NIRAL KRUPESHBHAIPATEL,VADODARA V. THE DY.CIT ,CPC, BENGALURU

ITA 962/AHD/2023

AI Insights

The case involves Niral Krupeshbhai Patel, the appellant, who contested the addition of Rs. 61,51,804 to his income under 'income from other sources' by the Deputy Commissioner of Income Tax, CPC, Bengaluru. This amount included Rs. 59,08,339 from M/s. Neptune Associates and Rs. 2,43,465 from HDFC Bank. The appellant argued that the interest income from M/s. Neptune Associates had already been disallowed and added back to the total income by the AOP in their return under Section 40(b) of the Income Tax Act, 1961, thus should not be taxed again in his hands to avoid double taxation. The CIT(A) dismissed the appeal, leading to the current appeal before the Income Tax Appellate Tribunal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 473962 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Other Referred Cases: M/s. Navodaya Education Trust vs. ITAT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ATUL PANDEY
• Assessee Lawyers: MANISH J SHAH; RUSHI PATEL; A.RS
• Keywords: Revised return; Salary income; Capital Gains; Rectification of order; FORM 26AS
• Section: 154; 143(1); 40(b)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE DR. BRR KUMAR, VICE PRESIDENT & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T.A. No.962/Ahd/2023 (Assessment Year: 2017-18) Niral Krupeshbhai Patel, Gujarat Spun Pipe Compound, At & P.O. Samiala, Padra Road, Dist: Vadodara, Gujarat-391410 Vs. Deputy Commissioner of Income Tax, CPC, Bengaluru, (Circle-1(1)(1), Vadodara) [PAN No.ACQPP6163R] (Appellant) .. (Respondent) Appellant by : Shri Manish J Shah & Shri Rushi Patel, A.Rs. Respondent by: Shri Atul Pandey, Sr. DR Date of Hearing 13.01.2025 Date of Pronouncement 25.02.2025 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 25.10.2023 passed for A.Y. 2017-18. 2. The assessee has taken the following grounds of appeal:- “1. That on the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming the action of Assessing Officer (CPC) in making addition of Rs. 59,08,339/- received from AOP M/s. Neptune Associates and other interest of Rs. 2,43,465/- totaling Rs. 61,51,804 under the head income from other sources. In fact, the interest received from AOP M/s. Neptune Associates of Rs. 59,08,339/- has already been disallowed and added back in total income U/s. 40(b) of the Income Tax Act in the Return of AOP M/s. Neptune Associates and interest income of Rs. 2,43,465/- has already been offered as income from other sources. Accordingly, total interest income of Rs. 61,51,804/- as mentioned in Form No. 26AS have already been considered by the appellant. ITA No. 962/Ahd/2023 Niral Krupeshbhai Patel vs. DCIT Asst.Year –2017-18 - 2– 2. Your appellant most humbly reserves the right to add, amend, alter or substitute the ground in this appeal on or before the time of hearing.” 3. The brief facts of the case are that the assessee is an individual earning income from salary, rent, capital gains, interest and share in profits received from various firms. During the impugned year under considereation, the assessee filed it’s return of income declaring total income of Rs.40,94,780/-. Thereafter, the assessee received a letter from CPC, Bangalore dated 03.05.2018 stating that there is a variation in income of Rs. 61,51,804/- as per return of income filed by the assessee and the amount received by the assessee as per Form 26AS. The income of the assessee as per Form 26AS as Rs. 61,51,804/- which is the aggregate of interest income received by the assessee from M/s. Neptune Associates (Rs. 59,08,339/-) and Rs. 2,43,465/- being interest income received by the assessee from HDFC Bank. The assessee had not included interest received from M/s. Neptune Associates amounting to Rs. 59,08,339/- since this interest expenses had already been disallowed and added back in it’s total income by M/s. Neptune Associates (AOP) while filing it’s return of income by disallowing this amount under Section 40(b) of the Act. The assessee’s position was that since the interest expense of Rs. 59,08,339/- had been disallowed in the hands of the AOP i.e. M/s. Neptune Associates while filing return of income by such AOP, under Section 40(b) of the Act, there was no question of offering such interest income in the hands of the assessee, since this would amount to double taxation. On receipt of notice dated 03.05.2018, the assessee filed revised return of income on 26.05.2018, including interest income of Rs. 59,08,339/- received from M/s. Neptune Associates and also interest income of Rs. 2,43,465/- received from HDFC Bank, under the head “income from other sources”. Since interest of ITA No. 962/Ahd/2023 Niral Krupeshbhai Patel vs. DCIT Asst.Year –2017-18 - 3– Rs. 59,08,339/- received from M/s. Neptune Associates had already been disallowed and added back to the total income under Section 40(b) of the Act while filing return of income by Neptune Associates, the said interest was claimed by way of a deduction by the assessee against total interest income earned by the assessee, for the impugned year under consideration. Moreover, in the return of income filed by the assessee, interest expenses amounting to Rs. 7,33,662/- were restricted to Rs. 2,81,191/- since the assessee was having interest income (other than interest income from the AOP i.e. M/s. Neptune Associates), amounting to Rs. 2,81,191/-. However, the assessee again received letter from CPC Bangalore dated 30.01.2019, again showing variation of income against which the assessee filed an application for rectification under Section 154 of the Act. In response, the assessee received the rectification order under Section 154 of the Act including total income of Rs. 61,51,804/- under the head “income from other sources” (interest income received from M/s. Neptune Associates Rs. 59,08,339/- and interest income from HDFC Bank of Rs. 2,43,465/-), and raising a demand of Rs. 27,85,480/-. 4. The assessee filed an appeal against the aforesaid order which was dismissed by Ld. CIT(A) with the following observations: “4.11. Applying this settled position of law to the facts of appellant's case, the effect of the subsequent rectification u/s.154 r.w.s. 143(1) has to be read as forming part of original intimation u/s.143(1) only and not independently. Therefore, the impugned addition of interest income made originally vide intimation u/s. 143(1) cannot be challenged by the appellant through the present appeal against order u/s. 154. 4.12. Reliance is placed on the decision of the Hon'ble IT AT, A Bench, Bangalore in ITA No.49/Ban/2021 in the case of M/s. Navodaya Education Trust, wherein it was held that asessee cannot use proceeding u/s.154 to file appeal against order passed u/s. 143(1) of the Act. ITA No. 962/Ahd/2023 Niral Krupeshbhai Patel vs. DCIT Asst.Year –2017-18 - 4– 4.13 In view of the above facts and discussions, Ground No.1 and 2 raised by the appellant are dismissed. 5. In the result, the appeal is \"Dismissed\".” 5. The assessee is in appeal before us against the aforesaid order passed by the Ld. CIT(A) confirming the additions made CPC, Bangalore. 6. Before us, the Counsel for the assessee submitted that since interest expenses of Rs. 59,08,339/- had already been disallowed and added back to the total income under Section 40(b) of the Act in the hands of the AOP i.e. M/s. Neptune Associates, then the question of considering the same as income of the assessee does not arise at all, since the same would amount to double taxation. The Counsel for the assessee submitted that Ld. CIT(A) erred in facts and in law in not considering that such interest income of Rs. 59,08,339/- had already been disallowed and added back to the total income of the AOP i.e. M/s. Neptune Associates under Section 40(b) of the Act, while filing it’s return of income. Accordingly, the same interest income cannot be the subject matter of taxation in the hands of the assessee. 7. In response, Ld. D.R. placed reliance on the observations made by CIT(A) in the appellate order. 8. We have heard the rival contentions and perused the material on record. 9. Looking into the instant facts, nothing has been brought on record to controvert the factual offerings made by the assessee. In our considered view, we concur with the view of the assessee that once the interest expenses of Rs. 59,08,339/- have been disallowed suo-moto by the AOP M/s. Neptune ITA No. 962/Ahd/2023 Niral Krupeshbhai Patel vs. DCIT Asst.Year –2017-18 - 5– Associates under section 40(b) of the Act, while filing it’s return of income, then the said interest cannot again be taxed as income in the hands of the assessee (being a member of the said AOP), since this would amount double taxation. Accordingly, the matter is being restored to the file of Assessing Officer, for verify whether such interest of Rs. 59,08,339/- has been offered as income by M/s. Neptune Associates in it’s return of income, and if that be the case, then the said interest income of Rs. 59,08,339/- is hereby directed to be deleted in the hands of the assessee. 10. In the result, the appeal of the assessee is allowed subject to the aforesaid aforesaid verification. This Order is pronounced in the Open Court on 25/02/2025 Sd/- Sd/- (DR. BRR KUMAR) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 25/02/2025 TANMAY, Sr. PS TRUE COPY आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / Concerned CIT 4. आयकर आयुƅ(अपील) / The CIT(A)- 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 24.02.2025 2. Date on which the typed draft is placed before the Dictating Member 24.02.2025 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S 24.02.2025 5. Date on which the fair order is placed before the Dictating Member for pronouncement 25.02.2025 6. Date on which the fair order comes back to the Sr.P.S./P.S 25.02.2025 7. Date on which the file goes to the Bench Clerk 25.02.2025 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Dispatch of the Order…………………………………… "