming the orders of AO rejecting the application of the assessee u/s 154 for not acknowledging and allowing refund on account of taxes inadvertently wrongly calculated under MAT and paid under self assessment at the time of filing of income tax return whereas no liability is due under MAT in the orders passed under section 143(3) r.w.s 147 as there was an error in records which is required to be rectified u/s 154 - HELD THAT - In the instant case, the agriculture income of Rs 23,60,000/- is determined in terms of original assessment order passed u/s 143(3) r/w 147 dated 14/12/2016 and thereafter, in reassessment order passed u/s 143(3) r/w 147 dated 27/09/2019. The said agriculture is exempt under section 10(1) - Therefore, it was incumbent on part of the AO to recompute the tax computation for the purposes of determining the liability under section 115JB by reducing the said agriculture income from the book profits declared by the assessee even though the assessee has not done so in the return of income. We find that the same has effectively been done by the AO by determining NIL tax liability under both the normal provisions as well as MAT provisions while passing original assessment order passed u/s 143(3) r/w 147 dated 14/12/2016 and thereafter, in reassessment order passed u/s 143(3) r/w 147 dated 27/09/2019. Therefore, the assessee was well within its right to claim refund of taxes which was not granted even though the tax liability has been determined at NIL. The action of the AO while disposing off the assessee s application u/s 154 recomputing the book profits by including the agriculture income is therefore clearly not sustainable in eyes of law. Firstly, there was no mistake in the original orders passed by the AO as we have seen above, secondly, there was no notice to the assessee before enhancing the income and thirdly, the AO in his zeal of disposing off the rectification application has failed to appreciate and consider the unambiguous provisions wherein the agriculture income is exempt from the book profits for the purposes of computing the MAT liability. Even the ld CIT(A) has failed to appreciate the said provisions. Therefore, in light of aforesaid discussions, we are of the considered view that matter as far as tax liability of the assessee is concerned, it has been rightly determined originally at NIL under the MAT provisions of section 115JB and there is no basis for invoking the jurisdiction u/s 154. Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Rejection of application under Section 154 for refund of taxes due to incorrect MAT calculation for Assessment Year 2012-13.
2. Rejection of application under Section 154 for refund of taxes due to incorrect MAT calculation for Assessment Year 2013-14.

Issue 1: Rejection of application under Section 154 for refund of taxes due to incorrect MAT calculation for Assessment Year 2012-13

The assessee filed an appeal against the order of the CIT(A) confirming the AO's rejection of the application under Section 154 for not acknowledging and allowing a refund of Rs 4,98,280/- due to incorrect MAT calculation. The assessee argued that their agricultural income was erroneously included as business income and claimed under Section 80IC(2). The assessment was reopened, and the AO accepted the revised computation showing business income at NIL and agricultural income separately. Despite this, the AO did not grant the refund during the rectification under Section 154, instead enhancing the income and raising a demand. The Tribunal found that the AO's action was not sustainable as there was no mistake in the original orders, no notice was given before enhancing the income, and the agricultural income should have been excluded from the book profits for MAT computation. The Tribunal directed the AO to refund the taxes to the assessee.

Issue 2: Rejection of application under Section 154 for refund of taxes due to incorrect MAT calculation for Assessment Year 2013-14

The assessee filed an appeal against the order of the CIT(A) confirming the AO's rejection of the application under Section 154 for not acknowledging a refund of Rs 10,46,000/- due to incorrect MAT calculation. The assessee argued that their agricultural income was erroneously included as business income. The AO accepted the revised computation showing business income at NIL and agricultural income separately. Despite this, the AO did not grant the refund during the rectification under Section 154, instead determining tax on book profit. The Tribunal found that the facts and circumstances were identical to the previous issue and directed the AO to refund the taxes to the assessee.

Conclusion:

In both appeals, the Tribunal concluded that the AO's actions were not sustainable and directed the AO to refund the taxes to the assessee. The appeals filed by the assessee were allowed.