MADHU SUDAN MISRA,DELHI V. DCIT, CIRCLE 52(1), NEW DELHI

SA 499/DEL/2025

AI Insights

The case involves an appeal by Madhu Sudan Misra against the order of the National Faceless Appeals Centre (NFAC), which upheld the assessment made by the CPC under section 143(1) of the Income-tax Act, 1961. The CPC had made adjustments to the assessee's declared income, which the assessee contested. The main issues revolved around the incorrect declaration of capital gains and the disallowance of set off of losses from previous assessment years. The Tribunal noted that the CPC did not consider the assessee's objections and failed to communicate reasons for rejecting the submissions. The Tribunal emphasized the need for the CPC to provide a fair opportunity to the assessee to contest the adjustments made.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 824602 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Stay Application
• Pronouncement Date: 29-12-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2018-2019
• Appeal Filed On: 30-08-2025
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DHEERAJ KUMAR JAISWAL
• Assessee Lawyers: GAGAN KUMAR
• Keywords: Capital Gains; Application of stay
• Section: 143(3); 142(1)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’: NEW DELHI BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER and SHRI SUDHIR KUMAR, JUDICIAL MEMBER SA No.499/Del/2025 (in ITA No.5028/DEL/2025) (Assessment Year: 2018-19) AND ITA No.5028/DEL/2025 (Assessment Year: 2018-19) Madhu Sudan Misra, vs. DCIT, Circle 52 (1), 20, Golf Links, New Delhi. New Delhi – 110 003. (PAN : AAAPM3711E) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Gagan Kumar, Advocate Shri Gagandeep, Advocate REVENUE BY : Shri Dheeraj Kumar Jaiswal, Sr. DR Date of Hearing : 30.09.2025 Date of Order : 29.12.2025 O R D E R PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER : 1. The assessee has filed appeal against the order of the learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [“Ld. CIT(A)”, for short] dated 29.07.2025 for the Assessment Year 2018-19. Printed from counselvise.com 2 ITA No.5028/DEL/2025 2. Brief facts of the case are, assessee filed its return of income declaring income of Rs.1,39,90,847/-. Subsequently, assessee received intimation dated 04.06.2019 from CPC, Bengaluru that it proposes to make some adjustment under section 143(1) of the Income-tax Act, 1961 (for short ‘the Act’) in respect of the returned income. Assessee filed its objection to the proposed adjustments. Therefore, CPC passed intimation u/s 143(1) dated 08.01.2020 determining the total income of the assessee at Rs.2,67,23,540/- after making following adjustments :- (a) It was intimated to the assessee that the assessee has declared the capital gains in incorrect schedule in the return of income of Rs.32,60,747/-; and (b) The claim of set off of loss by the assessee for the AYs 2010-11 and 2011-12 for the reason that assessee had filed his return of income beyond due date of filing his return of income as per CPC record. 3. In response, assessee has submitted that the error notified by the CPC is subsequently being rectified and there is no effect on the total income declared by the assessee. With regard to filing of return of income delayed, in this regard, assessee has submitted that the assessee is a partner in the firm, Kitchner Road Service Station which is subject to tax audit under the provisions of section 44AB of the Act, therefore, the due Printed from counselvise.com 3 ITA No.5028/DEL/2025 date of filing the return of income of the assessee based on the due date for filing of the return of income of the firm. 4. Meantime, the assessee received a notice u/s 143(2) dated 22.09.2019 under limited scrutiny for the purpose of verification on issue of Foreign Financial Interest. Subsequently, notice u/s 142(1) was issued and served on the assessee. In response, assessee submitted relevant information as called for. The assessment u/s 143(3) was completed without making any adjustment. However, the Assessing Officer considered the total income determined u/s 143(1) of the Act and without making any other adjustment completed the assessment u/s 143(3) of the Act. 5. Aggrieved with the above order, assessee preferred an appeal before the NFAC, Delhi and filed a detailed submissions and brought on record relevant facts. Ld. CIT (A) called for remand report from the Assessing Officer and Assessing Officer submitted that he has completed the assessment u/s 143(3) of the Act, the grievance of the assessee should have been addressed with the right authority. Since there was no record submitted by the assessee to the issues raised in this appeal were not verified. Based on the above remand report, ld. CIT (A) dismissed the appeal of the assessee with the observation that the assessee has failed to raise any valid ground warranting appellate intervention in the assessment completed u/s 143(3) of the Act. He found merit in the observation of the Printed from counselvise.com 4 ITA No.5028/DEL/2025 Assessing Officer that if the assessee was aggrieved by the intimation u/s 143(1), assessee ought to have filed an appeal before the appropriate forum i.e. CIT (A) against the said intimation. In the absence of any documentary evidence, assessee was not able to establish that the issue regarding the non-sustainability of disallowances made by the CPC u/s 143(1) of the Act was ever raised before Assessing Officer during the course of assessment proceedings. 6. Aggrieved with the above order, assessee filed an appeal before us raising following grounds of appeal :- “1. That the order under section 250 of the Income Tax Act, 1961 (\"the Act\") dated 29.07.2025 (\"Impugned Order\") passed by the National Faceless Appeals Centre, Delhi (\"Ld. NFAC/Ld. CIT(A)\") is erroneous and bad in law. 2. That the Ld. CIT(A) erred in law and facts and circumstances in upholding the assessment order under section 143(3) of the Act, passed by the Assessing Officer (\"Ld. AO\") without appreciating that the Ld. AO does not record any reasons for variation from the returned income. 3. That the Ld. CIT(A) erred in law and facts and circumstances by dismissing the appeal without appreciating that once an assessment order under section 143(3) of the Act is passed, it merges with and supersedes the earlier intimation under section 143(1) of the Act. 4. That the Ld. 'CIT(A) erred in law and facts and circumstances by failing to appreciate that once a notice under section 143(2) of the Act is issued, no adjustments can be made under section 143( ) of the Act. 5. That the Ld. CIT(A) erred in law and facts and circumstances while ignoring the fact that adjustments were made under section 143(1) of the Act by the Centralized Processing Centre, Bengaluru (\"CPC\"), without considering the objections raised by the Assessee. 6. That the Ld. CIT(A) erred in law and facts and circumstances of the case that no adjustment under section 143(1) of the Act can be made on any issue which requires further inquiry, without hearing the Assessee and/or giving the Assessee an opportunity to submit proof in support of its claim. Printed from counselvise.com 5 ITA No.5028/DEL/2025 7. That the Ld. CIT(A) erred in law and facts and circumstances by not appreciating that the Return of Income filed by the Assessee for assessment years 2010-11 and 2011-12 were within the due date and therefore, the disallowance of the loss claimed by CPC and Ld. AO is bad in law. 8. That the Ld, CIT(A) erred in law and facts and circumstances by failing to appreciate that the discrepancies with regard to Schedule CG were duly responded to by the Assessee; therefore, the addition under the head \"Income from Capital Gains\" is bad in law. 9. That the ld. CIT (A) erred in law and facts and circumstances by failing to appreciate that the CPC made additions under “Intra Head Adjustments” without providing any reason or explanation. 7. At the time of hearing, ld. AR of the assessee brought to our notice relevant facts on record and also submitted list of dates relevant for the present appeal which are reproduced below :- Sl.No. Dates Particulars 1 14.09.2018 Return of Income filed by the Applicant. 2 04.06.2019 Communication received from CPC proposing adjustments. 3 04.07.2019 Applicant duly filed objections in the IT portal. 4 22.09.2019 A notice under section 143(2) of the Act was passed by the Ld.AO. 5 13.01.2020 An intimation under section 143(1) of the Act was passed by CPC, making adjustments to the returned income. 6 06.12.2020 A notice under section 142(1) of the Act was passed by the Ld.AO. 7 31.03.2021 An Order under section 143(3) of the Act was passed by the Ld.AO. 8 29.07.2025 An Order under section 250 of the Act was passed by Ld. CIT(A). 9. Further he submitted that aggrieved by the assessment Order dated 31.03.2021, the assessee preferred an appeal before the ld. CIT (A). During the course of the appellate proceedings, the Ld. CIT(A) issued multiple notices under section 250 of the Act on 28.12.2021 16.03.202 Printed from counselvise.com 6 ITA No.5028/DEL/2025 and 07.07.2025. In response thereto, the assessee duly filed written submissions through the e-filing portal on 19.01.2022, 03.04.2024 and 15.07.2025, along with supporting documents, inter alia reiterating that the impugned assessment had been framed in violation of the limited scrutiny mandate and that reliance placed by the AO on the intimation issued under section 143(1) of the Act was wholly misconceived and bad in law. He further submitted that in the course of the appellate proceedings, the Ld. CIT(A) called for a remand report from the AO. The AO, vide report dated 06.06.2024, categorically stated that no additions were made in the assessment order passed under section 143(3) of the Act, and that the assessment had merely adopted the income determined in the earlier intimation issued under Section 143(1) of the Act, against which no appeal had been filed by the assessee. He submitted that relying upon the aforesaid remand report, the Ld. CIT(A), vide Order dated 29.07.2025, dismissed the appeal as not maintainable on the reasoning that since the AO had not made any fresh additions in the order under section 143(3) of the Act, but had merely adopted the figure determined in the earlier intimation under section 143(1) of the Act, the appeal did not survive. 10. On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities. Printed from counselvise.com 7 ITA No.5028/DEL/2025 11. Considered the rival submissions and material placed on record. We observed that CPC, Bengaluru has made two additions relating to declaration of capital gains in the incorrect schedule while filing the return of income by the assessee and it is brought to our notice that the assessee has subsequently rectified the above mistake and it was intimated to the CPC that it has no effect to the total income declared by the assessee. With regard to disallowance of set off of loss claimed by the assessee on the basis of non filing of return of income within the due date for an individual. However, it is brought to our notice that the assessee is a partner in the firm which is subject to tax audit u/s 44AB of the Act. This information was also submitted before the CPC, however CPC has proceeded to complete the intimation u/s 143(1) of the Act without communicating the reasons for rejecting the submissions made by the assessee. We further noticed that the case of the assessee was selected for limited scrutiny before completion of intimation u/s 143(1) of the Act. Assessee has complied to the various information called for limited scrutiny assessment and Assessing Officer has duly accepted the information submitted by the assessee and completed the assessment. It is also fact on record that the case of the assessee was selected for limited scrutiny and the Assessing Officer has not verified the issue raised by the assessee before CPC, Bengaluru and completed the assessment by only Printed from counselvise.com 8 ITA No.5028/DEL/2025 considering the total income determined u/s 143(1)(a) of the Act. Aggrieved with the above order, assessee preferred an appeal before the NFAC, Delhi. Ld. CIT (A), after considering the remand report from the Assessing Officer, chose not to interfere with the peculiar facts on record and merely dismissed the appeal of the assessee by observing that the assessee has not filed any appeal before the appropriate authority i.e. CIT (A). It is fact on record that even though the case of the assessee was selected for scrutiny for limited purpose, ld. CIT(A) should have directed the Assessing Officer to verify the claim of the assessee during remand proceedings. In this peculiar facts on record, ld. CIT (A) should have atleast verified the limited issue raised by the assessee relating to disallowance made by the CPC and the issues raised by the assessee are simple mistakes which CPC has over-looked the merit in the case of the assessee, even though assessee has submitted the relevant information before the CPC. It is also fact on record that there is no communication from the CPC for rejecting the submissions of the assessee and even ld.CIT (A) chose not to interfere with the material evidence on record and goes by the rule of book, there is no justice rendered to the assessee. The assessee has raised the issues before ld. CIT (A) for the reason that 143(2) notice was issued before completion of proceedings u/s 143(1) of the Act. Therefore, in our considered view, after considering the material facts Printed from counselvise.com 9 ITA No.5028/DEL/2025 available on record and also assessee has submitted in the form of paper book, it clearly indicates that the issues raised by the CPC are duly addressed by the assessee, not appreciated by the CPC and even further more CPC has not communicated the relevant reason for rejecting the same. Therefore, we are inclined to direct the Assessing Officer to consider the income declared by the assessee in his return of income and delete the disallowances made by the CPC. Accordingly, we allow the appeal filed by the assessee on the basis of concept of merger of intimation u/s 143(1) with the regular assessment u/s 143(3) of the Act. 8. In the result, the appeal filed by the assessee is allowed. 9. In view of the fact that appeal bearing ITA No.5028/Del/2025, in which the present stay application being SA No.499/Del/2025 was filed, has since been disposed off vide this composite order, the present stay application is hereby dismissed having been become infructuous. Order pronounced in the open court on this 29th day of December, 2025. Sd/- sd/- (SUDHIR KUMAR) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 29.12.2025 TS Printed from counselvise.com 10 ITA No.5028/DEL/2025 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals). 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "