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Income Tax Appellate Tribunal, PUNE B BENCH : PUNE
Before: SHRI MANISH BORAD & Ms. ASTHA CHANDRA
The appeal filed by the assessee is directed against the order dated 30.07.2024 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [“CIT(A)”] pertaining to Assessment Year (“AY”) 2017-2018.
Briefly stated, facts of the case as culled out from the order of the Ld. CIT(A) are that the assessee is mainly engaged in the business of trading in land and also in resort business. She is also carrying out agricultural activities since a long time. For A.Y. 2021-22, the assessee e-filed her return of income on 10/03/2022 declaring total income at Rs. 66,00,910/-. The Assessing Officer/CPC (“AO”) issued notice u/s 143(1)(a) of the Income Tax Act, 1961 (the “Act”) calling for explanation for not crediting the income of Rs. 1,21,91,739/- to profit & loss account, as reported
2 ITA.No.1984/PUN./2024 under clause 16(d) of tax audit report in Form 3CD. In response thereto, the assessee filed her reply. The return of income was processed by the Ld. AO/CPC u/s 143(1) on 08/07/2022 determining total income at Rs. 1,87,92,647/- and raising a demand of Rs. 49,2,840/-. Thereafter, the assessee filed rectification application on 02/08/2022 explaining arithmetic logic of income disclosed under appropriate heads of income requesting for rectification of mistake. The rectification application was processed on 11.01.2023 vide order passed u/s 154 of the Act determining the total income at Rs. 3,07,98,570/- and net amount payable at Rs. 1,14,10,750/-.
Aggrieved, the assessee went into an appeal before the Ld. CIT(A) against the order dated 11/01/2023 passed u/s 154 of the Act by the Ld. AO/CPC. Before the Ld. CIT(A), the assessee made her submissions which are recorded in para 4.2 of the impugned order of the Ld. CIT(A). After considering the submissions of the assessee, the Ld. CIT(A) confirmed the rectification order and dismissed the appeal of the assessee holding that the adjustments made by the Ld. AO/CPC are justifiable in light of inconsistency noticed and as per the provisions of the Act. The relevant observations and findings of the Ld. CIT(A) are reproduced below:- “4.2 In appeal proceedings, appellant has submitted that the return of income was processed u/s 143(1) on 08.07.2022 without taking into consideration the response submitted by the appellant which resulted in additional demand of Rs. 49,12,840/-. The appellant submitted that Income from Business is wrongly considered at Rs. 86,84,023/- instead of a loss of Rs. 35,07,716/- which has resulted in difference of Rs. 1,21,91,739/- between Income from Business as disclosed in ITR and Income from Business as per intimation order. The appellant has submitted that in response to intimation u/s 143(1), appellant filed rectification request u/s 154 on 02.08.2022 explaining the arithmetical logic of Income disclosed under appropriate heads of Income. However in rectification order the Income Tax Department has not correctly considered Income from Business & Profession which results in Income Tax Demand of Rs. 1,14,10,750/-. The appellant has further submitted that on analysis of the reasons for differences and incorrect treatment in Rectification order, it appears that the problem is not a legal problem. It is not a matter involving any tax evasion. The problem is relating to some validation
3 ITA.No.1984/PUN./2024 rule/schema/computer procedure. The cause behind that is in the manner and place of reporting income by the assessee and difference in manner and place of searching above income by the departmental computer system in the return. It may be further concluded that cause of mismatch is that the departmental computer system could not recognize the income reported in clause 16(d) in the return where the same was directly shown in the relevant schedule. 4.3 I have considered the rival submissions and perused the material available on record. It is culled out from record that the AO CPC noticed variation in reporting of income in ITR filed for AY 2021- 22 that income of Rs. 1,21,91,739/- as reported in Cl. 16(d) of Form No. 3CD had not been credited to Profit and Loss Account in ITR. AO/CPC noticed that there was inconsistency in amount mentioned in return at Sl. No. 5(d) of Part A OI i.e. Any other item of income and Tax audit report. The AO CPC accordingly made the adjustments in the income for the year relying upon the material available on record. The ITR and Audit Report both are statutory forms. The audit report which is relied upon by the AO CPC in the instant case is not an ordinary piece of paper. It is a reliable document which is prepared very carefully. It may be some technical reason behind enhancing income of the appellant for the year due to difference in manner and place of reporting income, however findings in audit report cannot be ignored and the same are required to be reported under specific column of ITR. The AO has rightly considered the material available before him and acted upon according. Considering the facts of the case, it is found that no interference is required to be drawn in the rectification order passed by the AO CPC. The adjustments made by AO/CPC are found justifiable in the light of inconsistency noticed and as per provisions of the Act. The rectification order is confirmed and accordingly grounds of the appeal are dismissed.”
Dissatisfied, the assessee is in appeal before this Tribunal raising the following grounds of appeal:-
1. The learned CIT(A), NFAC (hereinafter called as Learned CIT(A)) erred in law and in facts in confirming the total income assessed by learned CPC Bangalore amounting to Rs. 3,07,98,571 instead of returned income of Rs. 66,00,908/-.
2. Appellant contends that, the addition of Rs. 2,43,83,478 (i.e. Rs. 1,21,91,939 X 2) has crept into the assessment in an erroneous manner, due to clerical errors of filling the data in the ITR. Appellant contends that, an amount of Rs. 1,21,91,939 (i.e. capital gain, Income from other sources and Agricultural income) was twice included in Sr. No. 5 of PART A - Schedule "OI" of the rectified ITR; despite income from capital gain & income from other sources offered for taxation separately. As such, the Appellant contends that appellant has suffered a triple taxation.
3. The appellant contends that, the disclosure in Tax Audit report under Clause 16(d) of Form 3CD has been made on a conservative basis and as such the same ought not to be considered as a basis for upholding the present addition.
4 ITA.No.1984/PUN./2024 4. The learned CIT(A), NFAC erred in law and on facts in not appreciating the fact that the tax auditor has reported an amount of Rs. 1,29,91,939/- in Clause 16(d) of Form 3CD whereas the actual addition upheld is of Rs. 2,43,83,478/-.
Appellant contends that taxation ought to be restricted to the extent of real income and as such any income taxed due to incorrect/erroneous disclosure ought to be deleted.
6. The appellant craves leave to add/modify/delete/amend all/any of the grounds of appeal.”
5. The Ld. AR contended that the addition of Rs. 2,43,83,278/- (which is twice the amount of Rs. 1,21,91,739/- ) has crept into the assessment in an erroneous manner due to clerical errors in filling the data in ITR. He submitted that the amount of Rs. 1,21,91,739/- pertaining to capital gain; income from other sources and agricultural income was included twice in serial No. 5 of Part A- Schedule “OI” of the rectified ITR; despite income from capital gain and income from other sources offered for taxation separately which has resulted in triple taxation. He further submitted the impugned order of the Ld CIT(A) is not sustainable as the Ld. CIT(A) confirmed the rectification order passed by the Ld. AO/CPC merely on the basis of disclosure made in tax audit report under clause 16(d) of Form 3CD which was done by the assessee on a conservative basis and therefore ought not to have been considered as a basis by the Ld. CIT(A) for upholding the impugned addition. He also submitted the Ld. CIT(A) has incorrectly upheld the addition of Rs. 2,43,83,278/- whereas the amount disclosed in the tax audit report is Rs. 1,29,91,939/-. At the time of hearing before us, the Ld. AR furnished a Note showing the computation of income and explaining the factual scenario of the assessee’s case in support of its contention that the Ld. AO/CPC has made the impugned addition of the said amount afresh instead of removing the same ignoring the rectified return filed by the assessee wherein the assessee duly offered the other income of Rs. 1,21,91,739/- under the head income considered separately in schedule BP. The said Note filed by the Ld. AR is reproduced below:
5 ITA.No.1984/PUN./2024 Computation of Total Income
Note 1 – In Original ITR dated 10-03-2022, appellant worked out the total income as per the provisions of ITA Act, 1961. Appellant disclosed the income of Rs.121,91,739 (i.e. Rs. 1,15,12,951 + Rs. 6,27,580) in "Part A-OI" at Sr No.5 being amount not credited to P&L. Further, appellant also disclosed the said other income in its respective heads for taxation. However, appellant did not disclose the said income of Rs.1,21,91,739 under the clause "Income considered separately" in "Schedule BP". Ld.CPC, in intimation u/s 143(1) dated 08-07-2022, made additions of the said amount of Rs.1,21,91,739 on the basis of reporting under Tax Audit Report. Note 2 - To overcome this issue, appellant filed rectified return on 02-08-2022, wherein appellant duly offered other the income of Rs.1,21,91,739 under the head "Income Considered Separately" in "Schedule BP". Note 3 - Ld.CPC vide order u/s 154 dated 11-01-2023, made fresh additions of the said amount, instead of removing the same.
The Ld. DR supported the orders of the Ld. AO/CPC and the Ld. CIT(A).
We have heard the Ld. Representative of the parties and perused the material on record. Before us, the Ld. Counsel for the assessee has submitted a Note (reproduced above) explaining the factual error which was inadvertently made by the assessee in the original ITR and subsequently rectified by filing the rectified return on 02/08/2022. However, the Ld. AO/CPC erred in not appreciating the facts in correct perspective as explained by the Ld.
6 ITA.No.1984/PUN./2024 AR vide his Note reproduced above and dismissed the rectification application of the assessee. The Ld. CIT(A) has upheld the order of the Ld. AO/CPC for the reasons reproduced above. In our view, the above submissions/ claim of the Ld. AR made on behalf of the assessee need verification. Thus, considering the totality of the facts and in the circumstances of the case enumerated above, we deem it fit to set aside the matter to the file of the Ld. Jurisdictional AO to decide the issue(s) afresh on merits after verification of the above claim of the assessee in accordance with the facts and law. The Ld. AO/ CPC shall afford due opportunity of hearing to the assessee. The impugned order of the Ld. CIT(A) is set aside and the matter is restored back to the file of the Ld. AO for fresh adjudication. Ground Nos. 1 to 5 raised by the assessee are accordingly allowed for statistical purposes.
In the result, appeal of the Assessee is allowed for statistical purposes.
Order pronounced in the open Court on 08.05.2025.