MRS. KERAFRID N. DAMANIA (AS THE SURVIVING PARTNER OF PHIL CONSTRUCTION CO.),MUMBAI vs. THE ADIT CENTRALIZED PROCESSING CENTER BENGALURU AND THE INCOME-TAX OFFICER WARD 19(2)(4) MUMBAI, MUMBAI

ITA 2230/MUM/2026Status: DisposedITAT Mumbai03 August 2026AY 2024-254 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the adjustment made under section 143(1) was not sustainable as it resulted in taxing the same income twice. The assessee had already disclosed and offered the amount to tax under capital gains, and the adjustment by CPC was an erroneous inclusion.

What were the facts?

The assessee challenged an adjustment of Rs. 17,05,422/- made by the CPC while processing its return under section 143(1). The assessee contended that this amount, representing 'Revaluation of asset', had already been offered to tax under 'Capital Gains', leading to double taxation.

What were the issues?

Whether an adjustment made under section 143(1) is valid when it leads to double taxation of an amount already offered to tax under a different head. The validity of CPC's adjustment for 'Revaluation of asset' when capital gains on the same were already offered.

Which sections of the Income-tax Act were involved?

Section 143(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “J(SMC

Before: SHRI PAWAN SINGH & SHRI GIRISH AGRAWAL

Hearing: 04.05.2026Pronounced: 03.08.2026

IN THE INCOME TAX APPELLATE TRIBUNAL “J(SMC)” BENCH MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 2230/MUM/2026 Assessment Year: 2024-25 Kerafrid N. Damania ADIT, CPC, (as the surviving partner of Bengaluru and Phil Construction Co.) Income-tax Officer, 59-B, FIONIKA, Vs. Ward 19(2)(4), Mumbai Walkeshwar, Malabar Hill,, Mumbai - 400006 (PAN: AAAFP2507M) (Appellant) (Respondent) Present for: Assessee : Shri A. K. Jawadwala, CA Revenue : Shri Aditya M. Rai, Sr. DR Date of Hearing : 04.05.2026 Date of Pronouncement : 03.08.2026 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of Addl./Jt. CIT(A)-11, Delhi vide order no. ITBA/APL/S/250/2025- 26/1084160756(1), dated 29.12.2025, passed against the intimation issued by CPC, Bengaluru, u/s. 143(1) of the Income-tax Act (hereinafter referred to as the “Act”), dated 05.06.2025, for Assessment Year 2024-25.

Grounds taken by the assessee are reproduced as under: " 1 : 0 Re.: Validity of the adjustment of Rs. 17,05,422/- to the returned income:

2 ITA No. 2230/Mum/2026 Kerafrid N Damania AY 2024-25

1 : 1 The ADDL/JCIT (Appeals) has erred in confirming the action of the CPC Bengaluru/Assessing Officer in making an adjustment to the returned income of the Appellant while processing its return of income in terms of section 143(1) of the Income-tax Act, 1961. 1 : 2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject no adjustment was warranted in the case of the Appellant and the adjustment made by the CPC-Bengaluru/Assessing Officer is illegal, incorrect and unwarranted. 1 : 3 The Appellant submits that the CPC-Bengaluru/Assessing Officer be directed to delete the adjustment made by him to the total income as returned and to recompute/re-process the Appellant’s total income accordingly. 2 : 0 Re.: Taxing the same amount twice: 2 : 1 The ADDL/JCIT (Appeals) has erred in confirming the action of the CPC Bengaluru/Assessing Officer in taxing the amount of Rs. 17,05,422/- being ‘Revaluation of asset’ without considering the fact that the deemed capital gains on the said asset has already been offered to tax under the head ‘Capital Gains’ thereby taxing the said amount twice. 2 : 2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, the adjustment made by the CPC Bengaluru/Assessing Officer in this regard is incorrect, erroneous and not in accordance with the law. 2 : 3 The Appellant submits that the CPC-Bengaluru/Assessing Officer be directed to delete the adjustment made by him to the total income as returned and to recompute/re-process the Appellant’s total income accordingly.

At the outset, we note that the issue in the present appeal is confined to the adjustment of Rs.17,05,422/- made while processing the return of income under section 143(1). Assessee has challenged the said adjustment primarily on the ground that the amount representing "Revaluation of asset" has already been considered in computing the deemed capital gains and has accordingly been offered to tax under the head "Capital Gains". It is thus, the contention of the assessee that the impugned adjustment has resulted in taxing the same amount twice.

We have heard the rival submissions and perused the material available on record. We have also carefully considered the facts as emanating from the order/intimation of the authorities below. The issue

3 ITA No. 2230/Mum/2026 Kerafrid N Damania AY 2024-25 before us is whether the adjustment of Rs.17,05,422/- could validly be made while processing the return of income under section 143(1).

4.1. Section 143(1) contemplate only such adjustments as are specifically permissible within the limited scope of processing of return of income. The processing mechanism under section 143(1) cannot be employed for making an adjustment where the assessee has already disclosed the relevant income in the return and the adjustment results in the same income being brought to tax once again.

4.2. In the present case, specific attention was drawn to the income- tax return form filed by the assessee, placed on record in the paper book whereby in ‘Schedule BP – Computation of Income from Business or Profession’ while computing the income under the said head, suo moto adjustment is made by the assessee for an amount of Rs.17,05,422/- towards ‘Capital Gains’. The same is perused and found to be correct. This factual position is further corroborated by making reference to computation of total income placed in the paper book.

4.3. It is also noted from para 4.4 and 4.5 of the impugned first appellate order that treatment of capital gain as business income is held to be an error committed on the part of CPC and direction is given to the ld. Assessing Officer to compute the tax liability accordingly.

What emerges from the above is that factual position demonstrated by the assessee and affirmed by the first appellate authority remains uncontroverted. Accordingly, impugned adjustment made by CP has the effect of once again including the very same amount in the taxable income of the assessee. In our considered view, we hold that the impugned adjustment of Rs.17,05,422/- made while

4 ITA No. 2230/Mum/2026 Kerafrid N Damania AY 2024-25 processing the return of income under section 143(1) is not sustainable. The same is accordingly, deleted. Grounds raised by the assessee in this regard are allowed.

In the result, appeal of the assessee is allowed.

Order is pronounced in the open court on 03 August, 2026

Sd/- Sd/- (Pawan Singh) (Girish Agrawal) Judicial Member Accountant Member Dated: 03 August, 2026 MP, Sr.P.S. Copy to: 1 The Appellant 2 The Respondent 3 DR, ITAT, Mumbai 4 Guard File 5 CIT BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai

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