Balbir Singh Vs ITO (ITAT Chandigarh)
Wrong ITR Form Cannot Produce the Right to Tax Twice: ITAT Deletes ₹26.69-Lakh Form 26AS Addition Processed u/s 143(1)
Commission Receipts Reflected in Form 26AS
The assessee carried on the business of mobile recharge & sale of SIM cards. He filed his return of income for AY 2017-18 in ITR-4/Sugam, disclosing the income arising from the business activity.
While processing the return u/s 143(1), CPC noticed commission receipts of ₹26,69,319 appearing in Form No.26AS.
CPC treated the entire amount reflected in Form No.26AS as additional taxable income, resulting in an adjustment & consequential demand.
The assessee contended that the commission receipts were not undisclosed. They formed part of the business receipts already considered while computing the net business income offered in the return. Therefore, separately adding the gross receipts appearing in Form No.26AS resulted in taxation of the same stream of income for a second time.
Wrong Return Form Selected
The assessee filed an application u/s 154, explaining that ITR-4 had been selected inadvertently, whereas the appropriate return form was ITR-3.
According to the assessee, the mistake was confined to the choice of the return form. The underlying business receipts & corresponding net income had already been disclosed. Even if the return had originally been filed in ITR-3, the amount of taxable income would have remained the same.
CPC, however, rejected the rectification application.
The assessee then approached the CIT(A), reiterating that the entire addition arose from a procedural mistake in selecting the return form & that the adjustment resulted in double taxation.
CIT(A) Insists on Revised Return
The CIT(A) rejected the assessee’s explanation.
It was held that the assessee ought to have selected ITR-3 in the first instance. Having mistakenly filed ITR-4, the assessee should have corrected the error by filing a valid revised return.
According to the CIT(A), the assessee had failed to produce a revised return substantiating the claim that the commission receipts were already included in the declared business income.
The adjustment made by CPC was accordingly upheld.
Corrected Return Was Already on Record
Before the Tribunal, the assessee submitted that a corrected or rectified return containing the correct particulars had subsequently been prepared & placed on record. The document was also available before the CIT(A).
The assessee argued that there was no suppression of receipts or taxable income. The entire dispute originated from an inadvertent error in using ITR-4 instead of ITR-3.
The Revenue contended that CPC was justified in acting upon the information appearing in Form No.26AS because the assessee had admittedly selected an inappropriate return form & had not filed a proper revised return within the permissible framework.
Substance of Income Prevails Over Form
The ITAT identified the short question as whether the entire amount of ₹26,69,319 appearing in Form No.26AS could be taxed as additional income merely because the assessee filed ITR-4 instead of ITR-3, despite claiming that the corresponding income had already been disclosed.
The Tribunal noticed that the CIT(A)’s decision was founded principally upon the use of the wrong return form. There was no finding that the commission receipts represented income over and above the business income already offered to tax.
The ITAT held that the purpose of tax adjudication is to determine the assessee’s correct taxable income in accordance with law. The Revenue cannot take advantage of an inadvertent procedural mistake to tax income that has already been disclosed.
Selection of an incorrect return form may carry procedural consequences. However, it cannot transform disclosed business receipts into undisclosed income or justify taxation of the same income twice.
Form 26AS Mismatch Is Not Automatic Income
The Tribunal clarified that a mismatch with Form No.26AS cannot automatically result in addition of the gross receipts.
Before making such an adjustment, it must be established that the amount reflected in Form No.26AS constitutes a separate item of income not already included in the returned income.
Here, the assessee claimed that the gross commission receipts had already been accounted for in determining the net profit from the mobile recharge & SIM-card business. The CIT(A) recorded no contrary factual finding.
The material on record, including the corrected return, ought to have been examined to determine whether the relevant receipts were already incorporated in the business results.
Goetze (India) Distinguished
The Tribunal considered the Supreme Court’s decision in Goetze (India) Ltd. v. CIT, (2006) 284 ITR 323 (SC).
In that case, the Supreme Court held that the AO cannot entertain a new claim for deduction otherwise than through a revised return. However, the Supreme Court expressly confined the restriction to the AO’s powers & clarified that it did not curtail the jurisdiction of appellate authorities.
The present assessee was not introducing an altogether new claim for deduction. His case was that receipts already incorporated in the returned income were being taxed again as an independent addition.
Therefore, Goetze (India) could not be interpreted as authorising double taxation merely because the assessee selected an incorrect return form.
Entire Addition Deleted
The ITAT held that appellate proceedings exist to determine the correct tax liability on the basis of the material available. A technical return-filing error cannot be elevated into a substantive basis for taxing income already offered.
The addition of ₹26,69,319 based solely upon Form No.26AS was therefore held unsustainable. The CIT(A)’s order was set aside, the entire addition was deleted & the assessee’s appeal was allowed.
Author’s Comments
The ruling distinguishes a prohibited fresh claim from a legitimate plea against duplication of income. The assessee was not asking for a new deduction; he was demonstrating that gross receipts had already entered the computation through declared business income.
Form No.26AS is a valuable information source, but it is not an independent charging provision. A mismatch requires reconciliation, not mechanical addition.
Tax authorities must examine whether the receipts were omitted or merely presented differently because of an incorrect form. After all, ITR-4 may have been the wrong form, but taxing one income twice could never be the right computation.
Cases Discussed
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, CHANDIGARH
This appeal by the assessee is directed against the order passed by the learned Commissioner of Income-tax (Appeals) [“CIT(A)”] for Assessment Year 2017-18, whereby the learned CIT(A) dismissed the appeal of the assessee and upheld the adjustment made by the Centralized Processing Centre (“CPC”) while processing the return of income under section 143(1) of the Income-tax Act, 1961 (“the Act”).
2. Briefly stated, the assessee filed the return of income for the year under consideration in ITR-4/Sugam. In the return so filed, the assessee had disclosed the income arising from his business activity. However, while processing the return under section 143(1) of the Act, the CPC noticed commission receipts of Rs.26,69,319/- reflected in Form No. 26AS and treated the entire amount as taxable income, resulting in the impugned adjustment and consequential demand. The assessee thereafter moved an application under section 154 of the Act, explaining that ITR-4 had been filed inadvertently instead of ITR-3 and that the commission receipts represented business receipts. It was submitted that the corresponding net income had already been disclosed in the return of income and, therefore, treating the entire amount reflected in Form No. 26AS as additional income would amount to taxing the same income again. The CPC, however, rejected the rectification application.
3. Aggrieved by the action of the CPC, the assessee preferred an appeal before the learned CIT(A). The grounds raised by the assessee, in substance, challenged the treatment of the entire commission receipts of Rs.26,69,319/- reflected in Form No. 26AS as income, contending that the assessee had already disclosed the gross receipts and declared the net income therefrom in the return. The assessee further contended that ITR-4 had been filed inadvertently, whereas ITR-3 was applicable, and that the income declared would remain the same even if the return had been filed in ITR-3. It was also contended that the receipts arose from the assessee’s business of mobile recharge and SIM-card sales and that the net profit from such business had already been offered to tax.
4. Before the learned CIT(A), the assessee reiterated that the error was confined to the selection of the return form and that there was no suppression of income. It was specifically stated that the net profit from the business had already been declared and that the CPC had, by taking the entire amount appearing in Form No. 26AS, effectively made a double addition. The assessee also placed supporting documents on record.
5. The learned CIT(A), however, rejected the claim of the assessee. According to the learned CIT(A), the assessee ought to have selected the correct return form and, having filed ITR-4 instead of ITR-3, should have revised the return. The learned CIT(A) further observed that the assessee had failed to produce a revised return in support of his claim and, consequently, held that the claim of double addition was not substantiated by documentary evidence. The learned CIT(A) accordingly upheld the action of the CPC in treating the receipts reflected in Form No. 26AS as taxable income.
6. Before us, the learned AR submitted that the entire controversy has arisen only because the assessee had filed ITR-4 instead of ITR-3. It was submitted that the mistake in selecting the return form cannot result in taxation of income which had already been disclosed by the assessee. The learned AR submitted that the income corresponding to the receipts reflected in Form No. 26AS was already included in the income declared in the return originally filed by the assessee. It was further submitted that thereafter the assessee had filed a rectified/correct return, which was also placed on record, wherein the correct particulars were furnished. The said return was available on the record Ld. CIT(A) .
7. The learned AR further submitted that there was consequently no undisclosed income and no justification for treating the entire receipts reflected in Form No. 26AS as a separate source of income. The learned AR contended that the Revenue cannot take advantage of an inadvertent procedural mistake committed by the assessee so as to tax the same income twice. Accordingly, it was submitted that the addition sustained by the learned CIT(A) deserves to be deleted.
8. On the other hand, the learned DR supported the orders of the authorities below. The learned DR submitted that the assessee had admittedly filed ITR-4 despite ITR-3 being the appropriate form. It was contended that the assessee was required to file the correct return/revised return and that the CPC was justified in acting upon the information available in Form No. 26AS while processing the return under section 143(1) of the Act. The learned DR accordingly submitted that the order of the learned CIT(A) should be upheld.
9. We have considered the rival submissions and perused the material available on record. The short controversy before us is whether the entire amount of Rs.26,69,319/- reflected in Form No. 26AS could be brought to tax as additional income merely because the assessee had filed ITR-4 instead of ITR-3, when the assessee’s case is that the corresponding income had already been disclosed in the return and subsequently a corrected/rectified return was also placed on record.
10. On consideration of the entire material, we find that the sole basis of the learned CIT(A)’s decision is essentially the wrong selection of the return form by the assessee. The learned CIT(A) has not recorded any finding that the impugned receipts represented income over and above the income already disclosed by the assessee. The learned CIT(A)’s reasoning proceeds principally on the footing that the assessee ought to have filed ITR-3 and ought to have revised the return.
11. In our considered opinion, the aforesaid approach cannot be accepted when the substantive position is that the income in question had already been disclosed by the assessee. The purpose of tax adjudication is to determine the correct taxable income of the assessee in accordance with law. The Revenue cannot derive an advantage from an inadvertent mistake committed by the assessee in selecting the appropriate return form and thereby bring to tax, for a second time, income which has already been disclosed and subjected to tax.
12. The distinction between the form of return and the substance of income assumes significance in the present case. Merely because ITR-4 was filed instead of ITR-3, the income already disclosed by the assessee does not become undisclosed income. The mistake in filing the return in an inappropriate form may have procedural consequences in accordance with law; however, it cannot, by itself, justify taxation of the same income twice.
13. We also find merit in the contention of the learned AR that the subsequent corrected/rectified return was placed on record. The assessee’s explanation, therefore, was not merely a bare assertion that an incorrect form had been selected. The material on record was required to be examined to determine whether the receipts reflected in Form No. 26AS had already been accounted for in the income disclosed by the assessee.
14. Once the corresponding income has already been declared by the assessee and offered to tax, the subsequent mismatch with Form No. 26AS cannot automatically result in a further addition of the gross receipts, unless it is established that such receipts represent a separate item of income which was not already included in the returned income. No such finding has been brought on record in the impugned appellate order.
15. The learned DR has placed reliance on the fact that the assessee had filed an incorrect return form. We are unable to accept that contention as sufficient to sustain the impugned addition. The issue before us is not whether the assessee ought to have filed ITR-3. The issue is whether, on the facts available on record, the amount sought to be taxed had already been disclosed as income. If the same income has already suffered tax, a second levy on the same income cannot be sustained merely because the assessee committed an error in selecting the return form.
16. We are conscious of the decision of the Hon’ble Supreme Court in Goetze (India) Ltd. v. CIT, (2006) 284 ITR 323 (SC), wherein the Hon’ble Supreme Court held that the Assessing Officer cannot entertain a claim for deduction otherwise than by way of a revised return. However, the Hon’ble Supreme Court itself clarified that the said decision was confined to the powers of the Assessing Officer and did not impinge upon the powers of the appellate authorities under section 254 of the Act.
17. In the present case, the assessee is not seeking to introduce an altogether new claim for deduction before the Tribunal. The grievance of the assessee is that the Revenue has brought to tax, as additional income, receipts which according to the material on record were already disclosed in the return and subjected to tax. Therefore, Goetze (India) Ltd. (supra) cannot be read as authorising taxation of the same income twice merely because the assessee had committed an error in selecting the appropriate return form.
18. In our considered opinion, the appellate proceedings are intended to determine the correct tax liability on the basis of the material available on record. It is the duty of the appellate authority to apply the law correctly and determine the correct taxable income. A technical or procedural error in the filing of the return cannot be elevated to a substantive basis for taxing income which has already been offered to tax.
19. Accordingly, considering the totality of the facts and circumstances of the case, we hold that the addition of Rs.26,69,319/- merely on the basis of the amount reflected in Form No. 26AS is not sustainable when the corresponding income had already been disclosed by the assessee. The mismatch in Form No. 26AS, in the facts of the present case, cannot be used to bring the same income to tax again.
20. We, therefore, set aside the order of the learned CIT(A) on the issue under consideration and delete the addition of Rs.26,69,319/- sustained by the learned CIT(A).
21. In the result, the appeal of the assessee is allowed.
Order pronounced on 02nd September,2026.
