CPC Adjustments on Exempt Income and Disallowances Invalid: ITAT Deletes ₹5.95 Cr Additions, Citing Technical Glitches and Lack of Judicial Application [Read Order]
The Tribunal deleted the Rs. 5.95 crore additions under Section 143(1), citing CPC technical glitches and the First Appellate Authority's failure to apply judicial mind
Citing Technical Glitches and Lack of Judicial Application
Citing Technical Glitches and Lack of Judicial Application
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) ruled that adjustments made by the Central Processing Centre (CPC) under Section 143(1) of the Income Tax Act, 1961, were invalid due to technical glitches and deleted the Rs. 5.95 crore additions.
3I Infotech Limited (assessee) filed its return of income for Assessment Year (AY) 2018-19 declaring nil total income after setting off profits of Rs. 83,70,22,403 against brought forward losses.
The CPC processed the return under Section 143 (1) and issued an intimation dated 12.11.2019, assessing business income at Rs. 89,66,13,329 after making adjustments totaling Rs. 5,95,90,926.
The adjustments included Rs. 5,88,53,921 on account of provision for contingent expenses written back, not stated in Schedule EI, Rs. 2,31,254 on profit from sale of fixed assets, similarly not in Schedule EI; and Rs. 5,05,750 due to discrepancy in disallowances under Section 40(a)(i) between the return and Form 3CD.
Aggrieved by the CPC intimation, the assessee appealed to the Additional/Joint Commissioner of Income Tax (Appeals) [Addl./JCIT(A)]. The Addl./JCIT(A) confirmed the adjustments vide order dated 12.03.2025, holding that the assessee omitted details of exempt income in Schedule EI, preventing CPC from granting exemptions.
Aggrieved by the Addl./JCIT(A)’s order, the assessee appealed to the ITAT. The assessee’s counsel argued that the provisions written back were disallowed in AY 2017-18 and claimed as exempt in computation, but not under Section 10, hence not required in Schedule EI.
The Counsel also submitted that profit on fixed assets adjusted in WDV under Section 43(6) was not taxable. The counsel contended that the adjustments stemmed from CPC technical glitches, and the Addl./JCIT(A) failed to appreciate this, violating principles of natural justice.
The two-member bench, comprising Amit Shukla (Judicial Member) and Renu Jauhri (Accountant Member), observed that the adjustments were made due to the CPC system glitches.
The bench noted that the amounts were disclosed in the computation and ITR but not in Schedule EI, as they were not Section 10 exempt incomes. It held the Addl./JCIT(A) should have applied a judicial mind to correct automated errors.
The Bench also highlighted that adjudication requires fairness and discernment beyond digital formalism. The bench deleted all adjustments. The appeal of the assessee was allowed.
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