ITAT Ahmedabad Declares CIT(A) Order Infructuous After CPC Rectification

Yogesh Himatlal Thakker Vs ITO (ITAT Ahmedabad)

Background

The case before the Income Tax Appellate Tribunal (ITAT), Ahmedabad, concerned an appeal filed by Shri Yogesh Himatlal Thakker against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], Aurangabad, dated 15.05.2024, for the Assessment Year (AY) 2020–21.

The dispute originated from adjustments made by the Centralized Processing Centre (CPC) under section 143(1) of the Income-tax Act, 1961, relating to the treatment of long-term capital gains and other additions.

Facts of the Case

1. Return of Income:
   • The assessee filed his return on 25.01.2021, declaring an income of ₹1,03,87,440.
   • He had earned long-term capital gain (LTCG) of ₹53,01,700 from the sale of property.
   • In the computation, he reduced this amount from business income and offered LTCG separately after indexation, arriving at taxable LTCG of ₹24,98,113 under section 48.
2. CPC Adjustments:
   • The CPC accepted the LTCG computation but also added back the difference of ₹28,03,587 (i.e., ₹53,01,700 as per P&L vs. ₹24,98,113 as per indexed computation) as business income.
   • Additional adjustments included:
     • ₹2,46,925: Share of loss from a partnership firm added twice.
     • ₹3,350: Addition under section 36 for delayed ESI payment. However, as per CBDT notifications during the Covid-19 lockdown, the due date had been extended, so no delay existed.
3. Refund Dispute:
   • CPC processed refund at ₹25,89,060 instead of ₹35,88,770 claimed.
   • The assessee filed rectification under section 154.
   • On 21.06.2022, CPC rectified the intimation, determining refund at ₹37,12,170, resolving the computation error.
4. Appeal to CIT(A):
   • Despite the rectification, the assessee’s appeal filed on 27.01.2022 was pursued.
   • On 15.05.2024, CIT(A) confirmed the CPC adjustments, holding that the assessee failed to substantiate during the virtual hearing that ₹28,03,587 was disclosed under capital gains.

Tribunal’s Findings

• The ITAT noted two lapses:
  1. The assessee did not inform CIT(A) about the rectification already carried out by CPC.
  2. CIT(A) failed to verify records independently, despite the fact being apparent.
• Since the rectification by CPC had already resolved the matter and refund was granted, the Tribunal held the appellate order infructuous.
• The Tribunal therefore allowed the appeal, treating the CIT(A)’s order as redundant.

Judicial Precedents Considered