2022 (9) TMI 864 - AT - Income Tax

Rectification u/s 154 - assessee challenging the 143(1) order - HELD THAT - As it is seen that in these peculiar facts and circumstances, no mistake can be said to have been committed by the CIT(A) in dismissing the appeal filed. The assessee presumably under ignorance instead of challenging the order passed u/s.154 has instead challenged the order u/s.143(1) - Accordingly, on facts no fault can be found with the exercise of power by the First Appellate Authority. Appeal of the assessee deserves to fail, it need also be observed that being live to the concerns of the assessee, it is hereby deemed necessary to observe that in the eventuality the assessee deems it fit to challenge the order passed by the AO u/s. 154, it is hoped that the First Appellate Authority considers the delay in the filing of the appeal fairly as admittedly in the facts of the present case, the assessee cannot be said to have acted carelessly or be accused of sleeping over his rights. The assessee as per record has suffered on account of the ignorance in understanding the nuances of law. Accordingly, on account of lack of proper advice available to the assessee, opportunity to claim redressal under law should not be crushed. It is seen that no undue advantage is gained by the assessee by approaching the First Appellate Authority by filing appeal against the order u/s.143(1) and no vested right of the Revenue is upset if the assessee is permitted to appeal against the order u/s. 154 - Appeal of the assessee is dismissed.

Summary

Issues:
1. Correctness of order dated 17.12.2021 of CIT(A) NFAC Delhi regarding the addition of FDRs interest.
2. Appeal filed against order under section 143(1)(a) instead of section 154.
3. Violation of principles of natural justice.
4. Charging of interest under sections 234B and 234C.

Analysis:

Issue 1: Correctness of CIT(A) NFAC Order
The appeal challenged the order of CIT(A) NFAC rejecting the appeal summarily and sustaining an addition of Rs. 1667017 on account of FDRs interest. The appellant contended that the interest accrued on FDRs is incidental to carrying out charitable activities and exempt under section 10(23C)(iiiab) read with section 11 of the Income Tax Act. The AO had added the interest income twice, resulting in an incorrect total. The appellant argued for the deletion of the sustained interest amount.

Issue 2: Appeal Against Incorrect Order
The appellant filed an appeal against the order passed under section 143(1)(a) instead of section 154, believing the issues were the same. The AR reiterated that the AO acted contrary to law and facts by determining the total income incorrectly. The appellant's trust, being an educational institution, claimed exemption under sections 10(23C)(iiiab) and 11 of the Act. The AO's adjustment under section 143(1) was challenged as not permissible for contentious issues.

Issue 3: Violation of Natural Justice
The appellant argued that the principles of natural justice were violated by both CIT(A) NFAC and AO CPC in passing their respective orders. The interest income against FDRs, exempt under section 10(23C)(iiiab) and section 11, was considered incidental to the appellant's educational objectives. The appellant contended that the AO erred in charging interest under sections 234B and 234C, which should be deleted from the assessment order.

Conclusion:
The ITAT Chandigarh dismissed the appeal, noting that the appellant challenged the order under section 143(1) instead of section 154, where a rectification application had been filed. The tribunal observed that the appellant's ignorance led to the incorrect choice of appeal, but highlighted the need for fair consideration if the appellant decides to challenge the correct order in the future. The dismissal was based on the procedural error in selecting the order to appeal against, despite acknowledging the appellant's lack of legal understanding.