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Facts
The assessee, a salaried employee, claimed deductions under Section 10 of the Income-tax Act, 1961, for child education and house rent allowances. The Centralized Processing Centre (CPC) disallowed these deductions during return processing due to a mismatch between the assessee's return and data in Form 26AS/Form 16, leading to an increased tax demand. The assessee contended that the discrepancy arose from errors made by the employer in uploading TDS statements.
Held
The Tribunal remitted the case back to the Jurisdictional Assessing Officer (JAO) for verification of the assessee's claim and factual details. The JAO is directed to conduct proper verification, including contacting the employer if necessary, and pass a fresh order after providing the assessee a reasonable opportunity to be heard.
Key Issues
Whether the disallowance of Section 10 exemptions by CPC during return processing, based on data mismatches stemming from employer errors in TDS statements, is justified.
Sections Cited
143(1), 10, 234A, 234B, 234C, 271(1)(c)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH
Before: SHRI PAWAN SINGH & SHRI GIRISH AGRAWAL
O R D E R
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of Ld. ADDL/JCIT (A)-2 SILIGURI, vide order no. ITBA/APL/S/250/2024- 25/1072154356(1) dated 14.01.2025 passed against the intimation issued by Centralized Processing Centre (CPC), Bengaluru-560500, u/s. 143(1) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), for Assessment Year 2017-18.
Grounds taken by the Assessee are reproduced as under: “1) On the facts and circumstances of the case and in law, the authorities below had erred in disallowing/confirming the addition/disallowance of a sum of Rs. 2,92,522/- which were allowances exempt u/s 10 of the I T Act and the reasons assigned by the lower authorities were wholly wrong, inconsistent with the facts of the case and against the provisions of Income Tax Act, 1961 and rules made thereunder.
2) On the facts and circumstances of the case and in law, the authorities below have erred in levying the interest u/s 234A/234/B and 234C of the Income Tax which was wholly wrong, and against the provisions of Income Tax Act, 1961 and rules made thereunder. 3) On the facts and circumstances of the case and in law, the authorities below have erred in initiating the penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 which were wholly wrong, irrelevant, and not in accordance with the facts and circumstances of the case as no income is concealed nor any inaccurate particulars were furnished. 4) The appellant craves leave to add, alter, modify and delete all or any of the aforesaid grounds of appeal s on or before the date of hearing.”
3. Brief facts of the case are that assessee is an individual and a salaried employee with Ultratech Cement Limited. Assessee had filed his return of income on 03.10.2017 reporting total income at Rs.18,65,450/-. Total income included Rs.20,04,728/- under the head “income from salary”. While arriving at income under the head salaries, assessee reported gross salary including value of perquisites at Rs.22,90,157/-. From this, he claimed deduction of Rs.2,82,929/- towards allowance u/s.10 of the Act and Rs. 2,500 towards professional tax, giving a net figure of Rs.20,04,728/-. While processing return of the assessee, CPC did not take into consideration allowance claimed by the assessee u/s.10 of the Act, amounting to Rs.2,82,929/- and calculated taxable salary at Rs.22,97,250/-, raising a demand on the assessee. 3.1. Claim of the assessee is that assessee has earned total salary of Rs.22,90,157/- which is also reflected in Form 26AS. Assessee also referred to Part B of Form No.16 issued by the employer to demonstrate that employer had paid salary of Rs.22,84,750/- and perquisites of Rs. 5,407/-, totalling to Rs.22,90,157/-. Against this, employer gave an allowance of Rs. 1,200 towards child education and of Rs.2,81,729/- towards house rent, both u/s.10 of the Act. A further, deduction was granted of Rs. 2,500 towards tax on employer (Professional tax) after which income chargeable under the head salaries was reported by the employer as Rs.20,04,728/- on which required tax deduction at source was done. 3.2. According to the assessee, since the employer has already accepted the claim of exemption made u/s.10 of the Act as reported in part B of Form No.16, there is no basis for making a disallowance for the said claim by CPC while processing the return. From the perusal of the order of ld.CIT(A), it is noted that there were certain discrepancies in the return filed by the assessee by not correctly filing in the data in the correct rows and columns in the return which has resulted into the impugned disallowance/additions while processing of return by the CPC.
4. Before us, Ld. Counsel of the assessee has evidently demonstrated by placing the corroborative material including computation of income and tax, Form No.16 issued by the employer as well as Form No.26AS for the year under consideration. Before us, Ld. Counsel of the assessee also submitted that there are certain errors at the end of the employer while uploading data in its return/statement for tax deduction of sources which flowed into Form No.26AS of the assessee, resulting into a mismatch. The errors so committed at the end of the employer cannot lead to imposing of tax liability in the hands of the assessee. According to him, correct income is to be brought to tax which has been evidently demonstrated by placing all the relevant material on record and the same are verifiable. 4.1. Per contra, Ld. SR DR placed reliance on order of the Ld. CIT(A).
We have heard both the parties and perused the material on record. It is noted that the addition in the hands of the assessee is on account of mismatch of data reflected in Form No.26AS and Form No.16. Assessee has placed on record relevant documents to justify his claim which is on account of errors committed by his employer while furnishing its TDS statement.