Rajpal Lakhmichand Aryaan Individual, Aged 74 Years v. The Principal Commissioner Of Income Tax

Digitallysigned bySHRADDHASHRADDHAKAMLESHKAMLESHTALEKARTALEKARDate:2023.02.1720:02:15+0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAYCIVIL APPELLATE JURISDICTION WRIT PETITION NO. 5212 OF 2022 Rajpal Lakhmichand AryaAn individual, aged 74 years, residing at :81, Transport Nagar, Nigdi, Pune 411 044.… PetitionerPAN : ACXPA0453A Versus 1. The Principal Commissioner of Income Tax-3,Pune,Designated Authority under the Direct TaxVivad Se Vishwas Act, 2020, 3[rd] foor, Income Tax Offce, PMT Building,Shakar Seth Road, Pune, Maharashtra 411 037. Email : 2. The Deputy Commissioner of Income Tax,Circle-8, PunePratyakshakar Bhavan, Sec.26, Dr.AmbedkarMarg, Akurdi, Pradhikaran, Pune 411 044.Email : 3. The Union of India, Through the Secretary (Revenue),Department of Revenue, Ministry of Finance,Room No.128-A, North Block,New Delhi – 110 001.-Email : / …Respondents ***** Mr.Mihir Naniwadekar a/w. Ms.Rucha Vaidya i/b Ms.FarzeenKhambatta, Advocate for petitioner. Mr.Suresh Kumar, Advocate for respondents. CORAM : DHIRAJ SINGH THAKUR & ARIF S. DOCTOR, JJ. DATE :27[th] JANUARY, 2023. O R D E R: 1.The present petition is fled challenging the orders dated 20[th]September 2021 and 29[th] October 2021 (‘impugned orders’) passedby the Principal Commissioner of Income tax-3, Pune revising thepetitioner’s declaration for the assessment year 2014-15 by issuinga revised Form 3 seeking additional demand. 2.The petitioner fled his return of income for assessment year2014-15 declaring a total income of Rs.64,47,850/-. The case wasselected for scrutiny, and an order of assessment came to bepassed under section 143(3) of the Income Tax Act, 1961 (‘the Act’)on 16[th] December 2016. An amount of Rs.98,75,513/- was addedto the income of the petitioner. 3.An appeal was preferred by the petitioner before theCommissioner of Income Tax (Appeals). Rectifcation applicationalso came to be fled by the petitioner before the Assessing Offcerseeking rectifcation of the computation of the tax payable. Rectifcation application was allowed holding that there was anerror in treating the income as ‘taxable business income’ insteadof ‘taxable long term capital gains’. A reviseddemand/computation sheet was accordingly issued to thepetitioner and the tax and interest payable consequent to theorder under section 143(3) of the Act was reduced toRs.13,04,230/- instead of the earlier demand of Rs.36,07,220/-. 4.The petitioner, during the pendency of the appealproceedings, applied and fled the declaration under the DirectTax Vivad Se Vishwas Act, 2020 (‘the Act of 2020’) and the Rulesframed thereunder, after the order of rectifcation had beenpassed. Forms 1 and 2 fled by the petitioner were accepted andForm 3 was issued which refected the amount payable asRs.11,18,896/-, after giving credit of the taxes already paid, thebalance amount payable by the petitioner was determined atRs.3,48,692/-. 5.Based upon the aforesaid Form 3, the petitioner claims thathe had deposited an amount of Rs.3,48,692/- on 12[th] February2021. The petitioner further claimed that having taken all the steps required under the Act of 2020, it submitted Form 4 withthe respondents refecting the factum of the payment having beenmade, which was in the normal course to be followed by Form 5as per the Act and Rules. 6.It is stated that vide order dated 20[th] September 2021,respondent No.1 issued revised Form 3, by treatingRs.98,75,513/- as liable to be taxed at 30% ignoring the order ofrectifcation passed by the AO that the income had to be taxed aslong term capital gain at a lower rate of 20%. 5.Based upon the aforesaid Form 3, the petitioner claims thathe had deposited an amount of Rs.3,48,692/- on 12[th] February2021. The petitioner further claimed that having taken all the steps required under the Act of 2020, it submitted Form 4 withthe respondents refecting the factum of the payment having beenmade, which was in the normal course to be followed by Form 5as per the Act and Rules. 6.It is stated that vide order dated 20[th] September 2021,respondent No.1 issued revised Form 3, by treatingRs.98,75,513/- as liable to be taxed at 30% ignoring the order ofrectifcation passed by the AO that the income had to be taxed aslong term capital gain at a lower rate of 20%. 7.Objections raised by the petitioner were rejected by virtue ofcommunication, dated 29[th] October 2021. What is stated in thecommunication, dated 29[th] October 2021 which is impugned inthe present petition justifying the issuance of the revised Form 3is the fact that during the assessment proceedings under section143(3), as against the returned income of Rs.46,67,850/- by thepetitioner an addition of Rs.98,75,513/- was made determiningthe total income at Rs.1,63,23,363/- and the same was taxed atthe rate of 30% denying the claim of exemption of Long TermCapital Gain (LTCG) under section 10(38) of the Act and taxed the same as unaccounted income. 8.Reliance was placed upon the defnition of ‘Disputed Tax’under section 2(1)(j)A, which envisages as under : “Disputed Tax, in relation to an assessment year orfinancial year, as the case may be, means theincome Tax, including surcharge and cess payableby the appellant under the provisions of IncomeTax Act, 1961 (43 of 1961), as computedhereunder : 1. In a case where any appeal, writ petition orspecial leave petition is pending before theappellant forum on the specified date, the amountof tax that is payable by the appellant if suchappeal or writ petition or special leave petitionwas to be decided against him.”special leave petition is pending before theappellant forum on the specified date, the amountof tax that is payable by the appellant if suchappeal or writ petition or special leave petitionwas to be decided against him.” 9.With reference to the provisions of the Act of 2020, it was held that in case an appellant has fled an appeal before theCommissioner of Income Tax (Appeals) and in case the assessee lost in such an appeal, the tax payable by the assessee would beRs.33,56,687/- and for that reason, it was sought to be justifed that the revised Form 3 was issued refecting the correct taxliability. 10.Counsel for the petitioner urged that the application underAct of 2020 had been fled only after the order of rectifcation has been passed by the authorities and the liability was correctlydetermined earlier while issuing Form 3. 11.Counsel for the respondents, on the other hand, urged thatthe Assessing Offcer committed an error in passing the order ofrectifcation inasmuch as the order of assessment could not havebeen changed as there was no apparent mistake warranting sucha rectifcation. It was stated that the order passed under section154 by the Assessing Offcer on 2[nd] November 2021 was erroneousand that after rejection of the claim of adding long term capitalgain of the petitioner by the Assessing Offcer, such addition wasmade as ‘uncounted income’ ought to be charged to tax inaccordance with the rigor of the provisions of section 115BBE ofthe Act only. 12.We have heard learned counsel for the parties. 13.Admittedly, post the order of assessment under section143(3) of the Act, the Assessing Offcer passed an order on theapplication seeking rectifcation in terms of section 154 of the Act,which reads as under : Order u/s. 154 of the Income Tax Act, 1961 12.We have heard learned counsel for the parties. 13.Admittedly, post the order of assessment under section143(3) of the Act, the Assessing Offcer passed an order on theapplication seeking rectifcation in terms of section 154 of the Act,which reads as under : Order u/s. 154 of the Income Tax Act, 1961 1. In this case the assessee filed its return of income on29/11/2014 declaring total income of Rs.64,47,850/-.Assessment u/s.143(3) of the Act was completed on16/12/2018 determining total income atRs.1,63,23,363/-. During the course of assessmentproceedings, an addition amounting to Rs.98,75,513/-was made under the head ‘Long Term Capital Gain’.Subsequently, the assessee submitted an application forrectification u/s. 154 of the Act, vide letter dated17/10/2020. Vide the said letter, it has come to noticethat during the course of assessment proceedings,addition made on account of Long Term Capital Gainwas charged to tax under the head ‘business income’. On going through the assessment order as well asITD systems, it appears that the claim of the assessee isfound acceptable. As the mistake apparent fromrecords, hence rectified u/s. 154 of the Act. Issue revised demand notice to the assesseeaccordingly. Give credit for the prepaidtaxes/DDT/Regular tax. 14.The order having been passed on the application forrectifcation under section 154 assuming that the same waserroneous, as alleged, cannot simply be brushed aside. It wouldhave been open to the authorities to take remedial measures toquestion the legality and correctness of the order. In so far as theclaim under the Act of 2021 is concerned, a clarifcation issued bythe Central Board of Direct Taxes clearly envisages that if there isa reduction or increase in the income and tax liability of theassessee as a result of rectifcation, the disputed tax in suchcases would be calculated after giving effect to the rectifcation 15.Reference in this regard can be made to the clarifcationissued by the Central Board of Direct Taxes (“CBDT”) vide circularNo.9 of 2020 dated 22 April 2020 and in particular QuestionNo.25 thereof, which reads as under : 16.It thus becomes clear that the respondents ought to havetaken into consideration the aforementioned Circular, as alsoconsidered the rectifcation order passed, which the respondentsclearly missed to do in the present case. 17.In our opinion, issuance of revised Form 3 is clearly notsustainable. Be that as it may, we allow this petition. The ordersimpugned dated 20[th] September 2021 and 29[th] October 2021 are set aside. The respondents are directed to act in furtherance ofthe petitioner’s declaration by way of Form-3, dated 18[th] January2021 in accordance with the clarifcation of the Act of 2020 for therelevant assessment year 2014-15. [ ARIF S. DOCTOR, J. ] [DHIRAJ SINGH THAKUR, J.]