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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SANDEEP SINGH KARHAIL
PER OM PRAKASH KANT, AM
This appeal has been preferred by the assessee against the order dated 13.12.2021 passed by the National Faceless Appeal Centre (NFAC), Delhi [herein after referred as ‘the Ld. CIT(A)] for assessment year 2019-20, raising following grounds:
Jivaram B. Suthar 2 ITA NO. 493/M/2022
1. On the facts and in the circumstances of the case, the Ld. DCIT, On the facts and in the circumstances of the case, the Ld. DCIT, On the facts and in the circumstances of the case, the Ld. DCIT, CPC erred in adding rent of CPC erred in adding rent of ₹2,91,500/- as disallowance u/s as disallowance u/s 40(a)(i). 40(a)(i).
The order passed by the Ld. DCIT, CPC is against the The order passed by the Ld. DCIT, CPC is against the cannons of The order passed by the Ld. DCIT, CPC is against the equity of principles of jurisprudence. equity of principles of jurisprudence. 2. Briefly stated, the facts of the case are that the assessee filed its Briefly stated, the facts of the case are that the assessee filed its Briefly stated, the facts of the case are that the assessee filed its return of income on 12.10.2019 declaring total income of return of income on 12.10.2019 declaring total income of return of income on 12.10.2019 declaring total income of ₹10,36,870/-, however, , however, while processing the return of income u/s return of income u/s 143(1) of the Income Tax Act, 1961 (in short ‘the Act’) 143(1) of the Income Tax Act, 1961 (in short ‘the Act’) 143(1) of the Income Tax Act, 1961 (in short ‘the Act’), the Deputy Commissioner Commissioner Commissioner of of of Income Income Income Tax, Tax, Tax, Central Central Central Processing Processing Processing Centre Centre Centre (hereinafter referred as ‘the Assessing Officer’) made adjustment of (hereinafter referred as ‘the Assessing Officer’) made adjustment of (hereinafter referred as ‘the Assessing Officer’) made adjustment of ₹2,91,500/- and assessed the total income a and assessed the total income at ₹13,28,370/ 13,28,370/-.
Aggrieved, the assessee filed appeal before the Ld. CIT(A) but Aggrieved, the assessee filed appeal before the Ld. CIT(A) but Aggrieved, the assessee filed appeal before the Ld. CIT(A) but could not succeed and therefore, the assessee is in appeal before the could not succeed and therefore, the assessee is in appeal before the could not succeed and therefore, the assessee is in appeal before the Tribunal raising the grounds as reproduced above. Tribunal raising the grounds as reproduced above.
We have rival submissions of the parties on the issue-in- We have rival submissions of the parties on the iss We have rival submissions of the parties on the iss dispute and perused the relevant material on record. We find that dispute and perused the relevant material on record. We find that dispute and perused the relevant material on record. We find that the assessee before the Ld. CIT(A) contended that while filing audit the assessee before the Ld. CIT(A) contended that while filing audit the assessee before the Ld. CIT(A) contended that while filing audit
Jivaram B. Suthar 3 ITA NO. 493/M/2022 report in Form No. 3CD disallowance of rent of report in Form No. 3CD disallowance of rent of ₹2,91,500/ 2,91,500/- for TDS not deducted mistakenly entered in not deducted mistakenly entered in column section 40(a)(i) instead n 40(a)(i) instead of 40(a)(ia) of the Act of the Act and therefore entire amount of and therefore entire amount of ₹2,91,500/- has been disallowed by the Assessing Officer instead of 30% has been disallowed by the Assessing Officer instead of 30% has been disallowed by the Assessing Officer instead of 30% which was already disallowed by the assessee. It was further submitted was already disallowed by the assessee. It was further submitted was already disallowed by the assessee. It was further submitted that rent of ₹2,91,500/ 2,91,500/- was not paid outside India nor paid to non was not paid outside India nor paid to non- resident. It is paid for workshop of Alibag to a resident only. resident. It is paid for workshop of Alibag to a resident only. resident. It is paid for workshop of Alibag to a resident only. Therefore, while filing Form 3CD it was mistakenly entered Therefore, while filing Form 3CD it was mistakenly entered Therefore, while filing Form 3CD it was mistakenly entered in section 40(a)(i) instead of 40(a)(ia) of the Act. The Ld. CIT(A) section 40(a)(i) instead of 40(a)(ia) of the Act. The Ld. CIT(A) section 40(a)(i) instead of 40(a)(ia) of the Act. The Ld. CIT(A) however, held that this was a mistake rectifiable by the assessee and ld that this was a mistake rectifiable by the assessee and ld that this was a mistake rectifiable by the assessee and therefore, it was the onus of the assessee to therefore, it was the onus of the assessee to file revised return of revised return of income and there was no error in the order of the Assessing Officer. income and there was no error in the order of the Assessing Officer. income and there was no error in the order of the Assessing Officer. The relevant finding of the Ld. CIT(A) is reproduced as und The relevant finding of the Ld. CIT(A) is reproduced as und The relevant finding of the Ld. CIT(A) is reproduced as under:
“4.2 The 143(1)(a) has been passed by CPC based upon details The 143(1)(a) has been passed by CPC based upon details The 143(1)(a) has been passed by CPC based upon details filed by the appellant. A mistake on the part of the appellant while filed by the appellant. A mistake on the part of the appellant while filed by the appellant. A mistake on the part of the appellant while filing its return of income has to be rectified by the appellant itself. filing its return of income has to be rectified by the appellant itself. filing its return of income has to be rectified by the appellant itself. The CPC cannot be held responsible for processing The CPC cannot be held responsible for processing a return based a return based
Jivaram B. Suthar 4 ITA NO. 493/M/2022 upon the appellant's return. The appeal on the grounds that the upon the appellant's return. The appeal on the grounds that the upon the appellant's return. The appeal on the grounds that the "ITO has erred" is incorrect. "ITO has erred" is incorrect. 4.3 Having discovered the error it is the appellant's Having discovered the error it is the appellant's Having discovered the error it is the appellant's responsibility to file a revised return correcting the mistake. The responsibility to file a revised return correcting the mistake. The responsibility to file a revised return correcting the mistake. The intimation u/s 143(1) da intimation u/s 143(1) dated 10.12.2019 issued by the PC, ted 10.12.2019 issued by the PC, Bengaluru has been correctly made based upon the return and Bengaluru has been correctly made based upon the return and Bengaluru has been correctly made based upon the return and accompanying documents. accompanying documents. This ground is accordingly dismissed. This ground is accordingly dismissed.” 4.1 Before us, the Ld. counsel of the assessee drawn out attention Before us, the Ld. counsel of the assessee drawn out attention Before us, the Ld. counsel of the assessee drawn out attention to the computation of the income to the computation of the income available on page 25 of the Paper available on page 25 of the Paper Book. The total income as per this computation is Book. The total income as per this computation is ₹ ₹10,36,870/-. In the order u/s 143(1) row No. 15 also same amount has been the order u/s 143(1) row No. 15 also same amount has been the order u/s 143(1) row No. 15 also same amount has been reported as total income. Further, on perusal of the computation of reported as total income. Further, on perusal of the computation of reported as total income. Further, on perusal of the computation of income under the head ‘profit income under the head ‘profit and gains of business or profession’ and gains of business or profession’ we find that the assessee has added amount of we find that the assessee has added amount of ₹87,450/ 87,450/- i.e. 30% of ₹2,91,500/- amount disallowable u/s 40 of the Act. Thus it is evident amount disallowable u/s 40 of the Act. Thus it is evident amount disallowable u/s 40 of the Act. Thus it is evident that assessee has duly added 30% that assessee has duly added 30% of the amount of of the amount of ₹2,91,500/- to the returned income. Regarding the payment of rent to the Indian the returned income. Regarding the payment of rent to the Indian the returned income. Regarding the payment of rent to the Indian Resident, the assessee has filed rent agreement with M/s Resident, the assessee has filed rent agreement with M/s Resident, the assessee has filed rent agreement with M/s Nityanand
Jivaram B. Suthar 5 ITA NO. 493/M/2022 Engineers through owner Mr. Prabakar Pandurang Patil available of Engineers through owner Mr. Prabakar Pandurang Patil available of Engineers through owner Mr. Prabakar Pandurang Patil available of page 17 to 20 of the Paper Book. page 17 to 20 of the Paper Book. Under section 40(a)(i), the amount on 40(a)(i), the amount of any interest, royalty, fee for technical services or other sum of any interest, royalty, fee for technical services or other sum of any interest, royalty, fee for technical services or other sum chargeable under the Act, which is payable outside India or in India chargeable under the Act, which is payable outside India or in India chargeable under the Act, which is payable outside India or in India to non-resident and tax is not deducted, then said entire amount is resident and tax is not deducted, then said entire amount is resident and tax is not deducted, then said entire amount is non-deductible. Under seciton deductible. Under seciton 40(a)(ia) where tax has not been 40(a)(ia) where tax has not been deducted on any sum payable to a resident in India, which was laible deducted on any sum payable to a resident in India, which was laible deducted on any sum payable to a resident in India, which was laible for deduction of tax at asource, 30% of such sum would only be for deduction of tax at asource, 30% of such sum would only be for deduction of tax at asource, 30% of such sum would only be deudctible. The section 40(a)(i) is allowance in respect of non The section 40(a)(i) is allowance in respect of non- The section 40(a)(i) is allowance in respect of non deduction of payment to no deduction of payment to non-resident and therefore, the said resident and therefore, the said provision is not applicable in the case of the assessee. provision is not applicable in the case of the assessee. provision is not applicable in the case of the assessee. Thus it is evident that disallowance was falling u/s 40(a)(ia) rather than evident that disallowance was falling u/s 40(a)(ia) rather than evident that disallowance was falling u/s 40(a)(ia) rather than 40(a)(i) of the Act. Evidently, this was a mistake on the part of tax Evidently, this was a mistake on the part of tax Evidently, this was a mistake on the part of tax auditor is reporting in Form No. 3CD of the Act. The Ld. CIT(A) has g in Form No. 3CD of the Act. The Ld. CIT(A) has g in Form No. 3CD of the Act. The Ld. CIT(A) has not examined the prayer of the assessee on merit and simply not examined the prayer of the assessee on merit and simply not examined the prayer of the assessee on merit and simply rejected the appeal on the ground that the assessee has not rectified rejected the appeal on the ground that the assessee has not rectified rejected the appeal on the ground that the assessee has not rectified
Jivaram B. Suthar 6 ITA NO. 493/M/2022 the return of income. In our opinion, in the interest of justice, the Ld. the return of income. In our opinion, in the interest of justice, the Ld. the return of income. In our opinion, in the interest of justice, the Ld. CIT(A) was required to examine the issue on merit on the grounds (A) was required to examine the issue on merit on the grounds (A) was required to examine the issue on merit on the grounds raised before him. Therefore, we set aside the order of the Ld. raised before him. Therefore, we set aside the order of the Ld. raised before him. Therefore, we set aside the order of the Ld. CIT(A) on the issue-in in-dispute in view of discussion above and in view of discussion above and on the basis of the records which were made available before the lo the basis of the records which were made available before the lo the basis of the records which were made available before the lower authorities. We find that disallowance made by the AO is not authorities. We find that disallowance made by the AO is not authorities. We find that disallowance made by the AO is not justified in the case of the assessee and accordingly, we delete the justified in the case of the assessee and accordingly, we delete the justified in the case of the assessee and accordingly, we delete the same. The grounds raised by the assessee are allowed. same. The grounds raised by the assessee are allowed. same. The grounds raised by the assessee are allowed.
In the result, the appeal filed by the assessee is allowed. In the result, the appeal filed by the assessee is allowed. In the result, the appeal filed by the assessee is allowed.