SWAYAT TRADING CO.,AHMEDABAD vs. THE DY. CIT, CIRCLE-3(1)(1), AHMEDABAD

The brief facts of the case are that the assessee filed its return of income declaring total income from capital gain and from other sources. However, at the time of processing of the return u/s.143(1) of the Act, the CPC issued a defect notice stating that though the assessee had shown receipts from ‘business or profession’ of rupees more than 1 crore, but in the subsequent columns relating to ‘business or profession’ no such receipts were shown and even since said receipts were of more than Rs.1 core, the assessee did not furnish the audit report. In reply, the assessee stated to the CPC that the assessee had not earned any receipts from ‘business or profession’. That the assessee had earned income only from capital gains and from other sources. Therefore, the assessee had not filled any column relating to ‘business or profession’ and further there was no requirement for the assessee to get its accounts audited or to furnish the Audit report. However, the CPC rejected the contentions of the assessee in a mechanical manner, treated the return filed by the assessee as invalid for want of Audit Report. etc.

The assessee filed rectification application u/s.154 of the Act to the CPC requesting that there was no defect in the return filed by the assessee and that the assessee had not earned any income from ‘business or profession’ and, hence, was not liable to furnish any tax Audit Report. However, the CPC disposed of the application of the assessee vide order dated 14/01/2023 passed in Grievance Acknowledgement No.1796131, stating, “Dear Taxpayer, on perusal of the grievance it is seen that, for the said issue, action vests with Swayat Trading Co. vs. DCIT Jurisdictional Assessing Officer. Hence, you are requested to contact your Jurisdiction Assessing Officer”.

Thereafter, the assessee filed a rectification application u/s.154 of the Act to the Jurisdictional Assessing Officer vide Grievance Acknowledgement No.9376944. However, the AO vide his order dated 06/02/2023, rejected the application of the assessee, stating that jurisdiction to validate the return lied with the CPC.

Being aggrieved by the order of the AO, the assessee preferred an appeal before the Ld. CIT(A), however, the Ld. CIT(A) dismissed the appeal of the assessee stating that the Jurisdictional AO had acted correctly within the confines of his jurisdiction and that the jurisdiction vested with the CPC and not with the Jurisdictional AO. He further observed that the issue raised by the assessee required factual determination which was not within the purview of section 154 of the Act and, hence, he dismissed the appeal of the assessee.

Being aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us.

We have heard the rival contentions of the Ld. Representatives of the parties and gone through the record. The contention of the assessee from the very beginning has been that it had not earned any income from profits and gains of business or profession. Therefore, it was not required to furnish any Audit Report. The Ld. DR, however, has submitted that there might be Swayat Trading Co. vs. DCIT some mistake on the part of the assessee in furnishing the return of income and that is why the CPC has invalidated the return of the assessee. May it be so, however, the assessee in its rectification application has specifically pleaded that it has not earned any income on account of ‘business or profession’ and it was not required to file any Audit Report. The invalidation of the return of the assessee has caused financial loss to the assessee as the assessee has been denied the refund of the excess tax deposited. The lower authorities were required to go into the contention of the assessee and to find out if the assessee has earned any income from business or profession and then, whether the assessee was required to file the Audit Report or not. Instead of addressing the grievances of the assessee, the lower authorities have made the assessee shuttle between the CPC and the jurisdictional AO, and each of the authority is denying its jurisdiction to resolve the issue. The Ld. CIT(A) has crossed all limits by mechanically rejecting the appeal of the assessee without going into the merits of the case and thus leading the assessee to come in appeal before this Tribunal. These type of issues could have been resolved at initial stage itself. The irresponsible attitude and callous approach of the income-tax authorities, in this case, is highly deprecated. We request the higher authorities to take corrective steps, so that taxpayers are not harassed in this manner without redressal of their genuine grievances. We accordingly set aside the order of the Ld. CIT(A) and restore the matter to the file of the jurisdictional AO with a direction to properly look into the matter and consider and verify the plea of the assessee that it has not earned any income from ‘business or profession’ and further that it was not required to file any Audit Report. If the contention is found correct, irrespective of any bonafide mistake made by the assessee in the return of Swayat Trading Co. vs. DCIT income, the AO will treat the return as validly filed and grant the appropriate allowance, deduction or refund as admissible to the assessee.

In the result, the appeal of the assessee is treated as allowed for statistical purposes. Order pronounced in the Open Court on 01/04/2026. (Annapurna Gupta ) Judicial Member