2019 (8) TMI 1822 - AT - Income Tax

Rectification of mistake u/s 154 - Return processed u/s 143(1) - assessee has accumulated income out of the income derived from the trust which was not utilised for the objects of the trust - disallowance of deduction for amount of TDS for which credit has been claimed against tax payable on the returned income - HELD THAT - As we consider the scope of section 154 for making prima facie adjustment while processing return under section 143(1)(a) of the Act i.e. process of dealing with the return is an ex parte process. It is pertinent to observe that whenever any debatable issue is involved an explanation of the assessee is required then on such issue no prima facie adjustment in an ex parte proceedings can be made. Reading of judgment of Hon ble Kolkatta High Court in case of Natwarlal Chowdhury Charity Trust 1989 (8) TMI 19 - CALCUTTA HIGH COURT and if facts are looked into then it would reveal that both the issues were debatable one where more than one opinion was possible. Adjustment under section 143(1)(a) is not permissible on both these aspects. Therefore we allow appeal of the assessee and delete both the disallowances. Appeal of assessee allowed.

Summary

Issues Involved:
1. Disallowance of legitimate claim of deduction under section 11(1)(a) of the Income Tax Act, 1961.
2. Disallowance of deduction for TDS amount claimed against tax payable.

Analysis:

Issue 1: Disallowance of legitimate claim of deduction under section 11(1)(a) of the Income Tax Act, 1961:
The appellant contended that the accumulated income derived from the trust, not utilized for trust objects, should be entitled to further accumulation at 15%. The Assessing Officer (AO) made a prima facie adjustment rejecting this claim, resulting in an addition of Rs.4,03,435 under section 11(1)(a) of the Act. The appellant argued that the unutilized income should be considered part of the current income for the year, allowing for 15% accumulation. The CIT(A) upheld the AO's decision. The appellant relied on the Hon'ble Kolkata High Court judgment in a similar case to support their claim. The Tribunal observed that the issues were debatable, and no prima facie adjustment could be made under section 143(1) in such cases. Citing the Kolkata High Court judgment, the Tribunal allowed the appeal and deleted the disallowance.

Issue 2: Disallowance of deduction for TDS amount claimed against tax payable:
Regarding the disallowance of Rs.29,922 for TDS amount, the appellant argued that the credit should have been granted based on the TDS statement in Form NO.26AS. However, the CIT(A) did not provide a specific finding on this issue. The Tribunal, considering the debatable nature of the issue, ruled in favor of the appellant and deleted the disallowance, citing that adjustments under section 143(1) are impermissible for such matters.

In conclusion, the Tribunal allowed the appeal of the appellant, deleting both disallowances based on the debatable nature of the issues and the legal precedents cited.