LANDIS + GYR LIMITED,KOLKATA vs. DCIT, CIR. 1(1), KOLKATA

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ITA 573/KOL/2024Status: DisposedITAT Kolkata04 March 2025AY 2022-234 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal found merit in the assessee's contention that the information furnished in the tax report regarding the refund of GST admitted by the authority concerned (₹5,74,70,370/-) was mistook and misunderstood by the CPC, Bangalore. The Tribunal noted that the tax auditors' report in Para 16a stated that the amount falling within the scope of Section 28 of the Act was Nil. Furthermore, the assessee stated that the goods and service tax was not routed through the profit and loss account. The Tribunal concluded that the CPC had mistaken the refund of GST as an item falling under Para 16a (qua items falling within the scope of Section 28). The Tribunal held that this was a factual mistake committed by the CPC during processing, which the CIT(A) failed to appreciate and rectify. Therefore, the Tribunal found the order passed by the CIT(A) to be incorrect. The Tribunal set aside the order of the CIT(A) and directed the Assessing Officer to delete the adjustment made to the tune of ₹3,09,80,426/-. The ratio decidendi is that a factual mistake in processing by the CPC, leading to an incorrect adjustment of carry-forward losses due to misinterpretation of tax audit report entries concerning GST refunds, should be rectified, and the CIT(A) has a duty to correct such errors.

What were the facts?

The assessee, Landis + Gyr Limited, filed its return of income for Assessment Year 2022-23 on 29.12.2022, declaring nil total income and claiming a loss of ₹20,95,41,402/- to be carried forward. The Centralized Processing Centre (CPC), Bangalore, processed the return under Section 143(1) of the Income Tax Act, 1961, vide order dated 23.01.2023. The CPC reduced the eligible carry-forward loss by ₹3,09,80,426/-, resulting in an addition. The assessee appealed to the Commissioner of Income-tax (Appeals) [CIT(A)], who dismissed the appeal, confirming the adjustment made by the CPC. The CIT(A) noted that the assessee had an opportunity to correct Form 3CD but did not, and the adjustment was system-based due to a mismatch between the Income Tax Return (ITR) and Form 3CD. The CIT(A) also noted that the auditors clarified ₹5,74,70,370/- was an item under Section 28, and the assessee had reported ₹2,64,89,944/- under "any other item of addition u/s 28 to 44DB" which was set off against the GST adjustment, leading to a net adjustment of ₹3,09,80,426/-.

What were the issues?

1. Whether the adjustment made by the CPC, Bangalore, and confirmed by the CIT(A) to reduce the current year loss eligible for carry forward by ₹3,09,80,426/- is legally and factually correct, turning on the interpretation of Section 28 of the Income Tax Act, 1961, and the reporting in Form 3CD. Assessee's contentions: The assessee argued that the information furnished in the tax report regarding the refund of GST admitted by the authority concerned (₹5,74,70,370/-) was misunderstood by the CPC, Bangalore. The assessee contended that this amount was mistakenly treated as an item falling under Section 28 of the Act, whereas it was a GST refund not routed through the profit and loss account. The assessee relied on the tax auditors' report which stated that the amount falling within the scope of Section 28 was Nil. Revenue's contentions: The revenue, through the CIT(A)'s order, contended that the adjustment was factual and legally correct. The CIT(A) noted that the assessee had an opportunity to correct Form 3CD, which was not done, and the adjustment was made by the system due to a mismatch. The CIT(A) also noted the auditors' clarification that ₹5,74,70,370/- was an item falling under Section 28, and the assessee's own reporting of ₹2,64,89,944/- under "any other item of addition u/s 28 to 44DB" led to the net adjustment.

Which sections of the Income-tax Act were involved?

Section 143(1),Section 28

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, KOLKATA

Before: SHRI RAJESH KUMAR, AM & SHRI SONJOY SARMA, JM

For Appellant: Shri Rahul Shah &, Ms. Pooja Saraf, AR
For Respondent: Shri Raja Sengupta, DR
Hearing: 30.01.2025Pronounced: 04.03.2025

This is an appeal preferred by the assessee against the order of the Commissioner of Income-tax (Appeals), Coimbatore (hereinafter referred to as the “Ld. CIT(A)”] dated 23.01.2024 for the AY 2022-23.

2.

The only issue raised in the various grounds of appeal is against the order of ld. CIT (A) confirming the reduction in the current year loss eligible to be carried forward of ₹3,09,80,426/-, thereby confirming the addition made in the intimation passed u/s 143(1) of the Act by CPC, Bangalore.

4. Aggrieved assessee preferred the appeal before the ld. CIT (A) and ld. CIT (A) dismissed the appeal of the assessee by noting in para 5.5 that assessee had the opportunity to correct the mistake in form no.3CD, however, the same was not done and the adjustment was made by the system and software-based CPC upon mismatch of ITR and form no.3CD. According to the ld. CIT (A) the auditors of the assessee have clarified that ₹5,74,70,370/- was a item falling u/s 28 of the Act and thus, noted that the auditors report was wrong. The ld. CIT (A) however clarified as to how the amount of ₹3,09,80,426/- was arrived at by CPC Bangalore. The ld. CIT (A) in Para no.5.10 noted that the assessee while filing the return of income reported under item no.23 “any other item of addition u/s 28 to 44DB” at ₹2,64,89,944/- which was allowed to be set off against the said GST adjustment of ₹5,74,70,370 and only net adjustment of ₹3,09,80,426/- was made to the losses to be carried forward. The ld. CIT (A) thus, held that the addition/ adjustment by CPC is factual and legally correct and thus, dismissed the appeal of the assessee.

5.

After hearing the rival contentions and perusing the materials available on record, we find that the assessee has shown ₹5,74,70,370/- as refund of value added tax which was admitted by the authority concerned. In the tax auditors report in Para no.16a, the same was duly reported. Noteworthy to state that Para 16a, stated

6.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 04.03.2025.

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