2020 (2) TMI 1489 - AT - Income Tax

Adjustments made u/s 143(1)(a) - .CIT(A) enhanced the addition and directed the Assessing Officer(AO) to deny the exemption of long term capital gains on sale of property - AR argued that the assessee had sold the property during the year under consideration and admitted the capital gains on sale of property for a sale consideration of ₹ 31,38,000/- from which the cost of development to the extent of ₹ 7,31,016/- was claimed as deduction and the balance amount of ₹ 24,06,984/- was invested in bank fixed deposits which is eligible for deduction u/s 11(1A)(a) - HELD THAT - As perused the material placed on record as per the adjustments made by the CPC, Bangalore u/s 143(1)(a) is an issue which required to be verified with the relevant documents. Therefore, the adjustments are not within the scope provided u/s 143(1)(a) of the Act. As per proviso to section 143(1)(a), the AO is required to give an intimation before making such adjustments, either in writing or in electronic mode and the department has not demonstrated that it has given an intimation to the assessee proposing to make such adjustments. Therefore, the adjustment made by the CPC u/s 143(1)(a) is beyond the scope of the said section, hence, not permissible and accordingly deleted. Enhancement made by the Ld.CIT(A) in the appeal - CIT(A) has directed the AO to deny the exemption claimed by the assessee u/s 11(1A)(a) of the Act and the assessee contended that the Ld.CIT(A) is not permitted to make enhancement without giving opportunity to the assessee - In the instant case we, observe from the order of the Ld.CIT(A) that, he has not given any enhancement notice before enhancing the addition. Therefore, the enhancement made by the Ld.CIT(A) is unsustainable, hence deleted. Denial of credit - CIT(A) without verifying the details and reconciliation of the income has directed the AO to allow the sum of ₹ 35,309/- as against ₹ 46,426/- claimed by the assessee. Therefore, we, direct the AO to call for the information for reconciliation of the receipts and the admission of income as per the system of accounting followed by the assessee and allow the credit for the taxes paid/credit claimed in respect of the income admitted in the year under consideration or in the earlier years as per the method of accounting. Accordingly, the appeal of the assessee is on this ground is allowed for statistical purposes.

Summary

Issues Involved:
1. Adjustments made u/s 143(1)(a) of the Income Tax Act, 1961.
2. Enhancement of addition u/s 11(1A)(a) by the CIT(A) without giving opportunity to the assessee.
3. Denial of credit for taxes paid/credit claimed by the assessee.

Issue 1: Adjustments made u/s 143(1)(a) of the Income Tax Act, 1961:
The appeal was filed against the adjustments made by the Income Tax Department under section 143(1)(a) of the Act. The appellant contested the adjustments made to the income, which resulted in a demand raised by the department. The CIT(A) had enhanced the addition by denying the exemption of long term capital gains on the sale of property. During the appeal hearing, the appellant argued that the adjustments made were impermissible and beyond the scope of section 143(1)(a) of the Act. The Tribunal observed that the adjustments made by the department were not within the scope of section 143(1)(a) as the AO failed to provide intimation before making such adjustments. Consequently, the adjustments made by the department were deemed impermissible and were deleted.

Issue 2: Enhancement of addition u/s 11(1A)(a) by the CIT(A) without giving opportunity to the assessee:
The next issue revolved around the enhancement made by the CIT(A) concerning the denial of exemption claimed by the assessee under section 11(1A)(a) of the Act. The appellant contended that the CIT(A) had enhanced the addition without providing an opportunity to the assessee. The Tribunal noted that the CIT(A) had not issued any enhancement notice before making the addition, rendering the enhancement unsustainable. Consequently, the enhancement made by the CIT(A) was deemed unsustainable and was deleted.

Issue 3: Denial of credit for taxes paid/credit claimed by the assessee:
The third issue pertained to the denial of credit for an amount claimed by the assessee. The CIT(A) directed the Assessing Officer to allow a lesser amount as credit compared to what was claimed by the assessee without proper verification. The Tribunal directed the AO to reconcile the receipts and income details, ensuring that the credit for taxes paid/claimed was in accordance with the accounting method followed by the assessee. The appeal of the assessee on this ground was allowed for statistical purposes.

In conclusion, the Tribunal partially allowed the appeal of the assessee, primarily focusing on the impermissible adjustments made under section 143(1)(a) and the unsustainable enhancement made by the CIT(A) without providing an opportunity to the assessee. Additionally, the Tribunal directed the AO to verify and reconcile the credit claimed by the assessee for taxes paid, ensuring compliance with the accounting method followed.