2024 (11) TMI 969 - AT - Income Tax

Denial of Tax relief u/s 89 towards the arrears of salary received - Form 10E was not filed on or before filing of the return on 23.12.2021 - claim of the assessee u/s 89 was rejected by the CPC while issuing the intimation u/s 143(1) - HELD THAT - As per provisions of first proviso to section 143(1)(a), it was mandatory on the part of department to make any adjustment as prescribed in the said section after giving an intimation to the assessee in writing or in electronic mode to which the assessee would be entitled to respond within 30 days, which has to be considered before making such adjustment. In present case, whether such opportunity was afforded to the assessee are not prima facie coming out from the material available before us, therefore, in all fairness to verify such aspects, the matter needs to be restored back to the files of AO to examine and verify such material aspects before rejecting the claim of the assessee u/s 89(1). An application for rectification was filed by the assessee on 05.11.2022, whereas Form 10E and relevant documents was furnished online which were available with the department on 04.11.2022, however, such information was not considered by the department while passing the order u/s 154. This matter deserves to be set aside and to be adjudicated afresh by the Ld. AO on the basis of material furnished by the assessee and after considering the explanations therein. Appeal of the assessee is partly allowed for statistical purposes.

Summary

Issues:
1. Rejection of tax relief claim u/s 89(1) by CPC and subsequent filing of application u/s 154
2. Non-compliance by the assessee with notice issues and late filing of Form 10E
3. Consideration of material aspects before rejecting the claim u/s 89(1)
4. Failure to consider Form 10E and relevant documents by the department in passing the rectification order u/s 154
5. Necessity of providing a reasonable opportunity of being heard to the assessee in set-aside assessment proceedings

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) by the assessee for the Assessment Year 2021-22. The assessee, a retired salaried employee, claimed tax relief u/s 89(1) for arrears of salary but the claim was rejected by the Central Processing Centre (CPC) when the return was processed u/s 143(1). The assessee then filed an application u/s 154 on 05.11.2022. The Ld. CIT(A) noted non-compliance by the assessee with notices and late filing of Form 10E. The impugned order was a rectification order u/s 154, decided against the assessee and confirmed by the Ld. CIT(A.

The Tribunal observed that the department did not afford the assessee the opportunity to respond within 30 days before rejecting the claim u/s 89(1) as required by the first proviso to section 143(1)(a). The application for rectification was filed on 05.11.2022, and the relevant documents were available with the department on 04.11.2022, but were not considered while passing the order u/s 154. Both parties agreed that the matter needed to be set aside for fresh adjudication by the Ld. AO based on the material furnished by the assessee and explanations provided.

The Tribunal highlighted the importance of providing a reasonable opportunity of being heard to the assessee in the set-aside assessment proceedings as per the law. The provisions of the first and second provisos to section 143(1)(a) were referenced. Ultimately, the appeal of the assessee was partly allowed for statistical purposes based on the observations made during the proceedings. The order was pronounced in the open court on 19/11/2024.