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Facts
The assessee filed their return of income, which was processed under Section 143(1)(a). The CPC made disallowances on Long Term Capital Gains, exempt dividend income, and interest income. The assessee filed a rectification application under Section 154, which was not decided by the AO. The CIT(A) dismissed the appeal against the AO's order.
Held
The Tribunal held that the disallowances made by the CPC were not warranted. The Assessing Officer had wrongly rejected the rectification application without properly considering the assessee's claims. The additions made by the lower authorities were not sustainable.
Key Issues
Whether the disallowances made by the CPC without issuing proper notice under Section 143(2) and without deciding the rectification application under Section 154 are sustainable.
Sections Cited
143(1), 143(2), 154, 10(38)
AI-generated summary — verify with the full judgment below
Order The present appeal has been preferred by the assessee against the order dated 19-07-2024 passed by the Ld. Commissioner of Income Tax, National Faceless Appeal Centre (NFAC), Delhi[hereinafter referred to as ‘CIT(A)’], for the Assessment Year 2018-19.
2. The Assessee in this appeal is aggrieved by the action of the CIT(A) in confirming the additon made by the Assessing Officer (A.O.) of Rs. 5,46,809/-
2 3. The Assessee in this appeal has taken the following grounds :-
That the order passed by the Learned Assessing Officer Is bad and against the provisions of laws and facts.
That the Ld. CIT(A) has wrongly upheld additions made by the Assessing Officer of Rs. 5,46,809/ u/s 143(1) without issuing any notice u/s 143(2) of the Act.
That the learned Assessing Officer has not taken any action on the rectification request u/s 154 dated 06.05.2023 submitted by the assessee. 4. That the Ld.. CA) has wrongly upheld addition made by the Assessing Officer of Rs. 4,68,665/- on the account of exempt Long Term Capital Gain. 5. That the Ld. CIT(A) has wrongly upheld addition made by the Assessing Officer of Rs. 20,650/- on account of exempt Dividend. 6. That Ld. CIT(A) has wrongly upheld addition made by the Assessing Officer of Rs. 57,494/- on account of FDR interest. 7. That the appellant craves leave to add, amend, alter and withdraw any ground of appeal
before the final date of hearing.
1. 4. The brief facts of the case are that the Assessee had filed return of income on 31.10.2018 declaring total income at Rs.7,39,059/- This return of income was processed u/s143(1)(a) of the Income Tax Act. The CPC Bangalore has made a disallowance of Rs. 4,58,665/- on Long Term Capital Gains earned on the sale of shares. The assessee has claimed it as exempt under Section 10(38) of the Income Tax Act. This was disallowed by the CPC. Similarly, some dividend income was there which was shown under the head
3 ‘income/receipts’ credited to the Profit & Loss Account but this was separately assessed under the “other heads of income.” There was also disallowance of Rs. 57,494/- on account of interest income, which was not warranted.
The Assessee had filed rectification application u/s 154 of the Income Tax Act, 1961 before the Assessing Officer (AO). However, the Assessing Officer did not decide the same. The assessee per force filed an appeal before the Ld. CIT(A). However, Ld. CIT(A) dismissed the appeal. Aggrieved by the order of the Ld. CIT(A), the Assessee has preferred this appeal before this Tribunal.
This Tribunal, vide order dated 04.03.2025 directed the Assessing Officer to decide the rectification application pending u/s 154 of the Income Act before him.
Today, the learned counsel for the Assessee has produced on record a copy of the rectification order passed u/s 154 of the Income Tax Act. The perusal of the rectification order dated 20.05.2025 passed u/s 154 shows that the Assessing Officer had not disputed regarding the plea of the Assessee that the impugned disallowances made by the CPC were not warranted while processing the return u/s 143(1) of the Act.
7. That the Assessee had rightly claimed Long Term Capital Gains of Rs. 4,68,655/- and further Rs.20,650/- on account of tax
4 exempt dividend income. Further disallowance of interest of Rs. 57,494/- was also not warranted . The Assessing Officer has simply rejected the application observing that there were some mistakes committed by the Assessee while filing online ITR. The Ld. CIT(A) confirmed the additions so made by the AO in a mechanical manner.
Ld. D.R. also could not rebut the claim of the Assessee regarding unjustified additions made by the CPC without giving any opportunity to rebut to the Assessee.
It has been held time and again that the Income Tax Department should charge only the legitimate taxes from the tax payers. If there was an inadvertent and bonafide mistake made by the Assessee in the ITR form, the Assessing Officer was duty bound to consider the same. If the claim of the Assessee was found admissible, the AO should have allowed the same. However, Ld. AO has rejected the rectification application on the ground that there was an error by the Assessee while filing up ITR form. . However, it has not been rebutted by the Department that the claim of the Assessee, otherwise is admissible. In view of this, the impugned disallowance/addition made by the lower authorities is not sustainable and the same is ordered to be deleted.
In the result, the appeal of the Assessee stands allowed.