CIT(A) failed to consider Factual Mistake Committed by CPC: ITAT Directs AO to Delete Adjustment of Rs. 3.09 Crore [Read Order]

The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) directed the assessing officer to delete the adjustment of Rs. 3.09 crores as the Commissioner of Income Tax (Appeals) [CIT(A)] failed to consider the factual mistake committed by the Centralized Processing Centre (CPC).

The issue in this case is that the CPC flagged a mismatch involving a GST adjustment of Rs. 5.74 crore, which the system erroneously treated as an item falling under Section 28 of the Income Tax Act (income chargeable under business profits). The CIT(A) upheld the CPC’s adjustment, noting that the assessee had failed to correct the error in Form 3CD and that the auditors had incorrectly reported the amount.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

However, the ITAT found that the CIT(A) had overlooked a critical factual error, which includes that the GST refund of Rs. 5.74 crore was never routed through the profit and loss account and was correctly reported under Para 16b of the tax audit report, which pertains to refunds admitted by authorities, and not under Para 16a.  

The bench noted that “the assessee had shown Rs. 5,74,70,370 as a refund of value-added tax, which was admitted by the authority concerned, and that in the tax auditors report in Para no. 16a, the same was reported.”

The bench observed that the CIT(A) failed to consider the factual mistake committed by the CPC at the time of processing and did not rectify the same during the appellate proceedings. The bench reached a strong conclusion that the order passed by the CIT(A) was incorrect as it led to an incorrect confirmation of the adjustment.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The ITAT bench held that the CPC’s adjustment was based on a misinterpretation of the tax audit report the CIT(A) failed to rectify this mistake during appellate proceedings, and it set aside the CIT(A)’s order and directed the AO to delete the Rs. 3.09 crore adjustment.

The Kolkata ITAT, comprising Rajesh Kumar (Accountant Member) and Sonjoy Sarma (Judicial Member), allowed the assessee’s appeal.

To Read the full text of the Order CLICK HERE

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