SAMBHAVNATH INFRABUILD AND FARMS PVT. LTD, MUMBAI V. Dcit cent. cir7(3), Mumbai

ITA 2117/MUM/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 3222 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: G
• Assessment Year: 2017-2018
• Appeal Filed On: 21-11-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Revised return
• Section: 10; 154; 139; 115JB; 251; 119

Judgement Text

Page | 1 ITA no.2117/Mum/2021 Sambhavnath Infrabuild and farms Pvt. Ltd.; A.Y. 17–18 IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND SHRI PAVAN KUMAR GADALE, JM ITA No. 2117/Mum/2021 (Assessment Year 2017–18) Sa m b h a v n a t h I n f r a b u i ld a n d F a r m s P vt . L t d . Su c c e s s o r t o B e l l is s i m o Re a lt o r s P vt . L t d . , 4 1 2 , F l o o r–4 , 1 7 G Va r d h m a n Ch a m b e r , Ca wa s j i Pa t e l Ro a d , Ho r n im a n C ir c le , F o r t Mu m b a i-4 0 0 0 0 1 Vs. DCIT Circle 7(3) Room no. 655, 6 th Floor, Aayakar Bhavan, MK Road, Mumbai-400 020 (Appellant) (Respondent) PAN No. AALCS 1394 M Assessee by : Shri Vijay Mehta, AR Revenue by : Shri S. Anbuselvam, DR Date of hearing: 11.07.2022 Date of pronouncement : 26.07.2022 O R D E R PER PRASHANT MAHARISHI, AM: 01. This appeal is filed by Sambhavnath infrabuild and farms private limited [ Assessee/ Appellant] for assessment year 2017 – 18 against the order passed by The Commissioner of Income Tax, Appeals – 49, Mumbai [ The Ld CIT (A)] dated 30/9/2021 wherein appeal filed by the assessee against the order passed u/s 143 (3) of The Income Tax Act, 1961 (The Act) dated 25/11/2019 passed by the Asst Commissioner of Income Tax, Central Circle – 7 (3), Mumbai (The Ld AO) was dismissed. Page | 2 ITA no.2117/Mum/2021 Sambhavnath Infrabuild and farms Pvt. Ltd.; A.Y. 17–18 02. Assessee raised following grounds of appeal “1. On the facts and circumstances of the case and in law, the Hon'ble Commissioner of Income Tax (Appeals) -49, Mumbai erred in upholding the action of the Learned Assessing Officer ('Ld AO') by not granting exemption under section 10(38) of the Income tax Act, 1961 ('Act') in respect of an amount earned of Rs. 4,58,20,496 which was inadvertently offered to tax in the return of income filed by the appellant. 2. On the facts and circumstances of the case and in law, the Hon'ble Commissioner of Income Tax(Appeals) -49, Mumbai erred in upholding the action of the Ld AO by not granting exemption under section 10(38) of the Act in respect of an amount earned of Rs. 4,58,20,496 by treating the same as fresh claim instead of revised claim. 3) The appellant craves leave to add, amend, alter or delete the said ground of appeal.” 03. Fact shows that assessee is a company engaged in the business of construction of real estate. It filed return of income on 31/10/2017 at a total income of Rs 4 69,43,850/– Under normal provision and computed book profit u/s 115JB at ₹ 89,456,046/–. 04. Case of the assessee was selected for limited scrutiny Under CASS scrutiny system for two reasons (1) claim of any other amount allowable as deduction in schedule BP, 2) expenses incurred for earning exempt income. 05. During assessment proceedings, assessee submitted a letter on 10/10/2019 stating that out of inadvertent mistake, assessee has treated the long-term capital gain as taxable and offered to tax it in computation of income. Assessee requested that long-term capital Page | 3 ITA no.2117/Mum/2021 Sambhavnath Infrabuild and farms Pvt. Ltd.; A.Y. 17–18 gain of ₹ 45,820,496/– cannot be taxed in the hands of the assessee as it is exempt u/s 10 (38) of The Act. The learned AO did not find the above request acceptable for the reason that the accounts of the assessee are audited and also subject to tax audit, the case of the assessee is selected for limited scrutiny on the issues which did not cover the issue of long-term capital gain and therefore it cannot be examined under the limited scrutiny aspect. AO further stated that assessee has not filed any revised return of income but has made a claim during the assessment proceedings by way of a letter, which is not in accordance with law. Accordingly assessment order u/s 143 (3) of the act was passed on 25/11/2019 at the returned income of the assessee. 06. Assessee aggrieved with the order of the learned AO preferred an appeal before the learned CIT – A stating that long-term capital gain which is exempt has wrongly been offered by the assessee as a taxable, therefore, the learned AO should have reduced the income accordingly. Assessee further submitted even otherwise the appellate authorities have the power to allow fresh claim made during the assessment proceedings. The learned CIT – A held that it is an admitted fact that the assessee has not claimed the exemption in original return of income and neither filed any revised return of income. He further held that the claim that the impugned income was exempt from taxation within the meaning of Section 10 (38) of the act made by the assessee is a fresh claim and not a revised claim. The assessee has not claimed the said exemption in the return of income and neither filed any revised return and therefore acceptance of claim of the assessee tantamount to revision of the return of income itself. Accepting the submission of the assessee will amount to circumventing the provisions of the revision of the return of income and further assessee to a position of advantage against other assessees having made mistakes but there cases are not covered under scrutiny, which would not be proper. He further advised assessee to approach the central board of direct taxes u/s 119 (2) (b) of the act. He therefore held that additional claim of the Page | 4 ITA no.2117/Mum/2021 Sambhavnath Infrabuild and farms Pvt. Ltd.; A.Y. 17–18 assessee, which was a fresh claim, and not a revised claim, could not be entertained, as alternative mechanism for recourse is available in the act itself. Accordingly, he rejected the contentions of the assessee and dismissed the appeal. 07. Aggrieved with that order assessee is in appeal before us. The learned authorised representative submitted a paper book containing 67 pages. He referred to page number one, which is the computation of the total income. He demonstrated that assessee has offered long-term capital gain of ₹ 45,820,496 however while claiming exemption u/s 10 (38), it did not mention any amount in that column inadvertently and therefore the total capital gain of ₹ 45,820,496 was included in the total income. He submitted that this mistake was an inadvertent mistake. He referred to page number 7 – 9 of the paper book wherein a letter dated 10 October 2019 is placed for making requests to the learned assessing officer to correct the mistake while limited scrutiny assessment proceedings were going on. He submitted the tax could not be levied on assessee at a higher amount or at a higher rate merely because assessee under a mistaken belief due to an error offered income for taxation at that amount or at that rate. For this proposition he relied upon the decision of the coordinate bench in case of ACIT versus Roopam Impex (2016) 66 taxmann.com 181 he submitted that the fact that mistake has occurred is beyond doubt and the lower authorities have also not doubted the same. By a mistake it is also, a fact that assessee has been charged at the higher rate of taxes. He also referred to the administrative instructions for guidance of income tax officers on matters pertaining to assessment dated 11/4/1955 wherein it has been stated that revenue should not take advantage of an assessee’s ignorance to collect more tax out of him then is legitimately due from him. He further submitted that the limited scrutiny methodology restricts the power of the assessing officer against making undue enquiries however fresh claim can be raised, as there is no bar. Page | 5 ITA no.2117/Mum/2021 Sambhavnath Infrabuild and farms Pvt. Ltd.; A.Y. 17–18 08. He even otherwise submitted that during the course of appellate proceedings and alternative plea was raised before the learned CIT – A that appellate authorities are empowered to entertain the new claims. He submitted that there are no fetters on the powers of the appellate authorities to admit and entertain fresh claim before them. He referred to paragraph number 2.6 of submission of the assessee before the learned CIT – A wherein several judicial precedents were cited but the appellate authority decided not to permit such additional claim is to be raised by the assessee because of the reason that he was of the view that the additional claim of the assessee which was a fresh claim and not a revised claim, could not be entertained as alternative mechanism for recourse is available in the act itself which could be availed of as prescribed in Section 119 (2) (b) of the act. He submitted that the appellate authority could not shirk its responsibility by suggesting an alternative remedy. 09. He therefore submitted that the lower authorities are not justified in not granting the benefit of long-term capital gain which is wrongly offered by the assessee in its taxable income though exempt u/s 10 (38) of the act. 010. The learned departmental representative vehemently supported the orders of the lower authorities. He submitted that it is a case of a limited scrutiny; therefore, the assessing officer could not have looked into any other aspect of the assessment. He further stated that assessee had an option to file the revised return, which he did not of, and therefore merely by filing a letter, a claim cannot be entertained by the AO, as it is not in accordance with the law. He submitted that the honourable Supreme Court has already considered this aspect. He further submitted that even otherwise there is no evidence that the above sum is exempt u/s 10 (38) of the act. He therefore submitted that there is no infirmity in the orders of the lower authorities. Page | 6 ITA no.2117/Mum/2021 Sambhavnath Infrabuild and farms Pvt. Ltd.; A.Y. 17–18 011. We have carefully considered the rival contention and perused the orders of the lower authorities. Facts in this case clearly show that assessee has already filed its return of income, which was picked up for scrutiny by the learned assessing officer. During the course of scrutiny assessment proceedings, assessee submitted a letter on 10/10/2019 submitted that out of inadvertent mistake a long-term capital gain amounting to ₹ 45,820,496/– which should have been claimed as an exempt income, has been offered as taxable income erroneously and therefore, AO was requested to give effect to this while framing the assessment order u/s 143 (3) of the act. The assessing officer rejected such a request. We find that the only way in which a claim can be made, of course, u/s 139 (5) of the act, if a person having furnished return, discovers any omission or any wrong statement therein. This facility is granted to the assessee subject to certain timelines. If during that time line, the assessee does not correct its mistake of rectifying any omission or any wrong statement in the original return, assessee misses the bus with respect to such claim at least before the assessing officer. Therefore, there are no two views that when the assessment proceedings are going on, whether Under the limited scrutiny or complete scrutiny, if assessee makes a fresh claim without filing revised return, such claim cannot be entertained by the ld AO. This has been made abundantly clear by the honourable Supreme Court in no uncertain terms in 284 ITR 323 in Goetz India Ltd versus CIT. We do not find any infirmity in the order of the learned assessing officer in rejecting the claim of the assessee. The learned CIT – A has therefore correctly confirmed the order of the assessing officer to this extent. 012. The reliance placed by the learned authorised representative on the decision of coordinate bench in case of ACIT versus Rupam Impex (supra) does not help the case of the assessee, as the facts of that case did not relate to the fresh claim made by the assessee during the course of assessment proceedings without filing revised return. It was a case of rectification application u/s 154 of the Act. Even in the present case, the administrative instructions dated 11/4/1955 Page | 7 ITA no.2117/Mum/2021 Sambhavnath Infrabuild and farms Pvt. Ltd.; A.Y. 17–18 also do not apply, as it does not provide that in absence of revised return originally forgotten claims of assessee should be allowed. Hence, we do not find any infirmity in the action of the learned assessing officer in rejecting the claim not made by way of a revised return. There cannot be any distinction with respect to the fresh claim made during the course of either complete scrutiny or limited scrutiny, these are merely the risk parameters set up by the central board of direct taxes for scrutinizing the returns of the assessee and does not infringe on the rights of the taxpayers. 013. Accordingly, ground number 1 of the appeal is dismissed. 014. Ground number 2 is with respect to the fresh claim before the learned CIT – A. As per page number 11 of the order of the learned CIT – A at serial number 2.6 the assessee has made without prejudice to the claim rejected by the learned assessing officer during the assessment proceedings, requested the learned CIT – A allow its claim. Naturally, the authority of the appellate authorities are not restricted to not to allow/entertain such a claim. In the present case assessee made such a request before the learned CIT – A who did not permit such additional claims because of the reason that according to him there is an alternative mechanism of recourse is available to the assessee by filing a petition before the authority u/s 119 (2) (b) of the act. No doubt, it is the discretion of the appellate authority whether to permit or not to permit such additional claims. However exercise of such discretion should be reasonable and in accordance with the law. According to the provisions of Section 251 (1) of the act, the learned Commissioner (appeals) has been granted the power of reducing the assessment. Merely directing assessee to relegate to an alternative remedy at the highest forum of CBDT is not proper by refusing to exercise his authority. It is also not certain whether the assessee is eligible to approach CBDT in the facts of this case or not. In fact, the redressal of the grievance of the assessee, if it is genuine, all authorities are duty-bound to redress it at first instance, if they are empowered to do so. We find that in this case, Page | 8 ITA no.2117/Mum/2021 Sambhavnath Infrabuild and farms Pvt. Ltd.; A.Y. 17–18 the learned CIT – A is empowered to redress the grievance of the assessee and therefore we do not approve of the order of the learned CIT – A in not admitting the claim of the assessee. No doubt, this claim needs to verified, for this, proper remand powers could have been exercised before granting any relief. However, merely closing the doors to an agitating taxpayer cannot be appreciated in any circumstances. Accordingly the learned CIT – A was not justified in not admitting the fresh claim of the assessee. 015. We find that adequate details with respect to the earning of long- term capital gain by the assessee has been narrated by the learned CIT – A at paragraph number 2.2 of his order. However neither the AO nor the learned CIT – A has examined the same. Therefore, in the interest of justice, we direct the assessing officer to examine the nature of long-term capital gain earned by the assessee as well as its taxability and then decide the issue in accordance with the law. 016. Accordingly, ground number 2 of the appeal is allowed. 017. In the Result, appeal of the assessee is partly allowed. Order pronounced in the open court on 26.07.2022. Sd/- Sd/- (PAVAN KUMAR GADALE) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 26.07.2022 Sudip Sarkar, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, Page | 9 ITA no.2117/Mum/2021 Sambhavnath Infrabuild and farms Pvt. Ltd.; A.Y. 17–18 True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai