CAPITAL FORTUNES PRIVATE LIMITED,HYDERABAD V. DCIT, CIRCLE - 6(1), IT TOWERS

ITA 724/HYD/2025

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M/s. Capital Fortunes Pvt. Ltd. filed an appeal against the order of the Learned First Appellate Authority, which had dismissed their appeal on technical grounds without adjudicating on the merits. The primary issues in the appeal were the denial of set-off of brought forward losses, incorrect addition of income, and disallowance of employees' contribution to provident fund. The Tribunal found that the First Appellate Authority's dismissal on technical grounds was not justified and that the issues raised by the assessee deserved to be examined on merits.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 777001 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2025
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2020-2021
• Appeal Filed On: 26-04-2025
• Laws Referred To: Income Tax Act, 1961
• Court: TRIBUNAL
• Department Lawyers: SACHIN KUMAR
• Assessee Lawyers: C S SUBRAHMANYAM
• Keywords: Set aside; Opportunity of being heard; Rectification of order
• Section: 154

Judgement Text

" आयकर अपीलीय अधिकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘B’ Bench, Hyderabad श्री विजय पाल राि, उपाध् यक्ष एिं श्री मिुसूदन सािडिया, लेखा सदस् य क े समक्ष । BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MADHUSUDAN SAWDIA, ACCOUNTANT MEMBER आ.अपी.सं /ITA No.724/Hyd/2025 (निर्धारण वर्ा/Assessment Year:2020-21) M/s. Capital Fortunes Pvt. Ltd., Hyderabad. PAN:AABCC5489P Vs. Dy. Commissioner of Income Tax, Circle 6(1), Hyderabad. (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: Shri C S Subrahmanyam, C.A. and Shri V Siva Kumar,Advocate रधजस् व द्वधरध/Revenue by: Dr. Sachin Kumar, SR-DR सुिवधई की तधरीख/Date of hearing: 16/09/2025 घोर्णध की तधरीख/Pronouncement: 19/09/2025 आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M. : This appeal is filed by M/s. Capital Fortunes Pvt. Ltd. (“the assessee”), feeling aggrieved by the order passed by the Learned ADDL/JCIT (A), Kochi, (“Ld. First Appellate Authority”), dated 27.02.2025 for the A.Y. 2020-21. 2. The assessee has raised the following grounds of appeal : Printed from counselvise.com ITA No.724/Hyd/2025 2 3. The brief facts of the case are that, the assessee is a company which filed its return of income on 15.02.2021 for A.Y. 2020-21 declaring a total income of Rs.4,07,82,230/-. The return of the assessee was processed by CPC under section 143(1) of the Income Printed from counselvise.com ITA No.724/Hyd/2025 3 Tax Act, 1961 (“the Act”) on 24.12.2021 determining the total income at Rs.5,53,67,690/-. While processing the return of the assessee, the CPC did not allow the set-off of brought forward loss of Rs.1,42,70,219/-, did not allow the exemption of Rs.2,58,564/- on account of dividend income and made addition of Rs.56,673/- on account of employees’ contribution to provident fund. 4. Aggrieved with the order of CPC, the assessee filed an appeal before the Ld. First Appellate Authority. Simultaneously, the assessee also filed an application for rectification under section 154 of the Act before CPC against the intimation under section 143(1) of the Act. The said application was rejected by CPC. The Ld. First Appellate Authority, without adjudicating on merits, dismissed the appeal of the assessee on the technical ground that since the assessee had filed a rectification petition under section 154 of the Act, the order under section 143(1) of the Act merged with the rectification order and therefore, the appeal filed against intimation under section 143(1) of the Act was not maintainable. Printed from counselvise.com ITA No.724/Hyd/2025 4 5. Aggrieved with the order of Ld. First Appellate Authority, the assessee is in further appeal before us. The Learned Authorised Representative (Ld. AR) submitted that the main grievance of the assessee is against the denial of set-off of brought forward loss of Rs.1,42,70,219/-, exemption of Rs.2,58,564/- on account of dividend and incorrect addition of Rs.56,673/- towards employees’ contribution to provident fund. With regard to the set-off of brought forward losses, it was submitted that the assessee is duly eligible and the same has been correctly carried forward in earlier years. The CPC, however, while processing the return under section 143(1) of the Act, wrongly didn’t allow the set-off. On the issue of dividend exemption, it was submitted that due to an inadvertent clerical error while filling the ITR form, the exemption was not properly reflected in some columns of the return, though in computation it was correctly shown. As regards the disallowance of Rs.56,673/- towards employees’ contribution, the Ld. AR submitted that the assessee had already disallowed the said amount in the computation. Again, there was some inadvertent error in filing of the ITR form with regard to Printed from counselvise.com ITA No.724/Hyd/2025 5 disclosure of employees’ contribution to provident fund. Accordingly, CPC again added the same, resulting in double disallowance. It was submitted that these issues were also raised before CPC by way of rectification under section 154 of the Act, but CPC rejected the application. The Ld. AR contended that the Ld. First Appellate Authority, instead of examining the merits of the claims, dismissed the appeal only on technical ground of merger. The Ld. AR pleaded that the assessee has genuine claims which cannot be denied merely on technicalities, and the matter may be restored to the Ld. AO for fresh verification on merits. 6. Per contra, the Learned Departmental Representative (Ld. DR) relied on the order of the Ld. First Appellate Authority and submitted that since the assessee had already sought rectification under section 154 of the Act, the order under section 143(1) of the Act merged with the rectification order, and therefore the Ld. First Appellate Authority was justified in dismissing the appeal. Printed from counselvise.com ITA No.724/Hyd/2025 6 7. We have considered the rival submissions and perused the material available on record. It is noted that the Ld. First Appellate Authority dismissed the appeal of the assessee on the ground that the order under section 143(1) of the Act merged with the rectification order under section 154 of the Act. We find that the approach of the Ld. First Appellate Authority is not in accordance with the settled principle that genuine claims of the assessee should not be rejected merely on technicalities. The assessee had raised issues relating to eligibility of set-off of brought forward losses, exemption of dividend income, and disallowance of employees’ contribution. These go to the merits of computation of income and require verification of facts. In our considered view, these claims of the assessee deserve to be adjudicated on merits. The denial of relief solely on the ground of technical merger is not justified. Therefore, in the interest of substantial justice, we deem it fit to restore the matter to the file of the Ld. AO. The Ld. AO shall verify the claim of the assessee regarding eligibility of set-off of brought forward loss of Rs.1,42,70,219/-, exemption of Rs.2,58,564/- towards dividend Printed from counselvise.com ITA No.724/Hyd/2025 7 income and correctness of disallowance of Rs.56,673/- towards employees’ contribution. The Ld. AO shall call for necessary evidences and explanations from the assessee and decide the issues afresh in accordance with law after affording reasonable opportunity of being heard. In view of the above, we set aside the order of the Ld. First Appellate Authority and restore the matter to the file of the Ld. AO for de novo adjudication on merits. 8. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on 19th Sept., 2025. Sd/- Sd/- (VIJAY PAL RAO) (MADHUSUDAN SAWDIA) VICE PRESIDENT ACCOUNTANT MEMBER Hyderabad. Dated: 19.09.2025. * Reddy gp Printed from counselvise.com ITA No.724/Hyd/2025 8 Copy of the Order forwarded to : 1. M/s. Healthware Pvt. Ltd., 8-2-698, F.No.403, M J Towers, Road No.12, Banjara Hills, Hyderabad-500034 2. The DCIT, Circle 6(1), Hyderabad. 3. Pr.CIT, Hyderabad. 4. DR, ITAT, Hyderabad. 5. Guard file. BY ORDER, Printed from counselvise.com "