ALPHA STUD&FARMS PVT LTD.,MUMBAI vs. ITO 12(1)(1), MUMBAI

The present appeal has been preferred by the assessee against the order dated 22.05.2019 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2014-15.

The grounds raised

The only issue raised by the assessee is against the order of Ld. CIT(A) upholding the order passed under section 154 of the Act dated 11.02.2019.

The facts in brief are that during the year the assessee filed the return of income on 29.11.2014 declaring loss of Rs.1,00,033/- under the normal provisions of the Act and Rs.29,90,059/- under MAT u/s 115JB of the Act. The case of the assessee was selected under scrutiny and order under section 143(3) of the Act was passed accepting the returned income as well as the book profit. Thereafter, the case of the assessee was reopened and assessment was framed vide order dated 23.08.2018 under section 143(3) read with section 147 of the Act. Subsequent to that , the assessee filed a rectification application dated 08.10.2018 before the AO requesting the AO to exclude the gain on sale of agricultural land Rs.69,69,260/- and agricultural income of Rs.2,51,803/- which were wrongly included in the book profit. The assessee requested by way of rectification application that the agricultural income as well as the gain on sale of agricultural land are not liable to be included while computing the book profit for the purpose of MAT and therefore the same may kindly be excluded. However, the AO rejected the rectification of application moved by the assessee vide order dated 11.02.2019 passed under section 154 of the Act which is reproduced as under: “The return of income was e-filed on 29/09/2013, declaring loss of Rs.1,00,033/- under normal provisions and Rs.29,90,059/- u/s 115JB of the Act. After the case return of income was processed u/s 143(1) with book profit u/s 115JB of Rs. 36,72,709/- which resulted demand of Rs. 154570/- as the assessee did not add provision of tax of Rs. 6,82,650/-. The assessee accepted the demand u/s 143(1) of Rs.154570/-and paid the same on 18/06/2015. Subsequently, the case was selected for scrutiny and the assessment was completed u/s 143(3) of the Act with book 3 M/s. Alpha Stud & Farms Pvt. Ltd. profit of Rs. 29,90,059/- under section 115JB of the Act on the basis of return of income. Thereafter, it was noticed that the assessee has book profit of Rs. 36,72,709/- u/s 115JB instead of Rs. 29,90,059/-. Hence, the case was re-opened by issuing notice u/s 148 and re-assessment proceedings was completed vide order u/s 143(3) r.w.s. 147 dated 23/08/2018 with book profit u/s 115JB of Rs. 36,72,709/- Thereafter, the assessee vide letter dated 08/10/2018 & 11/01/2019 brought to the notice that while passing the order u/s. 143(3) r.w.s 147 dated 23/08/2018 for the A. Y. 2014-15 credit for Regular Tax of Rs.1,54,570/- paid on 18/06/2015 was not given. On verification, the contention of the assessee is found to be correct and the mistake is apparent from records. Total book profit remained unchanged to Rs.36,72,709/-. Rectified u/s 154 of the Act. Given credit for TDS, prepaid taxes and regular taxes. Charged interest u/s. 234A, B, & C applicable as per Income Tax Act. 1961 and issued Demand notice and challan accordingly.”

Aggrieved by the order of AO, the assessee preferred an appeal before the Ld. CIT(A) who also dismissed the appeal of the assessee by observing that assessee has accepted the order passed under section 143(3) of the Act . Besides the assessee has not claimed the exemption of gain on sale of agricultural land of Rs.69,69,260/- and agricultural income of Rs.2,51,803/- in the return of income while computing book profit under section 115JB. While passing the appellate order , the Ld. CIT(A) referred to the decision of Hon’ble Supreme Court in the case of Goetz India Ltd. vs. CIT 284 ITR 323 (SC) and held that AO has rightly rejected the claim of the assessee. Finally, the Ld. CIT(A) came to conclusion that there is no mistake apparent on record in the order passed under section 143(3) of the Act and dismissed the ground raised by the assessee by observing that scope of rectification under section 154 of the Act is limited to the extent of mistake apparent on record. The aggrieved assessee is in appeal before the tribunal against the said order of the ld CIT(A).

After hearing both the parties and perusing the material on record, we observe that this is not in dispute that gain on sale of agricultural land and income from agriculture as stated hereinabove are exempt under section 10(1) of the Act. We find that while computing the income under the normal provisions of the Act the assessee has duly excluded the profit on sale of agricultural income and agriculture income of Rs.69,69,260/- and Rs.2,51,803/- respectively. However, while computing the MAT in the return of income, the same was not reduced from the book profit and hence this anomaly has taken place. We are quite convinced that this is an apparent mistake which the revenue should have rectified on its own. In our view, the income which is not taxable under the Act, can not be brought to tax on the technicalities of the matter that no exemption was claimed by the assessee. In the present case the gain on sale of agricultural land as well as income from agriculture are exempt from tax under the provisions of section 10(1) of the Act and therefore it has erroneously been included while computing the book profit. On the issue of observation of the Ld. CIT(A) that the AO could not have considered the rectification in view of the decision of Hon’ble Supreme Court in the case of Goetz India Ltd. (supra), but certainly the Ld. CIT(A) could have directed the AO to rectify this mistake as there is no bar on the ld CIT(A) to correct the apparent mistake nevertheless the mistake attributed to the assessee . We are therefore not in agreement with the finding of the Ld. CIT(A) and direct the AO to exclude the gain on sale of agriculture and also income from agriculture while computing the book profit under section 115JB of the Act. Consequently, the Ld. CIT(A)’s order is set aside and AO is

The appeal of the assessee is allowed.