NARENDRA HARJIVANDAS SANGHVI,MASJID BUNDER, MUMBAI V. ITO WARD 16(3)(1), MUMBAI, CHURCHGATE, MUMBAI

ITA 1755/MUM/2025

AI Insights

The case involves Narendra Harjivandas Sanghvi, an advocate by profession, who appealed against the order of the Commissioner of Income Tax (Appeals) - Kochi, which upheld the adjustment made by the Central Processing Centre (CPC) on his income tax return for the assessment year 2021-22. The CPC had adjusted the assessee's income from \\u20b99,26,980 to \\u20b928,71,010 due to a perceived mismatch between the Tax Audit Report and the return of income, leading to an addition of \\u20b919,44,032. The assessee contended that this adjustment was based on an inadvertent clerical omission and that the income was correctly disclosed under appropriate heads in the return. The Tribunal found that the CPC's adjustment was mechanical and did not consider the actual disclosures made in the return, leading to duplication of income.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 707081 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Assessment Year: 2021-2022
• Appeal Filed On: 13-03-2025
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASIF KAR MALI
• Assessee Lawyers: DHARMESH SHAH AW
• Keywords: Revised return; Rectification of order; Earning of tax free income; Right to appeal
• Section: 154; 6

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “J (SMC)” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAJ KUMAR CHAUHAN (JUDICIAL MEMBER) ITA No. 1755/MUM/2025 Assessment Year: 2021-22 Narendra Harjivandas Sanghvi, 502, 5th floor, Faiz-E.Qutbi, 375 Narsi Natha Street, Masjid Bunder, Mumbai-400 009. Vs. ITO Ward 16(3)(1), Aayakar Bhavan, Maharshi Karve Road, New Marine Lines, Churchgate Mumbai-400020. PAN NO. AAPPS 8101 F Appellant Respondent Assessee by : Mr. Dharmesh Shah a/w Ms. Mitali Parekh Revenue by : Mr. Asif Karmali, Sr. DR Date of Hearing : 30/06/2025 Date of pronouncement : 10/07/2025 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 27.02.2025 passed by the Ld. Addl./Joint Commissioner of Income- tax (Appeals) – Kochi [in short ‘the Ld. CIT(A)’] for assessment year 2021-22, raising following grounds: 1. The Lr. Commissioner of Income Tax (Appeal) has erred in not affording sufficient opportunity the Order U/s. 250 dated 27.02.2025 rendering the said Order as arbitrary and ab 2. The Lr. C.I.T. (Appeal) has also grievously erred in dismissing the Appeal filed on 21.11.2020 treating the same as in 3. The Lr. C.I.T. (Appeal) has also erred in not examining the grievance of the Appellant that the addition of Rs. 19,44,030.00 consisted of Tax Free income of Rs. 12,56,269.00 being Interest from Government Tax Free Bonds etc being wrongly taxe Rs 6,87,761.00 Taxable interest already disclosed in I.T.R. were taxed twice. 4. The entire Order U/s. 250 is otherwise unjustified and 2. Briefly stated facts of the case are that t advocate by profession. assessee filed return of income on 27.01.2022 declaring total income at Rs.9,26,980/ was processed u/s 143(1) of the Income Act’) wherein the Central Processin total income at Rs.28,71,010/ Rs.19,44,032/-, resulting in the enhanced total income. The adjustment was premised on a perceived mismatch between the Tax Audit Report (Form 3CD) and the return of i 2.1 The assessee’s subsequent attempts to seek rectification of the said adjustment were unsuccessful. The appeal before the ld CIT(A) also met with no relief. Aggrieved, the assessee is now before us challenging the impugned order. Narendra Harjivandas Sanghvi ITA No. 1755/MUM/2025 1. The Lr. Commissioner of Income Tax (Appeal) has erred in not affording sufficient opportunity to present the case before passing the Order U/s. 250 dated 27.02.2025 rendering the said Order as arbitrary and ab-initio bad-in-law. 2. The Lr. C.I.T. (Appeal) has also grievously erred in dismissing the Appeal filed on 21.11.2020 treating the same as in 3. The Lr. C.I.T. (Appeal) has also erred in not examining the grievance of the Appellant that the addition of Rs. 19,44,030.00 consisted of Tax Free income of Rs. 12,56,269.00 being Interest from Government Tax Free Bonds etc being wrongly taxe Rs 6,87,761.00 Taxable interest already disclosed in I.T.R. were 4. The entire Order U/s. 250 is otherwise and unlawful. Briefly stated facts of the case are that the advocate by profession. For the year under consideration, the assessee filed return of income on 27.01.2022 declaring total income at Rs.9,26,980/-. The return of income filed by the assessee was processed u/s 143(1) of the Income-tax Act, 1961 (in short ‘the Act’) wherein the Central Processing Centre (CPC) determined the total income at Rs.28,71,010/- after making adjustment for resulting in the enhanced total income. The adjustment was premised on a perceived mismatch between the Tax Audit Report (Form 3CD) and the return of income. The assessee’s subsequent attempts to seek rectification of the said adjustment were unsuccessful. The appeal before the ld CIT(A) also met with no relief. Aggrieved, the assessee is now before us challenging the impugned order. Narendra Harjivandas Sanghvi 2 ITA No. 1755/MUM/2025 1. The Lr. Commissioner of Income Tax (Appeal) has erred in not to present the case before passing the Order U/s. 250 dated 27.02.2025 rendering the said Order 2. The Lr. C.I.T. (Appeal) has also grievously erred in dismissing the Appeal filed on 21.11.2020 treating the same as infructuous. 3. The Lr. C.I.T. (Appeal) has also erred in not examining the grievance of the Appellant that the addition of Rs. 19,44,030.00 consisted of Tax Free income of Rs. 12,56,269.00 being Interest from Government Tax Free Bonds etc being wrongly taxed and Rs 6,87,761.00 Taxable interest already disclosed in I.T.R. were 4. The entire Order U/s. 250 is otherwise he Assessee is an er consideration, the assessee filed return of income on 27.01.2022 declaring total The return of income filed by the assessee tax Act, 1961 (in short ‘the g Centre (CPC) determined the after making adjustment for resulting in the enhanced total income. The adjustment was premised on a perceived mismatch between the Tax The assessee’s subsequent attempts to seek rectification of the said adjustment were unsuccessful. The appeal before the ld CIT(A) also met with no relief. Aggrieved, the assessee is now before us 3. We have heard rival submissions of the parties and perused the relevant materials on record of adjustment of Rs.19,44,032/ the CPC. It is the contention of the assessee that the adjustment stems from an inadvertent clerical omission while filling Other Information – counsel submitted that assessee maintained books of accounts and the income earned from the profession is and loss account, whereas recorded in balance sheet under the head ‘capital account’. The Ld. counsel submitted that both the categories of the income were disclosed to the computation income under appropriate heads in turn were disclosed in the I 3.1 However, he submitted that in the tax audit report in Form No. 3CD uploaded on the income amount not credited item of income was reported at Rs.19,44,032/ 16B. The relevant detail of the tax audit report is reproduced for ready reference: 1 Dividend 2 Interets FD 3 Interest NSS 4 Interest PPF 5 Interest SB Acc 6 Interest Scss 7 Interest Tax Free Narendra Harjivandas Sanghvi ITA No. 1755/MUM/2025 heard rival submissions of the parties and perused the relevant materials on record. The issue in dispute is in respect of adjustment of Rs.19,44,032/- made by the Assessing Officer of It is the contention of the assessee that the adjustment from an inadvertent clerical omission while filling Clause 5 in the return of income counsel submitted that assessee maintained books of accounts and the income earned from the profession is accounted , whereas income from ‘other sources balance sheet under the head ‘capital account’. The Ld. counsel submitted that both the categories of the income were disclosed to the computation income under appropriate heads n were disclosed in the Income-tax return. However, he submitted that in the tax audit report in Form No. 3CD uploaded on the income-tax system in relevant clause No. 16 to the profit and loss account being any other was reported at Rs.19,44,032/- as per Schedule 16B. The relevant detail of the tax audit report is reproduced for Interest SB Acc Interest Scss Interest Tax Free Narendra Harjivandas Sanghvi 3 ITA No. 1755/MUM/2025 heard rival submissions of the parties and perused . The issue in dispute is in respect made by the Assessing Officer of It is the contention of the assessee that the adjustment from an inadvertent clerical omission while filling Schedule in the return of income. The Ld. counsel submitted that assessee maintained books of accounts and accounted in the profit other sources’ was balance sheet under the head ‘capital account’. The Ld. counsel submitted that both the categories of the income were disclosed to the computation income under appropriate heads and However, he submitted that in the tax audit report in Form No. tax system in relevant clause No. 16 to the profit and loss account being any other as per Schedule 16B. The relevant detail of the tax audit report is reproduced for Amount 18,067 3,86,059 1,42,070 1,46,812 77,265 86,372 9,67,387 8 Interest LIC Total 3.1 In the return of income under the relevant Schedule of information’ in clause 5 inadvertently said amount of any other item of income not credited at Rs. Nil. But the said income of Rs.19,44,032/ the assessee in return of income Rs.6,87,765/- which was chargeable to tax head ‘income from other sources’ (PB 46) and the balance amount of Rs.12,56,269/- was reported under the head ‘exempted income’ (PB 48). Thus, in this manner the other income was already declared in the return of income. 3.2 The CPC, in processing the return, appears to have relied solely on the absence of declaration under Clause 5 of “Other Information” to make the adjustment, without verifying the actual disclosure of the same income under the in the return. The CIT(A), in upholding the adjustment, assigned two principal reasons. First, that the error in reporting was attributable to the assessee and in the absence of a revised return, the CPC was justified in making the 143(1)(a). Second, that the intimation under Section 143(1) stood merged with the subsequent rectification orders, and hence was no longer amenable to challenge. Narendra Harjivandas Sanghvi ITA No. 1755/MUM/2025 19,44,032 n the return of income under the relevant Schedule of in clause 5 inadvertently said amount of any other item ed to the profit and loss account was reported at Rs. Nil. But the said income of Rs.19,44,032/- was reported by return of income two parts. The which was chargeable to tax was reported under the head ‘income from other sources’ (PB 46) and the balance amount was reported under the head ‘exempted income’ in this manner the other income was already the return of income. The CPC, in processing the return, appears to have relied solely on the absence of declaration under Clause 5 of “Other Information” to make the adjustment, without verifying the actual disclosure of the same income under the relevant heads elsewhere The CIT(A), in upholding the adjustment, assigned two principal reasons. First, that the error in reporting was attributable to the assessee and in the absence of a revised return, the CPC was justified in making the adjustment under Section 143(1)(a). Second, that the intimation under Section 143(1) stood merged with the subsequent rectification orders, and hence was no longer amenable to challenge. Narendra Harjivandas Sanghvi 4 ITA No. 1755/MUM/2025 1,20,000 19,44,032 n the return of income under the relevant Schedule of ‘other in clause 5 inadvertently said amount of any other item to the profit and loss account was reported was reported by The amount of reported under the head ‘income from other sources’ (PB 46) and the balance amount was reported under the head ‘exempted income’ in this manner the other income was already The CPC, in processing the return, appears to have relied solely on the absence of declaration under Clause 5 of “Other Information” to make the adjustment, without verifying the actual relevant heads elsewhere The CIT(A), in upholding the adjustment, assigned two principal reasons. First, that the error in reporting was attributable to the assessee and in the absence of a revised return, adjustment under Section 143(1)(a). Second, that the intimation under Section 143(1) stood merged with the subsequent rectification orders, and hence was no 3.3 We have perused the order of the Ld. CIT(A) on the issue in dispute. In our considered view, both findings warrant careful scrutiny. 3.4 As regards the first, it is no doubt true that under Section 143(1)(a)(ii), adjustments can be made for incorrect claims apparent from information in the return. However, where the income in question has otherwise been appropriate heads in the return limited to a technical misreporting in a secondary schedule (in this case, Clause 5 of “Other Information”), such an adjustment may no satisfy the rigour of “incorrect claim apparent from any information in the return. The records demonstrate that the amount of ₹19,44,032/- was in fact disclosed in part as exempt income. The CPC appears to have proceeded mechanically, without correlating disclosures across the schedules, thereby resulting in duplication of income. 3.5 Insofar as the second limb of the CIT(A)’s reasoning is concerned—that the intimation merged with the rectification orders—this, too, is lega under Section 154 are independent and do not efface the original intimation unless specifically revised. The right of appeal under Section 246A(1)(a) against the intimation under Section 143(1) remains unaffected. Narendra Harjivandas Sanghvi ITA No. 1755/MUM/2025 We have perused the order of the Ld. CIT(A) on the issue in In our considered view, both findings warrant careful As regards the first, it is no doubt true that under Section 143(1)(a)(ii), adjustments can be made for incorrect claims apparent from information in the return. However, where the income in question has otherwise been disclosed correctly under the appropriate heads in the return, and the perceived omission is limited to a technical misreporting in a secondary schedule (in this case, Clause 5 of “Other Information”), such an adjustment may no satisfy the rigour of “incorrect claim apparent from any information in the return. The records demonstrate that the amount of in fact disclosed— in part as taxable income and in part as exempt income. The CPC appears to have proceeded echanically, without correlating disclosures across the schedules, thereby resulting in duplication of income. Insofar as the second limb of the CIT(A)’s reasoning is that the intimation merged with the rectification this, too, is legally untenable. Rectification proceedings under Section 154 are independent and do not efface the original intimation unless specifically revised. The right of appeal under Section 246A(1)(a) against the intimation under Section 143(1) Narendra Harjivandas Sanghvi 5 ITA No. 1755/MUM/2025 We have perused the order of the Ld. CIT(A) on the issue in In our considered view, both findings warrant careful As regards the first, it is no doubt true that under Section 143(1)(a)(ii), adjustments can be made for incorrect claims apparent from information in the return. However, where the income in disclosed correctly under the and the perceived omission is limited to a technical misreporting in a secondary schedule (in this case, Clause 5 of “Other Information”), such an adjustment may not satisfy the rigour of “incorrect claim apparent from any information in the return. The records demonstrate that the amount of in part as taxable income and in part as exempt income. The CPC appears to have proceeded echanically, without correlating disclosures across the schedules, Insofar as the second limb of the CIT(A)’s reasoning is that the intimation merged with the rectification lly untenable. Rectification proceedings under Section 154 are independent and do not efface the original intimation unless specifically revised. The right of appeal under Section 246A(1)(a) against the intimation under Section 143(1) 3.6 In the circumstances, we are of the view that the addition of ₹19,44,032/- lacks legal sustainability and arises from a mechanical and incomplete processing of the return. However, since the matter involves questions of factual correlation between schedules and heads of income, the matter to the file of the Assessing Officer whether the sum of ₹ disclosed as exempt income) under appropriate heads in the original return filed, and if so, delete the impugned adjustment pass a reasoned order in accordance with law. appeal of the assessee purposes. 4. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on Sd/ (RAJ KUMAR CHAUHAN JUDICIAL MEMBER Mumbai; Dated: 10/07/2025 Rahul Sharma, Sr. P.S. Narendra Harjivandas Sanghvi ITA No. 1755/MUM/2025 In the circumstances, we are of the view that the addition of lacks legal sustainability and arises from a mechanical and incomplete processing of the return. However, since the matter involves questions of factual correlation between ules and heads of income, it would be appropriate to restore the matter to the file of the Assessing Officer, who shall verify ₹19,44,032/- was in fact duly offered to tax (or disclosed as exempt income) under appropriate heads in the original return filed, and if so, delete the impugned adjustment a reasoned order in accordance with law. The grounds of appeal of the assessee are accordingly allowed for statistical In the result, the appeal of the assessee is allowed for nounced in the open Court on 10/0 Sd/- Sd/ (RAJ KUMAR CHAUHAN) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Narendra Harjivandas Sanghvi 6 ITA No. 1755/MUM/2025 In the circumstances, we are of the view that the addition of lacks legal sustainability and arises from a mechanical and incomplete processing of the return. However, since the matter involves questions of factual correlation between it would be appropriate to restore , who shall verify was in fact duly offered to tax (or disclosed as exempt income) under appropriate heads in the original return filed, and if so, delete the impugned adjustment and The grounds of are accordingly allowed for statistical In the result, the appeal of the assessee is allowed for /07/2025. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Narendra Harjivandas Sanghvi ITA No. 1755/MUM/2025 Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Narendra Harjivandas Sanghvi 7 ITA No. 1755/MUM/2025 BY ORDER, (Assistant Registrar) ITAT, Mumbai "