Appeal Success: Court Orders Reassessment Excluding Foreign Income, Citing Missteps in Previous Tax Rulings.

The court allowed the appeal, overturning the decisions of the tribunal, CIT(A), and DCIT (International Taxation). It directed the assessing officer to reassess the case, excluding the foreign income under Section 10(6)(viii) of the Act, and to provide relief to the assessee within six weeks. The court found the tribunal's and CIT(A)'s decisions to be perverse, noting they ignored a binding High Court decision and relevant CBDT circulars, which constituted an error apparent on the face of the record. The court emphasized the duty of tax authorities to assist taxpayers and apply relevant provisions correctly.

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Issues Involved:
1. Whether the subject income could be taken to have accrued in India only for the reason that it was shown in the balance sheet of the assessee.
2. Whether the learned tribunal ought to have allowed the rectification application of the appellant for the assessment year 2012-13 based on the CBDT circular no. 13 of 2017.

Issue 1: Accrual of Income in India
The primary legal issue was whether the income of the assessee could be considered to have accrued in India merely because it was mistakenly shown as such in the balance sheet while filing the return of income on January 11, 2013. The assessee was employed by M/s. MSC Ship Management Hongkong Limited and was thus employed outside Indian territory. The return was processed, and an intimation under Section 143(1) was issued, computing the tax liability. The assessee filed an application for rectification under Section 154, which was rejected by the assessing officer, stating that the tax was correctly computed on the income return by the assessee. The assessing officer rejected the application for rectification on the grounds that it did not constitute a mistake apparent from the record.

Issue 2: Rectification Application Based on CBDT Circular No. 13 of 2017
The assessee filed another petition before the Deputy Commissioner of Income Tax (International Taxation), stating that the assessee was an NRI during the relevant period and that the income had been assessed without considering the NRI status. This petition was also rejected. The assessee then appealed to the CIT(A), contending that the assessing officer erred in ignoring the revised return filed on July 15, 2014, which claimed exemption under Section 10(6)(viii) of the Act. The CIT(A) dismissed the appeal, focusing on the scope of interference under Section 154 without addressing the merits. The tribunal also dismissed the appeal, considering the issue debatable and thus not suitable for rectification under Section 154. The assessee's subsequent application for rectification was dismissed by the tribunal.

Court's Analysis and Judgment
The court found the decisions of the tribunal and CIT(A) to be perverse. On the date of the tribunal's initial decision, there was a binding decision of the High Court in the case of Utanka Roy Vs. Director of Income Tax, International Taxation Transfer Pricing, Kolkata & Ors., which the tribunal ignored. This constituted an error apparent on the face of the record. The tribunal should have exercised its power under Section 154 to rectify this mistake.

The court noted that the Department had harshly dealt with the assessee, who had filed the return through a Chartered Accountant. The Department could have taken a more reasonable stand, especially since the law favored the assessee. The court referred to CBDT Circular No. 13/2017, which clarified that salary credited in the NRE account of a non-resident seafarer should not be included in total income merely because it was credited in an Indian bank account. The court also cited Circular No. 14 (XL-35) of 1995, which directed officers to assist taxpayers in claiming reliefs.

The court emphasized the duty of the Income Tax Officer to apply relevant provisions to determine the true taxable income, as held by the Supreme Court in Commissioner of Income Tax, Delhi Vs. Mahalaxmi Sugar Mills Co. Ltd. The court found that the assessing officer and CIT(A) had ignored these principles and the circulars issued by the Board.

The court also referred to the decision in Smt. Sumana Bandyopadhyay & Anr. Vs. The Deputy Director of Income Tax, (International Taxation), which addressed a similar issue, and the Supreme Court's ruling in ACIT vs. Sourashtra Kutch Stock Exchange, which held that non-consideration of a jurisdictional court's decision constitutes a "mistake apparent from the record."

Conclusion
The court allowed the appeal, quashing the orders of the tribunal, CIT(A), and DCIT (International Taxation). The court directed the assessing officer to review the assessment, exclude the foreign income under Section 10(6)(viii) of the Act, and grant relief to the assessee within six weeks.

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