2024 (6) TMI 806 - AT - Income Tax

Assessee cannot be denied relief from over-assessment due to mistake in declaring capital receipt as revenue income

ITAT Delhi allowed assessee's appeal regarding excise duty subsidy taxability. Assessee mistakenly declared capital receipt as revenue income in return, ... Taxability of Excise Duty subsidy - Characterization of receipt - claiming it to be capital in nature and not taxable - CIT(A) dismissed the claim stating it was not made before the AO or revised in the RO - As argued Excise Duty subsidy received by the assessee was wrongly declared as revenue income by the assessee and incorrectly offered to taxation as chargeable income while filing the return of income - CIT(A) has denied to entertain such claim of the assessee on the ground that such claim was neither made before the AO in the assessment proceedings nor the ROI was revised - assessee states that the higher taxable income has been offered by including Excise Duty subsidy as revenue income out of sheer mistake and inadvertence on the part of the assessee. HELD THAT:- It is trite that the authorities under the Act are under sacrosanct obligation to act in accordance with law. Tax can be collected only as provided under the Act. If an assessee, under a mistake, misconception or not being properly instructed, is over assessed, the authorities under the Act are required to ensure that only legitimate tax dues are collected. This is the view which flows from innumerable judgments including Shelly Products [2003 (5) TMI 4 - SUPREME COURT], S. R. Koshti [2004 (12) TMI 62 - GUJARAT HIGH COURT], Ester Industries [2009 (3) TMI 11 - DELHI HIGH COURT] and.Pruthvi Brokers & Shareholders (P.) Ltd. [2012 (7) TMI 158 - BOMBAY HIGH COURT] The essence of these decisions are that mere admission on the part of the assessee with respect to an addition/disallowance in its original return or in revised return would not ipso facto bar an assessee from claiming an expense or disputing an income, if it is otherwise permissible under law. It is thus well settled that if a particular income is not taxable under the Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. Revenue authorities cannot enforce untenable actions of the assessee against it which led to declaration of income of higher amount incorrectly. It is thus open to assessee to show that it was over assessed under erroneous impression of law or facts even if it is attributable to the mistake of assessee. So viewed, we do see potency in the argument laid on behalf of the assessee that the CIT(A) committed error in not making enquiry into legitimacy of relief so claimed and grant him appropriate relief if found in order. In our considered view, the action of the CIT(A) is in defiance of the judicial precedents on the issue and thus cannot be countenanced. Assessee cannot be prevented from raising such additional claim before the CIT(A) merely because the ROI could not be revised or claim was not put before Assessing Officer. The factual matrix towards character of Excise Duty subsidy however has not been verified by AO or by the CIT(A). It would thus be in fitness of things to remit the issue to the file of the AO rather than that of CIT(A) for fresh determination of correctness of claim. AO shall exclude the Excise Duty subsidy from the ambit of chargeable income in accordance with law on being satisfied with the claim of the assessee that such subsidy is to be regarded as capital in nature in the context of the case. The issue is accordingly set aside to the file of the AO for proper determination of taxability of Excise Duty subsidy in question in accordance with law after providing reasonable opportunity to Assessee in this regard. Appeal of the assessee is allowed for statistical purposes. Issues:Appeal against order of CIT(A) concerning non-taxability of Excise duty subsidy under Income Tax Act, 1961 for AY 2018-19.Analysis:The appeal filed by the assessee challenges the order of the Commissioner of Income Tax (Appeals) regarding the non-taxability of Excise duty subsidy under the Income Tax Act, 1961 for the assessment year 2018-19. The assessee sought to press Ground No.1.3, which questioned the refusal of the CIT(A) to grant the claim of Excise duty refund as non-taxable under the Act. The issue arose as the Excise duty subsidy was wrongly offered as taxable income by the assessee. The CIT(A) dismissed the claim stating that no such claim was made before the Assessing Officer (AO) and therefore, was not maintainable. The assessee argued that the incorrect classification of income as taxable by mistake does not render it taxable. The Revenue did not object to the assessee's contentions, and the Tribunal carefully considered the submissions and material on record.The Excise duty subsidy received by the assessee was incorrectly declared as revenue income and offered for taxation, although the assessee contended it was capital in nature and not taxable. The CIT(A) dismissed the claim as it was not raised before the AO or revised in the Return of Income (ROI). The assessee argued that even if mistakenly over-assessed, the Revenue is obligated to assess the correct income. The Tribunal agreed with the assessee, citing various judicial precedents, emphasizing that if income is not taxable under the Act, it cannot be taxed based on estoppel or equitable doctrine. The CIT(A) erred in not examining the claim's legitimacy and granting relief if found valid. The issue was remitted to the AO for proper determination of taxability, allowing the assessee to provide necessary evidence.The Tribunal held that the CIT(A) erred in not considering the claim of the assessee regarding the non-taxability of the Excise duty subsidy. The issue was set aside to the AO for a fresh determination in accordance with law, providing the assessee with a reasonable opportunity to support the exclusion of the subsidy from taxation. Consequently, Ground No.1.3 of the appeal was allowed for statistical purposes, and the appeal was partly allowed.