Officers of the department must not take advantage of ignorance of an assessee as to his rights and that it is one of their duties to assist a tax payer in every reasonable way

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Officers of the department must not take advantage of ignorance of an assessee as to his rights and that it is one of their duties to assist a tax payer in every reasonable way

There was an issue of Fresh claim before the Assessing Officer by way of a rectification application before the Kolkata ITAT. On the examinsaiotn of the issue, Kolkata ITAT visited the CBDT Circular No. 14(XL-35) of 1955 dated 11.04.1955 wherein it has been held that the officers of the department must not take advantage of ignorance of an assessee as to his rights and that it is one of their duties to assist a tax payer in every reasonable way

The case details are as under:

ITAT KOLKATA

 

SHRI RITUM JAIN VERSUS DCIT, CC-3 (2) , KOLKATA

 

ITA No. 466/Kol/2021

ITAT held as under:

  1. There is no bar on the higher authorities and especially upon this Tribunal in exercising its power u/s 254 of the Income Tax Act to entertain or to deal not merely with additional ground which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed.
  1. The case was pertaining to the Nature of receipt of  Subsidy received by the assessee as Industrial Promotion Assistance (IPA) from the state Govt, under West Bengal Industrial Promotion (Assistance to Industrial Units) Scheme
  2. The issue was whether it is a Capital Receipt or Revenue Receipt?
  3. Claim of the assessee was rejected by the Ld. AO as well as the Ld. CIT(A) on the ground that the same cannot be claimed by the assessee in the rectification petition u/s 154 since the same was not claimed in the return of income filed by the assessee

ITAT observed as under:

  1. Hon’ble Supreme Court in the case of Balaji Alloys [2016 (4) TMI 1161 – SC ORDER] and the decision of CIT vs Rasoi Limited [2011 (5) TMI 23 – CALCUTTA HIGH COURT] has held that the sales tax subsidy received by the assessee from the Govt. of West Bengal under a scheme of industrial promotion was a capital receipt.
  2. Also the said issue has already been decided by the Tribunal in the own case of the assessee [2020 (10) TMI 1322 – ITAT KOLKATA] as tax subsidy is to be treated as capital receipt.
  3. The taxation of a capital receipt which did not constitute income of the assessee, in our view would constitute a mistake apparent on record.
  4. The Hon’ble Delhi High Court [2016 (3) TMI 977 – DELHI HIGH COURT] has referred to in this respect to the decision of CIT vs Shelly Products and another [2003 (5) TMI 4 – SUPREME COURT].
  5. The Hon’ble Delhi High Court has also referred to CBDT Circular No. 14(XL-35) of 1955 dated 11.04.1955, wherein, the CBDT has directed that the officers of the department must not take advantage of ignorance of an assessee as to his rights and that it is one of their duties to assist a tax payer in every reasonable way, particularly, in the matter of claiming and securing relief’s and that they should take the initiative in guiding a tax payer where proceedings or other particulars before them indicate that some refund or relief is due to him.
  6. Thus in the light of Article 265 of the Constitution of India and in the light of various decisions of the Hon’ble Supreme Court and other High Courts of the country, in our view, the lower authorities failed to exercise jurisdiction vested in them under the jurisdiction of section 154 of the Act.
  7. Even otherwise the bar, if any, relating to entertain a fresh claim is on the Assessing Officer. However, there is no bar on the higher authorities and especially upon this Tribunal in exercising its power u/s 254 of the Income Tax Act to entertain or to deal not merely with additional ground which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed.
  8. Reliance in this respect can be placed on the decision of the Hon’ble Bombay High Court in the case of CIT vs Pruthvi Brokers and Shareholders Pvt. Ltd. [2012 (7) TMI 158 – BOMBAY HIGH COURT].
  9. Further, reliance in this respect can be placed on the decision of Hon’ble Supreme Court in the case of National Thermal Power Company Ltd [1996 (12) TMI 7 – SUPREME COURT] and the full bench of the Hon’ble Bombay High Court in the case of Ahmedabad Electricity Co. Ltd. [1992 (4) TMI 29 – BOMBAY HIGH COURT]

ITAT finally concluded as under:

We allow the appeal and direct the Assessing Officer to exclude the income from sales tax subsidy received from Govt. of West Bengal which has been inadvertently offered by the assessee for taxation and grant the appropriate relief / refund of the assessee. Appeal of assessee allowed.

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