The Jaipur Income Tax Appellate Tribunal (ITAT) has directed the Assessing Officer (AO) to pass an order on the merits of chargeability of salary earned by a non-resident Assessee through employment in Kenya, which was inadvertently offered to tax in India. The ITAT opines that the AO should have guided the non-resident and have passed the order on merits, particularly where the Assessee responded to the email addressed to him. The ITAT holds that it should not be the intention of the AO to tax the income which is not chargeable to tax in India.
The Assessee filed his return of income for Assessment Year 2018-19, offering salary income earned through his employment in Kenya and also claimed foreign tax credit in respect of taxes paid in Kenya. Although no adjustment was made to the returned income while processing, the Foreign Tax Credit (FTC) claimed by Assessee was rejected by the Central Processing Centre (CPC).
The Assessee filed a rectification application and submitted that the salary income was earned outside India and thus, not taxable in terms of Section 5. He clarifies that the income was inadvertently offered to tax in the return. However, the AO rejected the application for being outside the purview of Section 154 as there was no mistake apparent from the record.
The Commissioner of Income Tax (Appeals) [CIT(A)] opined that whether certain income was taxable or not is a debatable issue and can be determined only upon detailed examination and enquiry, and thus, the issue raised in the rectification application was beyond the scope of Section 154.
The ITAT notes that the Assessee on bona fide belief wrongly showed salary income which was charged to tax. The ITAT remarks that “it would be too technical for a non-resident Indian to go into the intricacy of Indian income tax once the assessee has fairly moved an application under Section 154.” Therefore, the ITAT directs the AO to call for details of the salary from the Assessee and determine whether the salary is chargeable to tax or not. The ITAT also directs the Assessee to place all the relevant material to decide about the taxability or otherwise of the income that he has earned on record.
In summary, the ITAT has directed the AO to pass an order on the merits of chargeability of salary earned by a non-resident Assessee through employment in Kenya. The ITAT opines that the AO should have guided the non-resident and have passed the order on merits. The ITAT holds that it should not be the intention of the AO to tax the income which is not chargeable to tax in India. The Assessee has been directed to provide all the relevant material to decide about the taxability or otherwise of the income that he has earned on record. The decision is in favor of the Assessee.
[Pappu Singh Rajpurohit v. AO (International Taxation) – [TS-192-ITAT-2023(JPR)] – Date of Judgement : 17.04.2023 (ITAT Jaipur)]
