S. M. Construction Vs NFAC (ITAT Mumbai)
ITAT Mumbai held that as and when the CPC has erred while processing the return of an assessee which causes tax liability on an assessee, then lawfully the appellate authorities should not cite procedure as a tool/ruse to deny the just claim of an assessee.
Facts- The main grievance of the assessee is against the action of the Ld. CIT(A) dismissing the appeal preferred by the assessee against the action of the CPC which passed the intimation u/s 143(1) of the Income Tax Act, 1961 (hereinafter “the Act”) on the reason that the assessee had filed another appeal against the same intimation order of CPC (for rectification of mistake u/s 154 of the Act).
Notably, the CPC has made adjustment under the head ‘capital gain’ amounting to Rs. 46,69,158/-whereby the capital gain had been reduced to Rs. 46 Lakhs as against the returned capital gain of Rs. 92,16,158/- as declared by the assessee; and correspondingly enhanced the business income (block of assets) by Rs. 46,69,158/- (which was reduced from head of capital gain).
According to assessee, the CPC u/s. 143(1) of the Act while processing the returned income could not have adjusted the capital gain with business assets and wondered as to how the CPC could have set-off capital gain against block of asset and to buttress the aforesaid submission drew our attention to the return of income.
Conclusion- Held that the CPC has dismissed the rectification application on the ground that there was no mistake apparent on the record, no reason is discernable from such an action other than a bald assertion to that effect, which cannot in any manner redress the grievance of assessee. When the CPC has erred while processing the return of an assessee which causes tax liability on an assessee, then the appellate authorities should not cite procedure as a tool/ruse to deny the just claim of an assessee. As per Article 265 of the Constitution of India Taxes cannot be imposed, without authority of law. In this case, we find that adjustment made by CPC does not fall under any of the permitted adjustments u/s 143(1) of the Act as discussed (supra). Therefore, we set aside the impugned action of Ld. CIT(A) and allow the appeal of the assessee subject to verification by AO of the reconciliation (supra) vis-à-vis the return filed by the assessee. If the reconciliation is found to be correct by AO, then no adjustment as made by CPC was warranted and it should be deleted.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This is an appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi dated 19.09.2022 for the assessment year 2020-21.
2. The main grievance of the assessee is against the action of the Ld. CIT(A) dismissing the appeal preferred by the assessee against the action of the CPC which passed the intimation u/s 143(1) of the Income Tax Act, 1961 (hereinafter “the Act”) on the reason that the assessee had filed another appeal against the same intimation order of CPC (for rectification of mistake u/s 154 of the Act).
3. At the outset, the Ld. AR of the assessee brought to our notice that the assessee had filed return of income on 03.02.2021 declaring total income of Rs.2,09,61,710/-. The AO/CPC processed the return of the assessee and passed the intimation u/s 143(1) of the Act and made adjustment/addition of Rs.46,69,158/- to the total income of the assessee. The CPC has made adjustment under the head “capital gain” amounting to Rs. 46,69,158/- whereby the capital gain has been reduced to Rs. 46 Lakhs as against the returned capital gain of Rs.92,16,158/- as declared by the assessee; and correspondingly enhanced the business income (block of assets) by Rs.46,69,158/-(which was reduced from head of capital gain). According to assessee, the CPC was not justified in disallowing indexation on the cost of the sale of the Long Term Capital Asset and ignored the claim of u/s 54EC of the Act amounting to Rs.50,00,000/-. According to the Ld. AR, the CPC u/s 143(1) of the Act while processing the returned income could not have adjusted the capital gain with business assets and wondered as to how the CPC could have set-off capital gain against block of asset and to buttress the aforesaid submission drew our attention to the return of income. We have perused the same and we find that the action of the CPC to make adjustment u/s 143(1) of the Act is per-se erroneous because it does not fall in any of the categories described in sub-clause (i) to (vi) of Sub-section 1A of Section 143 of the Act. Even though the Ld. DR submitted that the CPC may have taken the claim of the assessee as incorrect and therefore, sub-clause-2 could have been attracted. Though, we asked the Ld. DR to show us from the return of income [filed by assessee] as to whether the assessee had made any incorrect claim while filling up the return of income or whether there is any mis-match from any information in the return of income, the Ld. DR could not point out any such mistake. The Ld. AR nsubmitted the reconciliation of the error which crept in the impugned intimation of the CPC which is given as under: –
“The income under the head business and profession has been assessed at Rs.2,42,57,785/-
