2024 (8) TMI 927 - AT - Income Tax

Addition made by the CPC u/s 154 - income was accepted to be exempt as agricultural income in the assessment order passed u/s 143(3) - HELD THAT - CPC has correctly processed the return of income under section 143(1)(a)(ii) of the Act r/w the Explanation (a)(i) and (a)(ii). The learned A.R. fairly accepted the mistake in filing the return of income Schedule EI was not filled. The communication of proposed adjustment dated 01/01/2019, was not responded within 30 days. The entire profit claimed as agricultural income for ₹ 1,15,69,580, was not reported as exempt income in Schedule E1. Hence, the CPC was justified in making the adjustment, because the claim was inconsistent with item in the return of income. Rectification u/s 154 of the Act is not obligatory on the part of the AO if clear data is not available and in this regard we rely on the judgment of Anchor Processing Pvt. Ltd. 1986 (7) TMI 1 - SUPREME COURT The assessee failed to submit revised return of income u/s 139(5) of the Act to take care of the omission in the original return of income. This is an appeal against order passed by the AO u/s 154 of the Act. The scope is narrow and constricted and merits of claim need not be explored. The learned Authorised Representative pressed that the income was accepted to be exempt as agricultural income in the assessment order passed under section 143(3) - But at this stage, we are precluded from examination of the merit of the claim. DR rightly pointed out that when the assessee himself has conceded the mistake before the learned CIT(A), he has no arguable case any further. The appeal has no merits since there is no patent and manifest error amenable for rectification and hence liable to be dismissed. Thus, we are in consonance with the order passed by the learned CIT(A) who upheld the order passed by the CPC. Accordingly, all the grounds raised by the assessee in this appeal are dismissed.

Summary

Issues:
- Challenge to the addition of agricultural income by the CPC under section 154 of the Income Tax Act, 1961.
- Assessment of whether the claim of exemption by the assessee was justified.
- Consideration of rectification under section 154 of the Act for a mistake apparent from the record.
- Interpretation of provisions of section 143(1) of the Act regarding processing of returns.

Analysis:

The appellant, engaged in farming mushrooms, challenged the addition of agricultural income by the CPC under section 154 of the Income Tax Act, claiming it as exempt income. The appellant's return of income was processed without granting the exemption, leading to a dispute. The CPC rejected the claim based on the absence of the schedule of exempt income, resulting in the computation of total income at the same amount as the claimed exemption. The learned CIT(A) upheld the CPC's decision, emphasizing that the appellant failed to make a correct claim for exemption, which could not be rectified under section 154. The appellant contended that the mistake in not mentioning the figure in Schedule El was apparent and could be rectified under section 154(1)(b). However, the Tribunal noted that the error was in filing the return correctly and not in the processing driven by artificial intelligence.

Upon reviewing the provisions of section 143(1) of the Act, the Tribunal found that the CPC processed the return under section 143(1)(a)(ii) correctly, as the error in Schedule El was not rectified within the stipulated time. The Tribunal cited the Supreme Court's judgment in Anchor Processing Pvt. Ltd. v/s CIT, [1986] 161 ITR 159 (SC), to support the view that rectification is not mandatory if clear data is lacking. The appellant's failure to submit a revised return under section 139(5) to rectify the omission in the original return was highlighted. The Tribunal emphasized that the scope of rectification under section 154 is narrow and does not delve into the merits of the claim. The Tribunal upheld the decision of the learned CIT(A) and dismissed the appeal, as there was no evident error for rectification.

In conclusion, the Tribunal dismissed the appeal filed by the assessee, affirming the decisions of the CPC and the learned CIT(A) regarding the processing of the return of income and the denial of the exemption claim. The Tribunal emphasized the importance of timely rectification and submission of revised returns to address errors in the original filing, ultimately upholding the order passed by the learned CIT(A).