2022 (4) TMI 681 - AT - Income Tax

Rectification of mistake u/s 154 - agriculture income v/s business income - HELD THAT - Assessee is engaged in agriculture produce and the same was sold during the year under consideration. However the AO has not treated as agriculture income. The assessee has filed application under Section 154 mentioning therein that the assessee company has shown income which is exempt from tax. The prayer of the assessee is that application filed by the assessee under section 154 of the Act was not properly disposed off without providing adequate opportunity to the assessee. In the interest of equity and justice, the appeal of the assessee is remand to the file of the CIT (A) to decide it afresh by providing adequate opportunity of hearing to the assessee. We don t have any hesitation to condone the delay of 4 years for filing the application under section 154 of the IT Act due to reasonable cause and genuine in nature and we consider accordingly, it is a fit case for remand for proper adjudication of the case by following the established procedure laid down. under rules 46A(1), (2) and (3) of the Rules which we order accordingly. The impugned order passed by the Lower authority is hereby quashed and set aside. The appeal is remanded to the Commissioner of Income-tax.

Summary

Issues:
1. Addition of agriculture income as business income.
2. Rejection of rectification application under Section 154 of the IT Act.
3. Delay in filing the application under Section 154 of the IT Act.
4. Admissibility of additional evidence.

Analysis:

1. Addition of agriculture income as business income:
The appellant, engaged in agriculture produce, contested the addition of ?7,22,991 as business income by the Assessing Officer (AO). The AO's decision was based on the appellant declaring income from business in the ITR and not filing the Audit Report along with the ITR. The appellant argued that the income was from agriculture and exempt from tax under section 10(1) of the Income Tax Act. The CIT(A) upheld the AO's decision, citing the late filing of the rectification application and the declaration of business income in the ITR. However, the ITAT Jaipur observed that the AO did not treat the income as agriculture income and remanded the case to the CIT(A) for proper adjudication, considering the delay in filing the application and the genuine reasons provided by the appellant.

2. Rejection of rectification application under Section 154 of the IT Act:
The appellant filed a rectification application under Section 154 of the IT Act, stating that the income was exempt agricultural income. The AO rejected the application, citing the late filing after four years and the absence of an Audit Report along with the ITR. The CIT(A) upheld this decision, emphasizing the late filing and declaration of business income in the ITR. However, the ITAT Jaipur remanded the case for fresh consideration, acknowledging the reasonable cause for the delay and directing proper adjudication by the CIT(A).

3. Delay in filing the application under Section 154 of the IT Act:
The appellant explained the delay in filing the rectification application due to the main director's illness and memory loss. The ITAT Jaipur considered the medical records provided and condoned the delay of four years, deeming it a fit case for remand to ensure justice and equity. The appellant's genuine reasons for the delay were accepted, leading to the quashing of the lower authority's order and the remand of the appeal for proper adjudication.

4. Admissibility of additional evidence:
During the appeal, the appellant submitted additional evidence, including medical records and financial documents. The ITAT Jaipur accepted these additional evidences, directing the appellant to produce relevant documents concerning the issue within three months for verification by the Revenue authorities. The admissibility of additional evidence was crucial for the proper adjudication of the case and ensuring a fair decision based on all relevant information.

In conclusion, the ITAT Jaipur's judgment highlighted the importance of considering agriculture income separately, addressing delays in filing applications under Section 154, and allowing the submission of additional evidence for a comprehensive review of the case. The remand of the appeal aimed at ensuring a just and equitable decision based on all relevant factors and legal provisions.