M/S. QUALITY CHEMICALS INDUSTRIES,THANE vs. DY. CIT - CIRCLE 26(1), MUMBAI, MUMBAI

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ITA 3134/MUM/2026Status: DisposedITAT Mumbai25 September 2026AY 2021-229 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal observed that the CPC did not consider the assessee's objections and that the assessee failed to furnish evidence before the CIT(A). Therefore, the case was restored to the CIT(A) for fresh adjudication with a direction to consider the additional evidence.

What were the facts?

The assessee declared Short Term Capital Gains (STCG) from property sale. The CPC adjusted the STCG based on stamp duty value, which was higher than the declared sale consideration. The assessee objected, citing a valuation report and the first proviso to Section 50C(1).

What were the issues?

Whether the CPC correctly made adjustments under Section 143(1) without considering the assessee's objections and evidence, and whether Section 50C was correctly applied.

Which sections of the Income-tax Act were involved?

Section 143(1),Section 50C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI

Before: SHRI CHALLA NAGENDRA PRASAD & SHRI RAKESH KUMAR LODHA

For Appellant: Shri Ketan Vajani, CA
For Respondent: Shri Prasanna
Hearing: 31.08.2026Pronounced: 25.09.2026

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “D”, MUMBAI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER And SHRI RAKESH KUMAR LODHA, ACCOUNTANT MEMBER ITA No.3134/MUM/2026 Assessment Year: 2021-2022 M/S QUALITY DY. CIT – CIRCLE CHEMICALS 26(1), MUMBAI INDUSTRIES

Kautilya Bhavan, 1104-1105, Cyber One, Bandra Kurla Complex, Vs. Plot No 4-6, Sector-30A, Bandra (East), Vashi New Mumbai, Mumbai – 400 051 Navi Mumbai 400 073 Maharasthra Maharasthra

PAN- AAAFQ0137C (Appellant) (Respondent) Assessee Represented by : Shri Ketan Vajani, CA (Virtually Appeared) Revenue Represented by : Shri Prasanna Prakash Tewari - Sr.AR

Date of Hearing : 31.08.2026 Date of Pronouncement : 25.09.2026

ITA NO.3134/M/2026 M/S. QUALITY CHEMICALS INDUSTRIES AY 2021-2022 O R D E R PER : Shri Rakesh Kumar Lodha, Accountant Member:

This appeal has been filed by the Assessee against the order dated 16th January, 2026 for the assessement year 2021-2022, passed by the learned Commissioner of Income Tax (Appeals)[„Ld. CIT (A)‟], arising out of intimation u/s 143 (1) of the Income Tax Act, 1961 („the Act‟).

2.

The Assessee has raised the following grounds before this Tribunal:

1.

On the facts and in the circumstances of the case, the Addl / Jt. CIT (A), hereinafter referred to as the “JCIT (A)”, has erred in dismissing the appeal of the appellant without adjudicating any of the grounds raised by the appellant. The JCIT (A) has erred in not considering the facts of the case and the grounds of appeal raised by the appellant while deciding the appeal filed. 2. Without prejudice to the Ground – 1 above, the Centralized Processing Centre, hereinafter referred to as the “CPC”, has erred in making adjustment of Rs. 43,18,446/- to the income of the appellant in excess of the powers available to the CPC under the provisions of section 143(1) of the Act. The CPC has erred in not considering the express objections raised by the appellant against the proposed adjustments, thereby making the second proviso to section 143(1) as a nullity. The JCIT (A) has erred in not adjudicating the specific ground raised by the appellant in this regard and has thereby erred in confirming the action of the CPC. 3. Without prejudice to Ground – 1 and 2 above, the CPC has erred in making an addition of Rs. 43,18,446/- u/s. 50C of the Act. The impugned addition / adjustment is contrary to the provisions of the first proviso to section 50C(1) and also section 50C(2) of the Act. The CPC has erred in invoking the provisions of section 50C in a selective manner, thereby making impermissible addition in the case of the appellant. The JCIT (A) has erred in not adjudicating specific ground raised by the appellant in this regard and thereby confirming the addition which is not in accordance with the provisions of section 50C of the Act.

ITA NO.3134/M/2026 M/S. QUALITY CHEMICALS INDUSTRIES AY 2021-2022 4. In view of the above, the appellant submits that the adjustments made vide the intimation u/s. 143(1) are beyond the powers available to the CPC and further the said adjustments are contrary to the provisions of section 50C. The appellant, therefore, prays that the adjustments resulting into addition may please be deleted or any other relief as deemed fit may please be allowed to the appellant.

3.

The brief facts of the case; that the Assessee is a partnership firm (Quality Chemicals Industries), was engaged in manufacturing chemicals, and shifted to trading activities, filed its return of income u/s 139 for A.Y. 2021-2022 on 11.03.2022 declaring total income of Rs 204,48,030/- (comprising of STCG of Rs.27,94,421/-, LTCG Rs.1,74,15,956/-, business income from Business Rs 167,877/- & Other sources of Rs 69,776). The CPC, while processing return of income, found that stamp duty value of property sold was higher than the actual sale consideration reported by the assessee. Following that difference, CPC issued a communication to the Assessee on 9th August, 2022 for the proposed adjustment of Rs.43,18,446/- (difference between Rs.1,09,01,034/- & Rs.65,82,588/-) to the Short Term Capital Gains declared in the Return of Income. In response to that, the Assessee furnished its response on 26-08-2022, with disagreement to proposed adjustment with explanation “that sale transactions started on 07-10-2019 by receiving full value of sale price but with condition that all the permission from MIDC etc. are to be obtained before completion of sale transaction registration

ITA NO.3134/M/2026 M/S. QUALITY CHEMICALS INDUSTRIES AY 2021-2022 and handing over of the possession of building was completed on 26-02-2021, so sale price was taken as per the valuation report of registered valuer at Rs 65,82,588/- as on 01-04-2019 (being FMV for 07-10-2019) as per first proviso of section 50C(1) of the Income Tax Act, 1961”. For that case of the Assessee is covered by the first proviso to section 50C(1) of the Act.

4.

The CPC considering the response of assessee passed an intimation order u/s 143(1) of the Act on 02.11.2022 making addition of Rs.43,18,446/-. This addition has been determined by adopting 2021 stamp duty value, Rs.1,09,01,034/- of transferred short term capital asset, being building.

5.

Aggrieved by the intimation u/s 143(1) of the Act, Assessee filed an appeal before the Ld.CIT(A) disputing the additions, and challenged the authority of CPC to make adjustments in garb of provisions of section 143(1) of the Act.

6.

The Assessee, while filing of an appeal in Form No. 35, has mentioned detail statement of facts in the Form No. 35, stating that adjustment made by the CPC is not within the powers available to the CPC under the provisions of section 143(1)(a) of the Act. The CPC has made the impugned adjustment under clause (ii) of the section 143(1)(a) 4

ITA NO.3134/M/2026 M/S. QUALITY CHEMICALS INDUSTRIES AY 2021-2022 of the Act, which reads as : “an incorrect claim, if such incorrect claim is apparent from any information in the return”. This clause relevant to deduction claimed by Assessee or allowance or relief etc., in the present case, there is no such claim for any deduction or allowance or relief in the return of income of the Assessee, therefore the clause (ii) of section 143(1)(a) does not have any application. The Assessee further stated that the action of the CPC in making this adjustment is in complete disregard of the second proviso to section 143(1)(a), which provides that in a case where the response is received from the Assessee, such response from the Assessee shall be considered before making any adjustment. The mechanism provided in the second proviso is with a purpose that no wrong adjustments are made where they are not called for. The said mechanism is not mere ritual, or an empty formality, and the second proviso has to be followed in letter and spirit. Where there is no case for prima facie adjustments, the same cannot be made within the purview of section 143(1)(a) of the Act. The Assessee also mentioned that its case falls under the ambit of provisions of the first proviso to section 50C(1) and also the provisions of section 50C(2) of the Act, so, assessee has correctly applied the said provisions on the basis of a valuation report of an independent valuer.

ITA NO.3134/M/2026 M/S. QUALITY CHEMICALS INDUSTRIES AY 2021-2022 Once the Assessee has raised objection against the proposed adjustment and that too with a proper explanation about the facts of the case, the department could not have made the adjustment. Rather, it was open for the department to take up the regular assessment, where the Assessee could have explained all its contentions with proper reasoning and evidences. The Assessee cannot be put to a disadvantageous position on account of the failure of the department to take up the case of the Assessee for a regular assessment. 7. The Ld. CIT(A) during the course of appeal proceedings, provided multiple opportunities through notices in electronically mode, allowing to substantiate its grounds of appeal by furnishing of written submission and supporting documents. But, Assessee failed to comply with the same and repeatedly sought adjournments during the span of 2 year. Looking to non reply from assessee, with documentary or material evidence in support of the claims made, the Ld. CIT(A) observed that Assessee is not interested in pursuing the appeal, and relied upon following judgments, dismissed the appeal of the Assessee: 1. PCIT-3 vs Ashokji Chanduji Thakor, In ITA No. 710,711,712,713,714, 717 of 2018, Guj HC 2. M/s Chemipol v/s Union Of India [ Central Excise Appeal No.62 of 2009] Mumbai HC

ITA NO.3134/M/2026 M/S. QUALITY CHEMICALS INDUSTRIES AY 2021-2022 3. New India Assurance vs Srinivasan (2000) 3 SCC 242, etc 8. Now, the Assessee is in appeal before Tribunal, and furnished additional evidences for admission under rule 29 of ITAT, Rules, 1963. On perusal of documents, prima facie it is found that these evidences comprising of memorandum of understanding dated 07-10-2019 executed between buyer and seller, bank statement for verification of contemporaneous receipts from the buyer, Approval letter from MIDC, Valuation report dated 15-02-2022 etc, have not been furnished before the Ld. CIT(A) for the examination and verification. The ld AR of assessee also stated that these evidences could not be furnished before CPC for not having facility on the IT portal, however, the Ld.CIT(A) would be the first authority, where Assessee could have produced in support of its grounds of appeal. 9. Per contra, learned DR relied upon the order of Ld.CIT(A) and CPC. 10. We have considered the rival submissions and perused the additional evidences and orders of authority, we, observed that CPC while passing an intimation under section 143(1) of the Act, did not considered the objection cum reply of the Assessee for the proposed adjustments. The objections of Assessee were also not supported with evidences, as these could not be uploaded at IT Portal for its limited permission of furnishing of reply.

ITA NO.3134/M/2026 M/S. QUALITY CHEMICALS INDUSTRIES AY 2021-2022 11. Pertinently, before Ld.CIT(A), the assessee failed in prosecuting its appeal and furnishing all these evidences for examination and verification. The assessee furnished these additional evidences produced before us for consideration. We observed that, these are require to examine, verify by CIT(A) for determination of capital gain income by adopting the sale consideration of capital assets in terms of the applicable provisions, therefore, we deem it fit to restore the case to the file of Ld.CIT(A) and allow another opportunity to explain its case with facts and evidences to impart substantive justice to appellant. At this point of time, we are not putting any observation on the evidences / documents in relation to merits of the case. Thus, we, restore the case to the Ld. CIT(A) and direct the Assessee to co-operate in appeal proceedings. 12. In the result, the appeal of the Assessee is allowed for statistical purposes.

Order pronounced in the open court on 25.09.2026.

Sd/- Sd/- (CHALLA NAGENDRA PRASAD) (RAKESH KUMAR LODHA) JUDICIAL MEMBER ACCOUNTANT MEMBER

Mumbai, Dated: 25.09.2026. Sharath, Private Secretary.

ITA NO.3134/M/2026 M/S. QUALITY CHEMICALS INDUSTRIES AY 2021-2022 Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The DR Concerned Bench

//True Copy// By Order Dy/Asstt. Registrar, ITAT, Mumbai.

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