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2023 (12) TMI 1160 - AT - Income TaxAddition in an intimation order u/s 143(1) - AO/CPC jurisdiction to make an adjustment in an Intimation Order u/s. 143(1) - exemption claimed u/s 10 was denied and treated as profits and gains of business or profession.HELD THAT - According to the provisions of section 143 (1) (a) of the act where the total income or loss is required to be computed adjustment prescribed in clause number (i) to (vi) can be made only after giving an intimation to the assessee for such adjustment either in writing or in electronic mode. We do not find any such intimation is given to the assessee of such adjustment holding that the claim of exemption made by the assessee is incorrect. Therefore, such adjustment is made in contravention of the provision of section 143 (1) of the Act and hence, it is not sustainable. Even otherwise on the merits of the issue we find that exemptions claimed by the assessee is with respect to dividend from mutual fund which is exempt under section 10 (35) of the income tax act, interest from tax free bond which is exempt under section 10 (15) of the Act and the long-term capital gain on consolidation of mutual funds which is exempt under section 10 (38) of the act. Therefore, even otherwise the impugned income in dispute is exempt which is confirmed by the ld. CIT (A) also. Therefore, as the impugned adjustment is without intimation to the assessee and further the income is held to be exempt by the CIT (A) , we do not find any reason to sustain the intimation passed u/s 143(1) of The Act . In view of this Ground no 1 is allowed.
Issues involved:
The issues involved in this case include the jurisdiction of the AO/CPC to make adjustments in an Intimation Order under section 143(1), treatment of dividend income, interest from tax-free bonds, and profit on redemption of mutual funds. Jurisdictional Issue: The ITAT Mumbai addressed the jurisdictional issue regarding the adjustment made in an Intimation Order under section 143(1). The Appellant contended that the AO/CPC does not have the jurisdiction to adjust in an Intimation Order, as it should be a matter of scrutiny proceedings. The ITAT found that the adjustment made without prior intimation to the assessee was not sustainable under the provisions of section 143(1) of the Act. Dividend Income Issue: The ITAT considered the treatment of dividend income of Rs. 17,65,600/- claimed by the Appellant. The Appellant argued that the dividend income from Mutual Funds is exempt from tax under section 10(35) and should not be treated as taxable income under the head 'Profits and Gains of Business/Profession'. The ITAT found that the income in dispute was exempt under the relevant provisions of the Act, as confirmed by the CIT (A), and therefore allowed Ground no 1 of the appeal. Interest from Tax-Free Bonds Issue: The issue of interest from tax-free bonds amounting to Rs. 1,12,880/- was raised before the ITAT. The Appellant contended that this income is exempt from tax under section 10(15) and should not be treated as taxable income under the head 'Profits and Gains of Business/Profession'. The ITAT noted that this income was also exempt under the law and supported by the CIT (A)'s decision. Profit on Redemption of Mutual Fund Issue: The ITAT examined the Appellant's claim of profit on redemption of mutual funds amounting to Rs. 55,56,214/-. The Appellant argued that the income arising from the redemption of Mutual Funds was correctly offered for tax under the head 'Capital Gains' and not 'Business Income'. The ITAT found that the impugned income was exempt under section 10(38) of the Act and supported by the CIT (A)'s decision, leading to the allowance of the appeal. Conclusion: The ITAT allowed the Appellant's appeal, emphasizing the jurisdictional issue of adjustments in an Intimation Order under section 143(1) and confirming the exemption of dividend income, interest from tax-free bonds, and profit on redemption of mutual funds under the relevant provisions of the Income Tax Act. The decision was pronounced on 29.11.2023.
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