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Income Tax Appellate Tribunal, “C” BENCH KOLKATA
Before: SHRI RAJPAL YADAV & SHRI GIRISH AGRAWAL
Present for: Appellant by : Shri Ravi Tulsiyan, FCA Respondent by : Shri Vijay Kumar, Addl. CIT Date of Hearing : 27.12.2022 Date of Pronouncement : 13.03.2023 O R D E R
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of Ld. CIT(A), Income Tax Department, National Faceless Appeal Centre (NFAC), Delhi vide Order No. ITBA.NFAC/S/250/2022- 23/1043871894(1) dated 15.07.2022 passed against the order of intimation by Asst. Director of Income Tax, CPC, Bengaluru u/s. 143(1) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 23.12.2021.
Assessee has taken seven grounds of appeal and the dispute centres on legality of making adjustment to the returned income while processing the return of income u/s. 143(1) of the Act, more particularly when income from house property as reported in the return was accepted in the intimation issued u/s. 143(1) of the Act.
Brief facts of the case are that assessee filed its return of income on 19.01.2021 reporting total income of Rs.49,61,450/- which was processed at Rs.59,77,670/- by issuing an intimation u/s. 143(1) of the Act dated 23.12.2021. The said adjustment is an addition of Rs.10,16,216/- to the income from business/profession as reported in the return. In the year under consideration, assessee had received rental income of Rs.72,30,427/- which was included in the net profit computed in the P&L Account. In the return of income, this was reduced from the net profit in the P&L Account and was shown under the head ‘Income from house property’ which was computed separately. While processing the return, CPC, Bengaluru accepted the income from house property as reported in the return. However, while computing the income from business and profession instead of reducing the rental income of Rs.72,30,427/-, CPC, Bengaluru reduced the amount of Rs.62,14,211/- from the net profit which has resulted in the increase in income from the business and profession by Rs.10,16,216/-. Aggrieved, assessee went in appeal before the Ld. CIT(A).
Appeal of the assessee was partly allowed in respect of the adjustment made. Ld. CIT(A) though observing that the action of CPC is not correct, directed the Ld. AO to verify the details in respect of the adjustment made and based on his verification revise the income of the assessee after ascertaining the correct facts. Aggrieved, assessee is in appeal before the Tribunal.
Prima facie, case of the assessee as submitted by the Ld. Counsel is that adjustment made by the CPC, Bengaluru while processing the return and issuing intimation u/s. 143(1) of the Act are legally impermissible adjustment as enumerated in section 143(1) of the Act. According to the Ld. Counsel, CPC has travelled beyond the scope of the powers conferred upon it by section 143(1)(a) of the Act and thus has wrongly enhanced the total income. According to the Ld. Counsel, it is a non-speaking unilateral denial of the assessee’s claim without issue of any notice to the assessee for the enhancement made in the returned income and hence, outside the scope of prima facie adjustment. 5.1. Ld. Counsel also submitted that in the order of ld. CIT(A), he himself has categorically stated and admitted that action of CPC is not correct.Despite this statement by the Ld. CIT(A), he hadgone ahead to give direction to the ld. AO for verification and revising the income based thereon. Restoration of the matter to the Ld. AO by Ld. CIT(A) is beyond the scope of powers available to the Ld. CIT(A) u/s. 251 of the Act, claims ld. Counsel. 5.2 Ld. Counsel placed reliance on the decision of coordinate bench of ITAT, Kolkata in the case of Anita Seth Vs. DCIT in dated 18.04.2022 wherein it is held as under: “If the department finds that there is an anomaly, then it has liberty to do so by conducting scrutiny assessment under the provisions of law or to re-open the assessment u/s 147 of the Act. Thus, we find that CPC had no jurisdiction to make impugned
adjustment within the meaning of section 143(1)(a) of the Act. Accordingly, the adjustment made by the CPC stands deleted." Reliance is also placed on the decisionof Hon'ble Bombay High Court in the case of Bajaj Auto Finance Ltd. vs. CIT (2018) 404 ITR 564 (Bom), wherein it has been held that the Intimation u/s 143(1) issued without the assessee having an opportunity to explain its case was not valid in law. In such a case, the proper course is to choose the case for scrutiny by issue of notice u/s 143(2) of the Act and deal with the matter after giving the assessee an opportunity to explain its case, which was not done in the case of the assessee.”
5.3. According to the Ld. Counsel, impugned intimation u/s 143(1) was issued without the assessee having an opportunity to explain its case, which is not valid in law. In such a case, the proper course is to choose the case for scrutiny by issue of notice u/s 143(2) of the Act and deal with the matter after giving the assessee an opportunity to explain its case, which was not done in thepresent case. It is submitted that from the return and its accompanying documents, it was evident that assessee had correctly computed the income from business or profession at Rs.5,56,238/- and total income at Rs.49,61,450/- and that ld. AO, CPC has not assigned any justification for enhancing the income from business or profession to Rs.15,72,454/- and consequential increase by Rs.10,16,220/- to arrive at total income at Rs.59,77,670/-.
Per contra, Ld. Sr. DR placed reliance on the order of Ld. CIT(A) and submitted that there is no prejudice to the assessee when a direction has been given by the ld. CIT(A) to allow the claim, after verification of the records.
We have heard the rival contentions and perused the material available on record. Before adverting on the issue, we take note of the permissible adjustment available u/s. 143(1) of the Act which are as under: “143(1) of the Act is outside the scope of prima facie adjustment Nature of adjustments permissible u/s 143(1) of the Act are to the following extent: "(a) the total income or loss shall be computed after making the following adjustments, namely:- (i) Any arithmetical error in the return; (ii) An incorrect claim, if such incorrect claim is apparent from any information in the return; (iii) Disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139; (iv) Disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return; (v) Disallowance of deduction claimed under section 10M or under any of the provisions of Chapter VI-A under the heading "C-Deductions in respect of certain incomes" if the return is furnished beyond the due date specified under sub-section (1) of section 139;
Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode:”
In the present case before us, we take note of the fact that CPC has not assigned any justification for enhancing the income from business or profession by Rs.10,16,220/- even though the income from house property has been accepted as returned by the assessee. We also note that the adjustment made while processing the return are restrictive and limited as enumerated above. We also take note of the power of enhancement available to Ld. CIT(A) u/s. 251(2) of the Act which Ld. CIT(A) did not chose to exercise. Also, power to set aside the matter to the file of Ld. AO are not available with the Ld. CIT(A) as stated u/s. 251(1) of the Act. Admittedly, it is also a statement made by ld. CIT(A) while disposing the appeal that action of CPC is not correct. Considering the above submissions and the factual matrix as well as the provisions in thelaw, we are of considered view that adjustment made to the total income of the assessee u/s. 143(1) while processing the return and issuing an intimation u/s. 143(1) is uncalled for and is, therefore, directed to be deleted. Grounds taken in this respect are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on13th March, 2023.