Case Law Details
Pramod Kumar Tiwari Vs DCIT (ITAT Allahabad)
in the case in hand, the assessee has admittedly filed the return under wrong provisions of presumptive tax under section 44ADA whereas the commission income as reflected in Form 26AS is subjected to TDS under section 194H and is required to be declared in Form ITR 3 as per the normal computation of income and not under presumptive income under the provisions of section 44ADA of the Act. The assessee has filed the profit and loss account showing the income declared and the return of income as the net profit after deduction of expenditure from the gross commission income. The CIT(A) has dismissed the appeal of the assessee by citing the reason that the mistake in filing ITR 4 could have been rectified by the assessee by filing the revised return. The CIT(A) was of the view that the assessee has not availed the option available under the Income Tax Act. It is pertinent to note that when the assessee is having no other business activity then the commission income then the adjustment made by the CPC has resulted a double addition to the extent of Rs. 12,64,692/- already declared by the assessee in the return of income as the CPC has made the adjustment of gross amount of commission and not net income or profit out of the gross commission receipts. Accordingly, having regard to the facts and circumstances of the case and in the interest of justice, the impugned order of the CIT(A) is set aside and the matter is remanded to the record of the AO for deciding the same afresh after considering all the relevant facts and record to be produced by the assessee. Needless to say the assessee be given an appropriate opportunity of hearing before passing the fresh order.
FULL TEXT OF THE ORDER OF ITAT ALLAHABAD
This appeal by the assessee is directed against the order dated 6.4.2022 of CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the assessment year 201718. The assessee has raised the following grounds:-
“1. Ld. CIT(A) erred in confirming addition of Rs. 23,85,963/- made by the AO on account of alleged difference between the income reported in Form 26AS and that reflected in the return alleging that it has not been disclosed in the return form. The addition made by the AO and sustained by the Ld. CIT(A) is not justified.
2. Without prejudice to ground no. 1 above, Ld. CIT(A) erred in confirming addition of Rs. 23,85,963/- without appreciating facts and evidences on record. The order of Ld. CIT(A) is illegal and not justified.
3. The appellant reserves the right to add, amend or modify any of the ground/s of appeal.”
2. The solitary issue arises in this appeal of the assessee is regarding the adjustment of Rs. 23,85,963/- was made by the CPC while processing the return of income under section 143(1) of the Income Tax Act which was confirmed by the CIT(A).
3. The learned AR of the assessee has submitted that the assessee filed its return of income for the year under consideration on 17.11.2017 and declared total income of Rs. 19,88,690/- after claiming deduction under Chapter vi-A He has further submitted that the assessee is a Commission Agent of TCW Realty Pvt. Ltd. and received a Commission of Rs. 23,85,963/- which is reflected in Form No. 26AS. The assessee has declared the business income under section 44ADA which is a mistake on the part of the assessee as the return of income was filed under wrong ITR form-4 instead of ITR Form-3. He has pointed out that the assessee has declared more than 50% of the business income from gross commission of Rs. 23,85,963/- in the return of income though under wrong provisions of presumptive tax under section 44ADA. The assessee has declared income of Rs. 12,64,692/- out of the gross commission of Rs. 23,85,963/- and the CPC has made an adjustment of the entire gross commission of Rs. 23,85,963/- which is shown in Form No. 26AS. Thus, there is a double addition to the extent of the income already declared by the assessee out of the gross commission and further the adjustment was made for the entire commission instead of the profit element in the commission. He has referred to Sub Clause (vi) to section 143(1)(a) of the Income Tax Act and submitted that once the assessee has declared the commission income in the return of income, it is beyond the scope of the adjustment while processing the return of income under section 143(1) of the Income Tax Act. In support of his contention, he has relied upon the decision dated 16.10.2019 of Bangalore Benches of the Tribunal in the case of Shri Arthur Bernad Sebastine Pais vs. Dy. Commissioner of Income Tax, CPC, Bangalore in ITA No. 1683/Bang/2019. Thus, the learned AR has submitted that the adjustment made by the CPC was beyond the power conferred under section 143(1)(a)(vi) of the Act when the assessee has already included the commission amount while computing the total income declared in the return of income. He has referred to the impugned order of the CIT(A) and submitted that the CIT(A) did not adjudicate the issue by taking the correct income of the assessee but dismissed the appeal of the assessee on the ground that the assessee could have rectified the mistake in the return of income by filing the revised return of income but the assessee has failed to do so. He has also referred to the amendment to the provisions of section 143(1)(a) vide Finance Act, 2018 and submitted that the third Proviso to section 143(1)(a) has been inserted w.e.f. 1.4.2018 with a view to restrict the scope of adjustments under section 143(1)(a) of the Income Tax Act. The learned AR has submitted that the assessee has attempted to revise the return of income by changing the ITR 4 to ITR 3 but the system did not permit to do so. Therefore, the assessee could not revise the return of income. He has pointed out that in the subsequent assessment years i.e. assessment years 2018-19 and 2019-20 the assessee has filed the return in Form ITR 3 therefore, the assessee has rectified its mistake in the subsequent years. The learned AR has submitted that because of the mistake in filing return of income in Form No. 4 instead of ITR Form-3, the adjustment has been made by the CPC. Hence, he has pleaded that the addition made on account of the adjustment made by the CPC be deleted.
4. On the other hand, the learned DR has submitted that it is not clear from the return of income filed by the assessee that the assessee declared the commission income while computing the total income. The assessee has declared the business income under section 44ADA whereas the commission income does not fall under the said presumptive provisions. Even the gross income as stated in the return of income is not matching with the gross commission receipts reflected in 26AS. The assessee has not given the details of the computation of the total income and therefore, in the absence of any computation details filed alongwith the return of income it cannot be said that the assessee has included the commission income while computing the total income. He has further contended that the decision of the Bangalore Benches of the Tribunal relied upon by the assessee is not applicable in the facts of the present case as in the said decision the CPC made an adjustment on account of the applicability of the provisions of section 44ADA instead of 44AD under which the assessee declared the income. Therefore, the gross receipt was very much part of computation of total income but only the rate provided under section 44AD and 44ADA was in dispute. In the case of the assessee, though the assessee has declared the income under section 44ADA but the commission income which is shown in form No. 26AS does not fall under the provisions of section 44AD or under section 44ADA and therefore, it is not a case of undisputed fact of declaring the gross receipt in the return of income. Thus, the learned DR has submitted that if there is a double addition and taxation on the same income then the matter is required to be verified at the level of AO.
4. I have considered the rival submissions as well as relevant material on record. There is no dispute about the commission received by the assessee for the year under consideration of Rs. 23,85,963/- as reflected in Form 26AS. The assessee filed his return of income in ITR Form 4 and declared the income under presumptive provisions of section 44ADA. In the return of income, the assessee has shown the gross receipt under section 44ADA of Rs.24,97,963/- on which the presumptive income was declared at Rs.12,64,692/-. From these two figures, it is clear that these are not matching with the gross receipts of commission amounting to Rs.23,85,963/-. Therefore, it is not apparent from the details provided in the return of income that the assessee has declared the gross commission income while computing the total income. Though the assessee has given the details of schedule TDS-2 in the return of income but that total amount is also not matching with the gross receipts shown by the assessee.
5. Accordingly, in the facts and circumstances of the case, the decision of the Bangalore Benches of the Tribunal in the case of Shri Arthur Bernad Sebastine Pais vs. Dy. Commissioner of Income Tax, CPC, Bangalore (supra) is not applicable. In the said case before the Bangalore Benches of the Tribunal, the controversy was only regarding applicability of section 44AD or section 44ADA. Whereas in the case in hand, the assessee has admittedly filed the return under wrong provisions of presumptive tax under section 44ADA whereas the commission income as reflected in Form 26AS is subjected to TDS under section 194H and is required to be declared in Form ITR 3 as per the normal computation of income and not under presumptive income under the provisions of section 44ADA of the Act. The assessee has filed the profit and loss account showing the income declared and the return of income as the net profit after deduction of expenditure from the gross commission income. The CIT(A) has dismissed the appeal of the assessee by citing the reason that the mistake in filing ITR 4 could have been rectified by the assessee by filing the revised return. The CIT(A) was of the view that the assessee has not availed the option available under the Income Tax Act. It is pertinent to note that when the assessee is having no other business activity then the commission income then the adjustment made by the CPC has resulted a double addition to the extent of Rs. 12,64,692/- already declared by the assessee in the return of income as the CPC has made the adjustment of gross amount of commission and not net income or profit out of the gross commission receipts. Accordingly, having regard to the facts and circumstances of the case and in the interest of justice, the impugned order of the CIT(A) is set aside and the matter is remanded to the record of the AO for deciding the same afresh after considering all the relevant facts and record to be produced by the assessee. Needless to say the assessee be given an appropriate opportunity of hearing before passing the fresh order.
5. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court at the time of conclusion of hearing on 07.09.2022 at Allahabad, U.P.
