Taxpublishers.in - Monday Corner Answer to the Quiz for the week (03 Feb 2025)

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Quiz for the week (03 Feb 2025): Dinesh Ltd is engaged in manufacturing activity who filed its ITR within time in every assessment year. For the assessment year 2024-25, the assessee admitted an item of exempt income of Rs.15 lakhs as taxable income and paid tax thereon. The error was noticed only on 20th January, 2025. If the exempted income is excluded from the total income admitted in the ITR, it would result in a tax refund. Suggest a suitable course of action available to the assessee. Best Answer : The assessee in this case has filed return of income by including an exempt income in the total income and also paid income tax thereon. It is presumed that there is no pending proceedings against the assessee. Now the assessee wants to set right its tax record and also claim a refund in respect of an item which is not an income but inadvertently admitted and tax paid thereon. Section 139(8A) could not be used in view of the fact that the proviso to the section says that the updated return could not be filed where (i) it is a return of loss; or (ii) has the effect of decreasing the total tax liability on the basis of return furnished under section 139(1) or section 139(4) or section 139(5); or (iii) results in refund or increases the refund due on the basis of return furnished under section 139(1) or section 139(4) or section 139(5). Thus, the option of filing an updated return is not available. The assessee has paid tax on an item which is not an income and that the amount which has been paid by way of tax is sought by way of refund. Section 119(2)(b) says as under: "the Board may, if it considers desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorize any income-tax authority not being a Joint Commissioner (Appeals) or a Commissioner (Appeals) to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law". (Emphasis supplied) Therefore, the assessee may prefer section 119(2)(b) to claim refund of the excess tax paid on an item which is not an income. In Ena Chaudhari v. Asstt. CIT (2023) 455 ITR 284 (Cal) : 2023 TaxPub(DT) 384 (Cal-HC) the assessee inadvertently offered to tax exempted income relating to dividend and long-term capital gains. The mistake was realised only upon receipt of order under section 143(1) of the Act. The revised return could not be filed since it was barred by time limitation. The assessee filed revision application under section 264 before the Commissioner of Income-tax. The Commissioner dismissed the revision application holding that since the order passed under section 143(1) could not be called as erroneous and the assessee did not file a revised return, it could not be revised under section 264. The Court on writ, held the Commissioner in refusing to consider the revision application of the assessee under section 264 has misinterpreted and misconstrued the judgment of the Supreme Court in the case of Goetze India Ltd v. CIT (2006) 284 ITR 323 (SC) : 2006 TaxPub(DT) 1528 (SC) by equating with that of the jurisdiction of the Assessing Officer in considering the claim of any allowance / deduction by an assessee in the return or without filing any revised return. Accordingly, the assessee succeeded in the writ where the court remanded the matter back to the Commissioner concerned to reconsider and dispose of the application under section 264 by passing a reasoned and a speaking order within a specified time frame. Therefore, the taxpayer either approach the Board by taking recourse to section 119(2)(b) or file a revision petition under section 264 with the Commissioner for revision of order.

Quiz for the week (03 Feb 2025):

Dinesh Ltd is engaged in manufacturing activity who filed its ITR within time in every assessment year. For the assessment year 2024-25, the assessee admitted an item of exempt income of Rs.15 lakhs as taxable income and paid tax thereon. The error was noticed only on 20th January, 2025. If the exempted income is excluded from the total income admitted in the ITR, it would result in a tax refund. Suggest a suitable course of action available to the assessee.

Best Answer :

The assessee in this case has filed return of income by including an exempt income in the total income and also paid income tax thereon. It is presumed that there is no pending proceedings against the assessee. Now the assessee wants to set right its tax record and also claim a refund in respect of an item which is not an income but inadvertently admitted and tax paid thereon.

Section 139(8A) could not be used in view of the fact that the proviso to the section says that the updated return could not be filed where (i) it is a return of loss; or (ii) has the effect of decreasing the total tax liability on the basis of return furnished under section 139(1) or section 139(4) or section 139(5); or (iii) results in refund or increases the refund due on the basis of return furnished under section 139(1) or section 139(4) or section 139(5). Thus, the option of filing an updated return is not available.

The assessee has paid tax on an item which is not an income and that the amount which has been paid by way of tax is sought by way of refund. Section 119(2)(b) says as under:

"the Board may, if it considers desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorize any income-tax authority not being a Joint Commissioner (Appeals) or a Commissioner (Appeals) to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law". (Emphasis supplied)

Therefore, the assessee may prefer section 119(2)(b) to claim refund of the excess tax paid on an item which is not an income.

In Ena Chaudhari v. Asstt. CIT (2023) 455 ITR 284 (Cal) : 2023 TaxPub(DT) 384 (Cal-HC) the assessee inadvertently offered to tax exempted income relating to dividend and long-term capital gains. The mistake was realised only upon receipt of order under section 143(1) of the Act. The revised return could not be filed since it was barred by time limitation. The assessee filed revision application under section 264 before the Commissioner of Income-tax. The Commissioner dismissed the revision application holding that since the order passed under section 143(1) could not be called as erroneous and the assessee did not file a revised return, it could not be revised under section 264.

The Court on writ, held the Commissioner in refusing to consider the revision application of the assessee under section 264 has misinterpreted and misconstrued the judgment of the Supreme Court in the case of Goetze India Ltd v. CIT (2006) 284 ITR 323 (SC) : 2006 TaxPub(DT) 1528 (SC) by equating with that of the jurisdiction of the Assessing Officer in considering the claim of any allowance / deduction by an assessee in the return or without filing any revised return.

Accordingly, the assessee succeeded in the writ where the court remanded the matter back to the Commissioner concerned to reconsider and dispose of the application under section 264 by passing a reasoned and a speaking order within a specified time frame.

Therefore, the taxpayer either approach the Board by taking recourse to section 119(2)(b) or file a revision petition under section 264 with the Commissioner for revision of order.