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Facts
The assessee filed an appeal against the order of the CIT(A) that upheld a tax demand raised under Section 143(1). The assessee contended that the demand arose from a clerical data-entry error and that it had in fact incurred a business loss, supported by audited accounts.
Held
The tribunal noted that the appeal was filed with a delay. The assessee explained the delay was due to not receiving timely communication of the CIT(A)'s order. The assessee also argued that the tax demand was based on a system-generated error and not substantiated by the audited financials.
Key Issues
Whether the tax demand raised under Section 143(1) based on a system-generated error is valid, and whether the CIT(A) properly considered the audited financials and principles of natural justice.
Sections Cited
143(1), 250, 253
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, GUWAHATI BENCH, GUWAHATI
O R D E R PER LAXMI PRASAD SAHU, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order passed u/s 250 of the Income Tax Act, 1961 (hereafter “the Act”) by the Ld. Commissioner of Income Tax (Appeals), Additional/Joint Commissioner of Income Tax (Appeals) – 1, Visakhapatnam [hereafter “the Ld. Addl./JCIT(A)] dated 27.02.2025, DIN & order No. ITBA/APL/S/250/2024-25/1073782086(1) on the following grounds of appeal:
Sotai Tea Company Pvt. Ltd. “1. That the Learned Commissioner of Income Tax (Appeals) has grossly erred in law and on facts in upholding the tax demand of Rs. 3,81,930/- (Rupees Three Lakhs Eighty One Thousand Nine Hundred and Thirty Only) raised by the Learned Assessing Officer under Section 143(1) of the Income Tax Act, 1961, despite the Appellant having disclosed and substantiated a business loss in the return of income duly supported by audited books of account.
2. That the Ld. CIT(A) has failed to appreciate that the figure of Rs. 9,29,721/- (Rupees Nine Lakhs Twenty Nine Thousand Seven Hundred and Twenty One Only) as reflected in the system- generated ITR Acknowledgement is the result of a clerical and inadvertent data-entry error committed by the Department at the time of manual processing of the return, and thus could not have been relied upon as a basis for confirming the impugned tax demand.
3. That the Ld. CIT(A) has erred in dismissing the appeal solely on the basis of a misconstrued interpretation of the ITR Acknowledgement, without examining the duly audited Profit & Loss Account and Balance Sheet, which clearly demonstrate that the Appellant had incurred a net business loss and was under no obligation to pay any tax for the relevant assessment year.
4. That the Learned CIT(A) has failed to appreciate that although an Intimation under Section 143(1) of the Act was issued on 22.08.2007, the same was passed in a mechanical and cryptic manner, without disclosing any computation, basis, or reasoning for the tax demand of Rs. 3,81,930/- (Rupees Three Lakhs Eighty One Thousand Nine Hundred and Thirty Only), thereby rendering the said intimation arbitrary, devoid of due process, and in violation of the principles of natural justice.
5. That the impugned appellate order is vitiated by non-application of mind, suffers from legal infirmities, and is liable to be set aside as it has caused manifest injustice to the Appellant.
6. That the Learned department have erroneously and arbitrarily adjusted refund amounts aggregating to Rs. 2,43,470/- (Rupees Two Lakhs Forty Three Thousand Four Hundred and Seventy Only) against the impugned demand during the pendency of this dispute, without affording the Appellant an opportunity of hearing or awaiting final adjudication. Such adjustments are unjust, premature, and liable to be reversed in light of the disputed nature of the demand.
7. That the Appellant craves leave to add, alter, amend, or withdraw any of the aforesaid grounds of appeal
at the time of hearing, if so required or permitted in the interest of justice.”
2. At the outset of hearing, we noted that the appeal filed by the assessee is delayed by 68 days for which the assessee has filed condonation petition in which it has been stated as under:
“1. That the Appellant is preferring the accompanying Appeal under Section 253 of the Income Tax Act, 1961, against the Order dated 27.02.2025 passed under Section 250 of the Act by the Learned Commissioner of Income Tax Sotai Tea Company Pvt. Ltd. (Appeals). The present Application is being filed seeking condonation of a short delay of six (06) days that has occurred in filing the said Appeal. This application is submitted out of abundant caution and is an integral part of the appeal proceedings. This application be read as a part and parcel of the captioned case only and hence the contents are not repeated herein for the sake of brevity.
That the Appellant Order u/s 250 of the Act dated 27.02.2025 was communicated to the Appellant only on 29.04.2025. The Appellant did not receive any email, physical communication, or SMS alert intimating that the said order had been uploaded or made available on the Income Tax Portal. Consequently, the Appellant remained unaware of the availability of the said order until it was eventually accessed and downloaded on 29.04.2025, 3. That upon learning of the said appellate order, the Appellant promptly prepared and dispatched a physical copy of the Appeal, accompanied by all relevant enclosures, to the office of the Hon'ble Tribunal within the prescribed limitation period of thirty (30) days, under the bona fide belief that such physical filing was adequate for the purpose of compliance.
That subsequently, on 02.07.2025, the Appellant received a telephonic communication from the Learned Registrar of the Hon'ble Tribunal, informing the Appellant that all appeals are now mandatorily required to be filed through the designated e-filing portal. This was the first time the Appellant became aware of the procedural change mandating electronic filing.
5. That immediately upon receiving this clarification, the Appellant took swift action to initiate the online filing process. However, due to the unanticipated nature of this procedural requirement, a delay of six (06) days has occurred in completing the e-filing of the present Appeal.
That the Appellant submits with utmost respect that the delay in filing the Appeal is neither willful, wanton, nor deliberate. It has occurred solely due to the Appellant's lack of knowledge of the revised procedural requirement concerning e-filing of appeals before the Hon'ble Tribunal. The Appellant had at all times acted with due diligence and bona fide intent and had already taken steps to file the Appeal well within the statutory period, albeit through the now-outdated physical mode.
That it is settled law that procedural lapses or technical defaults should not defeat substantive justice. The Hon'ble Supreme Court in numerous pronouncements has emphasized that a meritorious matter should not be thrown out at the threshold merely on account of a short and unintentional delay, especially when the delay is properly explained and the party has acted bona fide.
That it is most humbly submitted and reiterated that the Appellant never intended to purposefully delay the filing of the complaint. The same is neither deliberate nor intentional. PRAYER In view of the above-mentioned facts and circumstances it is therefore most humbly prayed that this Hon'ble Tribunal may kindly be pleased to:
Sotai Tea Company Pvt. Ltd. a) Allow the present application and condone the delay caused in filing the captioned Appeal. b) Pass any such other order as this Hon'ble Tribunal may be deemed fit and proper in the facts and circumstances of the case, in the interest of justice.”
On going through the above reasons/explanations, we noted that the assessee had reasonable cause for not filing the appeal within the specified time. Therefore, in line of the judgment of Collector, Land Acquisition vs Mst. Katiji, (1987) 167 ITR 171 (SC), we condone the delay and the appeal is taking for adjudication.
4. Briefly stated the facts of the case from the submissions of the assessee that the assessee filed return of income on 14.11.2006 electronically declaring loss of Rs. 12,90,603/-. The return was processed under Section 143(1) of the Act and making addition of Rs. 22,20,330/- the income was computed as Rs. 9,29,710/- but the reasons for making adjustment was not clear by the CPC. The assessee filed appeal before the Ld. CIT(A). During the course of appellate proceedings, the remand report was called from the Jurisdictional Assessing Officer (JAO) in the remand report the JAO in his report stated that the assessee was requested to furnish the ITR copy for the year under consideration but the assessee did not furnish the copy of ITR and furnish acknowledgement copy of the ITR filed and JAO reported that in the acknowledgement total income declared by the assessee is amounting to Rs. 9,29,712/- and the same amount was computed under Section 143(1) of the Act, therefore, there was no question of any addition/disallowance by the CPC and furnished acknowledgment of the ITR along with remand report which is incorporated by the Ld. CIT(A). The Ld. CIT(A) after considering the remand report dismissed the appeal of the assessee.
Aggrieved from the above order, the assessee filed appeal before the ITAT.
6. The Ld. Counsel for the assessee reiterated the submissions made before the Ld. CIT(A), statement of facts and grounds of appeal taken before the Ld. CIT(A) and further submitted that in assessment year 2006-07 first time the income tax department introduced electronically filing of return while filing the return, the assessee claimed loss of Rs. 12,90,603/- since the return was filed electronically. Therefore, the assessee had no any hard copy of the ITR filed, therefore, the assessee was unable to produce any copy of ITR/documents during the remand proceedings. He further submitted that making of adjustment under Section 143(1) of the Act is not clear. During the remand proceedings, the Assessing Officer observed that in the departmental portal the return of assessee is not visible as it was filed manually is not correct, the assessee filed return electronically the acknowledgement of e-return is sent by the Assessing Officer during the remand proceedings. Therefore, the Assessing Officer is not justified for calling copy of ITR. It should have been with the income tax department. He further submitted that the loss claimed by the assessee for the impugned assessment year were set off in the subsequent assessment year and there is no adverse view taken by the revenue for the subsequent years, income tax return it has been accepted therefore, the appeal of the assessee should be allowed.
7. On the other hand, the Ld. DR relied on the order of Ld. CIT(A) and remand report submitted by the Assessing Officer. The Ld. DR submitted that electronically filing was introduced first time in the income tax department, the assessee filed return electronically after remitting the data to the income tax department, the acknowledgment was generated after filling of return in which there is a gross total income of Rs. 9,29,712/- the acknowledgment is generated as per the ITR designed by the income tax department and this acknowledgement is signed and verified by the assessee after verifying and signing the acknowledgement generated was sent to the CPC, Bangalore. Therefore, the assessee was Sotai Tea Company Pvt. Ltd. aware of the income/loss as shown in the e-acknowledgement and the matter is very old and retrieving the data for the A.Y. 2006-07 is up to the end of the CPC. The assessee himself accepted income as per the e- acknowledgment placed at page no. 11, he could have revised the return and there is no mistake while processing the return under Section 143(1) and income was not determined by the CPC, the same amount is appearing in the e-acknowledgment and in e-acknowledgement other columns are and tax figure is ‘zero’. Accordingly there is no error done by the CPC while processing the return under Section 143(1) of the Act. There was a demand computed by CPC only, therefore it cannot be said that the CPC had computed wrongly to the income of the assessee. therefore, he requested that the appeal of the assessee should be dismissed.
8. Considering the rival submissions, we noted that the case of the assessee is A.Y. 2006-07 and in A.Y. 2006-07 first time the income tax department introduced e-filing of income tax return and the assessee availed the facilities provided for filing return of income as per the computation of income by the assessee at page no.
There is a loss of Rs. 12,90,602/-. However, after completing the return, the e- acknowledgement was generated in which gross total income of Rs. 9,29,712/- was computed. If is so the assessee could have revised the return of income , since the assessee was knowing the true facts. During remand proceedings, the said acknowledgement was furnished by the Assessing Officer, the assessee filed paper book, page no. 50 which is uncertified containing financial statement, computation of income for the A.Y. 2006-07 and A.Y. 2007-08. It appears that these are fresh evidences because the reference of these paper books are not emanating from the order of ld. CIT(A).
It is undisputed fact that the e-acknowledgment is generated if computing the income tax return electronically filed by the assessee and the e-acknowledgement is shown income which same income computed by the CPC. Therefore, it is clear that there is no any mistake in processing the return of income under Section 143(1) of the Act and since e-filing was introduced first time by the income tax department from A.Y. 2006-07 and most of the tax professional were not completely aware, how to file income tax return electronically. It appears that there might be mistake while filing ITR by the assessee/assessee’s tax professional. We gone through the financial statements and of computation of income. There is a loss of Rs. 12,90,603/-. Considering the facts of the case and in the interests of justice, we are remitting this issue back to the file of Assessing Officer for denovo consideration and decide the issue as per law after giving a reasonable opportunity of being heard to the assessee and the assessee is directed to substantiate his case with cogent documents in support of his case and not to seek any unnecessary adjournments for early disposal of the case. We make it clear that in case of failure no second leniency shall be granted to the assessee.
In result, appeal of the assessee is allowed for statistical purposes.