Ajay Kumar Bakaya vs ACTI, Circle 1 (1)

“(15)(iv) interest payable-(h) by any public sector company in respect of such bonds or debentures and subject to such conditions, including the condition that the holder of such bonds or debentures registers his name and the holding with that company, as the Central Government may, by notification in the Official Gazette, specify in this behalf.”

“1.

On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeal) ["CITCA)"] is bad, both in the eye of law and on facts.

2.

On the facts and circumstances of the case, the learned CITCA) has erred, both on facts and in law, in confirming the order of the ACIT for assessing the income at Rs.3,39,41,390/-. as against the actual taxable income of Rs.3,13,99,390/-.

3(i). On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in taxing on Rs.25,42,000/-, being exempt income.

3(ii). That the learned CITCA) has erred in taxing exempt income and thus, grossly erring to compute the taxable income in contravention to Article 265 of the Constitution of India

4.

On the facts and circumstances of the case, the learned CIT (A) has erred, both on facts & in law, in passing the order without giving assessee an adequate and proper opportunity of being heard in violation of principle of natural justice.”

B.1. The rectification sought is a correction of a mistake apparent from the record, and not a fresh claim.

It is respectfully submitted that the rectification application filed by the Appellant did not seek to raise any new claim of deduction or exemption that was not otherwise supported by the record. The Appellant had, in fact, disclosed the receipt of interest income from the IIFCL and REC bonds in the return of income itself- the only error lay in classifying an admittedly exempt receipt under the taxable column instead of the exempt column. This is a plain, apparent and self-evident error, discoverable without any elaborate reasoning or investigation, and squarely falls within the scope of section 154 of the Act.

The Ld. AO's own order dated 07.04.2025 records, in terms, that the income from the bonds "was erroneously added as taxable income while filing the tax return." This is a finding rendered by the Ld. AO on a bare perusal of the record. Once the mistake stands acknowledged by the Assessing Officer himself, no further or elaborate argument is required to establish that it is an error apparent from the record, and the same is squarely rectifiable under section 154 of the Act.

B.2 Article 265 of the Constitution and CBDT Circular No. 14(XL-35) dated 11.04.1955

Article 265 of the Constitution of India provides that "no tax shall be levied or collected except by authority of law." Thus, under the constitution, the Government can levy and collect tax that is provided in the law. In simple words, the assessing authorities should allow all reliefs for which the assessee is entitled to under the law, (under Income Tax Act is this case) before the tax is levied and collected. The assessing authority therefore, not only should but is also duty bound to allow the legitimate relief and deductions as provided in the Income Tax Act although they may not have been claimed by the assessee.

Further, CBDT Circular No. 14(XL-35) dated 11.04.1955 casts a positive duty on the Department not to take advantage of an assessee's ignorance, and to assist a taxpayer in claiming and securing legitimate reliefs and refunds, including by drawing the assessee's attention to reliefs that have been omitted to be claimed. This Circular continues to bind the Revenue authorities, having never been withdrawn, as affirmed by the Hon'ble Supreme Court in CIT v. Mahendra Mills (24 1TR 56).

The Ld. AO, having himself recorded that the exempt income was erroneously offered to tax, was duty-bound under this Circular to grant the consequential relief rather than reject the rectification application on a technical ground.

B.3. Appellate Authorities have comprehensive jurisdiction which gives discretion to allow anew ground to be raised

Your Honor(s), the AO seems to have taken the judgement of Hon’ble Supreme Court in Goetze (India) Ltd. v. CIT [2006] 157 Taxman 1 (SC) in wrong context, as the ratio of Goetze (India) Ltd. is attracted only where an assessee seeks to raise a fresh claim for deduction that was never made in the return of income. That is not the fact situation here. The Appellant had already disclosed the interest income from the bonds in the return itself; the only infirmity was an inadvertent misclassification of an admittedly exempt receipt as taxable. There is, therefore, no "fresh claim" within the meaning of Goetze (India) Ltd. at all.

Without prejudice, it is now a trite law that the appellate authorities have due powers and authorities to admit new grounds of appeal, irrespective of the fact whether the same was taken up before the lower authorities. In this context, assessee lays reliance on the following judgements:

a. National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383

b. Commissioner of Income Tax vs Sam Global Securities (2014) 360 ITR 682 (Del)

c. CIT Vs. Bharat Aluminium Ltd. 303 ITR 256 (Del),

d. CIT vs. Jai Parabolic Springs Ltd. 172 Taxman 258 (Delhi)

Accordingly, the assessee is requests relief on such income erroneously offered for taxation.

B.4. The case of the assessee is squarely covered by a battery of judgements

Your Honor(s), at the outset, the assessee relies on the judgement of Kapil Dev Nikhanj v. ACIT [2025] 173 taxmann.com 100 (Delhi-Trib.), wherein, the Honourable Coordinate Bench had held as under:

6.

At the outset, we find that the decision of Goetze India referred (supra) only restricts the power of an assessing authority from not entertaining any fresh claim unless otherwise claimed in the valid It does not restrict the powers of the appellate authorities which is clearly mentioned in the last paragraph of the said decision. Hence the argument advanced by the Learned DR in this regard is hereby dismissed. ….………

In fact the assessee had voluntarily come forward to offer the one time benefit received from BCCI to tax in the return of income. However, pursuant to the subsequent developments by way of certain tribunal decisions, the assessee was advised that the said benefit received by the assessee would be exempt from tax in terms of Section 56(2)(vi) of the Act. The subsequent decision of the tribunal together with better understanding of provisions of section 56(2) (vii) of the Act had practically prompted the assessee to prefer an appeal per se before the Learned CIT(A). It is trite law that right amount of tax should be collected from the right person in accordance with law. Article 265 of the Constitution provides that no tax could be collected except by an authority of law. When a statute specifically provides a particular exemption of a particular receipt from tax, the said receipt cannot be brought to tax merely because the assessee had offered erroneously in the return of income. Ultimately, income is to be determined in accordance with the provisions of the Act and revenue cannot take advantage of ignorance of the assessee while determining the taxable income.

E. PRAYER

In view of the facts and circumstances stated above and the submissions made herein, it is most respectfully prayed that this Hon'ble Tribunal may be pleased to treat the interest income of Rs. 25,42,000/- earned on the IIFCL and REC tax-free bonds as exempt under section 10(15) (iv) (h) of the Act and direct the Ld. Assessing Officer to grant the consequential refund of Rs. 9,91,370/- to the Appellant, along with interest as admissible under law.”

“6.

At the outset, we find that the decision of Goetze India referred (supra) only restricts the power of an assessing authority from not entertaining any fresh claim unless otherwise claimed in the valid return. It does not restrict the powers of the appellate authorities which is clearly mentioned in the last paragraph of the said decision. Hence the argument advanced by the Learned DR in this regard is hereby dismissed. It is a fact that there is a delay of 1993 days with which appeal was filed by the assessee before the Learned CIT(A) which stood uncondoned by the Learned CIT(A). Hence, in the normal course, this issue should only be restored back to the file of Learned CIT(A) if sufficient cause is shown for the delay. The assessee had indeed filed an affidavit explaining the reasons for the delay. On going through the said affidavit, we are convinced that there is sufficient cause. In fact, the assessee had voluntarily come forward to offer the onetime benefit received from BCCI to tax in the return of income. However, pursuant to the subsequent developments by way of certain tribunal decisions, the assessee was advised that the said benefit received by the assessee would be exempt from tax in terms of Section 56(2)(vii) of the Act. The subsequent decision of the tribunal together with better understanding of provisions of section 56(2)(vi) of the Act had practically prompted the assessee to prefer an appeal per se before the Learned CIT(A). It is trite law that right amount of tax should be collected from the right person in accordance with law. Article 265 of the Constitution provides that no tax could be collected except by an authority of law. When a statute specifically provides a particular exemption of a particular receipt from tax, the said receipt cannot be brought to tax merely because the assessee had offered erroneously in the return of income. Ultimately, income is to be determined in accordance with the provisions of the Act and revenue cannot take advantage of ignorance of the assessee while determining the taxable income. It is a fact that this one-time benefit received from BCCI in recognition of services would be eligible for exemption under Section 56(2)(vii) of the Act as BCCI is a trust or institution registered under Section 12AA of the Act. This fact has been endorsed by the Coordinate Bench in the case of Maninder Singh (supra) for assessment year 2013-14 dated 6-1-2021. Hence, respectfully following the same, we do not deem it fit to restore this appeal to the file Learned CIT (A) for de novo adjudication and instead decide the issue here itself as the issue is already covered and the provisions of the Act are very clear in this regard. Accordingly, the grounds raised by the assessee are hereby allowed.”