SHRI CHETANBHAI RAMJIBHAI AVIAIYA,SURAT vs. INCOME TAX OFFICER, WARD -3(2)(2), SURAT

Brief facts of the case are that assessee is an individual. The assessee while filing his return of income for assessment year 2014-15 offered Long Term Capital Gains (‘LTCG’ for short) of Rs.1.346 crores. The return of assessee was processed under section 143(1) by Central Processing Centre (CPC) Bengaluru and was accepted. The assessee thereafter filed on-line application under section 154 for rectification of assessment order before CPC, Bengaluru. The application of assessee was transferred to ACIT / Assessing Officer. In the application for rectification, the assessee contended that in the return of income, the assessee has shown LTCG on sale of agricultural land. The said agricultural land is situated outside the Municipal limit having population of less than 10,000. The assessee furnished the certificate of Talati and claimed that he was not liable to pay tax on capital gains as the land / asset sold by him was an agricultural land. The application of assessee was not accepted by Assessing Officer by holding that no prima facie adjustment can be made nor any addition of income can be 2 (A.Y 14-15) Sh. Chetanbhai R Aviaiya made by Assessing Officer during the processing of return under section 143(1) of the Act. Further, the Assessing Officer cannot go beyond the return except to computing tax or interest on adjustment of pre-paid tax. The Assessing Officer has no power to disturb the income disclosed in the return of income. Further, the assessee failed to furnish any revised return after taking into consideration all the facts of the case. And that there is no mistake apparent from the record / typographical error which required rectification. Aggrieved by the order of Assessing Officer the assessee filed appeal before Ld. CIT(A). Before Ld. CIT(A), the assessee made similar submission as made by the Assessing Officer. The Ld. CIT(A) after considering the submission of the assessee held that the mistake by assessee in computation of income and this mistake cannot be rectified under section 143(1) as it require examination of conduct and enquiry. The Assessing Officer rightly held that provision of under section 154 can only be invoked only to rectify the mistake apparent from the record. No enquiry or cross-verification is allowed in proceeding under section 154 and that the scope of section 154 is limited and there is no fault in the order of Assessing Officer. Further 3 (A.Y 14-15) Sh. Chetanbhai R Aviaiya aggrieved the assessee has filed present appeal before the Tribunal.

We have heard the submission of Ld. Authorized Representative (AR) for the assessee and the Ld. Sr. Departmental Representative (Sr-DR) for the Revenue. The ld. AR for the assessee submits that assessee has raised a very limited plea before Tribunal that while filing return of income, the assessee by mistake offered LTCG of Rs.1,346 crores. The application filed by assessee for rectification under section 154 was not accepted by Assessing Officer by taking view that jurisdiction to rectify the mistake is very limited. The Assessing Officer also held that assessee has not filed revised return of income. The ld. AR for the assessee invited our attention on the income tax return (ITR) acknowledgement and the computation of total income attached therewith. The Ld. AR for the assessee has shown us the working of LTCG offered in the return of income of Rs.1,346 crores. In the statement of LTCG, the assessee has shown sale of agricultural land. The assessee claimed index cost from 03.01.2009 and the asset / agricultural land was sold on 11.12.2013. Thus, the Ld. AR for the assessee submits that 4 (A.Y 14-15) Sh. Chetanbhai R Aviaiya assessee earned LTCG accordingly. As the land is situated in rural area and thus agricultural land is not a capital asset within the meaning of Section 2(14) of the Act.

The Ld. AR for the assessee submits that Central Board of Direct Tax (CBDT) in its Circular No.14(XL-35) dated 11.04.1955 clarified that it is the duty of Assessing Officer not to take advantage of ignorance of an assessee as to his rights rather their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard and the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him which would inspire confidence the benefit the department to inspire the general public / taxpayer. The Ld. AR for the assessee by referring the para -6 of the said Circular, he submits that intention of this circular is not that due should not be charged or that any favour should be shown to anybody in the matter of assessment / or that where investigation are called for, they should not be made. Whatever the legitimate tax, it must be assessed and must be collected. The purpose of the Circular is 5 (A.Y 14-15) Sh. Chetanbhai R Aviaiya merely to emphasise that the officer should not take advantage of an assessee’s ignorance to collect more tax than is legitimately due from him. The Ld. AR for the assessee further submits that the Circular is still having force as same has not been withdrawn and recall. The Circulars of CBDT is binding on all the officers of the department. The said Circular has been referred by various superior courts including of jurisdictional High Court in the case of Commissioner of Income-tax vs. Ahmedabad Keiser-E-Hind Mills Co. Ltd. (1981) 128 ITR486 (Guj). The Ld. AR for the assessee submits that in this case before first appellate authority (Appellate Assistant Commissioner (AAC) at relevant time), the assessee claimed that they are entitled for rebate @ 2%, on the export sales made during the year. Such ground relating to the claim was not raised before assessing officer. The AAC allowed to raise such claim and directed the assessing officer to gather the details and work out the rebate as mention in section 5(1)(iii) of Finance Act of 1964. On appeal by revenue before Tribunal the order of AAC was held as justified. The Ld. CIT(A) AR of the assessee also invited our attention on the answer on the reference to Hon'ble Jurisdictional High Court in 6 (A.Y 14-15) Sh. Chetanbhai R Aviaiya second last para of the decision wherein on it was held that clear position regarding the effect of the circular, it is obvious that in the instant case it was incumbent on the ITO to advise the assessee before us to claim relief under section 2(5)(a)(iii) if the proceeding or any other particulars before him at the stage of the original assessment indicated that the assessee was entitled to such relief under the provisions of the relevant Finance Act, 1965, so far as the order under reference is concerned. This question in the light of this circular of 1955 has not been examined by the Tribunal. What applies to the obligation of the ITO would also apply to all officers of the department concerned with the execution of the I.T. Act, 1961.

The Ld. AR for the assessee further submits that in a recent decision of co-ordinate Bench of Ahmedabad Tribunal in the case of Florence Education Trust Vs Income Tax Officer (Ex)-1 Ahmedabad in for A.Y. 2014-15 dated 04.01.2022, while dealing with the application under section 154 held that where assessee by filing its return of income inadvertently, filled up incorrect details in column “C” of its audit report as “No” against the column “whether the Trust is 7 (A.Y 14-15) Sh. Chetanbhai R Aviaiya registered under section 12A/12AA?” The return of income was processed under section 143(1) and the exemption available to the trust was withdrawn and demand was created. The assessee filed rectification application or e-portal of CPC, Bengaluru to rectify the order. The application of assessee was rejected and the action of Assessing Officer. The order of assessing officer was upheld by Ld. CIT(A). However, on further appeal before Tribunal the matter was restored back for afresh adjudication of application on merit and as per due process of law. The Ld. AR for the assessee submits that he has a limited prayer that the application of assessee under section 154 of the Act, for rectification of mistake may be restored to the file of Assessing Officer to adjudicate the same on merit on the fresh claim raised by assessee. The assessee may be granted liberty to prove his case as the assessee is not liable to pay tax on LTCG as the same is exempted. To support his contention, all submission, Ld. AR for the assessee relied upon the following decisions:  CBDT Circular No.14(XL-35) Dated 11.04.1955  CIT vs. Ahmedabad Keiser-E-Hind Mills Co. Ltd. (1981) 128 ITR 486 (Guj)  Bansal Prop build Pvt. Ltd. vs. CIT(A) dt.12.04.2022 8 (A.Y 14-15) Sh. Chetanbhai R Aviaiya  Florence Education Trust vs. ITO ITA No.618/Ahd/2019 dated 04.01.2022  Gujarat Gas Trading Co. Ltd. vs. CIT SCA No.2514/2011 dated 07.09.2016 (Guj)  Kiritkumar Hiralal Doriwala Vs Wealth Tax Officer (2008) 26 SOT 27 (Ahd-ITAT) 107 TTJ 31 (Ahd-ITAT)  CIT vs. Shelly Products (2003) 129 Taxman 271 (SC) 5. At the time of concluding his submissions, the Ld. A.R for the assessee invited our attention under section 237 which prescribed that if a person satisfies Assessing Officer that the amount of tax paid by him or on his behalf for treated by him or on his behalf for any assessment year, exceeding the amount which he is properly chargeable under the Act for that year, he shall be entitled to a refund of excess amount of tax.

On the other hand, Ld. Sr-DR for the Revenue supported the order of authorities below. The Ld. Sr DR for the revenue submits that there was no mistake which can be said an apparent mistake on the order passed by CPC, Bengaluru. The Assessing Officer while rejecting the application has given categorical reason for dismissal of application and Ld. CIT(A) after due consideration approved the order of Assessing Officer. The Assessing Officer has clearly held that the assessee has not (A.Y 14-15) Sh. Chetanbhai R Aviaiya filed any revised return of income thus the said claim of assessee was not admissible.

In the alternative and without prejudice submissions, the Ld. Sr- DR for the Revenue submits that in case if the Hon'ble Bench find that there is any merit on the claim of the assessee, in such event the matter may be restored back to the file of Assessing Officer for consideration of such facts and proper verification of facts and adjudication of such pea on merit. But the relief as claimed by the assessee cannot be granted to the assessee unless the facts are properly examined by the assessing officer under four corners of the law.

We have considered the rival submission of both the parties. We find that there is no dispute on the facts of the present case that at the time of filing of return of income, assessee offered LTCG on sale of agriculture land and made payment tax of Rs.34,87,890/- . As per Ld. AR of the assessee, the assessee realized his mistake and filed an application for rectification under section 154 of the Act by taking plea that the agriculture land is not falls under the definition of capital asset. The said application of assessee was dismissed by Assessing Officer by holding that in the order under 10 (A.Y 14-15) Sh. Chetanbhai R Aviaiya section 143(1) no prima facie adjustment can be made nor any levy of additional income can be made by the Assessing Officer. The Assessing Officer cannot visit beyond that return except to compute tax or interest after adjustment of prepaid taxes. The Assessing Officer have no power to disturb the income disclosed in the return of income. And the assessee has failed to furnish any revised return, after taking into consideration all the facts of the case. The Ld. CIT(A) confirmed the action of Assessing Officer with the observation that the “mistake is by the appellant in computation of income”.

Now before us, the Ld. AR for the assessee vehemently relying upon the CBDT Circular No.14(XL-35) dated 11.04.1955 and submitted that though the assessee committed mistake which was realized later on, however, it was the duty of officer of the Department not to take the advantage of ignorance of as about his right. The Ld. AR for the assessee submits that the CBDT’s Circular dated 11.04.1955 has not been withdrawn till now and various courts including Hon'ble jurisdictional High Court by referring the said CBDT’s Circular dated 11.04.1955 held that it is the policy of Department that office should not take advantage 11 (A.Y 14-15) Sh. Chetanbhai R Aviaiya of ignorance of the ae about his right. Besides reliance on various case laws, Ld. AR for the assessee vehemently relied on the decision of Hon'ble jurisdictional High Court in the case of Ahmedabad Keiser-E-Hind Mills Co. Ltd. (supra), wherein the Hon'ble jurisdictional High Court while referring the said CBDT”s Circular dated 11.04.1955 held that is incumbent on the Income Tax Officer to advice the assessee to claim relief if any preceding either at this stage of original am that the assessee was entitled to such relief.

The Ld. AR for the assessee invited our attention under section 237 which prescribed that if a person satisfies Assessing Officer that the amount of tax paid by him or his on behalf for treated by him or on his behalf for any assessment year, exceeding the amount which he is properly chargeable under the Act for that year, he shall be entitled to a refund of excess. We are in full agreement with the submission of Ld. AR for the assessee that as per mandate of Section 237 if the amount of tax on behalf of assessee is paid in excess of the amount, he is properly chargeable; the assessee is entitled for refund of it.

Our view is also strengthen by the decisions Hon'ble Supreme Court in Goetez (India) Ltd. Vs CIT (2006) 284 ITR 323/158 Taxman 1 (SC) while discussing the scope of power of Tribunal under section 254 clarify though the assessing officer is not empower to entertain new claim without the assessee revising the return of income, however, this restriction is not impinge on the power of Tribunal under section 254. Further Hon'ble jurisdictional High Court in the case of CIT vs Mitesh Impex 367 ITR 85 (Guj), Hon'ble Bombay High Court in the case of CIT Vs 13 (A.Y 14-15) Sh. Chetanbhai R Aviaiya Pruthvi Broker & Shareholders Pvt. Ltd. 349 ITR 236 (Bom), Hon'ble Delhi High Court in the case of CIT Vs Sam Global Securities Ltd. (2013) 360 ITR 682 (Delhi), wherein it was held that Ld. CIT(A) as well as Tribunal have jurisdiction to consider additional claim. It was also held that such claims need not be those which became available on account of change of circumstances of law but which were even available when return of income was filed. (emphasis added by us).

As we have admitted such claim, thus, the issue is restore back to the file of assessing officer to adjudicate the same in accordance with law. The Assessing Officer to examine the fact that whether the LTCG earned on sale of such agricultural land, is exempt or not as the assessee claimed that the agriculture land sold by the assessee does not fall within the definition of asset as define section 2(14) of the Act.

In the result, the appeal of the assessee is allowed for statistical purposes.