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Facts
The assessee filed his return of income, which was processed by CPC making an addition. The assessee had offered rental income under house property and declared long-term capital gains from shares, but these were disclosed differently in Form 3CD, leading to adjustments.
Held
The Tribunal held that the addition for rental income constituted double taxation as it was already offered. For the capital gains, the Tribunal noted that Form 3CD indicated no actual transfer or accrual, and directed the AO to verify a certificate from the auditor before deleting the addition.
Key Issues
Whether the addition of rental income amounted to double taxation? Whether the long-term capital gain on shares was correctly taxed given the disclosures in Form 3CD and the absence of actual transfer?
Sections Cited
143(1), 3CD
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Income Tax Appellate Tribunal, ‘SMC’ BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI, VICE –
ORDER PER PRASHANT MAHARISHI, VICE – PRESIDENT 1.
Shri Bhawarlaldarla Harish Kumar (the Assessee/Applicant) for the assessment year 2021-22 against the Appellate Order passed by the Additional Commissioner of Income Tax (Appeals) – 2, Guwahati (the Ld. CIT(A)) on 25.02.2025 wherein the appeal filed by the Assessee against the order passed u/s. 143 (1) on 05.07.2022 by the Central Processing Centre, Bengaluru was partly allowed.
The Assessee is aggrieved with the same and has preferred the appeal. The main grievance of the Assessee is that Ld. CIT (A) has not Page 2 of 5 adjudicated the ground with respect to the addition of rent received of Rs. 6,96,846/- which was assessed under the head business profits despite the same was declared in the return of income under the head income from house property. Further, even otherwise the same income which was already offered to tax amounted to double addition. The next grievance of the Assessee is that the Ld. Central Processing Centre has treated the long term capital gain as income from business because of inadvertent disclosure in form no 3 CD for the reason that the Assessee did not submit the revised audit report.
The brief facts of the case show that the Assessee filed his return of income on 18.01.2022 at a total income of Rs. 9,51,840/-. This return was processed by an intimation u/s. 143 (1) of the Act on 05.07.2022 raising a demand of Rs. 2,57,970/-.
It is a fact that Assessee has received a rent of Rs. 6,96,846/- under the head income from house property. Further, the Assessee has shown profit on sale of shares of Rs. 2,95,131/-, However, it was found that no such income arose during the year. Inadvertently, the figures of unrealized gain based on market value as on 31st March were filed in the form 3CD.
Thus, the income for proposed adjustment was issued to the Assessee on 08.04.2022 which Assessee did not submit any response to. Therefore, the intimation was passed on 05.07.2022 wherein the addition of Rs. 12,18,356/- was made. The above sum is comprising of the items stated in form no. 3CD in column no. 16(d) as amounts not credited to profit and loss account. The Assessee in form no. 3CD has given the details of some bank interest and rent received of Rs. 6,96,846/- as well as profit on sale of shares of Rs. 2,95,131/-. This amount was added along with other sums to the total income of the Assessee while passing the intimation on mismatch by schedule BP
Accordingly, the business income of the Assessee as per return of income of Rs. 4,27,950/- was determined under 143 (1) at Rs.16,46,306/-.
The intimation was passed on 05.07.2022 which was agitated before the Ld. CIT(A). The Ld. CIT(A) partly allowed the appeal of the Assessee wherein he agreed with the contention of the Assessee on other issues except on rental income, which was not dealt with and long term capital gain on sale of shares decided against the assessee in absence of certificate from auditors or revised form no 3CD filed by assessee.
Thus, the Assessee is in appeal before us.
I have carefully heard the arguments of both the parties. I find that in the original computation and in the return of income Assessee has already offered rent received of Rs. 6,96,846/- and claimed deduction at the rate of 30% thereby offering the net income of Rs. 4,87,792/- under the head income from house property. However, in the form no. 3CD the Assessee has once again disclosed that the above income is not credited to the profit and loss account and therefore CPC made the addition. On careful perusal of the fact, I find that merely there is an error in the form no. 3CD which did not match with the income offered by the Assessee and therefore the CPC made the above adjustment. It is also true that Assessee did not respond to the communication. However, the process of appeal is determining the correct income of the Assessee, when this fact was drawn to the attention of the Ld. CIT(A), he did not give any direction. Now, I find that it amounts to double addition because it has already been offered in the return of income and once again because of wrong reporting in from no. 3CD by
The second issue involved is a long term capital gain on sale of shares of Rs. 2,95,131/- has been shown by the Assessee in column no. 16(d) of form no. 3CD stating that there is asale of shares which is not credited to the credit of profit and loss account. Similar communication was sent by CPC which was not responded to by the Assessee and therefore CPC made the above adjustment. When the issue was raised before the Ld. CIT(A), he rejected this argument that there is no transfer of shares during the year, and it is merely the market value of the shares is shown. He rejected this argument for the reason that Assessee has neither submitted revised audit report nor any certificate from the auditor about the above misreporting.That the Ld. CIT(A) could have verified or directed the Assessee to submit such a certificate which on verification by the Ld. Assessing Officer could have been examined and thereafter it would have been concluded that whether the addition is required, or it is wrongly made. I find that the Ld. CIT(A) did not do this exercise but confirmed the addition. It is alos not known on what evidence the ld CIT (A) has held that shares have been transferred. Therefore, this finding is not correct in absence of any evidence before him. In view of above facts, the Assessee is directed to submit the certificate because form no. 3CD is prepared by the Assessee and it is certified by the Auditor that there is no such accrual of income, there is no transfer of shares , hence, there is no income which is chargeable to tax. If the Assessee furnishes such detail, the Ld. AO is directed to examine and if found correct, directed to delete the addition. In view of this, ground no. 3 of the appeal is restored back to the file of the Ld. Assessing Officer.
Accordingly, ground no. 2 is allowed, and ground no. 3 is allowed for statistical purposes.
Appeal of the Assessee is allowed accordingly. Order pronounced in the open court on 4th December 2025.