2023 (8) TMI 672 - AT - Income Tax

Adjustment and issuing intimation u/s 143(1)(a) by CPC - whether Centralized Processing Centre (CPC) could not have made the disallowance u/s 143(1)(a) as it is beyond the scope of the adjustment enumerated in the said provision? - HELD THAT - We find, the first appellate authority has not examined the aforesaid aspects, may be because, as submitted by the learned counsel for the assessee, the appeal proceedings were conducted through faceless mechanism. Therefore, we are inclined to restore the issue to the file of the first appellate authority to examine assessee s contention regarding non-compliance with the conditions enshrined in first and second proviso to section 143(1)(a) - FAA is also directed to consider all other submissions of the assessee disputing the disallowances. Ground is allowed for statistical purposes. Credit for TDS - We do not find any infirmity in the decision of the FAA as he has directed AO to verify whether corresponding income relating to TDS amount credit for which it has been claimed by the assessee, has been offered to tax or not and thereafter allow the credit. In any case of the matter, the restriction imposed u/s 251 is only in respect of the first appellate authority. we direct the AO to verify whether the assessee has offered the corresponding income in relation to which it has claimed credit for TDS amount and thereafter allow the credit. Non grant of TDS credit in the written submissions filed before the first appellate authority, which was not considered - objection of DR on entertaining the issue is unacceptable. Be that as it may be, it is the case of the assessee that, though, the TDS amount of Rs. 5,76,79,710 is appearing in Form 26AS, however, the assessee has inadvertently not claimed the TDS credit in the return of income. The learned counsel has further submitted before us that he is ready to furnish a reconciliation statement before the Assessing Officer indicating that income corresponding to the TDS amount has been offered to tax. We are inclined to restore the issue to the Assessing Officer for examining assessee s claim after verifying the TDS credit appearing in Form 26AS and also the reconciliation statement to be filed by the assessee to ascertain whether the corresponding income in relation to the claim of TDS has been offered to tax by the assessee or not. Needless to mention, the Assessing Officer must provide reasonable opportunity of hearing to the assessee.

Summary

Issues involved:
The appeal challenges the order passed by the National Faceless Appeal Centre for the assessment year 2019-20, specifically addressing the disallowance made under Section 40(a)(i) of the Income-Tax Act, 1961, and other related directions issued by the first appellate authority.

Issue 1 - Disallowance under Section 40(a)(i) of the Act:
The assessee contested the disallowance made under Section 40(a)(i) before the first appellate authority, arguing that the Centralized Processing Centre (CPC) exceeded its scope by making the disallowance under Section 143(1)(a) of the Act. Additionally, the assessee claimed a non-discrimination clause based on tax treaties with certain countries. The Commissioner (Appeals) upheld the disallowance at 100%, prompting the assessee to request restoration of the issue to the first appellate authority. The Tribunal found that the first appellate authority did not consider all submissions due to the faceless scheme and therefore directed the issue to be restored for further examination.

Issue 2 - Direction to verify TDS credit income:
The assessee challenged the direction of the first appellate authority to the Assessing Officer to verify if the corresponding income for which TDS credit was claimed had been offered for tax. The Tribunal upheld the authority's decision, noting that the authority had the power to remand the matter to the Assessing Officer for verification. The Tribunal directed the Assessing Officer to verify the income related to the TDS credit claimed by the assessee and allow the credit after due verification and hearing.

Issue 3 - Non-grant of TDS credit:
The assessee raised the issue of non-grant of TDS credit amounting to Rs. 5,76,79,710, stating that although the TDS amount appeared in Form 26AS, it was inadvertently not claimed in the return of income. The Departmental Representative argued that this issue was not raised in the grounds of appeal before the first appellate authority. However, the Tribunal found that the issue was indeed raised in written submissions before the authority, leading to the decision to restore the matter to the Assessing Officer for verification of the TDS credit and corresponding income offered for tax, with the assessee given an opportunity to present a reconciliation statement.

In conclusion, the Tribunal allowed the appeal for statistical purposes, directing further examination and verification of the issues raised regarding disallowance under Section 40(a)(i) and the TDS credit matters.