Dr. Ramesh K. Sonawane, Pune V. Assessing Officer, Ward 9.3, Pune

ITA 929/PUN/2022

AI Insights

Dr. Ramesh Kisanrao Sonawane, a doctor by profession, filed his income tax return for the assessment year 2015-16, declaring an income of Rs. 25,09,290. The Central Processing Centre (CPC) adjusted this income to Rs. 37,83,040 under section 143(1) of the Income Tax Act, adding Rs. 12,73,746 as 'other expenses' without providing any reasons or opportunity for the assessee to contest this addition. The assessee's appeal to the Commissioner of Income Tax (Appeals) was dismissed due to a delay of three years, which the assessee attributed to procedural confusions directed by the CIT(A) himself. The Tribunal found that the CPC's adjustment was made without proper legal basis or adherence to procedural fairness, leading to the decision to allow the assessee's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135799 (ITAT-PUNE)
• Duration Of Justice: 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-02-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 20-12-2022
• Other Referred Cases: Khatau Junkar Ltd. 196 ITR 55 (Bom)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice
• Section: 154; 143(3); 143(1); 143(2)

Judgement Text

आयकरअपीलीय अिधकरण “बी” Ɋायपीठ पुणेमŐ। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “B” :: PUNE BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.929/PUN/2022 िनधाᭅरण वषᭅ / Assessment Year : 2015-16 Dr.Ramesh Kisanrao Sonawane, S.No.71, Kirti Nagar, Opp.Dharamveer Sambhaji Park, Aundh, New Sanghvi, Pune – 411027. PAN: AEGPS 3167 N V s The Assessing Officer, Ward-9.3, Pune. Appellant/ Assessee Respondent /Revenue Assessee by Shri Prasanna Joshi – AR Revenue by Shri M.G.Jasnani – DR Date of hearing 10/02/2023 Date of pronouncement 01/03/2023 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This appeal filed by the Assessee is directed against the order of ld.Commissioner of Income Tax(Appeal)[NFAC], Delhi dated 02.11.2022 for A.Y.2015-16 emanating from the order under section 143(1) dated 02/06/2016. The Assessee has raised the following grounds of appeal: “1. On the facts and in the circumstances of the case, it may be held that the appellant has been denied natural justice by the Revenue Authorities in respect of Intimation passed u/s 143(1) on 2-06-2016, in as much as: ITA No.929/PUN/2022 Dr. Ramesh K. Sonawane [A] 2 a) No reason is given for variation in Returned Total Income of Rs25,09,290 and Income Computed u/s 143(1) of Rs 37,83,040. b) No opportunity was given to the appellant to show that the above variation made by the Central Processing Centre was wrong. 2. On the facts and in the circumstances of the case, appellant prays that its Total Income as returned be accepted as its Total Income as Computed u/s 143(1) as well as Assessed u/s 143(3).” 2. Brief Facts of the Case : The assessee is a doctor. He filed return of Income on 30/9/2015 declaring total income at Rs.25,09,290/-. The Asst.Director of Income Tax (CPC) processed the return u/s143(1) of the Act on 02/06/2016. The Assistant Director Income Tax(CPC) vide order u/s 143(1) made an addition of Rs. 12,73,746/- to the total income and computed gross total income at Rs.37,83,040/-. Aggrieved, by the impugned order u/s 143(1) the assessee filed appeal before the Commissioner of Income Tax (Appeal) with a delay of 3 years. The assessee filed condonation petition. The Ld.CIT(A) dismissed the appeal of the assessee on the ground of delay. Aggrieved by the order of the Commissioner of Income Tax(A) the assessee filed appeal before this tribunal. The ld.Authorised Representative Submission : 3. The ld.AR submitted a paper book. The ld.AR vehemently submitted that ld.CIT(A) has dismissed the appeal of the assessee ITA No.929/PUN/2022 Dr. Ramesh K. Sonawane [A] 3 only on the ground of delay without appreciating fact that assessee initially had filed an appeal against the order under section 143(3) in time before the ld.CIT(A). At that time, the assessee was directed to withdraw the appeal and filed the appeal again before the ld.CIT(A) against the order under section 154 or 143(1), therefore, as per the directions of the ld.CIT(A), assessee withdrew the appeal and then filed appeal before the ld.CIT(A) against the order under section 143(1) passed by the CPC. Therefore, there is a valid reason for delay and delay is only on account of the Department’sinsensitivity towards the assessee. The ld.AR vehemently submitted that even during the proceedings under section 143(1) no opportunity has been given to the assessee. There is no application of mind. The order under section 143(1) has been passed without giving any reasons. Therefore, it is void-ab-initio. The ld.AR submitted that the Department has not even considered the rectification application filed by the assessee. The ld.AR filed copies of order under section 143(1) and other documents. The AR demonstrated that no opportunity was provided by the CPC before making the adjustment. The Ld.AR also submitted that the adjustment made by the CPC is outside the purview of section 143(1) of the Act. Hence the order is void ab intio. ITA No.929/PUN/2022 Dr. Ramesh K. Sonawane [A] 4 The ld.Departmental Representative’s submission : 4. The ld.DR relied on the order of the Assessing Officer(AO). However, on a specific query by us to explain the reason for adjustments, the ld.DR could not explain anything. Findings and Discussion : 5. We have heard both the parties and perused the records. The assessee is a Doctor filed his Return of Income for A.Y. 2015-16 electronically declaring the total income of Rs.25,09,290/-. There has been adjustment under section 143(1) computing the total income at Rs.37,83,040/-. We have gone through the order under section 143(1) which is part of paper book, however, we could not understand the reason for such adjustment. We have already mentioned that ld.DR also could not explain us the reason for such adjustment. It is observed that the ADIT(CPC) has disallowed the assessee’s claim of “other expenses” of Rs.12,73,746/- . The relevant part of the order u/s 143(1) is reproduced here as under : 5.1 In the reason mentioned in the order u/s 143(1) for the disallowance is as under : ITA No.929/PUN/2022 Dr. Ramesh K. Sonawane [A] 5 6. We have perused the entire order u/s 143(1) but could not find any evidence of an opportunity of hearing being provided to the assessee before making the adjustment. The Ld.DR could not demonstrate that opportunity of hearing was provided to the assessee before making the adjustment. 6.1 The relevant section 143 applicable for AY 2015-16 is reproduced here as under : 143. (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:— (a) the total income or loss shall be computed after making the following adjustments, namely:— (i) any arithmetical error in the return; or (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; (b) the tax and interest, if any, shall be computed on the basis of the total income computed under clause (a); (c) the sum payable by, or the amount of refund due to, the assessee shall be determined after adjustment of the tax and interest, if any, computed under clause (b) by any tax deducted at source, any tax collected at source, any advance tax paid, any relief allowable under an agreement under section 90 or section 90A, or any relief allowable under section 91, any rebate allowable under Part A of Chapter VIII, any tax paid on self-assessment and any amount paid otherwise by way of tax or interest; (d) an intimation shall be prepared or generated and sent to the assessee specifying the sum determined to be payable by, or the amount of refund due to, the assessee under clause (c); and (e) the amount of refund due to the assessee in pursuance of the determination under clause (c) shall be granted to the assessee: Provided that an intimation shall also be sent to the assessee in a case where the loss declared in the return by the assessee is adjusted but no tax or interest is payable by, or no refund is due to, him: Provided further that no intimation under this sub-section shall be sent after the expiry of one year from the end of the financial year in which the return is made. ITA No.929/PUN/2022 Dr. Ramesh K. Sonawane [A] 6 Explanation.—For the purposes of this sub-section,— (a) "an incorrect claim apparent from any information in the return" shall mean a claim, on the basis of an entry, in the return,— (i) of an item, which is inconsistent with another entry of the same or some other item in such return; (ii) in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished; or (iii) in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction; (b) the acknowledgement of the return shall be deemed to be the intimation in a case where no sum is payable by, or refundable to, the assessee under clause (c), and where no adjustment has been made under clause (a). (1A) For the purposes of processing of returns under sub-section (1), the Board may make a scheme for centralised processing of returns with a view to expeditiously determining the tax payable by, or the refund due to, the assessee as required under the said sub-section. (1B) Save as otherwise expressly provided, for the purpose of giving effect to the scheme made under sub-section (1A), the Central Government may, by notification in the Official Gazette, direct that any of the provisions of this Act relating to processing of returns shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in that notification; so, however, that no direction shall be issued after the 31st day of March, 2012. (1C) Every notification issued under sub-section (1B), along with the scheme made under sub-section (1A), shall, as soon as may be after the notification is issued, be laid before each House of Parliament. 7. The ADIT(CPC) has disallowed the amount of Rs.12,73,746/- claimed by the assessee under the head other expenses. The ADIT(CPC) has not given any reason for making such disallowance. The Ld.DR also could not explain us the reason for the impugned disallowance. 7.1 The Hon’ble Bombay High Court has held in the case of Khatau Junkar Ltd. 196 ITR 55 (Bom) as under ITA No.929/PUN/2022 Dr. Ramesh K. Sonawane [A] 7 Quote “What the ITO has done is to reject the basis on which the company has filed its accounts and calculated its book profits for the relevant accounting year. The ITO has not accepted the transfer of the above amount to the share revaluation reserve account, although, according to the petitioners, it is permissible as per accounting practice and should not be considered as a part of the book profits of the company. This is not the kind of adjustment which is contemplated under section 143(1)(a). In the guise of adjustment, the ITO cannot reject the profit and loss account filed by the company nor can he change the basis of allocation of various amounts made by the company in its various accounts. For this purpose it is necessary that the ITO should issue a notice to the assessee under section 143(2) and, after hearing the submissions of the assessee, decide the question in accordance with law. He cannot, unilaterally and without any reference to the assessee, send an intimation rejecting the entire profit and loss account of the assessee-company and substituting for it his own calculations. This is neither the correction of a clerical error nor is it the correction of an arithmetical error, as is submitted in the alternative by Dr. Balsubramaniyam. For the reasons which we have set out earlier, the ITO has, therefore, acted beyond his jurisdiction in calculating the total income of the company in the manner in which he has done in the present case.” Unquote 7.2 Thus, the Hon’ble Jurisdictional High Court has held that the AO should make the disallowance after hearing the assessee as per law. 8. In this case the ADIT(CPC) has made the upward changes to the total income by disallowing assessee’s claim of expenses without providing any opportunity to the assessee. The ADIT(CPC) has not ITA No.929/PUN/2022 Dr. Ramesh K. Sonawane [A] 8 passed a speaking order while making the disallowance. The ADIT(CPC) has disallowed the expenses stating that the disallowance may be due to not furnishing the break up of expenditure or error in total. Thus, it is clear from the narration given in the Order u/s143(1) that the ADIT(CPC)has himself not understood the exact reason for disallowance . In these facts and circumstances of the case, we are of the opinion that the disallowance made by the ADIT(CPC) is bad in law and unsustainable. Therefore, we direct the AO to delete the said addition. 9. In the result, appeal of the Assessee is Allowed. Order pronounced in the open Court on 1 st March, 2023. Sd/- Sd/- (S.S.GODARA) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 1 st March, 2023/ SGR* आदेशकᳱᮧितिलिपअᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीयᮧितिनिध, आयकरअपीलीयअिधकरण, “बी” बᱶच, पुणे / DR, ITAT, “B” Bench, Pune. 6. गाडᭅफ़ाइल / Guard File. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकरअपीलीयअिधकरण, पुणे/ITAT, Pune.