2024 (5) TMI 1296 - AT - Income Tax

Validity of rectification order passed u/s 154 - discrepancy in income computation - treatment of withdrawn amount from provident fund as taxable income - error in the intimation passed in the section 143 (1) - assessee is an employee who has derived income from the salary HELD THAT - Earlier year assessee was employed with other entity. He found his previous employer from 24 September 2009 to 13 February 2015. Therefore apparent that service of the assessee is more than five years. The assessee has offered and fund account from his previous employer namely Larsen and Toubro officers and supervisory staff provident fund. On 22 November 2016 assessee has written a sum of Rs. 3, 291, 601/ which is reflected in form number 26AS of the assessee wherein it shown that the above amount is paid to the assessee however total tax deducted thereon and deposited thereon is Rs Nil . In the rectified return of income filed by the assessee in schedule EI assessee has specifically disclosed at serial number 5 of details of exempt income wherein Rs. 3, 291, 601/ is stated to be exempt income. The total of the exempt income earned by the assessee is Rs. 4, 245, 904/ . In view of this is apparent that assessee has disclosed the above amount is exempt income. Therefore the order passed by the lower authorities are not sustainable in holding that the above sum withdrawn by the assessee from employees Provident fund account after serving for more than five years with his previous employer.it is not denied that if the above conditions are satisfied the income is exempt u/s 10 (12) of the act. Therefore no merit in the orders of the lower authorities which were passed without looking into the facts of the case stated in 2 rectification applications filed before the containing all the evidence. In view of this we direct the learned assessing officer to delete the addition made of withdrawal made by the assessee from his provident fund account which is exempt u/s 10 (12) of the act. Decided in favour of assessee.

Summary

Issues Involved:
The judgment involves issues related to the rectification order passed under section 154 of The Income Tax Act, discrepancy in income computation, and the treatment of withdrawn amount from provident fund as taxable income.

Rectification Order u/s 154:
The assessee filed an appeal against the appellate order passed by the National Faceless Appeal Centre, challenging the rectification order passed under section 154 of The Income Tax Act. The appellant raised grounds questioning the legality of the assessment order and the violation of natural justice. The dispute arose due to inconsistencies in the income declared by the assessee and the details in Form 26AS, leading to adjustments under section 143(1)(a) of the act.

Treatment of Withdrawn Amount from Provident Fund:
The main contention revolved around the treatment of the amount withdrawn by the assessee from his provident fund account. The Centralised Processing Centre made adjustments, considering the withdrawn amount as taxable income, leading to additions in the total income. The appellant argued that the withdrawn sum was exempt under section 10(12) of the act as it was accumulated during his employment with the previous employer for more than five years.

Appellate Proceedings:
The Assistant Commissioner of Income Tax rejected the rectification application, stating that the income was not disclosed as exempt in the original return. The National Faceless Appeal Centre also dismissed the appeal, upholding the decision of the AO. However, the Appellate Tribunal ruled in favor of the assessee, emphasizing that the withdrawn amount from the provident fund was exempt income under section 10(12) of the act.

Conclusion:
The Appellate Tribunal directed the assessing officer to delete the addition made to the income, considering the withdrawn amount as exempt under section 10(12) of the act. As a result, the appeal filed by the assessee was allowed, and the addition of the withdrawn sum to the total income was overturned.