2023 (9) TMI 369 - AT - Income Tax

Scope of the Adjustment made by the CPC u/s 143(1) when scrutiny assessment made u/s 143(3) - non-deduction of tax or non-depositing of TDS deducted by the assessee - case of the assessee was subsequently selected for scrutiny - CIT(A) dismissed the appeal of the assessee and confirmed the adjustment made by the CPC as the payment made on 31.102018 is not within the statutory time limit - HELD THAT - CIT(A) has taken statutory time limit for depositing the TDS as per the provision of chapter XVII instead of considering the disallowance u/s 43B and u/s 40(a)(ia) which provides the payment on or before due date of filing u/s 139(1) of Income Tax Act. As brought to the notice of the bench that the case of the assessee was subsequently, selected for scrutiny and Ld. AO has already passed scrutiny assessment order u/s 143(3) on 24.02.2021 by National Faceless Assessment Centre Considering the facts that the case of the assessee was subsequently taken up for scrutiny assessment and subsequent assessment order u/s 143(3) has been passed on 24.02.2021, we find that the order of processing u/s 143(1) stands merged with the scrutiny assessment order passed u/s 143(3) and therefore, the appeal proceedings against the processing and adjustment made by the CPC, becomes infructuous. Accordingly, we set aside the impugned order passed by the Ld. CIT(A) - Appeal of assessee is allowed.

Summary

Issues involved:
The issues involved in the judgment include the assessment based on hypothetical presumptions, consideration of extended due date for filing returns, confirmation of additions under specific sections of the Income Tax Act, and errors in confirming disallowances.

Issue 1: Assessment based on hypothetical presumptions
The appellant challenged the order of the Ld. Commissioner of Income Tax (Appeals) as being based on hypothetical presumptions, illegal, and beyond the facts of the case. The appellant argued that the Ld. CIT(A) erred in not considering the order passed u/s 143(3) for the same Assessment Year, which had deleted the additions made by the CPC under u/s 143(1). The appellant contended that the Ld. CIT(A) overlooked crucial evidence and repeated a grave mistake by not quashing the order u/s 143(1).

Issue 2: Consideration of extended due date for filing returns
The appellant raised the issue of the Ld. CIT(A) not considering the extended due date for filing returns and audit reports for A.Y. 18-19. The appellant provided proof of TDS payments made on 31/10/2018, within the extended timeline, but the Ld. CIT(A) did not acknowledge this and made adjustments based on incorrect timelines, leading to erroneous conclusions.

Issue 3: Confirmation of additions under specific sections of the Income Tax Act
The Ld. CIT(A) confirmed additions aggregating to Rs. 42,10,786, inclusive of amounts under various sections of the Income Tax Act. The appellant argued that the Ld. CIT(A) failed to verify the details of the additions made, leading to an incorrect assessment of the total income.

Issue 4: Errors in confirming disallowances
The Ld. CIT(A) confirmed disallowances under specific sections of the Income Tax Act, including disallowance of TDS amounts not paid within specified due dates. The appellant contended that the disallowances were made despite compliance with payment timelines and submission of relevant documents, resulting in an unjust assessment.

Separate Judgement:
The Appellate Tribunal, ITAT Indore, comprising Shri Vijay Pal Rao, Judicial Member, and Shri B.M. Biyani, Accountant Member, allowed the appeal of the assessee. The Tribunal held that the processing order u/s 143(1) stood merged with the subsequent scrutiny assessment order u/s 143(3), rendering the appeal against the processing and adjustments made by the CPC infructuous. As the scrutiny assessment had been completed, the impugned order of the Ld. CIT(A) was set aside, and the Tribunal refrained from expressing any view on the merits of the issues challenged by the assessee.