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Facts
The assessee filed her ITR, which the CPC processed under Section 143(1), making an upward adjustment of Rs. 10,81,500/- under 'Income from House Property'. This adjustment was based on treating the assessee as 100% owner of a property she claimed to co-own with a 25% share, attributing the error in the return to a clerical mistake. Despite the assessee's response to the 143(1)(a) notice, CPC proceeded with the adjustment, and the CIT(A) upheld this action, dismissing the appeal.
Held
The tribunal found that neither the CPC nor the CIT(A) had properly verified crucial factual aspects, such as the actual co-ownership share, the terms of the rent agreement, and whether other co-owners had offered their share of income. Concluding that the matter required further examination on merits, the tribunal set aside the CIT(A)'s order and the CPC's adjustment. The case was restored to the Assessing Officer for fresh adjudication, with directions to verify all factual contentions and provide the assessee a reasonable opportunity of being heard.
Key Issues
Whether an adjustment under Section 143(1)(a) for 'Income from House Property' is valid when the assessee claims a clerical error in reporting ownership percentage of a jointly owned property, necessitating factual verification of co-ownership and income attribution.
Sections Cited
Section 250, Section 143(1), Section 143(1)(a), Section 24, Section 26
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SHRI SIDDHARTHA NAUTIYAL & SHRI NARENDRA PRASAD SINHA
आदेश/O R D E R
PER SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:
This appeal filed by the Assessee is directed against the order passed by the office of the Commissioner of Income-Tax, Appeal, Addl/JCIT(A)-2 Bengaluru [hereinafter referred to as “PCIT”] dated 01/09/2025 passed under Section 250 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”], for the Assessment Year (AY) 2024-25.
The assessee has taken the following Grounds of Appeal:-
1. The Ld. AddI/JCIT(A)-2, Bengaluru has grossly erred in law and in facts in dismissing the appeal ex-parte without affording reasonable opportunity of being heard to the appellant. The appeal of the appellant may kindly be restored to the file of the Ld. Addl./ICIT (Appeals) and may please be directed to afford reasonable opportunity of being heard.
2. The Ld. Addl/JCIT(A)-2, Bengaluru has erred in law and in facts in not appreciating the fact that the adjustment made by Ld. A.O., CPC, Bengaluru does not fall within the permissible scope of section 143(1)(a), which allows Kapila Mahendra Patel vs. Dy.CIT Asst. Year : 2024-25 2 adjustments only for apparent arithmetical errors, incorrect claims, or clear mismatches with information in Form 26AS/AIS/TIS.
The Ld. Addl./JCIT(A)-2, Bengaluru has erred in law and in facts in confirming the action of the Ld. A.O., CPC, Bengaluru in assessing the income of the appellant at Rs. Rs. 1,81,76,250/- as against the returned income of Rs. 1,70,94,750/- by an upward adjustment of Rs. 10,81,500/- under the head Income from House Property (Rs. 1,19,54,670/- as determined by the CPC minus Rs. 1,08,73,172/- offered by the appellant in the return of income). The impugned enhancement of Rs. 10,81,500/-being bad in law and in facts is prayed to be deleted.
Your appellant craves liberty to add, alter, amend substitute or withdraw any of the grounds of appeal hereinabove contained.”
The brief facts of the case are that the assessee is an individual deriving income from house property, capital gains and income from other sources. The assessee filed her return of income for the Assessment Year 2024–25 on 21.07.2024 declaring a total income of Rs.1,70,94,750/-. The Centralised Processing Centre, Bengaluru processed the return under section 143(1) of the Income-tax Act, 1961 (“the Act”) and issued intimation dated 18.06.2025 to the assessee. In the said intimation, CPC computed the total income at Rs. 1,81,76,250/- as against the returned income of Rs. 1,70,94,750/-, thereby resulting in an upward adjustment of Rs. 10,81,500/- under the head “Income from House Property” and accordingly consequential demand was raised upon the assessee.
3.1. Prior to passing the intimation, the CPC had issued a notice under section 143(1)(a) of the Act alleging apparent arithmetical errors, to which the assessee responded (within time) stating that there was no arithmetical or apparent error in the return and that all income and deductions were correctly reported. Despite the response, the CPC proceeded to make the adjustment. The Kapila Mahendra Patel vs. Dy.CIT Asst. Year : 2024-25 3 adjustment arose on the ground that in respect of one property let out to M/s. Befree Business Resource LLP, the assessee was treated as 100% owner and the entire annual value of Rs. 20,60,000/- was considered in her hands, allowing standard deduction under section 24 of the Act and adding the difference of Rs. 10,81,500/- to her income. According to the CPC, the assessee had disclosed only Rs. 3,60,500/- as income from this property whereas, based on full ownership, the correct income after standard deduction worked out to Rs. 14,42,000/-.
Aggrieved by the intimation, the assessee preferred an appeal before the CIT(Appeals). The CIT(Appeals) noted that in the return of income, the ownership share in respect of the said property was shown as 100% and, therefore, upheld the action of the CPC in bringing the entire income from the property to tax in the hands of the assessee. The CIT(Appeals) held that the adjustment made under section 143(1) was correct and dismissed the appeal of the assessee.
The assessee is in appeal before us against the order passed by the CIT(Appeals) dismissing the appeal of the assessee.
We have heard the rival contentions and perused the material available on record. It is noticed that the core dispute in the present case relates to the addition of Rs. 10,81,500/- under the head “Income from House Property” made while processing the return under section 143(1) of the Act. The assessee’s consistent contention before us is that the property in question is jointly owned by five co-owners with clearly earmarked ownership for each co- owner of the said property and her correct ownership share was only 25%. The Counsel for the assessee submitted that while filing the return of income, due Kapila Mahendra Patel vs. Dy.CIT Asst. Year : 2024-25 4 to a clerical error, the column relating to ownership share for one particular rent receipt was inadvertently shown as 100% instead of 25%, though the actual income offered to tax was only the correct 25% share. The assessee has also placed reliance on the rent agreement, co-ownership agreement, copies of returns of the co-owners and the fact that similar addition in the case of one of the co-owners has already been deleted by the CIT(Appeals).
6.1. In our considered view, the issue raised by the assessee requires proper verification of factual aspects such as the correct ownership share in the property, the terms of the rent agreement, the co-ownership agreement, and whether the balance rent income has in fact been offered to tax in the hands of the other co-owners. These aspects have not been examined either by the CPC at the time of processing under section 143(1) of the Act or by the CIT(Appeals) at the first appellate stage, who proceeded solely on the basis of the ownership percentage reflected in the return of income filed by the assessee, without independently verifying the facts of the assessee’s case. The assessee’s plea that the error was clerical in nature and that the substantive income has been correctly offered to tax in accordance with section 26 of the Act has not been verified on merits.
6.2. In the interest of justice, we consider it appropriate to set aside the impugned order of the CIT(Appeals) as well as the adjustment made by the CPC and restore the matter to the file of the jurisdictional Assessing Officer. The Assessing Officer shall verify the factual contentions of the assessee regarding co-ownership of the property, correct ownership share, rental income attributable to the assessee, and the claim that the balance income has been offered to tax by the other co-owners. The Assessing Officer shall also examine the supporting agreements and other evidences placed on record and thereafter Kapila Mahendra Patel vs. Dy.CIT Asst. Year : 2024-25 5 decide the issue afresh in accordance with law after affording reasonable opportunity of being heard to the assessee. The Assessing Officer shall grant appropriate relief as per law based on such verification.
Accordingly, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the Open Court on 19/01/2026.
Sd/- Sd/- (NARENDRA PRASAD SINHA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER