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2025 (7) TMI 666 - AT - Income TaxRectification Applications u/s.154 - Period of limitation - HELD THAT - Had these applications been presented in time then the fate of those applications would have been in favour of the assessee as was the case for A.Y.2017-18. It is an admitted fact that for the Tax matters assessee is dependent upon the Tax Consultant. It is also well known that due date of filing of return of income is normally known to the assessee s but the time limit for filing Rectification Application u/s.154 of the Act and also whether the Rectification Application can be filed for certain apparent mistakes may not be known to all the assessee s and it is the Tax Consultant who need to give advice to the assessee depending upon the facts of the case. Even though the time limit for filing Rectification Application u/s.154 of the Act is four years but then for the reasons beyond control of the assessee and for genuine hardship if such delay has occurred then sympathetic and liberal approach needs to be taken. As decided in Bansal Propbuild Private Limited 2022 (4) TMI 681 - ITAT JAIPUR has dealt with the very same issue and has condoned the delay in filing the Rectification Application u/s.154. Thus in the larger interest of justice the delay in filing of Rectification applications u/s.154 of the Act for the years under appeal deserves to be condoned and accordingly the matter is restored to the file of ld. Jurisdictional Assessing Officer to entertain the Rectification Applications filed u/s.154 of the Act for the impugned assessment years - Appeals of the assessee are allowed for statistical purposes.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal in this matter are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Admissibility of belated Rectification Applications under Section 154 of the Act Relevant legal framework and precedents: Section 154 of the Income-tax Act permits rectification of mistakes apparent from the record, but such rectification applications must be filed within a prescribed time limit, generally four years from the date of the order sought to be rectified. The limitation period is mandatory and failure to file within time generally results in rejection of the application. However, judicial precedents have recognized that delay caused due to genuine hardship or reliance on professional advice may justify condonation of delay in exceptional circumstances. Court's interpretation and reasoning: The Tribunal noted that the Rectification Applications for the impugned years were admittedly filed beyond the prescribed time limit and hence were rejected by the Assessing Officer and the Commissioner of Income Tax (Appeals). However, the Tribunal observed that a similar Rectification Application for Assessment Year 2017-18, filed within the permissible time, was accepted and relief granted. This acceptance substantiates that the assessee's claim regarding the nature of income and its taxation is valid. Key evidence and findings: The assessee's Rectification Application for A.Y. 2017-18 detailed that the trust's income was distributed among beneficiaries with definite shares, who included the income in their returns and paid tax accordingly. The only exception was a small amount of Rs. 71,182/- which was inadvertently not declared by beneficiaries and was accepted to be taxable in the hands of the trust. The Assessing Officer, after examining supporting documents such as trust deed, returns of beneficiaries, Form 26AS, and computations, accepted this position and rectified the demand accordingly. Application of law to facts: The Tribunal found that the assessee's reliance on the tax consultant for filing and managing tax matters was genuine and that the assessee was not fully aware of the limitation period for filing Rectification Applications. Given that the delay was beyond the assessee's control and caused by professional advice, the Tribunal considered it a case of genuine hardship warranting a liberal and sympathetic approach. Treatment of competing arguments: The Revenue contended that the Rectification Applications were barred by limitation and rightly rejected. The Tribunal, however, referred to a coordinate Bench decision where delay in filing Rectification Applications was condoned due to reasonable cause and genuine nature of the delay, emphasizing the interest of equity and justice. Conclusions: The Tribunal concluded that the delay in filing Rectification Applications for the impugned years deserved to be condoned and the applications should be admitted for adjudication on merits. Issue 2: Taxability of income of the trust versus beneficiaries Relevant legal framework and precedents: Under the Income-tax Act, income of a specific trust is taxable in the hands of the beneficiaries if the income is distributed and the shares of the beneficiaries are definite and ascertainable. Section 161(1) of the Act clarifies that business income of the trust is taxable in the hands of the trust, but income from other sources or house property distributed to beneficiaries is taxable in their hands. Court's interpretation and reasoning: The Tribunal accepted the assessee's submission and documentary evidence that the trust was a specific trust with defined beneficiaries having specific shares in income and corpus. The income consisted mainly of house property and other sources such as interest, which were distributed to beneficiaries who duly declared the income and paid tax accordingly. The Tribunal noted that the trust itself had no business income and that the only amount taxable in the trust's hands was the small portion of income not declared by any beneficiary. Key evidence and findings: The trust deed, beneficiaries' returns, Form 26AS, and computations submitted by the assessee corroborated the claim that income was distributed and taxed in the hands of beneficiaries. The Assessing Officer's rectification order for A.Y. 2017-18 confirmed this position. Application of law to facts: The Tribunal applied the provisions of the Act and accepted that the trust's income, except the unaccounted portion, was rightly taxed in the hands of beneficiaries and not the trust. Treatment of competing arguments: No contrary evidence or argument was found convincing against the assessee's claim on this issue. Conclusions: The Tribunal upheld the principle that income of the specific trust with definite beneficiaries is taxable in the hands of beneficiaries and not the trust, except for income not declared by any beneficiary. Issue 3: Appropriate remedy and procedural directions Relevant legal framework and precedents: The Tribunal relied on a coordinate Bench decision which condoned delay in filing Rectification Applications under Section 154 and remanded the matter for fresh adjudication with directions to provide adequate opportunity and consider additional evidence as per procedural rules. Court's interpretation and reasoning: The Tribunal considered the precedent and the facts of the instant case and found it appropriate to restore the matter to the Assessing Officer for fresh adjudication of the Rectification Applications for the impugned years. The Tribunal emphasized that the Assessing Officer should consider the Rectification Application on merits, keeping in view the Rectification Order for A.Y. 2017-18, and apply the law accordingly. Key evidence and findings: The Tribunal noted that the Assessing Officer had accepted the Rectification Application for A.Y. 2017-18 on the same grounds and that the assessee's claim was consistent across years. Application of law to facts: The Tribunal's direction to restore the issue to the Assessing Officer ensures adherence to principles of natural justice and proper application of law. Treatment of competing arguments: The Revenue's reliance on limitation was overridden by the Tribunal's view on equity and justice. Conclusions: The Tribunal set aside the impugned orders and remanded the matter for fresh adjudication of Rectification Applications after condoning delay. 3. SIGNIFICANT HOLDINGS "Even though the time limit for filing Rectification Application u/s.154 of the Act is four years but then for the reasons beyond control of the assessee and for genuine hardship if such delay has occurred, then sympathetic and liberal approach needs to be taken." "It is an admitted fact that for the Tax matters assessee is dependent upon the Tax Consultant. It is also well known that the due date of filing of return of income is normally known to the assessee but the time limit for filing Rectification Application u/s.154 of the Act and also whether the Rectification Application can be filed for certain apparent mistakes may not be known to all the assessee's and it is the Tax Consultant who need to give advice to the assessee depending upon the facts of the case." "The assessee trust is a specific trust, having income from house property. In its application, the assessee has stated that the entire income of the assessee is distributed among all its beneficiaries whose shares are determined as per the deed of trust. No tax is payable by trust on its income except the portion of income which is not declared by any of the beneficiary." "The beneficiaries of the trust has offered the share of amount which is received from the trust for taxation in their return of income." "In the interest of equity and justice, the appeal of the assessee is remand to the file of the CIT (A) to decide it afresh by providing adequate opportunity of hearing to the assessee. We don't have any hesitation to condone the delay of 4 years for filing the application under section 154 of the IT Act due to reasonable cause and genuine in nature and we consider accordingly, it is a fit case for remand for proper adjudication." Final determinations:
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