FANCY CORPORATION LTD,MUMBAI V. ASSISTANT DIRECTOR OF INCOME TAX, CPC , MUMBAI

ITA 3958/MUM/2023

AI Insights

The case involves Fancy Corporation Ltd, which appealed against an order passed by the National Faceless Appeal Centre, Delhi, concerning the assessment year 2018-19. The primary issue was the adjustment of Rs. 15,00,000 by the Assessing Officer under section 143(1) of the Income Tax Act, 1961, which the assessee claimed was a bonafide mistake in reporting exempt income. The Tribunal considered precedents where similar inadvertent errors were rectified, emphasizing that the objective of assessment is to determine the correct total income of the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 33505 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2018-2019
• Other Referred Cases: NTPC Ltd Vs. ITO, Sumanchandra G. Mehta Vs ITO, Goodwill Management Pvt Ltd Vs DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL AGAWANE
• Assessee Lawyers: H.N.MOTIWALLA
• Keywords: Set aside; Business income; Revised return; Capital receipt; Ignorance of law; TDS; Rectification of order; Bonafide mistake; Earning of tax free income
• Section: 250; 154; 143(1); 244A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH MUMBAI BEFORE HON’BLE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA No. 3958/Mum/2024 (Assessment Year: 2018-19) Fancy Corporation Ltd 16 Sir Vithaldas Chambers, Mumbai Samachar Marg, Fort, Mumbai – 400023. Vs. ACIT, Ward 2(1)(3) Mumbai. PAN/GIR No. AAACF0866C (Applicant) (Respondent) Assessee by Shri H.N. Motiwalla Revenue by Shri Sunil Agawane, Sr.DR Date of Hearing 28.01.2025 Date of Pronouncement 25.02.2025 आदेश / ORDER PER SANDEEP GOSAIN, JM: The present appeal has been filed by the assessee challenging the impugned order 06.09.2023, passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre, Delhi (‘Ld. CIT(A)’) for the assessment year 2018-19. 2. At the outset, Ld. AR appearing on behalf of assessee, drawn my attention to the application for raising additional ground of appeal, wherein the assessee has taken two additional grounds. However, during the course of hearing on this application for raising additional grounds, Ld. AR 2 ITA No. 3958/Mum/2024 Fancy Corporation Ltd, Mumbai submitted that he do not want to press ground No. 1 and therefore wants to press ground No.2 alone as the same is legal in nature. 3. After having heard the counsels for both the parties and perused the material placed on record, while keeping in view, the principles laid down by Hon’ble Supreme Court with regard to allowing additional grounds of appeal which are legal in nature as held in the case of NTPC Ltd Vs. ITO, [1998] 229 ITR 283 (SC). Then allows application for raising additional ground. 4. Since the additional ground number one has been withdrawn therefore only ground no 2 remains to be adjudicated and the same is reproduced here in below: 1. On the facts and in the circumstances of the case, the said Ld. Ld.AO has also erred in making primafacie adjustment of Rs. 15,00,000/- as the appellant and shown the said amount in Schedule “BP” as capital receipt but inadvertently had not mentioned in Schedule “EI”, which was bonafide mistake of the appellant and therefore making an adjustment of the said amount u/s 143(1) of the Act was not justified. 5. In this regard Ld. AR reiterated the same arguments as were raised by him before the revenue authorities and also relied upon his written submissions, the same is reproduced here in below: 3 ITA No. 3958/Mum/2024 Fancy Corporation Ltd, Mumbai The appellant has filed its return of income on October 10, 2018 declaring loss of Rs. 77,200/-, and claimed refund of Rs 2,15,000/- Thereafter, The appellant had received notice under section 139(9) of the Income tax Act, 1961, wherein it had mentioned that \"the return of income filed, credit for TDS has been claimed but corresponding receipts/ income has been omitted to be offered for taxation The above omission is defect\" In response to notice under section 139(9) dated April 08, 2019, the appellant has uploaded return on April 11,2019 mentioning that \"there is no defective return,\" and informed that appellant has received Rs. 15,00,000/- as a token of appreciation and gratitude, which is not the business of the appellant. Therefore, the same is not taxable. Thereafter, the appellant has also received intimation under section 143(1)(a) of the Act, dated December 26, 2019 determining the total income at Rs. 14,22,800/-. Against the said intimation, the appellant has filed rectification application under section 154 of the Act, on January 03,2020,. Thereafter, the appellant has received a rectification order under section 154 of the Act, dated February 28,2020, determining the total income again at Rs. 14,22,2800/- received by the appellant on March 09, 2020. Now, The facts of the case are as under: As per the indenture dated March 24,2007 the appellant sold and transferred to Pioneer the land having an aggregate area of 2374.9 sq. mtrs as under: alongwith structure standing thereon: (i) CTS No. 166 B having area of 846.10 sq. mtrs. (ii) CTS No. 166 C having area of 900 sq. mtrs. (iii) CTS No. 166 D having area of447.60 mtrs, and 4 ITA No. 3958/Mum/2024 Fancy Corporation Ltd, Mumbai (iv) CTS No 166G having area of 181.20 sq. mtrs Thereafter by a Deed of Conveyance dated June 01,2010 Pioneer sold and transferred inter alia the said properties to Sunteck Realty Ltd.. While perusing the Indenture of 2006, it has come to the notice of Sunteck that though the Recitals and Third Schedule of the Indenture of 2006 clearly provided that Plot No. G having area of 181.20 sq. metrs forming a part of the said property has been sold and transferred by the appellant to Pioneer, the operative part of the Indenture of 2006 inadvertently did not mentioned the same.. Sunteck approached the appellant and requested to execute this Deed of confirmation for the sole purpose of confirming that the said plot was forming a part of the said property and was sold to Pioneer under indenture of 2006 The appellant considered the request of Sunteck and has agreed to execute this Deed of confirmation in favour of Sunteck. In order to appreciate the efforts made by the appeilant to come forward after all these years to execute the Deed of Confirmation in favour of the Sunteck, Sunteck has offered an amount of Rs. 15,00,000/- as token of appreciation and gratitude towards the appellant, Now your honour would appreciate that token of appreciation and gratitude is a capital receipt and not business receipt therefore the same is not taxable, as per the decision by Mumbai Tribunal in ACIT Vs. Shri Sameer Sudhakar Dighr bearing ITA No. 1327/M/2016 dated 13/04/2018] Therefore, appellant request your honour to direct the Asst. Director of CPC to pass an order as per the law and cancel the demand of Rs, 21,19,460/- and issue refund of Rs. 2,15,000/- with interest under section 244A of the Act. 5 ITA No. 3958/Mum/2024 Fancy Corporation Ltd, Mumbai 6. On the other hand, Ld. DR relied upon the orders passed by the revenue authorities. 7. I have heard the counsels for both the parties, perused the material placed on record, judgements cited before me and the orders passed by the revenue authorities. 8. From the records, I noticed that the only grievance of the assessee is that the amount of Rs.15,00,000/- received by the assessee was shown as “capital receipt“ under the head “business income “ in the return of income, but the same was not allowed on the ground that the said amount is not shown under the head exempt income. In this regard, it was submitted by the Ld. AR that the assessee in advertently could not mention the said amount in schedule “exempt income” which was a bonafide mistake of the assessee and therefore challenged the making of an adjustment of the said amount u/s 143(1) of the Act. 9. I have noticed that identical issue was examined by the coordinate bench of ITAT in the case of Sumanchandra G. Mehta Vs ITO in ITA 564 & 565/Mum/2012 and the relevant operative portion is reproduced here in below: 4. When this matter was agitated before the Ld. CIT(A), the CIT(A) was of the opinion that it was an incorrect claim on account of the assessee, failing to reflect the correct details in the return of income, as per computerized processing programme, the AO has 6 ITA No. 3958/Mum/2024 Fancy Corporation Ltd, Mumbai rightly made adjustments for this incorrect claim for deduction and held that there is no mistake in the processing of return and further concluded that no appeal lies against such processing where adjustments have been correctly made during processing as per Sec. 143(1)(a)(ii) of the Act. 5. Aggrieved by this finding of Ld. CIT(A), assessee is before us. CBDT, assuming powers, under delegated legislation came out with \"dictate\" and made it mandatory for all corporate assessees to file their returns in electronic form. Meaning thereby that henceforth return of income will be paperless returns. Thereafter, the CBDT included partnership firms and all assessee which were subject to tax audit within this ambit. The filing of e-return was further enhanced to include all assessees whose taxable income is more than 10 lakhs. To facilitate the taxpayers, the CBDT has provided free downloaded softwares/schema enabling the taxpayers to prepare e-returns and convert such returns into an XML file. Private payers also jumped into the band-wagon and came out with softwares for preparing e-returns and also enabling the taxpayers to upload returns electronically. 6. In this foray, no one cared to educate the taxpayers about the nuances of preparing an e-return vis-à-vis filing details in the return forms. This has resulted into many clerical errors because of the ignorance of the taxpayers in acclimatizing themselves with the latest technology. 7. The present case is a perfect example of such ignorance. The assessee has shown interest income earned as well as interest paid under the head\" income from other sources\", Not realizing that a negative figure is not accepted by the server and therefore the interest paid shown as Rs. 2,33,535/- was rejected by the server while processing the return. 8. No doubt the CBDT has the powers to frame the rules but, at the same time, it cannot benefit from the ignorance of the taxpayers using the latest technology. We do not find any reason why such error should not be rectified by the AO. This is not ignorance of law but ignorance of the usage of the latest technology. 7 ITA No. 3958/Mum/2024 Fancy Corporation Ltd, Mumbai 9. Therefore in the interest of justice and fair play to the taxpayer, we restore this issue back to the files of AO. The AO is directed to examine the claim of the assessee of interest paid at Rs. 2,33,535/- and if satisfied with the claim, the AO is directed to deduct the same from the positive interest figure of Rs. 3,38,345/- meaning thereby that only Rs. 1,04,810/- should be added to the taxable income. 10. Before parting, a similar issue came up for hearing before the Tribunal in the case of Srikant Real Estate Pvt. Ltd. 140 ITD 155 wherein one of us (AM) is the author of the decision where also the Tribunal has taken a similar view and directed the AO to rectify the error. Drawing support from the findings given in the aforesaid case, this appeal is also restored back to the files of the AO with the above direction. 11. In the result, the appeal filed by the assessee is allowed for statistical purposes. 10. And also in the case of Goodwill Management Pvt Ltd Vs DCIT in ITA No. 670/Bang/2020 the operative portion is reproduced here in below: 6. I heard the rival contentions and perused the record. I noticed that the assessee has mentioned that the dividend income of Rs.13.37 lakhs is exempt in \"Schedule BP\" relating to computation of business income. However, the details of exempt income were mentioned in the schedule El of the return of income. In view of the same, the CPC has not granted exemption to the assessec. The question that arises is whether the inadvertent error committed by the assessee while filling up the return of income filed through electronic mode would be fatal and would disentitle the assessee from exemption, which is otherwise allowable as per the provisions of the Act. An identical issue was examined by the Mumbai bench of Tribunal in the case of Suman Chandra G. Mehta (supra). Following 8 ITA No. 3958/Mum/2024 Fancy Corporation Ltd, Mumbai observations made by the Tribunal in the above said case are relevant here: \"4. When this matter was agitated before the Ld. CIT(A). the CIT(A) was of the opinion that it was a incorrect claim on account of the assessee, failing to reflect the correct details in the return of income, as per computerized processing programime, the A.O. has rightly made adjustments for this incorrect claim for deduction and held that there is no mistake in the processing of return and further concluded that no appeal lies against such processing where adjustments have been correctly made during processing as per Sec. 143(1)(a)(ii) of the Act. 7. The present case is a perfect example of such ignorance. The assessee has shown interest income earned as well as interest paid under the head \"income from other sources\". Not realizing the negative figure is not accepted by the server and therefore the interest paid shown as Rs 2,33,535/- was rejected by the server while processing the return 8. No doubt the CBDT has the powers to frame the rules but, at the same time, it cannot benefit from the ignorance of the taxpayers using the latest technology. We do not find any reason why such error should not be rectified by the AA.O. This is not ignorance of law but ignorance of the usage of the latest technology. 9. Therefore in the interest of justice and fair play to the taxpayer, we restore this issue back to the files of A.O. The A. O. is directed to examine the claim of the assessee of interest paid at Rs.2,33,535/- and if satisfied with the claim, the A.O. is directed to deduct the same from the positive interest figure of Rs.3,38,345/- meaning thereby that only Rs.1,04,810/- should be added to the taxable income. 10. Before parting, a similar issue came up for hearing before the Tribunal in the case of Srikant Real Estate Pvt. Ltd. 140 ITD 155 wherein one of us (AM) is the author of the decision where also the Tribunal has taken a similar view and directed the A.O. 1ο rectify the error. Drawing support from the findings given in the aforesaid 9 ITA No. 3958/Mum/2024 Fancy Corporation Ltd, Mumbai case, this appeal is also restored back to the files of the A.O. with the above direction.\" 7. The facts in the present case are identical. The assessee, out of ignorance or inadvertence has omitted to mention the details of exempt income in the relevant \"Schedule El\". So, the ignorance of the assessee or inadvertent mistake committed by the assessee should not come in his way in claiming exemption, which is otherwise allowable under the Act. It is also not a case that the assessee did not respond to the notice issued by CPC. The assessee has duly responded to the same, but it is the submission of revenue that the assessee should have filed a revised return of income. There is no dispute with regard to the fact that the assessee is entitled for exemption of dividend income. The object of assessment is to determine correct total income of the assessee. Accordingly, I am of the view that the right of the assessee could not be denied merely on accounting of technical errors. Hence there is a mistake apparent from record in not granting exemption claimed by the assessee. Accordingly, I am of the view that the said mistake deserves to be rectified. 8. Accordingly, I set aside the order passed by Ld. CIT(A) on this issue and direct the A.O. to allow the exemption claimed by the assessee. 9. In the result, the appeal filed by the assessee is allowed. 11. After having considered the decisions cited above and also the facts of the present case I am of the view that inadvertent mistake on the part of the assessee to mention the details of exempt income in the relevant schedule “cannot be a ground to deny the relief, if otherwise, assessee is found eligible”. As the object of the assessment is to determine the correct total income of the assessee. 10 ITA No. 3958/Mum/2024 Fancy Corporation Ltd, Mumbai 12 Therefore, keeping in mind the principles of natural justice, the present matter is restored back to the file of AO with a direction to allow the exemption claimed, if otherwise assessee is found eligible. Consequently, this ground raised by the assessee stands allowed. 13. In the result, the appeal filed by the assessee is partly allowed with no orders as to cost. Order pronounced in the open court on 25.02.2025. Sd/- (SANDEEP GOSAIN) JUDICIAL MEMBER Mumbai, Dated 25/02/2025 KRK, PS आदेश की \bितिलिप अ\u000eेिषत/Copy of the Order forwarded to : 1. अपीलाथ\f / The Appellant 2. \r\u000eथ\f / The Respondent. 3. संबंिधत आयकर आयु\u0019 / The CIT(A) 4. आयकर आयु\u0019(अपील) / Concerned CIT 5. िवभागीय \rितिनिध, आयकर अपीलीय अिधकरण, मु\u0003बई / DR, ITAT, Mumbai 6. गाड फाईल / Guard file. 11 ITA No. 3958/Mum/2024 Fancy Corporation Ltd, Mumbai आदेशानुसार/ BY ORDER, स\u000eािपत \rित //True Copy// 1. उप/सहायक पंजीकार ( Asst. Registrar) आयकर अपीलीय अिधकरण, मु\u0003बई मु\u0003बई मु\u0003बई मु\u0003बई / ITAT, Mumbai "