9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (5) TMI 1644 - AT - Income TaxAddition u/s 143(1)(a)(vi) - inconsistency being found between the lottery income under Income from Other Sources head in return and Form 26AS. HELD THAT - As lottery income received had already been disclosed in the return of income filed by the assessee and tax whereupon was deducted u/s 194B as is evident from Form 26AS and expenses to the as organized adventure in the nature of trade game was incurred for the purpose the entire addition made by the AO by invoking Section 143(1)(a)(vi) in the hands of the assessee is found to be palpably wrong and the order therefore is found to be not sustainable in the eye of law thus be deleted. Appeal of assessee allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal are: (a) Whether the addition of Rs. 30,00,000/- made under Section 143(1)(a)(vi) of the Income Tax Act, 1961 ("the Act") on account of alleged inconsistency between the income declared under "Income from Other Sources" and the amount reflected in Form 26AS is justified, given that the assessee had already disclosed the said income in the return of income? (b) Whether the Commissioner of Income Tax (Appeals) erred in upholding the addition of Rs. 16,04,850/- out of the said Rs. 30,00,000/- as income chargeable under Section 115BBE of the Act, despite the assessee having offered the entire sum under the head "Other Sources" and claimed expenses related to the organized adventure? (c) Whether the adjustment made under Section 143(1)(a)(vi) of the Act was beyond the jurisdiction and scope of that provision, especially when the income was already included in the return? (d) Whether the intimation issued under Section 143(1) of the Act without issuing a notice under Section 143(2) or without granting a fair and meaningful opportunity of hearing is valid or vitiated? (e) Whether the deduction of tax at source (TDS) at a special rate under Section 194B of the Act can be mechanically treated as evidence of income assessable at special rates under Section 115BB of the Act? 2. ISSUE-WISE DETAILED ANALYSIS Issue (a) and (c): Validity of addition under Section 143(1)(a)(vi) when income is already disclosed in return Relevant legal framework and precedents: Section 143(1)(a)(vi) of the Act empowers the Assessing Officer (AO) or Central Processing Centre (CPC) to make adjustments in the intimation where income appearing in Form 26AS or Form 16/16A has not been included in the return of income. The adjustment is limited to correcting omissions apparent from the records without initiating detailed scrutiny. Precedents relied upon by the assessee include:
Court's interpretation and reasoning: The Tribunal observed that the income of Rs. 30,00,000/- was already disclosed by the assessee under the head "Income from Other Sources" in the return of income filed under Section 139(1) of the Act. This was supported by the Form 26AS evidencing TDS deducted under Section 194B. The CPC's adjustment under Section 143(1)(a)(vi) was based on the premise that the income was not included in the return, which was factually incorrect. The Tribunal relied on the decision in Anita Seth's case, where it was held that CPC cannot make such adjustments under Section 143(1)(a) when the income is already declared and the issue is debatable, requiring scrutiny under Section 143(2) or reassessment under Section 147. The Tribunal emphasized that the adjustment under Section 143(1)(a)(vi) is limited to correcting omissions apparent from records and not for resolving factual disputes. Key evidence and findings: The return filed by the assessee clearly showed income of Rs. 30,00,000/- under "Others" in "Income from Other Sources." The reply to the CPC's communication reiterated this fact and explained that the income arose from an organized adventure in the nature of a trade game. The Form 26AS corroborated the TDS deduction on this income. Application of law to facts: Since the income was already included in the return, the CPC had no jurisdiction to make the addition under Section 143(1)(a)(vi). The addition was therefore unsustainable as it amounted to double taxation. Treatment of competing arguments: The Department argued that there was an inconsistency between the income declared and Form 26AS, justifying the adjustment. However, the Tribunal found that the inconsistency alleged was not factual but rather a debatable issue of classification and claimed expenses. The Tribunal rejected the Department's mechanical reliance on TDS entries as a basis for adjustment. Conclusions: The Tribunal concluded that the addition of Rs. 30,00,000/- under Section 143(1)(a)(vi) was without jurisdiction and not sustainable in law. Issue (b) and (e): Treatment of expenses claimed and TDS deduction at special rate under Section 115BB Relevant legal framework and precedents: Section 115BB of the Act deals with taxation of winnings from lotteries, crossword puzzles, races, games, gambling, and betting at a special rate. Section 194B mandates TDS on winnings from lotteries at a specified rate. Assessee contended that the entire amount of Rs. 30,00,000/- was offered under "Income from Other Sources," and expenses of Rs. 16,04,850/- incurred in relation to the organized adventure (trade game) were claimed. The deduction of TDS at source under Section 194B cannot be mechanically equated with income taxable under Section 115BB. The Tribunal noted the submission that TDS is a mode of collection of tax and does not determine the nature or quantum of income. The assessee relied on Section 190 of the Act, which clarifies that tax may be deducted at source notwithstanding that regular assessment is to be made later. The nature of income must be determined on facts and law, not solely on TDS deduction. Court's interpretation and reasoning: The Tribunal accepted that the expenses claimed by the assessee against the income from the organized adventure were legitimate and should be considered. Further, the mere fact that TDS was deducted at a special rate under Section 194B does not automatically imply that the income is taxable under Section 115BB. Key evidence and findings: The assessee's return disclosed income under "Other Sources" including the Rs. 30,00,000/- and claimed expenses of Rs. 16,04,850/-. The CPC and CIT(A) had treated the expenses as disallowed and added the amount under Section 115BBE, but the Tribunal found no justification for such treatment. Application of law to facts: The Tribunal applied the principle that TDS deduction is only a provisional mechanism and does not conclusively determine the taxability or classification of income. The expenses incurred in relation to the income must be allowed unless specifically disallowed under the Act. Treatment of competing arguments: The Department relied on the fact of TDS deduction at a special rate and the Form 26AS entries to justify disallowance. The Tribunal rejected this mechanical approach and upheld the assessee's claim for expenses and classification of income. Conclusions: The Tribunal deleted the addition of Rs. 16,04,850/- sustained by the CIT(A), holding that the expenses claimed were legitimate and the income was correctly disclosed under "Other Sources." Issue (d): Validity of intimation under Section 143(1) without opportunity of hearing Relevant legal framework: Section 143(1) provides for intimation of income determination based on the return and available information. However, adjustments under this section must be limited to mistakes apparent from records. For factual disputes or additions, notice under Section 143(2) is required, which entails opportunity of hearing. Court's interpretation and reasoning: The Tribunal noted the assessee's contention that the intimation dated 15.07.2019 was issued without reasons and without granting a meaningful opportunity of hearing, rendering it vitiated. The Tribunal agreed with the principle that where issues are debatable and require verification, the proper course is issuance of notice under Section 143(2) rather than adjustment under Section 143(1). Application of law to facts: Since the addition was made under Section 143(1)(a)(vi) despite the income being disclosed, and without issuing a notice under Section 143(2), the intimation was held to be unreasonable and invalid. Conclusions: The Tribunal held that the intimation was without jurisdiction and vitiated for lack of opportunity of hearing and reasons. 3. SIGNIFICANT HOLDINGS The Tribunal held: "Having regard to the entire aspect of the materials and particularly in view of the fact that the income of Rs. 30,00,000/- received from M/s MSG AII Trading International (P) Limited had already been disclosed in the return of income filed by the assessee and tax whereupon was deducted under Section 194B of the Act to the tune of Rs. 9,00,000/- as is evident from Form 26AS and expenses to the tune of Rs. 16,04,850/- as organized adventure in the nature of trade game was incurred for the purpose, the entire addition of Rs. 30,00,000/- made by the Ld. AO by invoking Section 143(1)(a)(vi) in the hands of the assessee is found to be palpably wrong and the order, therefore, is found to be not sustainable in the eye of law and consequently the addition of Rs. 16,04,850/- sustained by the Ld. CIT(A) is, thus, deleted." Core principles established include:
Final determinations on each issue: (a) Addition of Rs. 30,00,000/- under Section 143(1)(a)(vi) was without jurisdiction and deleted. (b) Addition of Rs. 16,04,850/- sustained by CIT(A) was deleted as expenses were legitimately claimed. (c) Intimation under Section 143(1) without opportunity of hearing was invalid. (d) TDS deduction at special rate is not determinative of income taxability under Section 115BB.
|
