PUNIT DEORA TRUST ,MUMBAI vs. ITO, WARD, 25(3)(1), MUMBAI

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ITA 6792/MUM/2024Status: DisposedITAT Mumbai19 August 2025AY 2019-2016 pages
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What did the Tribunal hold?

The Tribunal found sufficient merit in the assessee's contention regarding the adjustment made by the CPC under Section 143(1) without issuing a show cause notice. The AO, in a report submitted to the Tribunal, admitted that no prior prima facie adjustment notice was issued due to technical issues. Therefore, the Tribunal held that the adjustment made by the CPC was impermissible without intimation, as required by the proviso to Section 143(1)(a). Regarding the TDS credit, the Tribunal noted that while the procedural requirements of Rule 37BA(2) of the Income Tax Rules, 1962, regarding declarations to the deductor were not strictly followed, non-compliance with a procedural provision, if directory, should not disturb a substantive provision. The Tribunal acknowledged the intention of Section 199 of the Act and Rule 37BA(2) to ensure that TDS credit is available to the person chargeable to tax. To avoid duplication of TDS credit, the matter was restored to the AO with directions to assist the assessee in revising relevant TDS returns and rectifying Form 26AS pertaining to the beneficiaries. The AO was instructed to write to the deductor to rectify the TDS return and ensure appropriate reflection of TDS credit in the beneficiaries' Form 26AS, with the assessee being accorded reasonable time for amendments. The grounds of appeal were allowed for statistical purposes.

What were the facts?

The assessee, Punit Deora Trust, filed its return of income for Assessment Year 2019-20 showing Nil income. The CPC, Bengaluru processed the return under Section 143(1) of the Income Tax Act, 1961, and issued an intimation order dated March 29, 2021. The CPC assessed the assessee's income at Rs. 7,04,55,431/-, treating the declared House Property income as Business Income. The assessee appealed to the CIT(A), who dismissed the appeal. The assessee is a Private Specific Trust with five beneficiaries, each having a 20% share. The beneficiaries had offered their respective shares of income to tax in their individual returns. The assessee's primary contention is that the income should be taxed under the head 'House Property' and that the adjustment made by the CPC was impermissible without prior intimation.

What were the issues?

1. Whether the income from the property should be assessed under the head 'House Property' or 'Business Income' for AY 2019-20, and whether the assessee is entitled to deduction under Section 24(a) of the Income Tax Act, 1961, as argued by the assessee, or if it should be treated as Business Income as per the CPC's intimation, as contended by the revenue. 2. Whether the adjustment made by the CPC under Section 143(1) of the Act, assessing income at Rs. 7,04,55,431/- against a returned Nil income, was permissible without prior intimation to the assessee, as argued by the assessee, or if the adjustment was valid, as implied by the revenue's reliance on lower authorities. 3. Whether the income of the Trust should be taxed in the hands of the beneficiaries under Section 161 of the Act, as argued by the assessee, or if it should be taxed in the hands of the Trust, as determined by the CPC. 4. Whether the assessee is entitled to credit for TDS deducted on 'House Property' income, which is reflected in Form 26AS, and if such credit should be allocated amongst the beneficiaries, as argued by the assessee, or if the credit should be denied or handled as per the CPC's intimation, as implied by the revenue.

Which sections of the Income-tax Act were involved?

Section 143(1),Section 24(a),Section 161,Section 199,Section 139,Section 166

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Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI PRABHASH SHANKAR

For Appellant: Shri S.L. Jain, AR
For Respondent: Shri Kiran Unavekar, (Sr.DR)
Hearing: 18.07.2025Pronounced: 19.08.2025

आदेश की प्रयियलयि अग्रेयिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai

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