Sagar Dineshbhai Patel, Valsad V. Income Tax Officer, Ward - 4, Valsad

ITA 442/SRT/2022

AI Insights

The case involves Sagar Dineshbhai Patel, a medical professional, who appealed against the order of the National Faceless Appeal Centre/Commissioner of Income Tax (Appeals) for the Assessment Year 2017-18. The primary contention was the incorrect dual taxation of income under 'salary' and 'business/profession' heads. The assessee argued that income assessed under 'business income' was actually salary, mistakenly reported under the wrong head, and claimed deductions under Chapter VI-A which were not initially allowed. The Tribunal admitted the revised computation and directed the Assessing Officer to reassess the case, allowing only the deductions that are legally permissible for salaried individuals.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 301599 (ITAT-SURAT)
• Duration Of Justice: 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 27-03-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 27-12-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Salary income; Principle of natural justice; Wrong claim; Revised return; Bonafide mistake; TDS
• Section: 10; 143(3); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH (SMC), SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No. 442/Srt/2022 (Assessment Year 2017-18) (Virtual hearing) Sagar Dineshbhai Patel, Gita NIvas, Opp. Custom Office, Halar Cross Road, District Valsad-396001. PAN No. AVNPP 2667 A Vs. I.T.O., Ward-4, Valsad. Appellant/ assessee Respondent/ revenue Assessee represented by Shri Sujesh C Suratwala, CA Department represented by Shri Vinod Kumar, Sr. DR Date of hearing 28/03/2023 Date of pronouncement 01/06/2023 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of learned National Faceless Appeal Centre, Delhi (NFAC)/Commissioner of Income Tax (Appeals) (in short, the ld. CIT(A)) dated 31/01/2022 for the Assessment Year (AY) 2017-18. The assessee has raised following grounds of appeal: “1. The ld. AO as well as CIT(A)/NFAC has erred in levying tax twice on income shown under the head “income from business/Profession” and also originally shown in Form NO. 26AS under the head “Income from Salary” which is against the settled law, illegal hence addition made under one of the head is required to be deleted. 2. It is the law of land that income should be taxed once but ld. AO and CIT(A)/NFAC has levied twice on same income which is against the principles of natural justice and required to be deleted. 3. Tax should be levy on “Real” income whereas ld. AO as well as CIT(A)/NFAC has levy tax on “Artificial” income which is wrong, invalid to the assessee and required to be deleted. ITA No. 442/Srt/2022 Sagar Dineshbhai Patel Vs ITO 2 4. The ld. AO as well as CIT(A)/NFAC has not allowed the statutory deduction allowed like eligible under chapter VI-A which is unjustice to the assessee, against the principle of natural justice and required to be deleted. 5. The Appellant crave leave to add, alter, delete, amend or rescind any of the above grounds of appeal as and when necessary with the permission of ITAT.” 2. Brief facts of the case are that the assessee is a Medical professional, filed his return of income for A.Y. 2017-18 on 05/08/2017 under Section 139(1) of the Income Tax Act, 1961 (in short, the Act) showing income of Rs. 7,12,710/-. The assessee offered income from ‘business and profession’ and ‘other sources’ The return was processed by Central Processing Centre (CPC) Bangalore made addition of Rs. 12,22,793/- under the head income from salary and Rs. 6,90,390/- of net business income. CPC assessed income from salary on the basis of details in Form- 26AS in its system showing the details of salary earned by the assessee. 3. Aggrieved by the additions in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee filed his written submission on 16/09/2022. In the submission, the assessee stated that he is engaged in providing medical services to a company (Huber Group India Pvt. Ltd.) and received salary of Rs. 12,22,793/-. The assessee furnished Form AS-26 wherein reflecting TDS, deducted on salary. The assessee further submitted that while filing return of income, he has shown salary income of Rs. 12,22,793/- under the head business income by mistake after claiming expenses of Rs. 5,32,403/- and shown net business income of Rs. 6,90,390/-. The return was processed under Section 143(3) assessing total income of Rs. 19,35,503/- which ITA No. 442/Srt/2022 Sagar Dineshbhai Patel Vs ITO 3 represents salary income of Rs. 12,22,793/- and Rs. 6,90,390/- of net business income which was shown by assessee by mistake, thus the income assessed to the extent of Rs. 6,90,390/- is wrong and invalid which is assessed twice. The assessee prayed for allowing deduction as per Form No. 16 of Rs. 2,17,503/- and taxed on employment of Rs. 2,400/- and deduction of Rs. 1,46,074/- under Chapter VI-A and prayed for assessing total income at Rs. 8,79,136/-. 4. The ld. CIT(A) after considering the assessment order and submission of assessee, held that the assessee is individual, filed his return of income under ITR-3 on 25/06/2018 showing income from business and profession at Rs. 6,90,390/- and income from other sources of Rs. 22,320/-. The return was processed and intimation under Section 143(1) was issued to the assessee assessing income from salary of Rs. 12,22,793/- ad income from business and profession at Rs. 6,90,390/- and income from other sources of Rs. 22,320/-, thus the total income offered by assessee at Rs. 7,12,710/-, the Assessing Officer/CPC assessed total income at Rs. 19,35,503/-. During the appellate proceedings, the assessee submitted that he actually received salary of Rs. 12,22,793/- and furnished Form No. AS-26 wherein salary is reflected and TDS has been deducted. The assessee claimed that while filing return for this assessment year, income of Rs. 12,22,793/- was shown as ‘business income’ by mistake after claiming expenses at Rs. 5,32,403/- and shown net business income of Rs. 6,90,390/-. On the basis of such fact, the ITA No. 442/Srt/2022 Sagar Dineshbhai Patel Vs ITO 4 assessee claimed that income of Rs. 6,90,390/- is assessed twice and prayed for deleting the addition of Rs. 6,90,390/- from total income of Rs. 19,35,503/-. The assessee also prayed for claiming deduction, which is available to the salaried person and for assessing total income at Rs. 8,79,136/-. 5. The ld. CIT(A) further held that the assessee was very much aware about the fact that he is a salaried person, he has shown his salary income as ‘business income’ and wrongly claimed expenses of Rs. 5,32,403/- against ‘salary income’. The ld. CIT(A) noted that, if it was a genuine mistake, the assessee should have filed a revised return himself but assessee failed to do so. The assessee disclosed such facts only after intimation under Section 143(1) and that Assessing Officer has rightly computed the salary income at Rs. 12,22,793/- as per Form AS-26. The ld. CIT(A) specifically noted that the assessee is now acting smartly and now claiming deduction under Chapter VI-A, and praying that income may be assessed at Rs. 8,79,136/-. The ld. CIT(A) held that if the mistake would not have come to the notice of Assessing Officer, the assesse would have evaded the tax and succeeded in claiming bogus expenses of Rs. 5,32,403/-. Thus, the plea of assessee is unacceptable and the same is not covered under the prima facie adjustment under Section 143(1)(a) of the Act, as it is clear that in order to evade the tax, the assessee deliberately shown his income under wrong head and claimed bogus ITA No. 442/Srt/2022 Sagar Dineshbhai Patel Vs ITO 5 expenses and dismissed the appeal of assessee. Further aggrieved, the assessee has filed present appeal before this Tribunal. 6. I have heard the submissions of learned Authorised Representative (ld. AR) of the assessee and the learned Senior Departmental Representative (ld. Sr. DR) for the revenue and have perused the orders of lower authorities carefully. The ld. AR of the assessee submits that due to mistake, the assessee claimed expenses against the salary income which was not at all admissible. The assessee in a revised return of income has shown ‘salary income’ as well as income from ‘business and professional’ receipt separately. The assessee has limited prayer to allow admissible deduction under the head income from ‘salary’ as well as deduction of Chapter VI-A. The ld. AR of the assessee furnished following bifurcation of income from salary, other sources, admissible deduction against salary income and deduction of Chapter VI-A: ITA No. 442/Srt/2022 Sagar Dineshbhai Patel Vs ITO 6 7. The ld. AR of the assessee further submits that he accepts mistake committed by assessee and undertake to be more vigilant in future and not to repeat such mistake. The ld. AR of the assessee prayed that the Bench may consider his revised computation as fresh claim and admit for adjudication by invoking its inherent power of appellate authority. 8. On the other hand, the ld. Sr. DR for the revenue supported the orders of lower authorities. The ld. Sr. DR for the revenue submits that the assessee being a Doctor was very well aware that he is earning salary income and not eligible for claiming expenses other than the eligible deduction under Section 10 or deduction of Chapter VIA only. The ld. CIT(A) after considering the submission of assessee rejected the claim of assessee in a reasoned order. The assessee is not eligible for any leniency or relief. 9. I have considered the submissions of both the parties and find that the assessee has made wrong claim whether knowingly or unknowingly or under bonafide mistake, however, the fact remained the same the same that against the salaried receipt, the assessee was not eligible to claim expenses of Rs. 5,32,403/- as claimed by him. The assessee is only eligible for deduction of House Rent Allowance (HRA) (as per formula), Leave Travel Allowance (LTA) or other admissible allowances, if it was really paid. Considering the fact that the assessee has filed revised computation, therefore, by invoking inherent jurisdiction of appellate authority, the claim of assessee is admitted, however, the issue is ITA No. 442/Srt/2022 Sagar Dineshbhai Patel Vs ITO 7 restored back to the file of jurisdictional Assessing Officer to consider it afresh and allow admissible exemption/deduction as per law. The assessee is also directed to provide complete details including salary slip if any, appointment letter if any or other service contract whatever is available with the assessee for claiming various deduction/exemption including of HRA, LTA or Uniform allowance. The assessee is also directed to provide the details and evidences of deduction claimed under Chapter VI-A. With this direction, the grounds of appeal raised by assessee are allowed for statistical purposes. 10. In the result, this appeal of assessee is allowed for statistical purposes only. Order announced in open court on 01 st June, 2023. Sd/- (PAWAN SINGH) JUDICIAL MEMBER Surat, Dated: 01/06/2023 *Ranjan Copy to: 1. Assessee – 2. Revenue – 3. CIT 4. DR By order 5. Guard File Sr. Private Secretary, ITAT, Surat