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2022 (4) TMI 907 - AT - Income TaxReopening of assessment u/s 147 - TDS u/s 194J - adjustment of adding 50% presumptive income u/s 44ADA on manpower supply turnover - whether the CPC u/s. 143(1)(a) of the Act can make any adjustment/addition in the aforesaid facts and circumstances? - HELD THAT - According to us, the CPC could not have made the adjustment since the question of fact arises on the factual matrix of this case as noted above. The assessee s contention is that the amount of ₹ 31,21,167/- is included in the turnover of ₹ 52,81,344/-. Therefore, merely based on TDS entries given in Form 26AS for deduction of tax u/s. 194J, the adjustment could not have been made without conducting any enquiry, more particularly when the man power supply is not covered as a profession within the meaning of section 44AA of the Act read with relevant notifications. We find force in the contention of the Ld. AR that this particular issue could not have been decided by the CPC u/s. 143(1)(a) of the Act. In case, if the department finds that there is an anomaly, then it has liberty to do so by conducting scrutiny assessment under the provisions of law or to re-open the assessment u/s. 147 of the Act. Thus, we find that CPC had no jurisdiction to make impugned adjustment within the meaning of section 143(1)(a) of the Act. Accordingly, the adjustment made by the CPC stands deleted. Appeal of assessee allowed.
Issues:
Appeal against order of CIT(A) - Delay in filing appeal - Adjustment made by CPC Bengaluru - Jurisdiction of CPC under section 143(1)(a) - Adjustment based on Form 26AS entries - Nature of man power supply business - TDS deduction under section 194J - Classification of income - Jurisdiction of CPC to make adjustments. Analysis: 1. Delay in filing appeal: The appellant filed an appeal against the order of the CIT(A) with a delay of 13 days. The delay was condoned by the ITAT considering the reasonableness of the cause, and the appeal was taken up for adjudication. 2. Adjustment made by CPC: The issue revolved around the adjustment made by the CPC, Bengaluru while processing the appellant's income tax return. The CPC had adjusted the total income by adding 50% presumptive income under section 44ADA on the turnover of the man power supply business. The appellant contended that the adjustment was erroneous as the man power supply business did not fall under a profession as defined by the Act. 3. Jurisdiction of CPC under section 143(1)(a): The appellant argued that the CPC exceeded its jurisdiction under section 143(1)(a) by making the adjustment without providing a reasonable opportunity to the assessee. The ITAT agreed with the appellant, stating that the CPC could not have made the adjustment without conducting a detailed enquiry, especially considering the nature of the man power supply business. 4. Nature of man power supply business: The appellant emphasized that the man power supply business did not involve any technical or professional services as per the relevant provisions of the Act. The appellant's contention was that the TDS deduction under section 194J by clients did not automatically classify the income as professional income, as the appellant only provided labor supply services. 5. Classification of income: The ITAT noted that the classification of income was a complex issue that required detailed scrutiny and examination of records, which was not possible under section 143(1) of the Act. The ITAT agreed with the appellant that the CPC's adjustment was beyond its jurisdiction and should have been addressed through scrutiny assessment or reassessment under the Act. 6. Decision: After hearing both parties, the ITAT allowed the appeal of the assessee, ruling that the adjustment made by the CPC was not within the jurisdiction of section 143(1)(a) of the Act. The ITAT held that if there were anomalies, they should be addressed through proper scrutiny assessment or reassessment procedures, rather than through adjustments under section 143(1)(a). In conclusion, the ITAT allowed the appeal, emphasizing the importance of jurisdictional limits and proper procedures in making adjustments to a taxpayer's income.
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