2013 (12) TMI 358 - AT - Income Tax

Assessment of incme u/s 143(1) While filing the e-return, the assessee has shown interest received as income under the head Income from other sources at Rs.3,38,345 and at the same time under the very same head has shown interest paid as Rs. -2,33,535 During processing of return the negative figure was ignored and the income was assessed at Rs. 3,38,345 - Held that - The assessee was not aware of the fact that negative figure is not accepted by the server The department cannot benefit from the ignorance of the taxpayers using the latest technology - This is not ignorance of law but ignorance of the usage of the latest technology - In the interest of justice and fair play to the taxpayer This issue is restored back to the files of the Assessing Officer.

Summary

Issues involved: Adjustment made while processing e-return, incorrect claim for deduction, ignorance of taxpayers in preparing e-return, rectification of error by Assessing Officer.

Analysis of the Judgment:

Adjustment made while processing e-return:
The appeals by two different assessees were directed against orders of the Commissioner of Income-tax (Appeals) for the assessment year 2009-10. The grievance of the assessee in both appeals related to the adjustment made while processing the e-return. In one case, the interest received and interest paid were shown under the same head, resulting in a negative figure of interest paid being rejected during processing. The Commissioner of Income-tax (Appeals) held that the Assessing Officer rightly made adjustments for this incorrect claim and concluded that no appeal lies against such processing. However, the Tribunal found that the error was due to ignorance of technology by the taxpayer and directed the Assessing Officer to rectify the claim, allowing only the net interest income to be added to the taxable income.

Incorrect claim for deduction:
The Commissioner of Income-tax (Appeals) deemed the claim for deduction as incorrect due to the assessee's failure to reflect the correct details in the return of income. The Central Board of Direct Taxes had made it mandatory for corporate assessees to file electronic returns, leading to some taxpayers making clerical errors due to lack of familiarity with the technology. The Tribunal emphasized that such errors should be rectified in the interest of justice and fair play to the taxpayer, directing the Assessing Officer to examine and deduct the correct interest paid amount from the interest received figure.

Ignorance of taxpayers in preparing e-return:
The Tribunal highlighted the lack of education provided to taxpayers regarding the nuances of preparing an e-return, resulting in clerical errors and ignorance of technology. While acknowledging the power of the Central Board of Direct Taxes to frame rules, the Tribunal emphasized that it should not benefit from taxpayers' ignorance of technology. The Tribunal viewed the error in this case as ignorance of technology rather than ignorance of the law, emphasizing the need for rectification by the Assessing Officer.

Rectification of error by Assessing Officer:
Drawing support from a similar case, the Tribunal directed the Assessing Officer to rectify the error in processing the e-return, similar to previous instances where such errors were rectified. The Tribunal restored the appeals back to the files of the Assessing Officer with directions to examine and rectify the claims made by the assessees, ensuring that only the correct amount is added to the taxable income. Both appeals were allowed for statistical purposes based on the above findings.

This detailed analysis of the judgment highlights the issues involved, the Tribunal's reasoning, and the directions provided for rectification, emphasizing the importance of fair treatment to taxpayers and rectification of errors caused by ignorance of technology.