Dhondiram Tukaram Shinde At Murti Vs Asst. Director of Income Tax (ITAT Pune)
Pune ITAT: Tax Cannot Be Collected Merely Because Taxpayer Mistakenly Offered a Non-Taxable Receipt in ITR – Goetze (India) Does Not Restrict ITAT’s Power to Grant Legitimate Relief
The Pune ITAT granted relief to a retired Maharashtra Police Department employee who had inadvertently offered certain non-taxable/capital receipts as “Income from Other Sources” in his return. The assessee had declared total income of ₹33.77 lakh, but his daughter, who prepared the return, mistakenly included three receipts as taxable income.
The three amounts wrongly offered were ₹15,90,442 towards retirement gratuity, ₹10,10,000 towards sale proceeds of agricultural land and ₹10 lakh representing a Post Office fixed deposit, aggregating to about ₹36 lakh. CPC processed the return under Section 143(1) on that basis, resulting in a substantial tax demand. The assessee’s rectification application was unsuccessful.
Unfortunately, the assessee repeated the same mistake even in the revised return. The first appellate authority refused relief by relying on the Supreme Court decision in Goetze (India) Ltd. v. CIT, reasoning that a fresh claim not made through the return could not be entertained, and suggested that the assessee approach the jurisdictional PCIT for correction.
The ITAT held that this understanding of Goetze (India) was misplaced. The Supreme Court itself had expressly clarified that the restriction discussed in Goetze concerned the Assessing Officer’s power to entertain a fresh claim otherwise than through a revised return and did not impinge upon the powers of the ITAT under Section 254.
The Tribunal further relied upon CBDT Circular No. 14(XL-35)/1955 dated 11.04.1955, which recognises the duty of tax authorities to compute the correct income in accordance with law and assist taxpayers in securing relief legitimately due to them.
Importantly, relying on the Bombay High Court decision in Balmukund Acharya v. DCIT, the ITAT reiterated that where an assessee, because of mistake, misconception or lack of proper advice, is over-assessed, the tax authorities are required to assist him and ensure that only the legitimate tax actually due is collected. There can be no estoppel against the statute merely because the assessee himself mistakenly offered an amount to tax.
The Tribunal noted that the government gratuity of ₹15,90,442 was admittedly not taxable. As regards the agricultural-land sale proceeds of ₹10.10 lakh and the ₹10 lakh Post Office FD, the assessee claimed that these were also non-taxable. Instead of deciding those factual aspects itself, the ITAT restored the matter to the jurisdictional AO to verify the nature of all three receipts and grant appropriate relief in accordance with law.
The appeal was accordingly allowed for statistical purposes.
Key takeaway: Income-tax is leviable on what is legally taxable—not on what an assessee mistakenly declares as taxable in the return. Even where the mistake is repeated in a revised return, appellate authorities/ITAT are not barred by Goetze (India) from granting lawful relief. The Department’s duty is to determine the correct tax liability and not retain tax merely because of an inadvertent mistake by the taxpayer.
Cases Discussed:
- Balmukund Acharya vs. DCIT (Bombay High Court), (2009) 310 ITR 310 (Bom)
- Goetze (India) Ltd. vs. CIT (Supreme Court), (2006) 284 ITR 323 (SC)
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal filed by the assessee is directed against the order dated 24.12.2025 of the Ld. Addl. / JCIT(A)-2, Jaipur relating to assessment year 2020 21.
2. Facts of the case, in brief, are that the assessee is a retired person from government service on 31.12.2018. He was employed with the Police Department. He filed his return of income for the impugned assessment year declaring total income of Rs.33,77,080/-. Post-retirement the assessee received retirement benefits from the government in the form of Gratuity and maturity proceeds of Rs.10.00 lakhs on FD with Post office. Apart from this, the assessee received an amount of Rs.10,10,000/- on account of sale of agricultural land. While filing the return of income the daughter of the assessee, who is studying BSC Nursing, ignorantly considered the agricultural land sale of Rs.10,10,000/-, Gratuity amount of Rs.15,90,442/- and FDs with Post Office (Sr. Citizen) of Rs.10,00,000/- as income of the assessee though these amounts are not taxable. The CPC while processing the return u/s 143(1) considered the above items as income from other sources and processed the return and created a demand of Rs.9,70,690/-. The assessee filed a rectification application but without any success. Thereafter, the assessee filed an appeal before the Ld. Addl. / JCIT(A) who dismissed the appeal by observing as under:
6.2 After careful consideration of the submission and facts of the appellant case, it is observed from original return of income filed on 30.09.2020 that the appellant filed his Return of Income on 30.09.2020 for A.Y. 2020-21 showing an income of Rs.33,77,080/- wherein income under head of ‘income from other sources’ included of Rs.36,72,474/-. The receipts declared under head of income from other sources of Rs.36,72,474/-, including the receipt of Rs.10,10,000/- on account of sales proceeds of agricultural land, receipt of Rs.15,90,442/- on account of gratuity, and receipt of Rs.10,00,000/- on account of investment in post office fixed deposit. The return of income was processed/s 143(1) of the Income Tax Act on 27.11.2020 at same income raising demand of Rs.9,87,870/-.
6.2.1 Further, it is observed from revised return of income filed on 30.11.2020 that the appellant filed his Return of Income on 30.11.2020 for A.Y. 2020-21 declaring total income of Rs.34,77,080/- wherein income under head of ‘income from other sources’ included of Rs.37,72,474/-. The receipts declared under head of income from other sources of Rs.37,72,474/-, including the receipt of Rs.11,10,000/- on account of sales proceeds of agricultural land, receipt of Rs.15,90,442/- on account of gratuity, and receipt of Rs.10,00,000/- on account of investment in post office fixed deposit. The return of income was processed/s 143(1) of the Income Tax Act on 07.12.2020 at same income raising demand of Rs.10,50,460/-.
6.3 Considering all the facts and submission of the appellant, it is noted that the appellant has inadvertently and incorrectly considered receipts under head of “Income from Other Sources”, viz (i) the receipt from Gratuity on retirement is exempt under section 10(10) of the Act, (ii) Sales proceeds of agricultural land is not taxable under the Act, and (iii) the amount of fixed deposit represents capital investment is not income.
Here, it is important to mention that the powers of the first appellate authority are coterminous with that of the assessing officer and that the appellate authority can do what the assessing officers ought to have done. The Supreme Court of India in the case of Goetze (India) Ltd vs CIT [TS-21-SC-2006-O] dated 24.03.2006 has held that new claims need not be accepted by assessing officers when made by assessee’s through a letter, if the same is not claimed in return filed under section 139(1) as well as 139(5). The appellant has made same mistake in original return of income as well as in revised return of income.
Considering all the facts of case and in light of the Supreme Court of India’s Decision as mentioned above, the fresh claim of the appellant regarding considered taxable income offered in ITR as exempt income is not allowed. The appellant has suggested to approach office of the jurisdictional PCIT for correction in return filed by you regarding inadvertently considered of receipts for taxation under head of “Income from Other Sources”. Ground no. 1 raised by the appellant regarding this issue is accordingly dismissed.
3. Aggrieved with such order of the Ld. Addl. / JCIT(A) the assessee is in appeal before the Tribunal by raising the following grounds:
1. The learned Commissioner of Income Tax (Appeals) erred in confirming the action of the CPC/AO in treating the amounts of ₹36,00,442/- (comprising Gratuity ₹15,90,442/-, Agricultural Land Sale proceeds ₹10,10,000/-, and Post Office Fixed Deposit ₹10,00,000/-) as taxable income under the head “Income from Other Sources”, merely on the basis of inadvertent reporting in the return of income, without appreciating that the said receipts are either exempt in law or not income in the first place, and therefore not liable to tax.
2. The learned CIT(A) failed to appreciate that proceedings under section 143(1) are summary in nature and cannot be used to fasten tax liability on receipts which are ex facie not taxable and were included due to a bona fide and inadvertent mistake; and further failed to grant relief in accordance with settled legal principles that only real income can be brought to tax and tax cannot be levied without authority of law under Article 265 of the Constitution of India.
Appellant craves leave to add, amend, alter or withdraw any of the above grounds at the time of hearing.
4. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. Addl. / JCIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. It is an admitted fact that the assessee is an individual and a retired government employee who was earlier working with the Police Department, Government of Maharashtra. After the retirement the assessee received retirement benefits in the form of Gratuity aggregating to Rs.15,90,442/-. Out of the said retirement benefits the assessee opened a FD of Rs.10 lakhs with the Post office on 25.01.2019. Apart from this the assessee also received an amount of Rs.10,10,000/- towards sale of agricultural land. However, the assessee’s daughter field the return of income of her father and reported the following three items as income from other sources:
| a) | sale of agricultural land | Rs.10,10,000/- |
| b) | Gratuity (retirement benefit) | Rs.15,90,442/- |
| c) | FD with Post Office | Rs.10,00,000/- |
5. We find the CPC in the order passed u/s 143(1) treated the above three items as income from other sources. The assessee filed a revised return repeating the same mistake and the demand was perpetuated. In appeal, the Ld. Addl. / JCIT(A) upheld the action of the Assessing Officer, the reasons of which have already been reproduced in the preceding paragraphs. While doing so, he relied on the decision of Hon’ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT reported in (2006) 284 ITR 323 (SC) and held that the powers of the first appellate authority are co-terminus with that of the Assessing Officer and that the appellate authority can do what the Assessing Officer ought to have done. Further new claims need not be accepted by the Assessing Officers when made by the assessee through a letter if the same is not claimed in return filed u/s 139(1) as well as u/s 139(5). He suggested the assessee to approach the jurisdictional PCIT for correction in the return regarding inadvertent consideration of the receipts for taxation under the head ‘Income from other sources’.
6. We find the Hon’ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT (supra) 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.”
7. From the above decision it is clear that while the Assessing Officer cannot entertain a new claim without claiming the same through a revised return, however, the power does not impinge on the powers of the Income Tax Appellate Tribunal.
8. Further we find the CBDT vide Circular No.014(XL-35)/1955 dated 11.04.1955 has long back laid down the duty of its officer to compute correct income in law and even advice the assessee as to its benefit.
9. We find Hon’ble Bombay High Court in the case of Balmukund Acharya vs. DCIT reported in (2009) 310 ITR 310 (Bom) has held that if any assessee, under a mistake, misconceptions or on not being properly instructed is over assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected. It further held that if a particular levy is not permitted under the Act, tax cannot be levied applying the doctrine of estoppel. Since in the instant case admittedly the retirement benefits in shape of gratuity of Rs.15,90,442/- received from government is not taxable and since according to the Ld. Counsel for the assessee the amount received from sale of agricultural land of Rs.10,10,000/- and the fixed deposit with Post office of Rs.10 lakhs are also not taxable, therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Jurisdictional Assessing Officer with a direction to verify the nature of these receipts and upon satisfaction give necessary relief to the assessee. Needless to say the Assessing Officer shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
10. In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 14th August, 2026.
