AO cannot reject the exemption claim u/s 154 only because in return income was shown as taxable

AO cannot reject the exemption claim u/s 154 only because in return income shown as taxable. There is No estoppel against assessee to claim income exempt – ITAT

ABCAUS Case Law Citation:
ABCAUS 2632 (2018) (11) ITAT

An appeal was filed by the assessee against the impugned order passed by the Commissioner of Income Tax (Appeals) denying the claim of the assessee under section 154 of the Income Tax Act, 1961 (the Act).  

The assessee was an individual who filed his return of income which was duly processed u/s 143(1) of the Act. Later on, the assessee filed an application u/s 154 before the Assessing Officer (AO) stating that due to bonafide mistake an award received from BCCI (Board of Cricket Control of India), which otherwise was exempt u/s 10(17A) of the Act was included in the income.

It was also submitted that the eligibility to the said exemption had also been clarified by the CBDT vide Circular No. 2/2014 and the award was by mistake shown as taxable income.

The AO rejected the claim of the assessee on the ground that it was not a mistake apparent from record within the scope of section 154, on the ground that, since assessee had himself shown the receipts as taxable in his ITR filed, therefore, such a mistake could not be rectified u/s 154.

The CIT(A) also rejected the assessee’s appeal on the ground that such a request made by the assessee to exclude the award from the taxable income was beyond the scope and ambit of Section 154.

After detailed discussion on the scope of Section 154 and relying upon various judgments, the CIT(A) held that assessee had failed to give a justification in its application u/s 154, that there was a mistake apparent from record. He further held that it was a debatable issue, because assessee had first shown it as a taxable income and then had claimed to be exempted from tax. Thus, on this ground also such a claim could not be maintained.

The Tribunal opined that once it is brought to the notice of the Assessing Officer that income shown in the return of income is not in accordance with law and such an income cannot be taxed under the Income Tax Act or is entitled for exemption, then there cannot be estoppel against the assessee to claim it as exempt and Assessing Officer cannot reject the same simply because assessee had shown it in the return of income.

The Tribunal stated that it is a well settled law that tax can be levied under the express provision of law and if any deduction or exemption is allowable to the assessee in law, then it is the duty upon the Assessing Officer to compute the income and allow such deduction under such express provision of the law.

The Tribunal held that if the assessee claims that an income is exempted u/s 10(17A) which is duly supported by CBDT Circular which is binding on the Revenue Authorities, then the same needs to be exempted and allowed in accordance with law.

Accordingly, the Tribunal remitted the matter back to the file of the Assessing Officer to examine the assessee’s claim in light of provisions of law with direction to allow the claim in terms of CBDT Circular No. 2 of 2014 r.w.s. 10(17A)

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