M/S. JAI CORP LIMITED, MUMBAI V. ACIT (CPC, BANGALORE

ITA 1324/MUM/2023

AI Insights

M/s Jai Corp Limited appealed against the orders of the Commissioner of Income Tax (Appeals)-49 Mumbai, which confirmed the adjustments made by the Central Processing Centre (CPC) Bangalore to the returned income for the assessment years 2018-19 and 2019-20. The adjustments included reclassification of dividend income, disallowances under section 43B for payments not added back to the income computation, and disallowances under section 40(a)(ia) for non-deduction of withholding tax. The Tribunal found that the issues for both assessment years were identical and directed the Assessing Officer to re-examine the adjustments in light of the assessee's claims and the relevant provisions of the law.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123487 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: F
• Next Hearing Date: 10-07-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 18-04-2023
• Other Referred Cases: CIT Vs. Pruthvi Brokers & Shareholders [2012] 23 taxmann.com 23 (Bom.), Dhanesh Kumar Jain Vs. ACIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Revised return; TDS
• Section: 43B; 40(a)(ia); 143(1); 246A; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “F” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND MS. KAVITHA RAJAGOPAL (JUDICIAL MEMBER) ITA No. 1324/MUM/2023 Assessment Year: 2018-19 & ITA No. 1325/MUM/2023 Assessment Year: 2019-20 M/s Jai Corp Limited 11 and 12 B Mittal Tower, Free Press Journal Marg, Mumbai- 400021 Vs. Asst. Director of Income Tax (CPC) Bangalore PAN NO. AAACJ2591A Appellant Respondent Assessee by : Shri Rajesh P Shah Revenue by : Shri Sunny Mathews, AR Date of Hearing : 11/07/2023 Date of pronouncement : 17/07/2023 ORDER PER OM PRAKASH KANT, AM These appeals by the assessee are directed against separate orders, both dated 15.03.2013, passed by the Ld. Commissioner of Income Tax (Appeals)-49 Mumbai [in short Ld. CIT(A)] for assessment year 2018-19 and 2019-20 , respectively which are arising from the adjustment to returned income made by the Central Processing Centre (CPC) Bangalore in terms of section 143(1) of the Income-tax Act, 1961(in short ‘the Act’) . Since , the ITA NO. 1324 & 1325/M/2023 M/s Jai Corp Limited 2 grounds raised being identical in both the appeals, same were heard together and disposed off by way of this consolidated order for convenience. 2. Firstly, we take up appeal of the assessee for assessment year 2018-19. The grounds raised by the assessee are reproduced as under:- AY 2018-19 Grounds of appeal 1. On the facts and under the circumstances of the case and in law, the learned CIT(A) erred in confirming the additions/disallowances made by the AO/CPC of Rs. 3,78,96,199/- 2. On the facts and under the circumstances of the case and in law, the learned CIT(A) erred in confirming the additions made by the AO/CPC of Rs 3.68.50,869-merely on account of error in presentation of dividend income in income tax return without appreciating the fact that such income is on account of dividend which is exempt u/s 10(34), thus such addition is bad in law 3. On the facts and under the circumstances of the case and in law, the learned CIT(A) erred in confirming the disallowance made by the AO/CPC of Rs. 9,17,508/ under section 438 merely on account of presentational changes in income tax return and tax audit report without appreciating the fact that such payments were actually made during the year and allowable u/s 438, thus such disallowance is bad in law. 4. On the facts and under the circumstances of the case and in law, the learned CIT(A) erred in confirming the additions made by the AO/CPC of Rs 1,27,822/on account of non deduction of withholding tax u/s 40(a)(ia) merely on account of presentational changes in income tax return and tax audit ITA NO. 1324 & 1325/M/2023 M/s Jai Corp Limited 3 report without appreciating the fact that the same has already been disallowed while filing income tax return and has been already offered to tax by the appellant amounting to double addition and hence bad in law. 5. On the facts and under the circumstances of the case and in law, the learned CIT(A), erred in concluding that the mistakes and errors were made by the appellant while filing its return of income and concluded that appellant has failed on substantiate its stand on trying to file rectification, without appreciating the fact that the appellant was unable to file the rectification against order u/s 143(1) issued by CPC as the case was selected for scrutiny assessment and the rights were transferred to jurisdictional AO. The CIT(A) ought to have followed the principles of natural justice and granted benefit of exempt income as well as effect of 43B and 40(a)(ia) adjustments. 3. Briefly stated facts of the case are that the assessee filed its return of income on 30.09.2018 declaring total income of Rs. 88,11,36,510/- which was proceed u/s 143(1) of the Act on 02.10.2019, wherein adjustments for three amounts were made. The first adjustment of Rs. 3,68,50,869/- is for the reason that dividend income was shown as other income under the profit and loss account, however same was no disclosed under the head ‘Income from other sources’. The second adjustment is of Rs. 9,17,508/- which was shown as liable for disallowance u/s 43B of Act but same was not added back to the computation of income. The third adjustment is for Rs. 1,27,823/- , which was shown as disallowance u/s 40(a)(ia) of the Act , but was not added back while computation of income. ITA NO. 1324 & 1325/M/2023 M/s Jai Corp Limited 4 4. On further appeal, the Ld. CIT(A) held that adjustments were due to certain error or mistake on part of the assessee and not on the part of the Assessing Officer and therefore the assessee should have revised its return of income and in absence of which claim of the assessee cannot be entertained. Before the Ld. CIT(A) , the assessee pleaded for deleting the adjustment for the reasons that firstly, dividend income of Rs. 3,68,50,869/- being in the nature of exempted income, was not taxable and thus correctly reported in the return of income under schedule for exempted income, secondly, the amount of adjustment u/s 43B was already paid before due date of filling of return and thirdly, regarding the disallowance for non deduction of TDS u/s 40(a)(ia) of the Act was already added back by the assessee in computation of income while filing return of income. All this submissions of the assessee have been rejected by the Ld. CIT(A) observing as under:- 4.1 The matter has been duly examined. It is an admitted fact the captioned issues/grounds relating to the provisions of sections 10(34), 438 and 40(a)(a) of the Act have arisen due the errors/mistakes on the part of the appellant and not on the part of the Ld. AO. Thus, the correctness and accuracy of paraphrasing of the respective grounds i.e. Grounds 1 2(a), 2(b), 3(a), 3(b) and 4 suffers to that extent and also such grounds apparently do not get strictly covered within the ambit of provisions of section 246A of the Act, as the appellant is admittedly "Aggrieved" by its own actions. In addition to this, it is evident that such issues/claims were not explicit in the (original) return filed for the year i.e. AY 2018-19 due to the mistakes/errors committed at the time of filing of return and hence, revision/correction thereof has been apparently sought in the first appellate proceedings for the first time. This is clearly forthcoming from the facts that- ITA NO. 1324 & 1325/M/2023 M/s Jai Corp Limited 5  the appellant has not submitted any details of the response it had filed before the ADIT(CPC) in reply to the response sought on the proposed adjustments before making such adjustments in the intimation dated 02.10.2019.  the appellant has also not adduced single evidence to show that such contentions/ requests were raised before the Ld. AO (before the CPC/Jurisdictional AO) In such a scenario and circumstances, as per the ratio laid down in various decisions of Hon'ble Courts including the decision of the jurisdictional Hon'ble Bombay High Court in the case of CIT Vs. Pruthvi Brokers & Shareholders [2012] 23 taxmann.com 23 (Bom.), it was incumbent upon the appellant to conclusively bring out that omission of such claims in the return/before the AO was inadvertent with supporting cogent evidences as the onus in this regard was squarely cast on the appellant. In the present appellate proceedings, as mentioned earlier, the appellant has not given single evidence to show that the issues were taken up before the AO and merely submitted that it had filed rectification couple of times which was either rejected or failed. The copy of screenshot mentioning the transfer of rights to the jurisdictional AO does not substantiate the stand of the appellant that it had applied for rectification (couple of times) and the same was rejected/failed. In addition, the appellant has not disclosed any facts as to the treatment given by it to these issues in the return subsequently filed in response to notice u/s 153C of the Act and the outcome thereof. Further, the appellant has merely stated that the claims/issues have arisen due to the punching/presentation mistakes made by the accountant who was new and not aware of filing of income tax returns, but no evidence, whatsoever, to this effect has been adduced by the appellant to substantiate this submission. Without prejudice to the above, as per the submission of the appellant, if the accountant was new and naïve/not aware of filing of income tax return, then the matter that-some other mistakes have not been committed in the said return ITA NO. 1324 & 1325/M/2023 M/s Jai Corp Limited 6 assumes paramount importance for verification. In addition, when the appellant itself submits that it is mistake apparent from record at the time of filing of return, the appropriate natural course for correcting/revising the same would have been filing of revised return. But the aforesaid submission of the appellant does not contain even a whisper on this aspect of filing of revised return. Last but not the least, as is evident from the above submissions for AY 2018-19 and AY 2019-20, same issues relating to the provisions of section 10(34) and 43B of the Act find place citing identical reasons in AY 2019- 20 also. It is impossible to comprehend that the same errors continued in next year also after a gap of almost one year with the same accountant who continued to remain new and inexperienced even after a year. It is a fact on record that each of such return has been verified by Shri Gaurav Jain, who as per the available records is the Managing Director. Hence, the conjoint examination of the details available on record does not bring out that the appellant is successful in establishing that such omissions were inadvertent. In view of such failure on the part of the appellant and considering the totality of facts and circumstances of the matter as per the above discussion, there is no jurisdiction for considering such claims made for the first time in these first appellate proceedings, hence, the same cannot be assumed. Accordingly, the corresponding claims and grounds viz., grounds 1, 2(a), 2(b), 3(a), 3(b) and 4(a) of AY 2018-19 lack merit for consideration and are thus, DISMISSED in view of the above detailed discussion without going into merits or any other aspects. The decision of the Hon'ble ITAT, Delhi relied upon by the appellant in the case of Dhanesh Kumar Jain Vs. ACIT (supra) relates to the powers of the AO and not to the powers of appellate authorities, hence, the same is not applicable in the facts of the matter under consideration and also appreciating that the assessee is not left with no remedy, as there are specific provisions under the section 119(2) of the Act for addressing such issues in the statute. ITA NO. 1324 & 1325/M/2023 M/s Jai Corp Limited 7 5. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record including paper book filed by the assessee containing pages 1 to 175 (in two volumes). Regarding the issue of adjustment of dividend income of Rs. 3,68,50,869/-, the Ld. Counsel of the assessee referred to page 26 of the return of income filed wherein dividend income of Rs. 3,68,50,869/- was shown as other income as part of the profit and loss account. While the computing the head wise income the assessee carried the dividend income to schedule EI (Exempted income) on page 78 of the return of income and shown amount of dividend income under the head income from other sources as Nil. He submitted that the dividend income which was reflected under the profit and loss account as other income being in the nature of exempted income and it is not liable to tax and therefore the assessee has not taken under the head income from other sources. Thus the adjustment made by the Ld. CPC need to be deleted. Regarding the adjustment of Rs. 9,17,508/-, the Ld. Counsel of the assessee referred to page 34 of the Paper book and indicated the row relevant to the amount debited to profit and loss account as disallowance u/s 43B of the Act , which mention amount of Rs. 12,43,686/-. The Ld. Counsel submitted that out of which amount of Rs. 9,17,508/- was already paid before filling return of income but accountant of the assessee, while punching the return of income omitted to claim the same. Similarly, regarding adjustment of Rs. 1,27,822/-, the Ld. Counsel of the assessee submitted that said amount was already offered by the assessee in computation of ITA NO. 1324 & 1325/M/2023 M/s Jai Corp Limited 8 the income and therefore this amount need to be deleted as adjustment. 6. Before us the Ld. Counsel of the assessee submitted that the assessee filed rectification application before the Assessing Officer for relief from the adjustments and also pleaded before the AO for deleting those adjustments during the course of scrutiny proceeding u/s 153C of the Act, but the Assessing Officer did not consider request of the assessee and computed total income u/s 153C of the Act on and above the income assessed u/s 143(1) of the Act. In view of the above facts and circumstances, the Ld. Counsel of assessee before us submitted that issue might be restored back to the file of the Ld. Assessing Office for verification of the facts and thereafter deciding the adjustment under provisions of law. 6.1 In view of the facts and circumstance of the case discussed above, we find that the adjustments made are not in the nature in the income which are liable for tax in the hand in the assessee. The assessee cannot be penalized for some bonafide error while filling return of income. It is imperative on part of the assessing officer to examine and verify that no addition or adjustment of income is made or computed which is not liable to tax under provisions of the Act. In the case of the assessee clearly the dividend income of Rs. 3,68,50,869/- was in the nature of the exempted income and therefore it was no liable to be taxed as income under the head ‘income from other sources’. Similarly, regarding the addition of Rs. 9,17,508/- under the provision of section 43B of the Act, the ITA NO. 1324 & 1325/M/2023 M/s Jai Corp Limited 9 assessee has claimed to be have already paid the said amount of bonus or commission to the employee before the due date of filling return of income and therefore assessee is eligible for deduction of the same. Regarding the addition of Rs. 1,27,822/- u/s 40(a)(ia) of the Act for non deduction of tax, the assessee has submitted that said amount has already been included in the computation of the income and therefore it is double addition. Considering the above facts and circumstances, we restore the matter to the file of the Ld. Assessing Officer with the direction to examine /verify the claim of the assessee and decide the issue of adjustments in accordance with law. 7. In the result, all the grounds of appeal of the assessee are allowed for statistical purpose. 8. Now, we take up the appeal of the assessee for AY 2019-20. The grounds raised are reproduced as under: Assessment year 2019-20 Grounds of appeal 1. On the facts and under the circumstances of the case and in law, the learned CIT(A) erred in confirming the additions/disallowances made by the AO/CPC of Rs. 4,62,45,223/- 2. On the facts and under the circumstances of the case and in law, the learned CIT(A), erred in confirming the additions made by the AO/CPC of Rs. 30,61,068 merely on account of error in presentation of dividend income in income tax return without appreciating the fact that such income is on account of dividend which is exempt u/s 10(34), thus such addition is bad in law, ITA NO. 1324 & 1325/M/2023 M/s Jai Corp Limited 10 3. On the facts and under the circumstances of the case and in law, the learned CIT(A), erred in confirming the disallowance made by the AO/CPC of Rs. 4,31,84,155 under section 43B merely on account of presentational changes in income tax return and tax audit report without verifying the actual details of all the allowances and disallowances submitted during the appellate proceedings, thus such an addition is bad in law, 4. On the facts and under the circumstances of the case and in law, the learned CIT(A), erred in concluding that the mistakes and errors were made by the appellant while filing its return of income and concluded that appellant has failed on substantiate its stand on trying to file rectification, without appreciating the fact that the appellant was unable to file the rectification against order u/s 143(1) issued by CPC as the case was selected for scrutiny assessment and the rights were transferred to jurisdictional AO. The CIT(A) ought to have followed the principles of natural justice and granted benefit of exempt income as well as effect of 43B adjustments. 8. Regarding the appeal for 2019-20. the Ld. CIT(A) in para 4.2 of the impugned order has mentioned that the facts and assessment year 2019-20 are identical to facts and ground raised in 2018-19. The relevant finding of the Ld. CIT(A) is reproduces as under:- 4.2 Applicability of above decision of AY 2018-19 for AY 2019- 20-The issues, facts and circumstances of AY 2019-20 covered by the grounds 1, 2(a), 2(b), 3(a) and 3(b) in that year are identical to those of AY 2018-19 which have been discussed at length in earlier paragraphs. Hence, the afore-mentioned discussion and decision thereon holds good and is squarely applicable mutatis mutandis in AY 2019-20 also. Hence, for the identical reasons, the corresponding claims and grounds viz., grounds 1, 2(a), 2(b), 3(a) and 3(b) of AY 2019- 20 lack ITA NO. 1324 & 1325/M/2023 M/s Jai Corp Limited 11 merit for consideration and are thus, DISMISSED without going into merits or any other aspects. 9. In view of the facts and circumstances, for assessment year 2019-20 being identical to grounds raised and facts and circumstances for assessment year 2018-19, following our finding in assessment year 2018-19, grounds raised by the assessee in appeal for assessment year 2019-20 are accordingly decided “mutatis mutandis”. 10. In the result, both the appeals of the assessee are allowed for statistical purpose. Order pronounced in the open Court on 17/07/2023. Sd/- Sd/-/- (KAVITHA RAJAGOPAL) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 17/07/2023 Shubham P. Lohar Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai