MANJARI HOUSING PROJECTS LLP,MAHARASHTRA V. THE DEPUTY DIRECTOR OF INCOME TAX, CENTRALIZED PROCESSING CENTRE, BENGALURU, BANDRA KURLA COMPLEX, MUMBAI

ITA 3368/MUM/2024

AI Insights

The case involves Manjari Housing Projects LLP appealing against the order of the Commissioner of Income Tax (Appeals) - National Faceless Appeal Centre, which restored the issue of TDS credit reduction by the Centralized Processing Center (CPC) to the file of the Assessing Officer. The CPC had initially granted a full TDS credit to the assessee in response to rectification petitions but later reduced the credit without notice, leading to a tax demand. The Tribunal found this reduction and the subsequent demand unjustified, emphasizing the need for adherence to procedural fairness and the principles of natural justice in tax assessments.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471318 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2021-2022
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R.R. MAKWANA
• Assessee Lawyers: F.V. IRANI; WAY OF ISSUANCE
• Keywords: Set aside; Principle of natural justice; TDS; Rectification of order
• Section: 154; 244A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI “D” BENCH : MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI SUNIL KUMAR SINGH, JUDICIAL MEMBER ITA No. 3368/Mum/2024 Assessment Year : 2021-22 Manjari Housing Projects LLP, M/s. Kalyaniwalla & Mistry LLP, Esplanade House, 2nd Floor, 29, Hazarimal Somani Marg, Fort, Mumbai PAN : AARFG0014F vs. The Income Tax Officer, Ward-41(1)(1), Kautilya Bhavan, G Block, Bandra Kurla Complex, Bandra East, Mumbai (Appellant) (Respondent) Assessee by : Shri F.V. Irani Revenue by : Shri R.R. Makwana, Sr.DR Date of Hearing : 31-12-2024 Date of Pronouncement : 01-01-2025 ORDER PER B.R. BASKARAN, A.M : The assessee has filed this appeal challenging the order dt.03-05-2024 passed by the Ld. Commissioner of Income Tax (Appeals)- National Faceless Appeal Centre (NFAC), Delhi [„Ld.CIT(A)‟] and it relates to AY. 2021-22. The assessee is aggrieved by the decision of the Ld.CIT(A) in restoring the issue relating to withdrawal of refund already granted to the assessee by the CPC, Bengaluru („CPC‟) to the file of the AO. 2 ITA No. 3368/Mum/2024 2. The facts relating to the above said issue are that the assessee had filed its return of income for the year under consideration claiming a refund of Rs.50.19 lakhs. The same was processed by the CPC. Even though the total income (here it was loss) was accepted by the CPC without making any adjustment, yet the CPC allowed TDS credit of Rs. 36,203/- only, as against the TDS credit claim of Rs.48,39,268/-. Hence, the assessee filed a rectification petition u/s 154 of the Act on 09-11-2022 and the same was accepted by granting full amount of TDS credit as claimed by the assessee. The Ld.AR submitted that the above said refund was also received by the assessee. 3. Since there was mistake in granting of interest u/s. 244A of the Act against the refund granted in the above said order, the assessee filed another rectification petition u/s 154 of the Act on 09-02-2023. The same was processed and in that intimation also, the full amount of TDS credit was given. On the very same day, another rectification order u/s. 154 of the Act was passed, wherein also the full credit of TDS was given. 4. Subsequently, the CPC suo motu passed another rectification order u/s. 154 of the Act on 05-06-2023, wherein the TDS credit of only Rs.1,08,591/- was granted, as against the TDS claim of Rs.48,39,268/-. Accordingly, a tax demand has been raised upon the assessee. Hence the assessee filed appeal before Ld CIT(A), but the Ld CIT(A) restored the matter to the file of the AO. 3 ITA No. 3368/Mum/2024 5. The Ld.AR submitted that this rectification order has been passed by the CPC, without giving an opportunity to the assessee by way of issuance of any notice or otherwise. The same is in violation of sec.154 of the Act. Further, the CPC has not furnished any reason for reducing the TDS credit, even though full credit of TDS was granted to the assessee in the earlier three rectification orders. The Ld.AR submitted that the Ld.CIT(A) in principle has accepted the contentions of the assessee. However, he has restored the matter to the file of the jurisdictional AO with a direction to examine the claim of the assessee in accordance with the provisions of section 199 r.w. Rule 37(VA) of the Income Tax Rules, 1962 („the Rules‟). The Ld.AR submitted that the order so passed by the Ld.CIT(A) is not in accordance with law for more than one reason, i.e., the said rectification order has been passed without giving notice to the assessee and further, the CPC itself had allowed full credit of TDS in three of its earlier rectification orders passed for the very same year. Accordingly, the Ld.AR submitted that the demand raised by the CPC may be cancelled. 6. We have heard the Ld.DR and perused the record. As submitted by the Ld.AR, the CPC has given full credit of TDS in three of its orders. However, in the last order passed u/s. 154 of the Act, the TDS amount has been reduced, which resulted in raising of a demand. It is the submission of the assessee that the CPC has not issued any show cause notice to the assessee before reducing the amount of TDS credit. The said action of the CPC is not in accordance with the provisions of sec.154 of the Act and it results in violation of principle of natural justice also. 7. Accordingly, in the facts of the case discussed above, we are of the view that the CPC was not justified in reducing the TDS credit and raising a demand upon the assessee. Accordingly, we set aside the order passed 4 ITA No. 3368/Mum/2024 by the Ld.CIT(A) and direct the AO/CPC to allow the full credit of TDS to the assessee and accordingly nullify the corresponding demand raised. We order accordingly. 8. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 01-01-2025 Sd/- Sd/- [SUNIL KUMAR SINGH] [B.R. BASKARAN] JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated: 01-01-2025 TNMM Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, “D” Bench, Mumbai 5) Guard file By Order Dy./Asst. Registrar I.T.A.T, Mumbai "