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Facts
The assessee filed a return declaring income of Rs. 5,53,66,710/-. The CPC processed the intimation under Section 143(1) and computed total income at Rs. 8,10,65,590/-, by adding capital gains based on stamp duty valuation, as against the consideration received by the assessee.
Held
The Tribunal held that the CIT(A) erred in dismissing the appeal based on the doctrine of merger, as an appeal against an intimation under Section 143(1) stands on its own and must be adjudicated on merit.
Key Issues
Whether the CIT(A) was justified in dismissing the appeal on the ground of the doctrine of merger, and whether the addition made by the CPC under Section 143(1) was outside its purview.
Sections Cited
143(1), 143(3), 50C, 246(1)
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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI R. K. PANDA & SHRI VINAY BHAMORE
This appeal filed by the assessee is directed against the order dated 26.12.2024 of the Ld. Addl / JCIT(A)-2, Visakhapatnam relating to assessment year 2020-21.
Facts of the case, in brief, are that the assessee is an individual and has filed his return of income declaring total income of Rs.5,53,66,710/-. The CPC passed the intimation u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) wherein the total income was computed at Rs.8,10,65,590/- on the ground that the assessee had sold his land at Survey No.21 and Survey No.22, at Jambe for consideration of Rs.1,41,75,000/- and Rs.93,75,000/- respectively. The assessee had worked out the long term capital loss by adopting the said sale consideration. Since the stamp duty valuation of the said land was Rs.3,37,55,000/- and Rs.1,93,50,000/- respectively, the CPC computed the long term capital gain at Rs.2,56,98,885/-.
Before the Ld. Addl / JCIT(A) it was argued that the computation of long term capital gain made by the Assessing Officer is not justified. It was submitted that the CPC has substituted the stamp duty valuation as against actual consideration received by the assessee which is outside the scope of provisions of section 143(1) of the Act. It was further submitted that the land sold by the assessee was having various adverse factors due to which the actual fair market value of the said land was much less. The assessee had also obtained the report of the valuer wherein he has listed the various adverse factors. It was accordingly argued that considering the adverse factors the stamp duty rate does not reflect correct market value and therefore, the addition made on account of long term capital gain should be deleted.
3.1 However, the Ld. Addl / JCIT(A) was not satisfied with the arguments advanced by the assessee and dismissed the same by observing as under:
“5. Decision: In response to notices of hearing issued u/s 250 of the IT Act, the appellant filed certain written submissions in support of the grounds of appeal. The appellant submission, statement of Facts, ground of appeal as per Form No.35 filed by the appellant and also considering the information/data available in the Departmental portals the appeal is adjudicated as under: 5.1 The present appeal was filed by the appellant against the intimation u/s. 143(1) dated 16.12.2021 for the assessment year 2020-21. The appellant has filed its return of income for the assessment year 2020-21 on 12.02.2021 by admitting income of Rs.5,53,66,710/- under normal provisions of the Act. The said return of income was processed u/s. 143(1) on 21.12.2021 wherein taxable income under normal provisions of the Act was determined at Rs.8,10,65,590/-. While processing the return of income the AO computing the total income under head of capital gain at Rs.2,56,98,885/- as against Rs.NIL. The AO adopting the stamp valuation as per 50C for computing the Long Term Capital Gain on sale of land. Aggrieved with the said intimation the appellant preferred the present appeal. On the other hand, it is noticed from the information/data available on the Departmental portals that the appellant's case for assessment year 2020-21 selected for scrutiny and an order u/s 143(3) of the IT Act, 1961 was passed on 28.09.2022. In this order the taxable income of the appellant was determined at Rs.8,10,65,593/- by making certain additions. Subsequently, the appellant had filed an appeal against the order u/s 143(3) on 19. 10.2022.
5.2 In view of the above, I find that the present appeal of the appellant must fall on a technicality itself. The reason is that the intimation under section 143(1) stands merged in the order under section 143(3). The doctrine of merger clearly applies on this and hence the present appeal is technically infructuous. Further, the appellant also filed an appeal against the order passed u/s 143(3) wherein it had contested about the adjustments/additions made in intimation u/s 143(1) of the Act. Thus, the grounds of appeal raised in the present appeal of the appellant is 'Dismissed' for statistical purpose.
6. Subject to the above discussion, the grounds of appeal raised by the appellant Shri Rajesh Anirudha Patil against the intimation/order passed u/s 143(1) for the AY 2020-21 is 'Dismissed'.”
Aggrieved with such order of the Ld. Addl / JCIT(A), the assessee is in appeal before the Tribunal by raising the following grounds:
On facts and in law, 1] The learned CIT(A) erred in dismissing the appeal filed by the assessee against the order passed u/s 143(1) on the ground that the intimation order passed u/s 143(1) had merged with the asst. order passed u/s 143(3) and therefore, the appeal filed by the assessee was infructuous. 2] The learned CIT(A) erred in not appreciating the addition made in the intimation order passed u/s 143(1) was not justified at all and he ought to have deleted the said addition made in the order passed u/s. 143(1). 3] The learned CIT(A) ought to have decided the appeal filed by the assessee against the intimation order passed u/s 143(1) instead of dismissing the appeal of the assessee on the ground that the order passed u/s 143(1) stood merged in the order u/s 143(3).
4] The learned CIT(A) erred in not appreciating that the learned CPC had adopted the stamp duty valuation as per section 50C for computing the income from long term capital gain on sale of land without appreciating that such an adjustment was outside the purview of the provisions of section 143(1) and hence, the said addition ought to have been deleted. 5] The learned CIT(A) erred in considering the submissions filed in a different case while disposing the appeal of the assessee 6] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.
The Ld. Counsel for the assessee at the outset submitted that the findings of the Ld. Addl / JCIT(A) that the intimation u/s 143(1) of the Act stands merged in the order u/s 143(3) of the Act and that the doctrine of merger clearly applies on this is misconceived and is not in accordance with law. Referring to the provisions of section 246(1) of the Act, he submitted that an assessee can file an appeal against an order being intimation under sub-clause (1) of section 143 where the assessee objects to making of adjustments. Therefore, the Ld. Addl / JCIT(A) should have decided the appeal on merit.
In his alternate contention, the Ld. Counsel for the assessee at the outset submitted that the adjustment made by the CPC in the intimation passed u/s 143(1) of the Act is outside its purview. Referring to the provisions of section 143(1) of the Act, he drew the attention of the Bench to the same and submitted that the case of the assessee does not fall under any of the clauses mentioned therein.
Therefore, the CPC could not have made any adjustment. He accordingly submitted that the addition made by the CPC and sustained by the Ld. Addl / JCIT(A) should be deleted.
The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. Addl / JCIT(A).
We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. Addl / JCIT(A) and the paper book filed on behalf of the assessee. It is an admitted fact that the CPC made addition of Rs.2,56,98,885/- on account of long term capital gain being the difference between the stamp duty value adopted by the stamp duty authority and the actual sale consideration shown by the assessee. We find the Ld. Addl / JCIT(A) dismissed the appeal filed by the assessee on the ground that the appeal filed by the assessee is not maintainable on account of doctrine of merger since the intimation u/s 143(1) of the Act stands merged in the order u/s 143(3) of the Act. We find as per the provisions of section 246(1) of the Act, the assessee can file an appeal against an order being intimation under sub-section (1) of section 143 of the Act where the assessee objects to making of the adjustments. Further, while completing the assessment u/s 143(3) of the Act, the Assessing Officer starts making additions on the basis of order passed u/s 143(1), if any. Under these circumstances, the findings of the Ld. Addl / JCIT(A) that the intimation u/s 143(1) stands merged in the order u/s 143(3) and the doctrine of merger clearly applies on this and therefore, the appeal filed by the assessee is technically infructuous is not in accordance with law. An appeal against the intimation u/s 143(1) of the Act stands on its own and the Ld. Addl / JCIT(A) is duty bound to adjudicate the same. In this view of the matter, we deem it proper to restore the issue to the file of the Ld. Addl / JCIT(A) with a direction to decide the appeal on merit and in accordance with law after providing due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open Court on 13th May, 2025.
Sd/- Sd/- (VINAY BHAMORE) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 13th May, 2025 GCVSR आदेश की �ितिलिप अ�ेिषत/Copy of the Order is forwarded to: अपीलाथ� / The Appellant; 1. ��थ� / The Respondent 2. 3. The concerned Pr.CIT, Pune 4. DR, ITAT, ‘B’ Bench, Pune गाड� फाईल / Guard file. 5. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune
S.No. Details Date Initials Designation 1 Draft dictated on 07.05.2025 Sr. PS/PS 2 Draft placed before author 08.05.2025 Sr. PS/PS Draft proposed & placed before the 3 JM/AM Second Member Draft discussed/approved by Second 4 AM/AM Member 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS Date on which the file goes to the Head 9 Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order