Case Law Details
P.S. Jagdish Vs DCIT (ITAT Chennai)
We noted that the return of income filed by the assessee was processed by CPC, Bengaluru and intimation u/s.143(1) of the Act was issued on 05.03.2012 (which is not disputed by Revenue). Admittedly, the AO passed rectification order on 20.06.2016. The claim of the assessee is that the rectification period i.e., limitation period expired on 31.03.2016 as per the provisions of Section 154(7) of the Act. We are of the view that when an order is rectified by an order of rectification u/s.154 of the Act, the time limit is to be reckoned as per the provisions of Section 154(7) of the Act. The provisions of section 154(7) of the Act makes it clear that except orders u/s.155 or 186(4) of the Act, no rectification order can be passed after the expiry of 4 years from the date of order sought to be rectified. Thus, the date of original order is the commencing point of limitation even if that order is in between these 4 years being subjected to a rectification on a later date, the commencing point of limitation remains the same date of the original order and not the later date of its subsequent rectification or subsequent application. This view is supported by the Hon’ble Jurisdictional High Court in the case of Kothari (Madras) Ltd., vs. AG(ITO), (1989) 177 ITR 538 Mad. In the present case before us there is no controversy about first order or second order but order under rectification is only the order passed by CPC, Bengaluru u/s.143(1) i.e., intimation or processing of return of income vide letter dated 05.03.2012. The rectification order by the AO u/s.154 of the Act was passed only on 20.06.2016. It means, that the rectification order u/s.154 of the Act in the present case can be passed upto 31.03.2016 and not beyond that. In the given facts and circumstances and above legal position discussed, we are of the view that the rectification order passed u/s.154 of the Act is clearly barred by limitation and hence, on this sole ground, the order is quashed.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
These two appeals of different assessees (assessee being brothers) are arising out of two different orders of Commissioner of Income Tax (Appeals)-6, Chennai in ITA No.233/CIT(A)-6/2016-17 & 232/CIT(A)-6/2016-17, vide orders of even date 30.01.2019. The rectification orders u/s.154 of the Income Tax Act, 1961 (hereinafter the ‘Act’), in both the cases were framed by the DCIT, Corporate Circle 2(2), Chennai vide orders of even date 20.06.2016 for the assessment year 2010-11.
2. Since the issues in both the appeals are common and facts are identical, we will first take up ITA No.1028/Chny/2019 in the case of Shri P.S. Jagdish. The assessee has raised the following issues:-
(i) Whether in the rectification proceedings u/s.154 of the Act, can the AO change the head of income from “Long Term Capital Gain – Non-indexed” (rate of tax 30%) to “Income from other Sources” (rate of tax 10%).
(ii) Whether the AO can make rectification u/s.154 of the Act without issuing show cause notice and without affording reasonable opportunity of being heard as mandated u/s.154(3) of the Act.
(iii) Whether the AO while acting u/s.154 of the Act can treat the income disclosed under the head “Long Term Capital Gain” being non-indexed, interest received as “income from other sources” which is highly debatable and contentious issue.
2.1 The assessee has also filed petition raising additional grounds of appeal and assessee has raised two effective additional grounds that the rectification carried out u/s.154 of the Act dated 20.06.2016 in intimation issued u/s.143(1) of the Act dated 05.03.2012 is barred by limitation. For this assessee has raised following two grounds:-
1) The order u/s 154 (dt.20.06.2016) in so far as it relates to shifting of LTCG of Rs.2,92,62,629/- admitted/assessed in the Intimation u/s.143(1) of the Act (dt. 05.03.2012) and treating the amount as “Income from Other sources” is barred by time.
2) The appellant submits that his omission to raise the issue of limitation in the appeal before the Commissioner (Appeals) and in the Grounds of Appeal before this Hon’ble Tribunal is bonafide.”
3. Brief facts are that the assessee has filed his return of income for the assessment year 2010-11 on 30.07.2010 declaring an income of Rs.56,16,95,700/-. The assessee subsequently revised his return of income on 06.10.2010 and claimed TDS of Rs.42,75,145/-. This return of income was processed u/s.143(1) of the Act by the CPC, Bengaluru. The assessee filed rectification petition before the jurisdictional AO vide petition dated 13.08.2014 requesting for giving credit for TDS of Rs.42,75,145/- as against the claim of TDS allowed u/s.143(1) of the Act by CPC, Bengaluru of Rs.14,62,550 /-. The assessee in his petition filed complete details in regard to credit of income as well as claim of TDS and TDS certificates in Form No.16A issued by HDFC and Citibank. The assessee vide letter dated 25.04.2016 reminded for passing of order u/s.154 of the Act, reminding AO of his application dated 13.08.2014. The AO passed rectification order on 20.06.2016 and considered the rectification petitions dated 13.08.2014 and 25.04.2016. The AO noted in his rectification order passed u/s.154 of the Act, that the CPC, Bengaluru calculated income on LTCG at Rs.66,13,11,764/- instead of Rs.60,69,05,824/- failing to give credit for the cost of acquisition for a sum of Rs.5,40,35,400/- as claimed by assessee and TDS credit claimed for a sum of Rs.27,43,065/- on Escrow account. The AO while considering this rectification noted that as far as TDS is concerned, the income from Escrow account of Rs.2,92,62,629/- is to be considered as ‘income from other sources’ as against claimed by assessee as ‘LTCG’. Aggrieved, assessee preferred an appeal before the CIT(A).
4. The CIT(A) confirmed the action of AO on the grounds raised by assessee but the assessee has not raised the ground of limitation before CIT(A). Now, the assessee before us has raised additional grounds on limitation i.e., the above reproduced Ground No.1 & 2.
5. At the time of hearing of this appeal, the ld. senior counsel for the assessee Shri T.N. Seetharaman, argued that the additional grounds raised by assessee could not be raised at the time of filing of appeal before the Tribunal and it could not be visualized by the assessee even during the appeal proceedings before the CIT(A). But in any case, the ld.counsel stated that this is a jurisdictional issue which goes to the root of the matter and it can be raised at any stage and the Tribunal being last fact finding body has to adjudicate this ground. The ld.counsel stated that the facts relating to this jurisdictional issue are very much available on record of the Tribunal and on the record of the AO as well as the CIT(A). Hence, there is no bar in admitting this ground. The ld.counsel for the assessee stated that this issue of admissibility of additional ground i.e., jurisdictional ground as regards to limitation is very much covered by various decisions of Hon’ble Supreme Court and Hon’ble Jurisdictional High Court. He particularly referred to the decision of Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. vs CIT, (1998) 229 ITR 383. When this fact was brought to the notice of ld.Senior Department Representative, Shri V. Sreenivasan, he could not controvert the above arguments made by the ld.counsel for the assessee. As we have noticed that this issue of limitation goes to the root of the matter and the assessee has raised the same by way of additional ground, in view of decision of Hon’ble Supreme Court in the case of NTPC, supra, we have no hesitation in admitting this ground. Hence, we admit this ground and will adjudicate.
6. The ld.counsel for the assessee took us through the facts of the case. He first of all, took us to the fact that assessee has filed his return of income for the assessment year 2010-11 on 30.07.2010 and the same was revised on 06.10.2010 in which TDS was claimed at Rs.42,75,145/-. This return of income was processed u/s.143(1) of the Act by CPC, Bengaluru vide intimation dated 05.03.2012. The assessee moved rectification application vide petition dated 13.08.2014 and reminder to the letter on 25.04.2016. The AO carried out rectification vide order dated 20.06.2016. Now, the ld.counsel stated that as per the provisions of the Act, Section 154(7) of the Act categorically put a time limit of 4 years and after expiry of 4 years from the end of financial year in which the order sought to be amended was passed will become barred by limitation. The ld.counsel for the assessee referred to relevant provision of sub-section (7) to section 154 of the Act, which reads as under:-
“154….
(7) Save as otherwise provided in section 155 or sub- section (4) of section 186, no amendment under this section shall be made after the expiry of four years from the end of the financial year in which the order sought to be amended was passed.”
6.1 However, the ld.counsel for the assessee has made submissions that in case the petitioner wishes to file a rectification application in time and which is to clarify that he has made an application for further credit of TDS in time, as made in this case on 13.08.2014 as provided u/s.154(2)(b) of the Act, the application has to be disposed off even beyond the time limit referred in Circular No.73(F.No.245/13/71-A&PAC) dated 07.01.1972, the CBDT has dealt with such a situation and ordered u/s.119(2)(a) as follows:
“In exercise of the powers conferred by clause (a) of sub-section (2) of section 119, the Central Board of Direct Taxes hereby orders that in all the cases where a valid application under clause (b) of sub-section (2) of section 154 had been filed by the assessee within the statutory time limit but was not disposed of by the authority concerned with in the time specified under sub-section (7) of section 154, it may be disposed of by that authority even after the expiry of the statutory time limit, on merits and in accordance with law.”
7. Contra, the ld. Senior DR argued that the assessee’s second application for rectification is dated 25.04.2016 and AO has considered this application and passed the rectification order and according to him this is within the limitation period. Apart from this, he could not controvert the above submissions made by the ld.counsel for the assessee.
8. We have heard rival contentions and gone through facts and circumstances of the case. We noted that the return of income filed by the assessee was processed by CPC, Bengaluru and intimation u/s.143(1) of the Act was issued on 05.03.2012 (which is not disputed by Revenue). Admittedly, the AO passed rectification order on 20.06.2016. The claim of the assessee is that the rectification period i.e., limitation period expired on 31.03.2016 as per the provisions of Section 154(7) of the Act. We are of the view that when an order is rectified by an order of rectification u/s.154 of the Act, the time limit is to be reckoned as per the provisions of Section 154(7) of the Act. The provisions of section 154(7) of the Act makes it clear that except orders u/s.155 or 186(4) of the Act, no rectification order can be passed after the expiry of 4 years from the date of order sought to be rectified. Thus, the date of original order is the commencing point of limitation even if that order is in between these 4 years being subjected to a rectification on a later date, the commencing point of limitation remains the same date of the original order and not the later date of its subsequent rectification or subsequent application. This view is supported by the Hon’ble Jurisdictional High Court in the case of Kothari (Madras) Ltd., vs. AG(ITO), (1989) 177 ITR 538 Mad. In the present case before us there is no controversy about first order or second order but order under rectification is only the order passed by CPC, Bengaluru u/s.143(1) i.e., intimation or processing of return of income vide letter dated 05.03.2012. The rectification order by the AO u/s.154 of the Act was passed only on 20.06.2016. It means, that the rectification order u/s.154 of the Act in the present case can be passed upto 31.03.2016 and not beyond that. In the given facts and circumstances and above legal position discussed, we are of the view that the rectification order passed u/s.154 of the Act is clearly barred by limitation and hence, on this sole ground, the order is quashed.
9. As regards to the other issues raised by various grounds noted above, we are refraining ourselves from adjudicating the same because on the issue of limitation, we have decided the appeal in favour of assessee and against Revenue. This appeal of the assessee is allowed.
10. As regards to the petitioner alternative claim before us regarding credit of TDS, we are convinced that in term of the above CBDT Circular No.73(F.No.245/13/71-A&PAC) dated 07.01.1972, the AO has to allow the credit of TDS as per law after verifying the TDS certificates. The AO is ordered accordingly.
11. Coming to ITA No.1029/Chny/2019, in the present case the return of income for assessment year 2010-11 in the case of Shri P.S. Shekar was filed on 30.07.2010 declaring an income of Rs.52,15,90,290/-. This return of income was revised on 06.10.2010 claiming TDS of Rs.40,40,143/-. This return of income was processed by CPC, Bengaluru on 29.03.2012. The assessee filed rectification petition dated 28.08.2014 and remainder to the rectification petition on 25.04.2016. The AO passed rectification order u/s.154 of the Act on 20.06.2016, in which the AO changed the head of income from “Long Term Capital Gain” to “Income from other Sources”. The facts and circumstances are exactly identical to the above discussed case and in the given facts and circumstances, the assessee has raised additional ground that the rectification order passed by the AO dated 20.06.2016 in regard to processing of return of income by issuing intimation u/s.143(1) of the Act dated 29.03.2012 is barred by limitation. For this, the assessee has raised these two grounds:
1) The order u/s 154 (dt.20.06.2016) in so far as it relates to shifting of LTCG of Rs.2,84,04,542/- admitted/assessed in the Intimation u/s.143(1) of the Act (dt. 29.03.2012) and treating the amount as “Income from Other sources” is barred by time.
2) The appellant submits that his omission to raise the issue of limitation in the appeal before the Commissioner (Appeals) and in the Grounds of Appeal before this Hon’ble Tribunal is bonafide.”
12. As regards this issue, we have already dealt in ITA No.1028/Chny/2018 in the case of Shri P.S. Jagdish above, taking a consistent view, we held that rectification order passed by AO u/s.154 of the Act is barred by limitation. As regards to the other issues raised by various grounds, we are refraining ourselves from adjudicating the same because on the issue of limitation, we have decided the appeal in favour of assessee and against Revenue. This appeal of the assessee is allowed.
13. As regards to the petitioner alternative claim before us regarding credit of TDS, we are convinced that in term of the above CBDT Circular No.73(F.No.245/13/71-A&PAC) dated 07.01.1972, the AO has to allow the credit of TDS as per law after verifying the TDS certificates. The AO is ordered accordingly.
14. In the result, both the appeals of the assessees are allowed.
Order pronounced in the court on 24th January, 2022 at Chennai.
