MR. MANOJ KUMAR NAYAK,BHUBANESWAR vs. DDIT, INTERNATIONAL TAXATION, BHUBANESWAR, BHUBANESWAR

आयकर अपीऱीय अधिकरण, कटक न्यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI N.S.SAINI, AM & SHRI PAVAN KUMAR GADALE, JM ITA No.389/CTK/2014 (नििाारण वषा / Assessment Year :2011-2012) Manoj Kumar Nayak, Vs. JCIT(OSD), International Plot No.N-5/416, IRC Village, Taxation, Bhubaneswar Bhubaneswar-751015 स्थायी लेखा सं./जीआइआर सं./ PAN/GIR No. : ADVPN 7849 L (अऩीलाथी /Appellant) (प्रत्यथी / Respondent) .. ननधाारिती की ओर से /Assessee by : Shri S.C.Bhadra, AR िाजस्व की ओर से /Revenue by : Shri S.C.Mohanty, DR सुनवाई की तािीख / Date of Hearing : 19/04/2018 घोषणा की तािीख/Date of Pronouncement 17/05/2018 आदेश / O R D E R Per Shri Pavan Kumar Gadale, JM: This is an appeal filed by the assessee against the order of CIT(A)- I, Bhubaneswar, dated 24.07.2014, passed in I.T.Appeal No.0271/13-14, for the assessment year 2011-2012. 2. Earlier this appeal was disposed off by this Tribunal vide order dated 31.11.2015. Thereafter on miscellaneous application filed by the Department, this order has been recalled vide order dated 31.10.2017 and appeal has been restored to its original number. Today i.e. on 19.04.2018 we heard the arguments of the learned counsel for both the parties on merits and appeal is disposed off in the following manner. 3. The grounds of appeal raised by the assessee are as under :- 1. That the learned assessing officer has erred to ignore the following errors as enumerated vide a) and b) below which are apparent on record and also the inconsistency vide c) below: a. The assessee has clearly mentioned in his filed return, his residential status as ―NON-RESIDENT INDIAN‖ and the

2 ITA No.389/2014 employer category as ―OTHERS‖ thereby indicating that he was not employed either in public sector or in government ending any scope for deeming his salary income to be earned in India. b. The TDS figure of Rs.1,35,546/- on the return clearly indicates that it pertains to the interest income, deducted at the rate of 30.9% on the total interest of Rs.4,38,648. In other words the total TDS figure constitutes the TDS on interest income only thereby establishing that the entire salary income has not suffered from TDS. From this it is clearly apparent that the salary income is exempt from income tax. c. The figure of total income at Rs.2743360 as mentioned in the return is inconsistent with the entries: a) residential status – NON-RESIDENT INDIAN‖ b) employer category – ―OTHERS‖ and c) TDS-Rs.135546 which are the entries of facts and it is this inconsistency which has been brought to the kind notice of the learned assessing officer as stipulated u/s.154(2) of the Act. 2. That the conduct on the part of the learned assessing officer to call for the original copies of the assessee’s passport, acknowledgement of ITR-1 for the said assessment year, the wages statements and the original TDS certificate for the previous year relevant to the assessment year 2011-12 has established beyond any doubt that she noticed the above mentioned inconsistency as apparent from the facts on record and she insisted on those documents to check the veracity of the claim of the assessee that the figure of total income at Rs.2743360 is an error apparent on record and is also inconsistent with the other entries on record viz. residential status, category of employer and the figure of TDS, the learned assessing officer erred in not rectifying the figure of the gross total income which is evidently inconsistent with the correct entries. 3. That the finding of the learned assessing officer that As per Board’s Circular No.549 dated 31.10.1989 the assessee income cannot be less than the returned income‖ is not in consonance with the words of the said circular which are reproduced below verbatim and hence is misplaced. 4. That the finding of the learned assessing officer that ―Changing the income figure from Rs.27,43,360 to NIL cannot be considered as mistake apparent from the record‖ is also not a finding based upon facts on record. This finding is not a mistake suggested by the assessee to be apparent on record in view of the facts and the points of law as discussed above. This finding being rendered extraneous to the issue is liable to be ignored. 5. For that the appellant craves leave to add, alter, amend and/or rescind any of the above submissions made in the statement of facts/grounds of appeal at the time of or before the hearing of the appeal.

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4 ITA No.389/2014 be less than returned income and as per provisions of section 154 of the Act, changing the income figure from Rs.27,43,360/- to NIL cannot be considered as mistake apparent from the record. Finally, the AO raised tax demand along with interest of Rs.8,24,967/- and rejected the petition filed u/s.154 of the Act vide order dated 20.11.2013. 5. Aggrieved with the order of AO, the assessee filed appeal before the CIT(A). However, the CIT(A) observed that NRI status of the assessee is not apparent mistake on record committed by the AO/CPC and determination of status cannot be covered under apparent mistake but a substantive issue and dismissed the appeal of the assessee. The observations of the CIT(A) at page 2 of the order are as under :- 3. During the course of appeal hearing, a written submission was filed which is nothing but the repetition of grounds of appeal. It is submitted that the appellant is an NRI and salary income which has been offered to tax is exempt. However, the NRI status of the appellant is not apparent mistake on record committed by the AO/CPC and determination of status cannot be covered under apparent mistake but a substantive issue. In any case, the status shown by the appellant and income offered for taxation has been duly accepted and it cannot be said that a mistake has taken place in the order of the AO. Since there is no apparent mistake on record, no rectification of mistake could have been done by the AO. In view of the same, the AO is correct in rejecting the petition filed by the appellant u/s.154. 6. Aggrieved by the order of CIT(A), the assessee filed an appeal before the Tribunal, wherein the Tribunal vide order dated 30.11.2015 considering the submissions of assessee and findings of both the lower authorities, remitted the matter back to the file of AO to verify regarding actual status of the assessee and the number of days spent abroad and dispose of the rectification petition filed by the assessee u/s.154 of the Act. The observation of the Tribunal at page 3 is as under :-

5 ITA No.389/2014 ―7. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case. 8. It was the contention of the assessee that he has stayed more than 181 days outside India, therefore, the status is a non-resident and tax payable is Nil. However,. inadvertently while filing the return of income, a mistake has taken place which could have been rectified under section 154 of the Act. In support of his claim, Id counsel submitted that in order to establish the non-resident status, the assessee has furnished copy of passport, wages statement and the original TDS certificates for the assessment year, which are On record and finds mention in the order u/s.154 of the AO. However, it is not clear from the assessment order whether the assessee has stayed more than 180 days abroad. In the impugned order, the Id CIT(A) has stated that the status shown by the assessee and income offered for taxation has been duly accepted and it cannot be said that a mistake has taken place but that is in reference to the initial processing of return u/s.143(1) of the Act. The order of the Id CIT(A) is not a speaking order nor there is any attempt to verify the NRI status of the assessee vis-a-vis the number of days he had spent abroad before adjudicating on the petition validity u/s.154 of the Act. 9. So far as rectification u/s.154 is concerned, we find from a general perusal of the provisions laid down under section 154(2)(b), which reads that "Subject to other provisions of this section, the authority concerned —(b) shall make such amendment for rectifying any such mistake which has been brought to its notice by the assessee...." The above definition clearly lays down that the AO is well competent to rectify any mistake, which is brought to its notice. In the instant case the status of the assessee as NRI is not clear either from the assessment order nor from the impugned order of the Id CIT(A). There are plethora of judgments that once the assessee has established that he is not subject to be taxed on a certain income but however, it has been returned, then such returned income becomes a mistake which is apparently clear and the assessee gets the right to modify the same by filing petition u/s.154 of the Act. In this view of the matter, we, set aside the order of the Id CIT(A) on this issue and restore the matter back to the file of the AO to verify regarding the actual NRI status of the assessee, the number of days spent abroad and dispose of the rectification petition filed by the assessee u/s.154 of the Act. Hence, the appeal is restored back to the file of the AO for necessary verification and consider for rectification petition u/s.154 afresh. 10. In the result, appeal of the assessee is treated as allowed for statistical purposes. 7. Being aggrieved with the above order, the Department has filed a miscellaneous application before the Tribunal stating that when the return

6 ITA No.389/2014 of income was voluntarily filed by the assessee declaring certain total income, no part of which is claimed as exempt from tax in the return of income itself. Therefore, the assessee cannot make a fresh claim after the completion of proceedings u/s.143(1) of the Act and submitted that the order passed by the Tribunal constitutes a mistake apparent from record as the direction of the Tribunal to verify the status of assessee and rectify if necessary the status so returned is not in conformity with the law laid down by the Hon’ble Jurisdictional High Court in the case of M/s Orissa Rural Development Corporation Ltd. (2012) 247 CTR 137(Orissa). 8. The Tribunal considered the submissions of department and the decision of the Hon’ble jurisdictional High Court in the case of M/s Orissa Rural Development Corporation Ltd. (supra) and vide order dated 31.10.2017 recalled the order dated 30.11.2015 observing as under :- ― 4. We have considered the submissions of ld. DR and perused the record along with the judicial pronouncement. From the observations of the Tribunal made in the order dated 30.11.2015, we found that there is apparent mistake from the record as the Tribunal has restored the matter back to the file of the AO and directed to verify regarding the actual status of the assessee, the number of days spent abroad and dispose of the rectification petition filed by the assessee u/s.154 of the Act. However, as per the Hon’ble Jurisdictional High Court in the case of M/s Orissa Rural Development Corporation Ltd. (2012) 247 CTR 137(Orissa), if there is any mistake in the return filed, the same can only be corrected by way of filling a revised return and not by way of filing a petition before the AO. Accordingly, we are of the substantive view that the order of the Tribunal be recalled and, we direct the Registry to fix the case for hearing afresh in usual course.‖ 9. Now, the appeal is being fixed for fresh hearing before us. 10. Ld. AR before us submitted that income from salary was not considered for computation of tax and income tax computed without including salary, which is being reflected in the return of income and ld.

7 ITA No.389/2014 AR referred to page 2 of the paper book, wherein the computation of income tax worked out as under :-

10.1 Ld. AR further submitted that the assessee has clearly mentioned his residential status as “NON-RESIDENT INDIAN” and the employer category as “OTHERS” thereby indicating that he was not employed either in public sector or in government ending any scope for deeming his salary income to be earned in India. The ld. AR also submitted that the TDS amount of Rs.1,35,546/- in the return of income pertains to the interest income, deducted at the rate of 30.9% on the bank interest of Rs.4,38,648/-. In other words, the total TDS figure constitutes the TDS on interest income only thereby establishing that the entire salary income has

8 ITA No.389/2014 not suffered from TDS and the salary income is exempt from income tax. Therefore, the ld. AR of the assessee submitted that the correct total income of the assessee is Rs.4,97,448/- after excluding the amount of salary income of Rs.22,45,912/- being the salary income in the capacity of a crew member of a foreign ship which was received outside India and is not deemed to have been received or on his behalf in India and did not accrue/arise in India and hence is not deemed to have accrued/arisen in India and exempt u/s.5 of the I.T. Act. 10.2 Ld. AR further submitted that the CIT(A) observed that the NRI status of the assessee is not apparent mistake on record committed by AO/CPC and termination of the status cannot be covered under apparent mistake but a substantive issue, however, neither the CPC nor the AO has disputed the status of the assessee. The ld. AR relied on the following judgments :- i) ACIT Vs. Rupam Impex, ITA No.472/RJT/2014 (Rajkot Tribunal). 11. Contra, ld. DR relied on the order of lower authorities. 12. We have heard rival submissions and perused the record available on record. The substantive dispute that arises for consideration in the present case is as to whether the authorities below are justified in denying the claim of the assessee, which has not been claimed in the return of income filed by the assessee. In the present case, the assessee filed return of income electronically u/s.139(1) of the Act on 27.04.2012 and the same was processed u/s.143(1) of the Act on 23.06.2012. Subsequently, the assessee filed a rectification application electronically

9 ITA No.389/2014 before the CPC, Bangalore on 03.09.2012 and on the directions of CPC dated 21.09.2012 the assessee filed an application u/s.154(2)(b) of the Act to the AO as the rectification cannot be done by the CPC due to some technical reasons. However, the AO stated that changing the figure cannot be considered as mistake apparent on record and rejected the rectification application on 20.11.2013. On appeal, the CIT(A) confirmed the action of AO, whereas the contention of assessee to rectify the return of income is that salary income was excluded for computation of income and income tax computed without including salary income and therefore, the actual total income of the assessee is Rs.4,97,448/- after excluding the amount of income of Rs.22,45,912/- being the salary income in the capacity of a crew member of a foreign ship which was received outside India and is not deemed to have been received by or on his behalf in India and claimed for exemption u/s.5 of the Act. 13. Ld. DR before us relied on the decision of Hon’ble Jurisdictional High Court in the case of Orissa Rural Housing Development Corporation Ltd. Vs. ACIT, (2012) 343 ITR 316, wherein the Hon’ble High Court has held that if there is any mistake in the return filed, the same can only be corrected by way of filling a revised return and not by way of filing a petition before the AO. The observation of the Hon’ble High Court is as under :- “12. It is quite possible and natural that in submitting a return, some bona fide omission or wrong statement may have occurred. In order to obviate this possibility the legislature has made provisions in section 139(5) enabling an assessee to furnish a revised return. Thus, the assessee has a right to file revised return if he discovers any omission or any wrong statement in the originally filed return.

10 ITA No.389/2014 Such a revised return can be furnished at any time before expiry of one year from the end of the relevant assessment year or the completion of the assessment, whichever is earlier. Thus, the statute provides safeguard to an assessee in case he discovers any omission or wrong statement in his original return to file a revised return. The further requirement is that this omission or wrong statement in the original return must be due to a bona fide inadvertence or mistake on the part of the assessee. 13. There is a distinction between a revised return and a correction in the originally filed return. If an assessee files an application for correcting a return already filed or for making some amendments therein, it would not certainly mean that he has filed a revised return. Such a petition is not recognized under the Income Tax Act. The basis of assessment is the return filed by the assessee. If a revised return is filed under Section 139(5) of the I.T. Act the assessment can be completed only on the basis of revised return and not otherwise. 14. Where an assessee, following mercantile system of accounting, furnishes a return of income on the basis of accrued income, the filing of a revised statement of income, on the ground that such interest income had not been received during the relevant previous year, is of no avail. In absence of the revised return as provided under Section 139(5), the Assessing Officer is bound to make assessment on the basis of original return. Further, a change over from mercantile system to cash system is not permissible by filing a revised return much less a revised statement of income. 15. There is no provision under the Income Tax Act to enable an assessee to revise his income by way of filing a revised statement of income as has been done by the petitioner. In the instant case, a revised statement of income was filed on 08.12.2008 before the Assessing Officer after commencement of assessment proceedings. If such revised statement of income is accepted, then the very purpose of enacting Section 139(5) under the I.T. Act for filing revised return shall be frustrated and provision of said section becomes redundant. During the relevant time, as the assessee had maintained the accounts on mercantile basis, it was bound to file the returns on that basis. 16. The Hon'ble Supreme Court in the case of Goetze (India) Ltd. (supra), held that the Assessing Officer has no power to entertain fresh claim made by the assessee after filing of the original return other than by filing of revised return. 17. Law is well-settled that when the statute requires to do certain thing in certain way, the thing must be done in that way or not at all. Other methods or mode of performance are impliedly and necessarily forbidden. The aforesaid settled legal proposition is based on a legal maxim "Expressio unius est exclusion alteris", meaning thereby that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner and following of other course is not permissible. (See Taylor v. Taylor [1876] 1 Ch.D.426; Nazir Ahmed v. King

11 ITA No.389/2014 Emperor AIR 1936 PC 253; Ram Phal Kunduv. Kamal Sharma [2004] 2 SCC 759 and Indian Bank's Association v. Devkala Consultancy Service AIR 2004 SC 2615). 18. Therefore, we are of the view that the learned Assessing Officer is fully justified in completing the assessment under Section 143(3) of the I.T. Act on the basis of the original return filed under Section 139(1) without taking into consideration the revised statement filed on 08.12.2008 in absence of the revised return as contemplated under Section 139(5) of the I.T. Act and the CIT is also justified in confirming the view of the learned Assessing Officer.‖

12 ITA No.389/2014 open to the Appellate authorities to consider the claim and adjudicate upon the same. The observations of the Hon’be High Court are as under:- ―A long line of authorities establish clearly that an assessee is entitled to raise additional grounds not merely in terms of legal submissions, but also additional claims not made in the return filed by it. [Para 10]

From a consideration of decision of the Supreme Court rendered in the case of Jute Corpn. of India Ltd. v. CIT [1991] 187 ITR 688/[1990] 53 Taxman 85 , it is clear that an assessee is entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised. It cannot, however, be said that they have no jurisdiction to consider the same. They have the jurisdiction to entertain the new claim. They may choose not to exercise their jurisdiction in a given case is another matter. [Para 11]

Further the observation of the Supreme Court in the case of Jute Corpn. of India Ltd. (supra ) to the effect 'if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made….' or 'that the ground became available on account of change of circumstances or law,' does not curtail the ambit of the jurisdiction of the appellate authorities stipulated earlier. They do not restrict the new/additional grounds that may be taken by the assessee before the appellate authorities to those that were not available when the return was filed or even when the assessment order was made. The appellate authorities, therefore, have jurisdiction to deal not merely with additional grounds, which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed. The first part viz ., 'if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made….' clearly relate to cases where the ground was available when the return was filed and the assessment order was made but 'could not have been raised' at this stage. The words are 'could not have been raised' and not 'were not in existence'. Grounds which were not in existence when the return was filed or when the assessment order was made fall within the second category viz., where 'the ground became available on account of change of circumstances or law.' [Paras 12 and 13] It is indeed a question of exercise of discretion whether or not to allow an assessee to raise a claim which was not raised when the return was filed or the assessment order was made. As held by the Supreme Court in the case of Jute Corpn. India Ltd. (supra) there may be several factors justifying the raising of a new plea in appeal

13 ITA No.389/2014 and each case must be considered on its own facts. However, such cases include those, where the ground though available when the return was filed or the assessment order was made, was not taken or raised for reasons which the appellate authorities may consider valid. In other words, the jurisdiction of the appellate authorities to consider a fresh or new ground or claim is not restricted to cases where such a ground did not exist when the return was filed and the assessment order was made. [Para 15]

The conclusion that the error in not claiming the deduction in the return of income was inadvertent cannot be faulted for more than one reason. It is a finding of fact which cannot be termed perverse. There is nothing on record that militates against the finding. The revenue has not suggested much less established that the omission was deliberate, mala fide or even otherwise. The inference that the omission was inadvertent is, therefore, irresistible. [Para 21] 16. Further, the Hon’ble Bombay High Court in the of Sanchit Software and Solutions (P.) Ltd. Vs Commissioner of Income Tax [2012] 25 taxmann.com 123 (Bom.) held that the revision application filed by the Tax Payer for claiming exemption of Dividend Income inadvertently included as taxable in the Annual Return Form, should be considered. The observations of the Hon’ ble High Court are as under :- “Assessing Officer not to take advantage of assessee's ignorance • In any civilized system, the assessee is bound to pay the tax which he liable under the law to the Government. The Government on the other hand is obliged to collect only that amount of tax which is legally payable by an assessee. The entire object of administration of tax is to secure the revenue for the development of the country and not to charge assessee more tax than that which is due and payable by the assessee. It is in aforesaid circumstances that as far back as in 11-4-1955 the Central Board of Direct Tax had issued a circular directing Assessing Officer not to take advantage of assessee's ignorance and/or mistake. Therefore, the above Circular should always be borne in mind by the officers of the respondent -revenue while administering the said Act. [Para 5] Fundamental error in order of Commissioner • There was a fundamental error in the order of CIT as it proceeds on the erroneous basis that the assessee had admittedly not claimed the benefit of sections 10(34) and 10(38) in respect of its dividend income and long term capital gains on sale of shares respectively in its return of income. In fact, in the return of income, the assessee had admittedly sought to exclude its dividend income and long term capital gains from sale of shares under section 10 as

14 ITA No.389/2014 is evident from the return of income. However, in the return of income as filed originally on the assessee by mistake, omitted to exclude the dividend income and income from long term capital gains from the total income being declared by it. [Para 6] Conclusion • In view of the above relevant extracts of the return of income it is clear that the Commissioner committed a fundamental error in proceeding on the basis that no deduction on account of dividend income and income from capital gains under section 10 was claimed. Therefore, there was an error on the facts of the order of Commissioner and the same was not sustainable. [Para 7]‖

15 ITA No.389/2014 18. The Hon’ble Apex Court the case of Goetze (India) Ltd. [2006] 157 Taxman 1 (SC) has held as under :- “4. The decision in question is that the power of the Tribunal under section 254 of the Income-tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the Assessing Officer to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the Income-tax Appellate Tribunal under section 254 of the Income-tax Act, 1961. There shall be no order as to costs.‖

“265. Taxes not to be imposed save by authority of law No tax shall be levied or collected except by authority of law.” 21. Further, the Circular No: 14(XL35) dated 11 April 1955 issued by the Central Board for Direct Taxes (CBDT) in the context of Refunds and Reliefs due to the assessee, wherein the CBDT has instructed that the Officers of the Department should not take advantage of ignorance of the Tax Payer with regards to his rights. Rather, the Tax Officer should

16 ITA No.389/2014 consider it as their duty to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs. The Officers should take the initiative in guiding a Tax Payer where proceedings or other particulars before them indicate that some refund or relief is due to him. The circulars issued by the CBDT are binding on the Income-tax Authorities under section 119(1) of the IT Act.

The power of entertaining the claim vests with the Appellate Authorities based on the facts and circumstances of the case. The power of the Appellate Authorities to consider claims made based on material already on record is co- terminus with the power of the Assessing Officer. The failure to advert to the claim in the original return or the revised return cannot denude the Appellate Authorities of their power to consider the claim, if, the relevant material is available on record and is otherwise tenable in law. Any other view will set at naught the plenary powers of Appellate Authorities. [Para 12.5] 23. We find the decision of Hon’ble Madras High Court fortifies that both Assessing and Appellate Authorities are to consider fresh claims even otherwise than by revised return. 24. Similarly the Rajkot Bench of the Tribunal in case of ACIT Vs. Rupam Impex, ITA No.472/RJT/2014 for the assessment year 2008-2009

17 ITA No.389/2014 order dated 21.01.2016, relying on the decision of Hon’ble Bombay High Court in the case of Dattatraya Gopal Bhotte vs. CIT [(1984) 150 ITR 460 (Bom), has held as under :- ―7. When this appeal was called out for hearing, Shri Anjaria, learned Departmental Representative, still proceeded with justifying the stand of the Assessing Officer. When we put it to him as to how could the Assessing Officer on one hand agree that the figures set out in his computation of taxable income in the assessment order are wrong, and yet decline to adopt the correct figures, he had nothing much to say except to play reliance on the stand of the Assessing Officer. He said that the Assessing Officer should not be faulted for accepting the claim made by the asseessee. Shri Pandey, learned Commissioner (DR), goes a step further. He submits that pointing out the correct figures of profit and depreciation amounts to a new claim by the assessee which cannot be made except through a revised return. He submits that since the claim of the assessee, as made in the income tax return, was accepted and the assessee could not have made a fresh claim, without a revised return, the Assessing Officer was justified in not adopting the figures of the profit and depreciation as per profit and loss account on record. He vehemently supports and justifies the stand of the Assessing Officer. He submits that the CIT(A) committed a grave error in granting the impugned relief. 8. We are appalled by the arguments of the learned Departmental Representatives, even as we understand the compulsions of unenviable task, that they have, in pursing this appeal. Here is a case in which the figures set out in the assessment order are admittedly incorrect. What is stated to the profit as per profit and loss account is not the profit as per the profit and loss account. It is profit as stated to be, in the computation of income by the assessee- though wrongly, the profit as per profit and loss account, but clearly at variance with the profit and loss account on the assessment record. Clearly, the Assessing Officer did not even apply his mind to the material on record. He did a simple cut and paste job from the statement of taxable income filed by the assessee. The starting point of his computation of income was incorrect, he accepts it but still fights shy of giving effect to the natural corollaries of discovering this mistake. If there is a mistake, it is to be rectified. There cannot be any justification of Assessing Officer’s inertia in this respect. The same is the position with respect to the depreciation figure, and the same is the stand of the Assessing Officer. 9. A lot of emphasis is placed on the fact that the mistake was committed by the assessee himself which has resulted in the error creeping in the assessment order as well. Instead of being apologetic about the complete non application of mind to the facts

18 ITA No.389/2014 and making a mockery of the scrutiny assessment proceeding itself, the Assessing Officer has justified the mistake on record on the ground that it is attributed to the assessee. The income tax proceedings are not adversarial proceedings. As to who is responsible for the mistake is not material for the purpose of proceedings under section 154; what is material is that there is a mistake- a mistake which is clear, glaring and which is incapable of two views being taken. The fact that mistake has occurred is beyond doubt. The fact that it is attributed to the error of the assessee does not obliterate the fact of mistake or legal remedies for a mistake having crept in. It is only elementary that the income liable to be taxed has to be worked out in accordance with the law as in force. In this process, it is not open to the Revenue authorities to take advantage of mistakes committed by the assessee. Tax cannot be levied on an assessee at a higher amount or at a higher rate merely because the assessee, under a mistaken belief or due to an error, offered the income for taxation at that amount or that rate. It can only be levied when it is authorised by the law, as is the mandate of Art. 265 of the Constitution of India. A sense of fairplay by the field officers towards the taxpayers is not an act of benevolence by the field officers but it is call of duty in a socially accountable governance. If authority is needed even for justifying this approach to the taxpayers, one need not look beyond the circulars issued by the CBDT itself. In Circular No. 14, which has been taken note of by the Hon’ble Bombay High Court in the case of Dattatraya Gopal Bhotte vs. CIT [(1984) 150 ITR 460 (Bom)], the Board has these words of advice for the field officers : "..................Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist taxpayer in every reasonable way, particularly in the matter of claiming and securing any relief and in this regard the officers should take initiative in guiding the taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would in the long run benefit the Department for it would inspire confidence in him that he may be sure of getting a square deal from the Government........" 10. It is heartening to note that the CBDT has given such humane guidance to the field officers. The best thing that the field officers can do to enhance the respect for and trust in the Department, is to follow these valuable words of advice in letter and in spirit, but then, sometime overzealous, even if well meaning, efforts to collect the revenue end up sacrificing these humane niceties on the way, and thus derail the efforts of the CBDT to earn taxpayer’s confidence and trust. That must not be allowed to happen. An action or inaction which erodes any taxpayer’s faith in Indian tax and judicial system does not do any of us any good. The well meaning advice given by the CBDT must be implemented to the fullest extent. As to what is binding nature of this advice, we may only refer to s. 119 of the Act and Hon’ble Supreme Court’s judgment in the case of UCO Bank

19 ITA No.389/2014 vs. CIT [(1999) 237 ITR 889 (SC)]. Hon’ble Supreme Court has time and again held that the circulars of the CBDT are legally binding on the Revenue and that this binding character attaches to the circular even if they be found not in accordance with the correct interpretation of section or they depart or deviate from such construction. The advice contained in the circular, which is reproduced above, is also legally binding on all the field officers. It is indeed a pity that even after such a pragmatic approach being conveyed to the field officers in no uncertain terms, a pedantic approach, as adopted by the Assessing Officer, is adopted in practice. It does not end here. When the first appellate authority gives relief in such deserving cases, the agony of the taxpayer is not allowed to come to an end. The appeals against the relief granted by the first appellate authority are filed as a matter of routine. One can understand the young Assessing Officers being overzealous in their approach and making such mistakes, something is needed to be done to ensure that the appeals are not filed before the higher forums as a matter of routine. Only if the field authorities are little more cautious, and stay away from such pedantic approach, such thoughtful initiatives and pragmatic approach of the Government, at the highest level, will earn more goodwill and greater trust at the ground level. As we are dismissing this appeal, and confirming the relief granted by the learned CIT(A), we make it clear that while we are not awarding any costs in this case, we must put in a word of caution here. There has to be proper mechanism to ensure that such frivolous appeals are not filed. However, if that does not happen and these frivolous appeals continue to clog the system, it is only a matter of time that the Tribunal starts awarding costs, in such cases, as a measure to deterrence to the officers concerned. We hope that does not happen.‖ 25. We apply and following the judicial decisions to the present case and find that the assessee is a NRI, worked as a crew member of foreign ships during the previous year relevant to the assessment year 2011- 2012 and was not disputed by the AO and CIT(A). In the rectification proceedings the assessee as required by the AO has produced original copy of passport, Acknowledgement of ITR-1 for the assessment year 2011-2012, the wages statement and original TDS certificate and also explained that the assessee stayed for 181 days in India in the previous year and pursuant to section 6(1) of the Act if an individual is resident in

20 ITA No.389/2014 India for more than 182 days or more during a financial year, he is considered as resident of India for tax purposes and the entire income earned in or outside India would be taxable in India. Section 6 of the Income Tax Act reads as under :- Residence in India. 6. For the purposes of this Act,— (1) An individual is said to be resident in India in any previous year, if he— (a) is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more ; or (b) [* * *] (c) having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty days or more in that year.‖ 26. In the present case, the contention of the ld. AR is that the assessee is NRI and that the salary income was wrongly offered in the return of income and if such salary income is excluded from the total income, as the assessee has stayed for 181 days in India, the income received by the assessee which accrued to him outside India during such year, does not fall under the scope of total income and referred to section 5(1)(c) of the Act, which is as under :- “Section 5(1)(c) of the Income- Tax Act, (1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which- (a) is received or is deemed to be received in India in such year by or on behalf of such person; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year; or (c) accrues or arises to him outside India during such year:

21 ITA No.389/2014 Provided that, in the case of a person not ordinarily resident in India within the meaning of sub- section (6) of section 6, the income which accrues or arises to him outside India shall not be so included unless it is derived from a business controlled in or a profession set up in India. 27. Ld. DR could not bring out any new material to controvert these submissions of ld. AR. We find the ld. AR referred to the computation of income filed by the assessee at page 2 of the paper book, wherein it was mentioned that the assessee received salary for 184 days outside India and claimed exemption u/s.5(1)(c) of the Act, we are of the substantive opinion that the matter requires further examination and verification of facts by the AO. Accordingly, we restore the disputed issue to the file of AO and we direct the assessee to substantiate its stay in India for claim of exemption and the assessee shall cooperate in submitting the details for early disposal of the case. If the assessee substantiates its stay in India for 181 days, the AO is directed to exclude the income that was wrongly offered in the return of income after examining the actual NRI status of the assessee. It is nevertheless to say that the AO shall provide adequate opportunity of hearing to the assessee before passing the order. Thus, we allow the grounds of appeal of the assessee for statistical purposes. 28. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 17/05/2018. Sd/- Sd/- (N. S. SAINI) (PAVAN KUMAR GADALE) ऱेखा सदस्य / ACCOUNTANT MEMBER न्यानयक सदस्य / JUDICIAL MEMBER कटक Cuttack; ददनाांक Dated 17/05/2018 प्र.कु.मि/PKM, Senior Private Secretary

22 ITA No.389/2014 आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अपीलाथी / The Appellant- 1. Manoj Kumar Nayak, Plot No.N-5/416, IRC Village, Bhubaneswar-751015 2. प्रत्यथी / The Respondent- JCIT(OSD), International Taxation, Bhubaneswar आयकर आयुक्त(अपील) / The CIT(A), 3. आयकि आयुक्त / CIT 4. 5. विभागीय प्रविविवि, आयकर अपीलीय अविकरण, कटक / DR, ITAT, Cuttack गार्ा पाईल / Guard file. 6. आदेशािुसार/ BY ORDER, सत्यापऩत प्रनत //True Copy// (Senior Private Secretary) आयकर अपीऱीय अधिकरण, कटक / ITAT, Cuttack