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Income Tax Appellate Tribunal, “A’’ BENCH: BANGALORE
Before: SHRI B. R. BASKARAN & SMT. BEENA PILLAI
PER B.R. BASKARAN, ACCOUNTANT MEMBER:
The assessee has filed these two appeals challenging the orders passed by Ld CIT(A)-12, Bengaluru and they relate to the assessment years 2009-10 and 2010-11. Both the appeals were heard together and are being disposed of by this common order. The assessee is aggrieved by the decision of Ld. CIT(A) in confirming the orders passed by the A.O. rejecting the rectification applications filed u/s 154 of the Income-tax Act,1961 ['the Act' for short] in both the years.
IT(IT)A Nos.255 & 256/Bang/2021 Sri Rajat Deb, Bangalore
Page 2 of 5 2. The Ld. Counsel appearing for the assessee submitted that the assessee is employed outside India during these two years under consideration. The assessee’s status was “non-resident” under the Indian Income Tax Act in these years and actually there was no necessity to file return of income. However, the assessee filed returns of income for these two years on the advice of a tax practitioner. While filing return of income, the salary earned outside India was declared under the head “Income from salary” even though the same is not taxable in India. However, entire salary was claimed as deduction under Chapter VIA of the Act. Accordingly, the taxability was shown as NIL in both the years. However, while processing return u/s 143(1) of the Act, the deduction u/s Chapter VIA was restricted to Rs.1.00 lakh and accordingly tax demand of Rs.1,71,055/- and Rs.2,66,342/- was raised for assessment year 2009-10 and 2010-11 respectively.
The Ld A.R submitted that the assessee, however, filed revised return of income for AY 2010-11 within the time limit available u/s 139(5) of the Act omitting the salary income as well as deduction claimed under Chapter VIA. However, till date, the revised return of income has not been processed.
The Ld A.R submitted that the assessee also filed rectification petitions u/s 154 of the Act for both the years and it was not disposed of by CPC. Subsequently, the assessee learnt that the rectification petitions were transferred to the assessing officer for disposing them of physically. When the matter was pursued before the AO, the assessing officer passed the impugned order u/s 154 of the Act rejecting the rectification petitions filed by the assessee for both the years holding that there is no mistake apparent from record.
IT(IT)A Nos.255 & 256/Bang/2021 Sri Rajat Deb, Bangalore
Page 3 of 5 5. The Ld CIT(A) also dismissed both the appeals holding that there is no mistake apparent from record. The Ld A.R submitted that the appeal filed before Ld CIT(A) for AY 2009-10 was time barred by 74 days. Even though the Ld CIT(A) refused to condone the delay, yet he proceeded to dispose of the appeal on merits for that year. Hence it should be deemed that the Ld CIT(A) has condoned the delay.
The Ld. A.R. submitted that the assessee is a non-resident and hence the income earned outside India is not taxable in India as per the provisions of section 5(2) of the Act. He further submitted that there is no estoppel against law. Hence, what could not be taxed under the Income Tax Act could not be subjected to tax by the A.O. on the reasoning that the assessee has voluntarily offered the same in the Income tax return. The Ld. A.R. submitted that the assessee is not liable to declare salary income earned outside India for taxation. However, he has erroneously declared the same under the head “income from salary” and claimed entire income as deductible under Chapter VIA. It was done so only to demonstrate that the said salary income is not taxable in India. Hence, salary earned outside india has been offered wrongly in the return of income and the same is a mistake apparent from record. Hence the AO should have rectified the same u/s 154 of the Act. Accordingly, he submitted that the matter may be restored to the A.O. with a direction to rectify the mistake.
On the contrary, the Ld. D.R. supported the order passed by Ld. CIT(A).
Having heard the rival contentions, we are of the view that there is merit in the submissions made by the Ld. A.R. There is no dispute
IT(IT)A Nos.255 & 256/Bang/2021 Sri Rajat Deb, Bangalore
Page 4 of 5 with regard to the fact that the assessee is a non-resident. It is the submission of the assessee that the salary income was earned by him abroad and hence the same is not liable to tax under the Act u/s 5(2) of the Act. There is merit in the submission of the assessee that the A.O. could not assess an income, which is not liable to tax under the Income Tax Act even if it was offered by the assessee in its return of income. As rightly pointed out by Ld. A.R., there is no estoppel against law and, in our view, the income erroneously offered in the return of income would constitute mistake apparent from record.
With regard to the action of Ld CIT(A) in refusing to condone the delay of 74 days in filing appeal before him for AY 2009-10 and then proceeding to dispose of the appeal on merits, we notice that the Hon’ble Madras High Court considered an issue relating to condonation of delay in the case of Vijayeswari Textiles Ltd vs. CIT (2003)(131 Taxman 833) on identical circumstances, i.e., in the case before Hon’ble Madras High Court also, the Tribunal had refused to condone the delay, but disposed the appeal on merits also. The Hon’ble Madras High Court observed as under:- “7. Matters relating to condonation of delay are indeed discretionary and are normally left to the Tribunal and this court will not ordinarily interfere with the discretion. In this case, as we have already pointed out, the Tribunal did not stop with the order declining to condone the delay, but considered the matter on merits and has practically treated the appeal as being properly before it and has answered the question brought before it with reference to the material placed on record. It is in the circumstances, we hold that the Tribunal was in error in not condoning the delay. The question regarding the correctness of the Tribunal’s holding that the delay is not to be condoned is therefore answered in favour of the assessee and against the Revenue….” According to the ratio of the above said decision, if the appeal is adjudicated on merits, then refusing to condone the delay is an error.
IT(IT)A Nos.255 & 256/Bang/2021 Sri Rajat Deb, Bangalore
Page 5 of 5 10. Accordingly, we set aside the orders passed by Ld CIT(A) in both the years under consideration and restore them to the file of the AO to examine the claim of the assessee raised in the petitions filed u/s 154 of the Act in accordance with the law. In respect of AY 2010-11, the assessee has filed revised return of income and if the said revised return of income is processed, then the issue would get settled. The AO may take appropriate action which suits him.
In the result, both the appeals of the assessee are treated as allowed for statistical purposes. Order pronounced in the open court on 8th Oct, 2021