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, but CIT(A) refused to entertain the claim since it wasn't raised before AO or through revised return. ITAT held that tax authorities must collect only legitimate dues per law, and assessee cannot be barred from claiming relief for over-assessment due to mistake, citing SC and HC precedents. Matter remitted to AO for fresh determination of subsidy's capital nature after proper verification and reasonable opportunity to assessee.

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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.

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