RISHIT JAILESH DALAL,MUMBAI vs. INCOME TAX OFFICER, WARD 22(1)(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “D” MUMBAI

BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI ANIKESH BANERJEE (JUDICIAL MEMBER)

ITA No. 4984/MUM/2026 Assessment Year: 2017-18

Rishit Jailesh Dalal, Income Tax Officer, Ward 22(1)(1), 2301, Oberoi Springs, Off Link Road, Piramal Chambers, DR S S Rao Andheri West, Mumbai, Maharashtra Vs. Marg, Parel, Mumbai, 400053 Maharashtra 400012 PAN NO. AIEPD7174L APPELLANT RESPONDENT

: Shri Dharan Gandhi Assessee by Department by : Shri Mahesh Londhe, SR. DR. Date of Hearing : 21.08.2026 Date of pronouncement : 31.08.2026

ORDER PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against order dated 19.02.2026, passed in faceless mode by the Learned Additional/Joint Commissioner of Income-Tax (Appeals)-1 Gurugram– [in short ‘the Ld. CIT(A)’] for Assessment Year (in short ‘A.Y’) 2017-18, arising following grounds:-

Rishit Jailesh Dala, Vs. 2 Income Tax Officer, Ward 22(1)(1), ITA No. 4984/MUM/2026

1.1. The learned CIT(A) failed to appreciate the fact that the amount of Rs. 8,40,000/-was indeed the repayment of loan and not the salary income.

1.2 The learned CIT(A) and CPC has erred in assuming income merely on the basis of Form 26AS, ignoring the fact that no such income has been earned

1.3 The learned CIT(A) and CPC failed to appreciate the fact that the amount of Rs. 8,40,000/- was reflecting in the Form 26AS due to non- validation of the correct position of the case and due to procedural difficulties.

1.4 Under the facts and in law, the learned CIT(A) erred in stating that addition made by CPC cannot be stated as rectifiable mistake apparent from record.

2.1 The return was processed by the Centralised Processing Centre (“CPC”), Bengaluru under section 143(1) of the Act. On comparison of the return with the information available in Form 26AS, the CPC noticed that salary income of Rs.3,06,72,802/- from JRPL and Rs.8,40,000/- from CMPL was reflected in Form 26AS.

Rishit Jailesh Dala, Vs. 3 Income Tax Officer, Ward 22(1)(1), ITA No. 4984/MUM/2026

The assessee, however, had not offered the amount of Rs.8,40,000/- as salary income from CMPL in the return of income.

2.2 The CPC accordingly issued intimations dated 05.05.2018 and 25.09.2018 proposing an adjustment of Rs.8,40,000/- on account of the difference between the salary income disclosed in the return and the amount reflected in Form 26AS. The assessee objected to the proposed adjustment and furnished an explanation. The CPC, however, proceeded to make the adjustment and determined the total income at Rs.3,22,82,580/-, resulting in a demand of Rs.2,92,470/-.

2.3 Thereafter, the assessee filed an application for rectification on the Income-tax Portal on 09.11.2020 seeking correction of the aforesaid adjustment. The rectification application was rejected by the CPC under section 154 of the Act vide order dated 13.11.2020, which was served upon the assessee on 19.11.2020.

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as salary merely because of an erroneous reporting in the TDS statement. It was further submitted that adjustment made by the CPC was a mistake apparent from the records and therefore, the same should be rectified.

3.1 The learned CIT(A), however, rejected the claim. He held that the information available in Form 26AS and the TDS records reflected salary income of Rs.8,40,000/- and that determination of the true nature of the receipt as loan repayment would require examination of books of account, employer records, revised TDS statements and other evidence. According to the learned CIT(A), such an exercise fell beyond the limited scope of rectification under section 154. He further observed that, unless the deductor corrected its TDS statement and the correction was reflected in the departmental records, the claim of the assessee could not be accepted merely on the basis of an assertion. The learned CIT(A), accordingly, upheld the order passed under section 154. The relevant finding of the ld. CIT(A) is reproduced as under:

5.1 Section 154 permits rectification only of mistakes apparent from record. Issues requiring verification of facts, examination of additional evidence or determination of the true nature of a transaction cannot be rectified under section 154.

5.2 Juxtaposition of appellant’s contention and record

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5.2.1 The appellant argues that the amount of Rs. 8,40,000/- is loan repayment and not salary income. However:

(1) Form 26AS and TDS records available with the Department clearly reflect deduction of tax on salary of Rs. 8,40,000/-.

(2) The rectification proceedings under section 154 are limited to correcting patent mistakes based on available records; the claim that the amount represents loan repayment requires verification of books of accounts, employer records, revised TDS returns and supporting evidences, which goes beyond the scope of section 154.

(3) No conclusive documentary evidence establishing correction of TDS reporting in departmental records has been produced so as to demonstrate an apparent error in the system records at the time of passing the impugned order. Thus, the CPC acted correctly in relying upon information available in Form 26AS and other system records while processing the rectification.

5.3 Merits of the issue

5.3.1 Even otherwise, the adjustment arose due to mismatch between return income and third-party information. Unless the deductor revises the TDS statement and the same gets reflected in departmental records, the credit and corresponding income cannot be modified merely on the basis of an assertion by the assessee. Hence the addition cannot be said to be a rectifiable mistake apparent from record.

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such, the CPC was justified in making the impugned adjustment on the basis of information available in departmental records. Therefore, no interference with the order under section 154 is called for.

Rishit Jailesh Dala, Vs. 7 Income Tax Officer, Ward 22(1)(1), ITA No. 4984/MUM/2026

4.1 The learned Departmental Representative relied upon the orders of the lower authorities and submitted that, so long as Form 26AS and the corresponding TDS statement reflected salary income of Rs.8,40,000/-, the CPC was justified in making the adjustment.

5.1 At the stage of processing under section 143(1), the CPC was required to act upon the information available in the return and the material contemplated by the statutory scheme. The information available in the departmental system, including Form 26AS/TDS statement furnished by the deductor, reflected payment of salary of Rs.8,40,000/- by CMPL and deduction of tax thereon. The

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adjustment made by the CPC, therefore, flowed from the information then available on record and cannot be said to suffer from any mistake apparent from the record.

5.2 The assessee has subsequently taken the stand that the aforesaid amount was not ‘salary’ but it was repayment of a loan earlier advanced by him to CMPL. The assessee is admittedly a director and shareholder of the said company. Determination of the true nature of the payment would necessarily require examination of the original loan transaction, the accounts and bank statements of the assessee and CMPL, the corresponding entries in the books of the company, the circumstances in which tax was deducted, the original TDS statement and the alleged subsequent attempt to revise the same. Such an exercise involves investigation and appreciation of evidence and, therefore, cannot be characterised as rectification of an obvious and patent mistake apparent from the record.

5.3 The fact that the assessee asserts that the amount was inadvertently reported by CMPL as ‘salary’ does not, by itself, render the information reflected in Form 26AS erroneous for the purposes of section 154. Form 26AS reflects the information furnished by the deductor. If the information furnished by the deductor is alleged to be erroneous, the correction has necessarily to originate at the level of the deductor through correction/revision of the relevant TDS

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statement. The Income-tax Department itself advises that, in the event of a TDS mismatch, the employer/deductor is required to file a revised TDS return, whereafter the corresponding tax-credit information can be reconciled.

5.4 The distinction between the jurisdiction under section 143(1) and that under a regular assessment under section 143(3) is therefore material. The processing under section 143(1) is not intended to undertake an investigation into the true nature of a transaction on the basis of books of account, bank statements or other evidence requiring appreciation of facts. Equally, section 154 confers a limited power to rectify a mistake apparent from the record and does not provide a forum for reopening and re- adjudicating a debatable or fact-intensive issue. The Department has provided separate procedure for correction of TDS mismatch through the prescribed mechanism.

5.5 We are of opinion that in an appeal arising from proceedings under section 154 read with section 143(1), the appellate authority cannot enlarge the limited scope of rectification by undertaking an enquiry which properly falls within the domain of a regular assessment.

5.6 Applying the aforesaid principle to the facts of the present case, we find that the learned CIT(A) was justified in holding that the assessee's claim that Rs.8,40,000/- represented ‘repayment of a

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loan’, rather than ‘salary’, could not be adjudicated in proceedings under section 154 on the basis of the material then forming part of the record. The adjustment made by the CPC was based upon the information reflected in Form 26AS, which itself emanated from the TDS statement furnished by CMPL. The existence of an alleged error in such reporting and the true character of the underlying transaction are matters requiring factual verification and cannot be brought within the limited jurisdiction of section 154.

5.7 We may clarify that we are not recording any finding on the ultimate character of the receipt of Rs.8,40,000/-. Form 26AS may not, in an appropriate substantive proceeding, be conclusive of the true character of a receipt merely because the deductor has described it in a particular manner. But where the assessee seeks to displace the information furnished by the deductor and reflected in Form 26AS by asserting a different underlying transaction, such assertion cannot be adjudicated in the proceedings u/s 154 unless the error is apparent from the existing record itself. The assessee's contention that the deductor was unable to correct the TDS statement owing to an alleged technical limitation of the electronic system also does not, by itself, convert the disputed issue into a mistake apparent from the record.

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5.9 As regards the assessee’s grievance that it was prejudiced by the failure of the Department’s electronic system to provide an option to the Employer for amendment of the quarterly TDS return, the assessee shall be at liberty to avail such remedy as may be available in law for correction of the TDS statement by the deductor and for consequential correction of the information reflected in Form No. 26AS. Any such correction, if duly carried out in accordance with law and reflected in Form No. 26AS, may thereafter be considered by the Assessing Officer in accordance with law. The matter was initially heard on 07.08.2026 and was thereafter posted on 21.08.2026 to enable the assessee to furnish clarification as to whether the employer had carried out the requisite modification in the quarterly TDS return for the relevant period. However, no convincing material has been placed before us to establish that such correction has, in fact, been carried out. In these circumstances, and in the interest of justice, we consider it appropriate to restore the matter to the file of the Assessing Officer with a limited direction that, if the employer has already rectified or modified the relevant quarterly TDS return by correctly reflecting the amount as unsecured loan instead of salary, and the corresponding correction is duly reflected in the assessee’s Form No. 26AS, the Assessing Officer shall examine the same and grant

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consequential relief, if otherwise admissible, in accordance with law.

5.10 The grounds raised by the assessee are, accordingly, partly allowed for statistical purposes.

Order pronounced in the open Court on 31/08/2026.

Sd/- Sd/- (ANIKESH BANERJEE) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 31/08/2026 ANKIT, PS

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.

BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai