The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) has held that the appellate authority should not cite procedure as a tool or ruse to deny the just claim of an assessee.
The Assessing Officer made adjustment/addition to the total income of the assessee S. M. Construction after passing intimation under Section 143(1) of the Income Tax Act 1961. The CPC has made adjustment under the head “capital gain” amounting to whereby the capital gain had been reduced as against the returned capital gain as declared by the assessee and correspondingly enhanced the business income (block of assets) which was reduced from head of capital gain.
According to assessee, the CPC under Section 143(1) of the Act while processing the returned income could not have adjusted the capital gain with business assets and wondered as to how the CPC could have set-off capital gain against block of asset and to buttress the aforesaid submission drew our attention to the return of income
Hari Raheja, on behalf of the assessee submitted that AO was not justified in disallowing indexation on the cost of the sale of the Long-Term Capital Asset and ignored the claim under Section 54EC of the Income Tax Act 1961.
He further submitted that the sale consideration of the motor car falls in the block of assets under the head “Income from Business”, and resultant sale price got adjusted in the block of assets whereby depreciation was allowed on the net block as per Section 50A of the Act
Abi Rama Karthikeyan, appeared on behalf of the revenue.
The Division Bench of Om Prakash Kant (Accountant Member) and Aby T. Varkey (Judicial Member) allowed the appeal and set aside the impugned order observing that,
“We find that adjustments made by CPC do not fall under any of the permitted adjustments u/s 143(1) of the Act as discussed. When the CPC has erred while processing the return of an assessee which causes tax liability on an assessee, then the appellate authorities should not cite procedure as a tool/ruse to deny the just claim of an assessee”
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