TMI Blog2023 (3) TMI 1193X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) that these incomes are already declared by the assessee and due tax was paid while filing the return of income. This fact has been completely ignored by the CIT(A) while passing the impugned order. The two item of income being interest on PPF and interest on REC bonds which are exempt incomes under section 10 of the Income Tax Act are also overlooked by the CIT(A) while passing the impugned order. It appears that the CIT(A) has simply confirmed the adjustments made by the CPC by referring to the guidance note on the tax audit under section 44AB and ignoring relevant and crucial fact that the rental income as well as income from other source has already been declared by the assessee in the return of income and adjustment to that extent has resulted double taxation of the income already declared by the assessee and further the exempt income has been taxed by the CPC which is absolutely against the provisions of the Income Tax Act. Hence, we find that the impugned order has been passed by the CIT(A) mechanically without application of mind which has forced the assessee to file this second appeal and suffered financial loss on account of appeal fee of Rs. 10,000/- and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to note that in the automated processing of returns u/s 143(1), any variance between Tax Audit Report and the ITR shall result in necessary adjustments in accordance with the provisions of the Act. This process does not involve any detailed investigation of facts or documents other than ITR, Form 3CD etc. Detailed instructions are issued every year by CBDT/DGIT(Systems) as to how the various schedules and entries in different ITR are to be properly filled in and how its consistency with other reports like Form 3CD are to be ensured. Processing of return by CPC does not entail any detailed investigation of notes on accounts and or final accounts etc. as is being sought by the appellant, since it is not permitted under the scope and ambit of the provisions of Section 143(1) of the Act. (Para 4.5 of the appellate order) without going to the facts of the case that income has already been offered to taxation in the original return of income under section 139(1) of the Income-tax Act, 1961 is wholly bad in law and on facts of the case. 5. BECAUSE the order appealed against is contrary to the facts, law and principles of natural justice. 2. The learned AR of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the return of income under the head exempt income but the CPC has made the adjustment and addition on account of these exempt incomes also. Hence, the learned AR has pointed out that the adjustment made by the CPC is nothing but the items which are reported in the tax audit report under Clause No. 16(d) representing any other income apart from the items of income within the scope of section 28 required to be reported in Clause 16(a) of the Audit report in Form 3CB. Thus, the learned AR has submitted that the adjustment has been made mechanically and resulted double taxation of certain incomes as well as the taxation of exempt income which is highly unjustified. He has referred to the written submissions filed before the CIT(A) and submitted that the assessee has specifically pointed out in the written submissions as well as the grounds of appeal before the CIT(A) that the adjustment made by the CPC, while processing the return of income under section 143(1)(a) has resulted in double taxation of the same income on account of rental income, interest on saving bank account, interest on fixed deposit and dividend income. Apart from double taxation it has also taxed the exempt income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed set off of brought forward depreciation of Rs. 3,26,446/- which has resulted net income from business and profession as loss of Rs. 7,63,940/-. The said return of income was processed by the CPC, vide order dated 11.08.2022 whereby an adjustment of Rs. 15,21,057/- was made as per Sr. No. 23 of annexure to computation of income from business or profession. The CPC has then allowed the current year s business loss of Rs. 4,37,494/- and net amount of Rs. 10,83,563/- was added to the income from house property and income from other sources declared by the assessee. Thus, the total income of the assessee was computed by CPC at Rs. 16,98,990/- as against the declared income of Rs. 1,77,930/-. On careful perusal of the intimation of processing of return of income by the CPC under section 143(1) and the tax audit report in Form 3CB, we find that the tax auditor has reported in Clause 16(a) to 16(d) as under:- Acknowledgement Number 191975550140222 FORM 3CB [See rule 6G(2)] Statement of particulars required to be furnished under Section 44AB of the Income Tax Act, 1961 PART-A 1. * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * 2. * * * * * * ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ental Income ₹11,26,000 2 Interest on PPF ₹3,41,127 3 Interest on SB A/C ₹30,185 4 Interest on FDR ₹2,771 5 Dividend ₹4,714 6 Interest of Bonds ₹16,260 (e) Capital Receipt, if any: SI. NO. Description Amount 1 LIC Survival Benefit ₹ 11,21,500 XXXXXXX XXXXXXX XXXXXXX XXXXXXX XXXXXXX 5. It is clear that Sub-Clause (d) of Clause 16 of the audit report describes any other item of income which is entirely different from the item of income falling within the scope of section 28 as per Sub Clause (a) of Clause 16 of Form 3CB. Though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding with that company, as the Central Government may, by notification' in the Official Gazette, specify in this behalf;] 7. Thus, when the REC tax free bonds were issued with the specific notification that the benefit of tax under section 10(15)(iv)(h) of the Income Tax Act is available on these bonds then there is no question of taxing and making the adjustment of interest on REC bonds by the CPC and the same is highly unjustified. The assessee before the CIT(A), has raised this specific issue in the grounds of appeal which are reproduced by the CIT(A) in para 2 of the impugned order. The assessee has also filed the written submissions before the CIT(A) and specifically explained that the incomes which are reported in the tax audit report in Form 3CB under Clause 16(d) has already been declared by the assessee in the return of income under the head income from house property and income from other sources and therefore to that extent, it is double taxation of the said income by the CPC. Further, the assessee has explained that the two items of income being interest on PPF and interest on REC tax free bonds are exempt income duly reported in the return of income and addit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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