Rajalben Hirenbhai Patel, Ahmedabad V. The Dy.CIT, Circle-2(1)(1), Ahmedabad

ITA 669/AHD/2023

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 4790 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 03-12-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 31-08-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rectification of order; Set aside
• Section: 10; 154; 12A; 143(1)

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘SMC’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD ] ] BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA No.669/Ahd/2023 Asstt.Year : 2018-19 Rajalben Hirenbhai Patel Nirma House Nr. Income Tax Circle Ashram Road Ahmedabad. PAN : AFIPP 0507 N Vs DCIT, Circle-2(1)(1) Vejalpur Ahmedabad. (Applicant) (Responent) Assessee by : Shri Hemanshu Shah, AR Revenue by : Shri V.K. Mangla, Sr.DR स ु नवाई क तार ख/D a t e o f H e a r i n g : 0 4 / 1 2 / 2 0 2 2 घोषणा क तार ख /D a t e o f P r o n o u n c e m e n t : 0 6 / 1 2 / 2 0 2 3 आदेश/O R D E R The present appeal has been filed by the assesseeagainst order passed by the Commissioner of Income Tax(Appeals), National Faceless Appeal Centre, Delhi [in short referred to as ld.CIT(A)] under section 250(6) , dated 27/07/2023,upholding the rejection by the Centralized Processing Centre (CPC), dated 26/07/2019 ,of the rectification application of the assessee made u/s 154 of the Act pertaining to Asst.Year2018-19. 2. The grounds raised by the assessee are as under: 1. In law and in facts and circumstances of the Appellant case, the learned Commissioner of Income-tax (Appeals) has grossly erred in points of law and facts. 2. In law and in the facts and circumstances of the Appellant case, the learned Commissioner of Income-tax (Appeals) has grossly erred in ITA No.669/Ahd/2023 2 confirming the addition of Rs.50,65,550 made by Ld. AO treating as dividend u/s. 10 (34) of IT Act. However appellant earned income from mutual fund which is exempt u/s. 10(35) of I T Act. 3. In law and in the facts and circumstances of the Appellant case, the learned Commissioner of Income-tax (Appeals) has grossly erred in confirming the addition of Rs 50,65,550, though in the intimation u/s. 143(1) dt 23rd January 2019 this income was considered as exempt and income was assessed for Rs Nil which was returned income. 4. In law and in the facts and circumstances of the Appellant case, the learned Commissioner of Income-tax (Appeals) has grossly erred in confirming the addition of Rs 50,65,550 though original intimation u/s 143(1) was passed on 23rd January 2019 accepting returned income of Rs Nil. Later on, rectification order was passed u/s 154 of I T Act on 27th June 2019 though notice u/s 154 was not issued to appellant. The order passed on 27th June 2019 is, therefore, is null and void having no legal effect. 5. In law and in the facts and circumstances of the Appellant case, interest u/s.234C was charged for Rs 21,013. Appellant considered this income as exempt u/s. 10(35) of I T Act and hence not liable to pay interest u/s. 234C of I T Act. Interest u/s. 234C is chargeable on returned income of Rs Nil and not on assessed income.” 3. Brief facts of the case are that the assessee had filed return of income determining NILincome . The return was processed under section 143(1) of the Act acceptingthe returned income. Later on Central Processing Centre (CPC) enhanced the assessee’s income to Rs.40,65,550/-in a rectification order passed under section 154 of the Act. The assessee in turn filed a rectification application u/s 154 of the Act against this order of the CPC, which was rejected by the CPC vide order dated 26/-7/2019.Aggrieved by the dismissal of its rectification application, the assessee went in appeal to the ld.CIT(A) who confirmed the dismissal order of the CPC. The assessee has now come before the Tribunalin this back-ground. 4. I have heard both the parties. I have also gone through all the documents which were placed before me, and after going through of the same, I hold that the assessee’s application for rectification of the CPC’s order needs to be allowed; I find that there was a clear ITA No.669/Ahd/2023 3 mistake in the CPC’s order of which the assessee had sought rectification. My reasons for holding so follow. But before proceeding with the reasons, I shall first bring out necessary facts relating to the issue. 5. The order of the CPC u/s 154 of the Act against which the assessee had moved the rectification application first needs to be considered so as to understand the rectification sought by the assessee which was denied . The same was placed before me at PB Page No.7 to 10, but for the purpose of adjudication of issue before me, the computation of income in the rectification order of the CPC is only relevant, which is placed at PB Page No.7 & 8 before us and is reproduced hereunder: ITA No.669/Ahd/2023 4 ITA No.669/Ahd/2023 5 6. As is clear from the above, the assessee had filed return declaring income of Rs.37,796/- and claimed the same as deduction under Chapter VIA, thus returning NIL income for taxation. The same is revealed in first column of the tax computation made by the CPC under section 154 of the Act reproduced above. The second column of the said computation brings out rectification made by the CPC. A bare perusal of the second column reveals that under the different heads of Income no rectification was made. The income returned by the assessee of Rs.37,796/- as income from other sources was the same income computed under section 154 of the Act also. It is only in the gross total income that the income has been computed at Rs.41,03,348/- as against Rs.37,796/- returned by the assessee. Clearly the returned income has been accepted as such in the income computed under section 154 of the Act by the CPC. There is no correction of any mistake vis-à-vis income returned by the assessee. 7. With no rectification of income returned by the assessee under different heads, how the gross total income has been shown of Rs.41,03,348/-is not coming out from the rectification order. Even as per the formula applied in the order of calculating the gross total income i.e. 9=6-(7+8),the income does not come to Rs.41,03,348/-, since income in column-6 in the income computed under section 154 is Rs.37,796/- and there is “0” figure mentioned against column no.7 & 8. Therefore, even as per the formula applied for calculating the gross total income under section 154 of the Act, the income ought to have been Rs.37,796/- only. 8. The computation of income under section 154 of the Act by the CPC at Rs.41,03,348/- is clearly a patent mistake and the assessee’s rectification application therefore against this order u/s 154 of the ITA No.669/Ahd/2023 6 Act passed by the CPC, I hold, ought to have been entertained and allowed. 9. Be that so, the ld.counsel for the assessee has pointed out that this intimation under section 154 of the Act was made by the AO computing the assessee’s income (though incorrectly) at Rs.40,65,552/-, without even giving opportunity of hearing to the assessee; that no notice was given to the assessee prior to the passing of this order computing the assessee’s income under section 154 of the Act. The ld.DR was unable to controvert the same. In view of the impugned order passed by the CPC being in gross violation of the principles of natural it is not sustainable in law, I hold. 10. Without prejudice to what has been stated above, on receipt of this computation of income by the CPC under section 154 of the Act, computing the income of assessee at Rs.40,65,552/- chargeable to tax at special rate, the assessee had moved an application seeking rectification in the said order pointing out that she had earned dividend income from mutual funds during the year, which were exempt from taxation under section 10(35) of the Act. 11. The relevant application filed by the assessee is produced before me at page no.12 as under: Rectification Details: Rectification Request Type : Return data correction (XML) Reason selected : Others Other Reason : Mutual Fund Dividend Rs.50,65,552 is exempt income us.10(35) of the IT Act. Hence this income should not be added in total income. ITA No.669/Ahd/2023 7 12. To the Ld.CIT(A) the assessee had pointed out thatincome from dividend earned from the domestic companies , which was otherwise exempt from tax under section 10(34) of the Act, if exceededRs 10lacs, it was chargeable to tax at a special rate under section 115BBDA at the rate of 10%. That the assessee having not earned dividend exempt u/s 10(34) of the Act, therefore the invocation of section 115BBDA of the Act to the dividend income earned by the assessee was a mistake needing rectification. 13. The ld.CIT(A) however, without dealing with the contention of the assessee upheld the rejectionof the rectification application of the assessee by the CPC, thus confirming the addition made by the AO. 14. I have gone through the relevant provisions of law and I find merit in the contention of the assessee. For clarity the provisions of section 115BBDA, 10(34) and 10(35) of the Act are reproduced hereunder: “115BBDA. (1) Notwithstanding anything contained in this Act, where the total income of a specified assessee, resident in India, includes any income in aggregate exceeding ten lakh rupees, by way of dividends declared, distributed or paid by a domestic company or companies on or before the 31st day of March, 2020, the income-tax payable shall be the aggregate of— (a) the amount of income-tax calculated on the income by way of such dividends in aggregate exceeding ten lakh rupees, at the rate of ten per cent; and (b) the amount of income-tax with which the assessee would have been chargeable had the total income of the assessee been reduced by the amount of income by way of dividends. (2) No deduction in respect of any expenditure or allowance or set off of loss shall be allowed to the assessee under any provision of this Act in computing the income by way of dividends referred to in clause (a) of sub- section (1). Explanation.—For the purposes of this section,— ITA No.669/Ahd/2023 8 (a) "dividend" shall have the meaning assigned to it in clause (22) of section 2 but shall not include sub-clause (e) thereof; (b) "specified assessee" means a person other than,— (i) a domestic company; or (ii) a fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub- clause (vi) or sub-clause (via) of clause (23C) of section 10; or (iii) a trust or institution registered under section 12A or section 12AA or section 12AB. (35) any income by way of,— (a) income received in respect of the units of a Mutual Fund specified under clause (23D); or (b) income received in respect of units from the Administrator of the specified undertaking; or (c) income received in respect of units from the specified company: Provided that this clause shall not apply to any income arising from transfer of units of the Administrator of the specified undertaking or of the specified company or of a mutual fund, as the case may be: 15. It is clear from a bare reading of the above provisions that section 115BBDA of the Act levies special rate of tax only on dividend income earned from domestic companies if exceeding Rs.10 lakhs. This dividend income is exempt upto Rs.10 lakhs under section 10(34) of the Act. The assessee has claimed to have ITA No.669/Ahd/2023 9 earned dividend income from mutual fund which are exempt under section 10(35) of the Act. Evidence to this effect was also filed by way of statement of Mutual Fund. The assessee Ifind had clearly demonstrated the inapplicability of section 115BBDA of the Act to the facts of her case. 16. In the light of the same theLd.CIT(A)’s order upholding the rejection of her application seeking rectification to this effect is clearly untenable more particularly since I find that the Ld.CIT(A) has not even cared to deal with the contention of the assessee before upholding the order of CPC . 17. For the aforesaid reasons therefore, we hold, the rectification application filedby the assessee needs to be allowed. In view of the above the order of the CPC/AO, rejecting the assessee’s rectification application seeking deletion of addition made to her income of dividend income earned from mutual fund and subjected to tax at 10%, is set aside.The CPC/ AO is directed to allow the rectification application of the assessee and delete the adjustment made to her income to the tune of Rs.40,65,550/-, taxed at the rate of 10%. The grounds of appeal of the assessee are allowed. 18. In the result, the appeal of the assessee is allowed. Order pronounced in the Court on 6 th December, 2023 at Ahmedabad. Sd/- (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad, dated 06/12/2023 vk*