2023 (5) TMI 787 - AT - Income Tax

Rectification u/s 154 - disallowance claim of the amount of the exempted allowance - rectification request of the assessee is rejected as there was no mistake apparent from the record in the order passed u/s 143(1)(a) as no claim of the amount of the exempted allowance was made in the return of income and therefore there being difference in the amount of salary appearing in the Form No. 26AS - HELD THAT - It can be said that assessee did not make any claim for exempted allowance in the return of income thus omission was on the part of the assessee and therefore there is no mistake in the order passed u/s 143(1) by the CPC. Accordingly we uphold the finding of the CIT(A) of rejecting the claim of rectification of order u/s 143(1)(a) of the Act. Whether CIT(A) has rejected the claim of allowing relevant exemption on merit? - We find that the assessee made a fresh claim before the CIT(A) which was rejected by CIT(A) on the ground that no relevant documents in support of exemption was filed during the first appellate proceedings before him and said claim of exemption was sought merely on the basis of the Form No. 16. But we are of the opinion that if the assessee is otherwise eligible for exemption under the provisions of the Act she should not be deprived merely for the reason that she failed to report the claim properly in the form prescribed for filing return of income. Assessee submitted that the assessee is willing to produce all the documents in support of exemption claimed if matter is restored back to the AO. We feel it appropriate to restore this issue back to the file of the AO with the direction to the assessee to produce all necessary evidence in support of its claim of exemption of the allowances. AO is directed to examine the said claim and allow in accordance with law after due verification and enquiry if so required

Issues Involved:
1. Adjustment of Rs. 55,26,484 under the head Salaries.
2. Levy of additional interest under Section 234B.
3. Levy of additional interest under Section 234C.
4. Adjustment of Rs. 35,26,484 not being income of the Appellant.
5. Opportunity of being heard before passing the NFAC order.
6. Validity of rectification order under Section 154.
7. Principles of natural justice and opportunity of being heard.
8. Erroneous computation of income, tax, and interest.

Summary:

Issue 1: Adjustment of Rs. 55,26,484 under the head Salaries
The assessee challenged the adjustment made by the NFAC, which added Rs. 55,26,484 under the head Salaries. The Tribunal noted that the assessee did not claim any exemption under Section 10 in the return of income, and the CPC correctly enhanced the income based on Form 26AS. The Tribunal upheld the finding of the Ld. CIT(A) rejecting the claim of rectification.

Issue 2: Levy of additional interest under Section 234B
The assessee contested the additional interest levied under Section 234B. The Tribunal did not provide specific details on this issue, but it was implied that the additional interest was a consequence of the adjusted income.

Issue 3: Levy of additional interest under Section 234C
Similar to Section 234B, the assessee disputed the additional interest levied under Section 234C. The Tribunal did not address this issue separately, indicating that it was also a result of the adjusted income.

Issue 4: Adjustment of Rs. 35,26,484 not being income of the Appellant
The assessee argued that Rs. 35,26,484 was not her income and should be exempt under Section 10. The Tribunal found that the assessee did not declare this exemption in the return and upheld the CPC's adjustment. However, the Tribunal allowed the assessee to present evidence supporting the exemption claim and directed the Assessing Officer to verify and allow the claim if valid.

Issue 5: Opportunity of being heard before passing the NFAC order
The assessee claimed that the NFAC order was passed without providing an opportunity of being heard. The Tribunal did not specifically address this issue, but the overall judgment implied that procedural fairness was considered in the remand for verification.

Issue 6: Validity of rectification order under Section 154
The assessee challenged the rectification order under Section 154, arguing it was bad in law and void ab initio. The Tribunal upheld the CPC's action, stating that the assessee's omission was not a mistake apparent from the record and could not be rectified under Section 154.

Issue 7: Principles of natural justice and opportunity of being heard
The assessee argued that the rectification order violated the principles of natural justice. The Tribunal acknowledged this by allowing the assessee to produce necessary evidence for the exemption claim upon remand to the Assessing Officer.

Issue 8: Erroneous computation of income, tax, and interest
The assessee contended that the income, tax, and interest were computed erroneously based on incorrect facts. The Tribunal found that the assessee failed to report the exemption properly in the return, but allowed the opportunity to correct this by presenting evidence to the Assessing Officer.

Conclusion:
The Tribunal partly allowed the appeal for statistical purposes, directing the Assessing Officer to verify the exemption claim of Rs. 35,26,484 and allow it if valid, while upholding the CPC's adjustment and rejecting the rectification claim under Section 154.

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