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Facts
The assessee filed an appeal against an order for assessment year 2024-2025. The appeal was initially time-barred by 8 days, but the delay was condoned. The core issue is the denial of rebate under section 87A by the CPC in an intimation under section 143(1).
Held
The Tribunal held that the denial of rebate under section 87A by the CPC was based on system-driven logic, not statutory mandate. The interpretation upholding such denial was not in consonance with the law. The Tribunal followed a coordinate bench decision, quashing the intimation as erroneous.
Key Issues
Whether the rebate under section 87A can be denied by the CPC in an intimation under section 143(1) for short-term capital gains taxable under section 111A, especially when the total income does not exceed Rs. 7 lakhs.
Sections Cited
87A, 111A, 143(1), 115BAC(1A)
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Income Tax Appellate Tribunal, “SMC” BENCH KOLKATA
Before: SHRI GEORGE MATHAN
O R D E R This is an appeal filed by the assessee against the order dated 31.07.2025, passed by the ld.Addl/CIT(A)-5, Mumbai, for the assessment year 2024-2025.
It was submitted by the Ld.AR that the appeal of the assessee is time barred by 08 days on account of which the assessee has filed necessary affidavit mentioning that the delay was on account of festival of Durga Puja the office of tax consultant was closed from 20.09.2025 to 06.09.2025. As the delay is on account of the fault of the tax consultant and the assessee has filed the affidavit and the concerned tax consultant also accepted the failure, the delay in filing the appeal stands condoned.
It was submitted by the ld. AR that the return filed by the assessee came to be processed and an intimation came to be issued u/s.143(1) of the Act, wherein the assessee’s claim of rebate in respect of short term capital gain u/s.87A of the Act has been denied. It was the submission that such adjustment could not be made in an intimation u/s.143(1) of the Act for which he relied upon the decision of the coordinate bench of the Tribunal in the case of Jayshreeben Jayantibhai Palsana, passed in vide order dated 12.08.2025, wherein the coordinate bench of the Tribunal has under similar circumstances, held in para 5.15 to 5.18 as follows :- 5.15 In the recent judgment dated 24.01.2025 in the case of The Chamber of Tax Consultants vs. Director General of Income Tax (Systems) [TS-5026-HC-2025 (Bombay)-O], the Hon'ble Bombay High Court considered the issue of system-based denial of 87A rebate on STCG under section 111A for assessees who had opted for 115BAC(1A). While the Hon'ble Court refrained from interpreting the substantive provisions, it held that the assessee must be allowed to claim rebate under section 87A, and it is for the quasi-judicial authority to decide on merits. Thus, the Hon'ble High Court clearly held that the CPC utility or system configuration cannot override statutory rights, and that each case must be adjudicated on its own merits. We at the Tribunal, being such a quasi-judicial authority, are therefore duty-bound to examine the claim in light of the statutory framework and not be influenced by automated denial or procedural logic adopted by the CPC. 5.16 The assessee has also relied on an appellate order dated 27.05.2025 passed by CIT(A)-1, Nagpur in the case of Avni Milanbhai Maniya, wherein on identical facts the CIT(A) allowed the claim of rebate under section 87A in respect of STCG taxable under section 111A. We also note that such decision was taken by the JCIT/Addl. CIT(A) relying on the decision of Beena Manishbhai Fofaria for the A.Y. 2024-25. While not binding, the said appellate order affirms that divergent views exist and such benefit has been allowed in similar factual circumstances. 5.17 In view of the above discussion, we find that the assessee is a resident individual and the total income declared for the assessment year 2024-25 does not exceed Rs.7,00,000. It is also an admitted position that the assessee has exercised the option to be assessed under the new tax regime in accordance with the provisions of section 115BAC (1A) of the Act. On a plain reading of the statutory provisions, there exists no express bar either in section 87A or section 111A for denial of rebate in respect of tax payable on short- term capital gains arising from transfer of listed equity shares taxable at special rates under section 111A. The legislative intent is further clarified by the subsequent amendment proposed in the Finance Bill, 2025, which is prospective in nature and thereby reinforces that no such restriction was in force during the relevant assessment year. The denial of rebate under section 87A by the CPC, Bengaluru, appears to be based solely on system-driven logic and not on any statutory mandate. Moreover, the interpretation adopted by the CIT(A) in upholding such denial is, in our considered view, not in consonance with the plain and unambiguous language of the law as applicable for A.Y. 2024-25. 5.18 Accordingly, we hold that the assessee is eligible for rebate under section 87A for A.Y. 2024-25 even though the income includes STCG taxable under section 111A. The Assessing Officer is directed to allow rebate of Rs.13,320/- and recompute tax liability accordingly. The demand of Rs.15,820/- raised in CPC intimation stands deleted. Refund, if any, shall be granted in accordance with law.
It was the submission that the intimation being erroneous, insofar as the rebate u/s.87A of the Act cannot be denied in the intimation, especially when the total income of the assessee during the impugned assessment year, does not exceed Rs.7 lakhs, the intimation is liable to be quashed.
In reply, ld. Sr. DR supported the orders of the CPC and ld.CIT(A) 6. I have considered the rival submissions. On merits it is noticed that the issues is squarely covered by the decision of the coordinate bench of the Tribunal in the case of Jayshreeben Jayantibhai Palsana, referred to supra, wherein the Tribunal has categorically held that the adjustment in respect of rebate u/s.87A of the Act for the assessment year 2024-2025 even though the income includes the short term capital gain is not permissible in an intimation u/s.143(1). Respectfully following the decision of the Tribunal in the above case, the intimation as issued by the CPC is found to be erroneous and consequently the same stands quashed.