VISAKHA JILLA NAVA NIRMANA SAMITHI, ,NARSIPATNAM vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CPC,, BENGALORE

This appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]-6, Hyderabad in I.T.A.No.10607/2018-19/B3/CIT(A)-6 dated 18.02.2019 for the Assessment Year (A.Y.)2015-16.

All the grounds of appeal are related to the issue of adjustments made u/s 143(1)(a) of the Income Tax Act, 1961 (in short ‘Act’). The assessee filed the return of income admitting total income of Rs.Nil on 30.09.2015. The Income Tax Department, CPC, Bangalore processed the return u/s 143(1) (a) and made the adjustment to the extent of Rs.7,31,016/- and raised the demand of Rs.46,660/-. The assessee went on appeal before the CIT(A) and the Ld.CIT(A) enhanced the addition and directed the Assessing Officer(AO) to deny the exemption of long term capital gains on sale of property to the extent of Rs.24,06,984/-.

Against which the assessee is in appeal before us. During the appeal hearing, the Ld.AR argued that the assessee had sold the property during the year under consideration and admitted the capital gains on sale of property for a sale consideration of Rs.31,38,000/- from which the cost of development to the extent of Rs.7,31,016/- was claimed as deduction and the balance amount of Rs.24,06,984/- was invested in bank fixed deposits which is eligible for deduction u/s 11(1A)(a) of the Act. The assessee also enclosed the details of fixed deposits made in page No.28 of the paper book and argued that the adjustments made by the AO u/s 143(1)(a) is not permissible and beyond the scope of section/s 143(1)(a) of the Act,

On the other hand, the Ld.DR relied on the orders of the lower authorities.

We have heard both the parties, perused the material placed on record. As per the adjustments made by the CPC, Bangalore to the extent of Rs.7,31,016/- u/s 143(1)(a) is an issue which required to be verified with the relevant documents. Therefore, the adjustments are not within the scope provided u/s 143(1)(a) of the Act. As per proviso to section 143(1)(a), the AO is required to give an intimation before making such adjustments, either in writing or in electronic mode and the department has not demonstrated that it has given an intimation to the assessee proposing to make such adjustments. Therefore, the adjustment made by the CPC u/s 143(1)(a) is beyond the scope of the said section, hence, not permissible and accordingly deleted.

The next issue is enhancement made by the Ld.CIT(A) in the appeal. The Ld.CIT(A) has directed the AO to deny the exemption claimed by the assessee u/s 11(1A)(a) of the Act and the assessee contended that the Ld.CIT(A) is not permitted to make enhancement without giving opportunity to the assessee. In the instant case we, observe from the order of the Ld.CIT(A) that, he has not given any enhancement notice before enhancing the addition. Therefore, the enhancement made by the Ld.CIT(A) is unsustainable, hence deleted.

The third issue in this appeal is denial of credit for an amount of Rs.35,309/- as against the claim of Rs.46,426/- claimed by the assessee. The Ld.CIT(A) without verifying the details and reconciliation of the income has directed the AO to allow the sum of Rs.35,309/- as against Rs.46,426/- claimed by the assessee. Therefore, we, direct the AO to call for the information for reconciliation of the receipts and the admission of income as per the system of accounting followed by the assessee and allow the credit for the taxes paid/credit claimed in respect of the income admitted in the year under consideration or in the earlier years as per the method of accounting. Accordingly, the appeal of the assessee is on this ground is allowed for statistical purposes.

In the result, appeal of the assessee is partly allowed.