Taxpublishers.in - Monday Corner Answer to the Quiz for the week (10 Jun 2024)

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Quiz for the week (10 Jun 2024): Yogesh a resident individual employed in a company owned 3 acres of land acquired for Rs.20 lakhs in financial year 1999-2000. The Fair Market Value (FMV) as on 1st April, 2001 was Rs.26 lakhs. In June, 2022 the lands were acquired under RFCTLARR Act,2013 for Rs.120 lakhs. The assessee computed capital gain and paid tax thereon besides filing ITR for the assessment year 2023-24. In April, 2024 he became aware that the said capital gain is not chargeable to tax and accordingly wants refund of tax paid by him. You are requested to advise Yogesh for getting refund of tax erroneously paid by him. Best Answer : From the facts given in the query it is apparent that the assessee assumed the transfer of land as liable for capital gain and paid tax besides filing ITR. He could have filed a revised return under section 139(5) at any time 3 months prior to the end of the relevant assessment year. Unfortunately, he became aware of the fact that the capital gain is not liable for income-tax only in April, 2024 and hence could not file a revised return for the assessment year 2023-24 which could have been filed before 31st December, 2023 for seeking refund of tax. It may be noted that the CBDT vide Circular No.36 of 2016 has provided income-tax exemption in respect of compensation received under RFCTLARR Act, 2013. Also, the assessee cannot file "updated return" under section 139(8A) since the first proviso to section 139(8A) says that the benefit of updated return would not be available if the updated return has the effect of decreasing the total tax liability determined on the basis of return furnished under sections 139(1) / 139(4) / 139(5). Also, the assessee cannot seek refund by any other method except by filing a return. It is in this context, reference must be made to section 119(2)(b) which says that the CBDT 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 authorise any income-tax authority (other than JC (Appeals) or CIT (Appeals)) to admit an application or claim for any exemption, deduction, refund or any other relief under the Act after the expiry of the period specified by or under the Act for making such application or claim and deal with the same on merits in accordance with law. Recently, in K.S.Bilwala & Others v. Pr. CIT (2024) 463 ITR 766 (Bom) the assessee engaged in the business of acquiring and developing plots of land for resale was subjected to compulsory acquisition under the provisions of RFCTLARR Act, 2013. The assessee received a sum of Rs.39.07 lakhs by way of compensation / award. The assessee admitted the same and filed the return of income which was processed under section 143(1). Later, the assessee came to know of the fact that the compensation / award received under RFCTLARR was not liable for income-tax. By then the time limit for filing a revised return got expired. The assessee accordingly filed an application for condonation of delay for leave to file a revised return under section 119(2)(b) of the Act. This application got rejected for the reason that there was no genuine hardship to the assessee. The court made reference to its precedent in Optra Health (P) Ltd v. Addl. CIT (2024) 462 ITR 238 (Bom) where it was held that the phrase 'genuine hardship' used in section 119(2)(b) must be interpreted liberally. The Court held that while considering the application of this nature, the power to condone the delay has been conferred to enable the authority to do substantial justice to the parties by disposing of the matter on merits. While considering these aspects, the tax authorities are expected to bear in mind that no applicant would stand to benefit by lodging delayed returns. Refusing to condone the delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when the delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. Taking note of the above decision, Yogesh must file a petition under section 119(2)(b) to claim refund of tax paid under mistaken belief in respect of an income which is not liable for income-tax. There are so many decisions where various appellate forums have held that the tax authorities must not collect or retain tax without proper legal authority. This also aligns well with Article 265 of the Constitution which states that no tax shall be levied or collected except by authority of law. The CBDT vide Circular No.7 of 2023 dated 31.05.2023 says that where the assessee seeks remedy under section 119(2)(b) for condonation of delay in filing returns, claiming refund and claiming carry forward loss and set off where the claim is up to Rs.50 lakhs for one assessment year the petition has to be filed with Pr.CIT or CIT with whom the power of acceptance or rejection is vested. Govind Krishna Kanpur

Quiz for the week (10 Jun 2024):

Yogesh a resident individual employed in a company owned 3 acres of land acquired for Rs.20 lakhs in financial year 1999-2000. The Fair Market Value (FMV) as on 1st April, 2001 was Rs.26 lakhs. In June, 2022 the lands were acquired under RFCTLARR Act,2013 for Rs.120 lakhs. The assessee computed capital gain and paid tax thereon besides filing ITR for the assessment year 2023-24. In April, 2024 he became aware that the said capital gain is not chargeable to tax and accordingly wants refund of tax paid by him. You are requested to advise Yogesh for getting refund of tax erroneously paid by him.

Best Answer :

From the facts given in the query it is apparent that the assessee assumed the transfer of land as liable for capital gain and paid tax besides filing ITR. He could have filed a revised return under section 139(5) at any time 3 months prior to the end of the relevant assessment year. Unfortunately, he became aware of the fact that the capital gain is not liable for income-tax only in April, 2024 and hence could not file a revised return for the assessment year 2023-24 which could have been filed before 31st December, 2023 for seeking refund of tax. It may be noted that the CBDT vide Circular No.36 of 2016 has provided income-tax exemption in respect of compensation received under RFCTLARR Act, 2013.

Also, the assessee cannot file "updated return" under section 139(8A) since the first proviso to section 139(8A) says that the benefit of updated return would not be available if the updated return has the effect of decreasing the total tax liability determined on the basis of return furnished under sections 139(1) / 139(4) / 139(5).

Also, the assessee cannot seek refund by any other method except by filing a return. It is in this context, reference must be made to section 119(2)(b) which says that the CBDT 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 authorise any income-tax authority (other than JC (Appeals) or CIT (Appeals)) to admit an application or claim for any exemption, deduction, refund or any other relief under the Act after the expiry of the period specified by or under the Act for making such application or claim and deal with the same on merits in accordance with law.

Recently, in K.S.Bilwala & Others v. Pr. CIT (2024) 463 ITR 766 (Bom) the assessee engaged in the business of acquiring and developing plots of land for resale was subjected to compulsory acquisition under the provisions of RFCTLARR Act, 2013. The assessee received a sum of Rs.39.07 lakhs by way of compensation / award.

The assessee admitted the same and filed the return of income which was processed under section 143(1). Later, the assessee came to know of the fact that the compensation / award received under RFCTLARR was not liable for income-tax. By then the time limit for filing a revised return got expired. The assessee accordingly filed an application for condonation of delay for leave to file a revised return under section 119(2)(b) of the Act. This application got rejected for the reason that there was no genuine hardship to the assessee.

The court made reference to its precedent in Optra Health (P) Ltd v. Addl. CIT (2024) 462 ITR 238 (Bom) where it was held that the phrase 'genuine hardship' used in section 119(2)(b) must be interpreted liberally. The Court held that while considering the application of this nature, the power to condone the delay has been conferred to enable the authority to do substantial justice to the parties by disposing of the matter on merits. While considering these aspects, the tax authorities are expected to bear in mind that no applicant would stand to benefit by lodging delayed returns. Refusing to condone the delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when the delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties.

Taking note of the above decision, Yogesh must file a petition under section 119(2)(b) to claim refund of tax paid under mistaken belief in respect of an income which is not liable for income-tax. There are so many decisions where various appellate forums have held that the tax authorities must not collect or retain tax without proper legal authority. This also aligns well with Article 265 of the Constitution which states that no tax shall be levied or collected except by authority of law.

The CBDT vide Circular No.7 of 2023 dated 31.05.2023 says that where the assessee seeks remedy under section 119(2)(b) for condonation of delay in filing returns, claiming refund and claiming carry forward loss and set off where the claim is up to Rs.50 lakhs for one assessment year the petition has to be filed with Pr.CIT or CIT with whom the power of acceptance or rejection is vested.

Govind Krishna
Kanpur