2023 (2) TMI 799 - AT - Income Tax

Rectification of mistake u/s 154 - LTCG computation - cost of acquisition while computing the capital gains - AO/CPC not reducing a sum from working of the profits of business or profession as the said sum represented sale proceeds of immovable property which had been credited to the Profit and Loss Account and while filing the return, the same had been duly considered under the head income from capital gains - HELD THAT - Adjustment to gross total income as per the intimation issued by the CPC has arisen on account of capital gains which has to be segregated from profit/loss and considered under the head capital gains . In the return of income, the assessee has reduced the sale consideration from profit /loss account and offered the same under the head long term capital gains. CPC however has adjusted and reduced only a figure of Rs 2,06,559/- which has resulted in higher income by Rs 17,83,441/-under the head profit/loss from business/profession . It is an admitted fact that the assessee has offered the long term capital on sale of the plot of land and which has been considered along with long term capital loss of Rs 23,31,449-/ and after setting off, long term capital loss has been allowed by CPC to the extent of Rs 17,51,746/-. In light of aforesaid, it is clearly a mistake apparent from record and the same is hereby directed to be deleted. Appeal of the assessee is allowed.

Summary

Issues:
- Whether the adjustment made by the Centralized Processing Centre, Bengaluru under section 143(1) of the Income Tax Act was justified.
- Whether the rectification application filed under section 154 of the Act was rightly rejected.

Analysis:

1. Adjustment by CPC under Section 143(1):
The appellant contested the adjustment of Rs. 17,83,441 made by the CPC, Bengaluru, claiming it was not in line with the treatment of sale proceeds of immovable property in the return. The appellant argued that the sale consideration was duly reduced from business income and accounted for separately under capital gains. The Tribunal referred to a similar case adjudicated by the Chandigarh Bench, where it was held that the adjustment made by CPC was erroneous. The Tribunal noted that the sale consideration was appropriately reduced from business income and offered under capital gains. Consequently, the adjustment was directed to be deleted as it was a mistake apparent from the record.

2. Rejection of Rectification Application under Section 154:
The appellant filed a rectification application under section 154, which was rejected by the CPC, Bengaluru. The Ld. CIT(A) upheld this rejection stating that the appellant should have filed an appeal instead of a rectification request. However, the appellant argued that the rectification request was filed within the prescribed time limit for filing an appeal. The Tribunal agreed with the appellant, citing the provisions of Section 154 that allow for rectification of mistakes apparent from the record. Additionally, the appellant relied on a previous order of the Tribunal in a similar case involving the appellant's brother, where the appeal was allowed. The Tribunal found merit in the appellant's argument and directed the adjustment to be deleted, thereby allowing the appeal.

In conclusion, the Tribunal allowed the appeal, directing the deletion of the adjustment made by the CPC under section 143(1) and emphasizing the applicability of rectification under Section 154 for correcting mistakes in the income tax proceedings.