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Income Tax Appellate Tribunal, DELHI BENCH : SMC : NEW DELHI
Before: SHRI C.M. GARG
ORDER This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre (NFAC), Delhi, relating to Assessment Year 2019-20. 2. The assessee has raised the following grounds of appeal:- “1. On the facts and in the circumstances of the case and in law, the authorities below have erred in invoking section 50C of the I.T Act without following the proper procedure laid down in the act. The action of the authorities below is wrong, illegal, misconceived and unjustified therefore it should be quashed.
2. On the facts and in the circumstances of the case and in law, the authorities below have erred in confirming the addition on account of deemed capital gain amounting to Rs.9,50,000/-. The action of the authorities below is wrong, illegal,' misconceived and unjustified therefore it should be quashed.
3. On the facts and in the circumstances of the case and in law, the authorities below have erred in enhancing the interest u/s 234B & 234C of the Income Tax Act. The action of the authorities below is wrong, illegal, misconceived and unjustified therefore it should be quashed. The appellant craves the right to add, submit, alter or withdraw any or all grounds of appeal before or on the date of hearing.”
The ld. Assessee’s representative (AR), placing reliance on the judgement of the coordinate Bench of ITAT Delhi in the case of SVS Guarding Services Pvt. Ltd. vs. ITO, and ACIT vs. Haryana Telecom Ltd. (2009) 14 taxmann.com 122 (ITAT, Delhi), submitted that the CPC-AO has made addition u/s 50C of the Act in the order passed u/s 143(1) of the Act which is not permissible as per the scheme of the Act. He further submitted that it is beyond the power of the AO u/s 143(1)(a) of the Act to make prima facie adjustment of controversial nature and where while resorting to prima facie adjustments of controversial nature, and where by resorting to prima facie adjustments of controversial nature in purported exercise of power u/s 143(1)(a) of the Act it can be said that the AO overstepped his jurisdiction thereby determining the income much higher than what was the returned by the assessee. The ld. AR submitted that if such addition is made, then, this is a clear case where illegality or mistake in the intimation u/s 143(1)(a) arises for the reason that the said provision of making prima facie adjustment of controversial nature which ought not to have been invoked by the AO and the income was wrongly determined by making unilateral adjustment of controversial nature which did not fall within the ambit of section 143(1)(a) of the Act.
Replying to the above, the ld. Sr. DR supported the orders of the authorities below.
In the present case, as noted by the ld.CIT(A) in para 1 of the first appellate order, the assessee preferred an appeal against the intimation u/s 143(1) of the Act dated 15.07.2020 issued by CPC, Bangalore for AY 2019-20 wherein the CPC made addition of Rs.9,50,000/- on account of capital gain on the basis of stamp value of assets u/s 50C of the Act.
The coordinate Bench of ITAT in the case SVS Guarding Services Pvt. Ltd. vs. ITO (supra), in para (E) held as follows:-
“(E) In the light of the foregoing conclusions in paragraph (D.2.1) of this order, we are of the view that the aforesaid additions of Rs.29,52,674/- by way of adjustment and intimation u/s 143(1) of Income Tax Act, were beyond the scope of Section 143(1) of Income Tax Act; and further, that the Ld. CIT(A) erred in law in confirming the aforesaid addition on a debatable and controversial issue. Accordingly, we set aside the impugned appellate order dated 03.12.2021 of the Ld. CIT(A), and direct the Assessing Officer to delete the aforesaid addition of Rs. 29,52,674/-. (E.1) By way of abundant caution, we hereby clarify that we have not expressed any view in this order, on whether the aforesaid amendments brought in by Finance Act, 2021 [whereby Explanation-2 was inserted in Section 36(1)(va) of Income Tax Act and Explanation-5 was inserted in Section 43B of Income Tax Act] are prospective or retrospective. In the light of our decision in foregoing paragraph (E) of this order; this issue is merely academic in nature; hence not decided.”
Further, the coordinate Bench of ITAT Delhi in the case ACIT vs. Haryana Telecom Ltd. (2009) 14 taxmann.com 122 (ITAT, Delhi) (supra), in para 27, under identical facts and circumstances, held as follows:-
“27. We, therefore, hold that it is beyond the power of the Assessing Officer under section 143(1)(a) to make prima facie adjustments of controversial nature and where by resorting to prima facie adjustments of controversial nature in purported exercise of power under section 143(l)(a), it can be said that the Assessing Officer over-stepped his jurisdiction thereby determining the income much higher than what was 3 returned by the assessee. This has obviously introduced an error, which is _ apparent from record. When such an error of making prima facie adjustments of controversial under section 143.(1)(a) is pointed out to the Assessing Officer, he is duty bound to amend, under section 154(l)(b), the intimation under section 143(1 )(a). This is a case where the illegality or mistake in the intimation under section 143(1 )(a) arises for the reason that the said provision of making prima facie adjustment of controversial nature which ought not to have been invoked has been invoked by the Assessing Officer and the income was wrongly determined by making unilateral adjustments of controversial nature which do not fall within the ambit of section 143(1)(a) of the Act. Thus, in such circumstances, if the Assessing Officer passes an order rejecting the assessee's application under section 154, it can be said that the Assessing Officer has failed to exercise his jurisdiction which he ought to have exercised under section 154 of the Act by rejecting his intimation and deleting therefrom the prima facie adjustments of controversial nature earlier made by him while making an intimation under section 143(1 )(a) of the Act. The hon'ble Rajasthan High Court in the case of CIT v. Bank of Rajasthan Ltd. [2008] 306 ITR 363 has held that where the provisions of making prima facie adjustments under section 143(l)(a) are not attracted and since the action has been taken by the Assessing Officer under section 143(l)(a), it rightly attracted the right of the assessee to move an application under section 154, and in that view of the matter, the application under section 154 was rightly allowed by the learned Commissioner of Income-tax (Appeals), as well as the Income-tax Appellate Tribunal.”
In view of the above, I am inclined to hold that the AO has made addition u/s 50C of the Act in the intimation issued u/s 143(1)(a) of the Act on a controversial issue. In my humble understanding, the impugned addition by way of adjustment and intimation u/s 143(1) of the Act is beyond the scope of section 143(1) of the Act and the ld.CIT(A) has also erred in law in confirming the aforesaid addition on a debatable and controversial issue. Accordingly, the addition made by intimation u/s 143(1)(a) of the Act and confirmed by the ld.CIT(A) is set aside and the AO is directed to delete the addition of Rs.9,50,000/-. Accordingly, the grounds of the assessee are allowed.