2020 (2) TMI 1489 - AT - Income Tax

Tribunal partially allows appeal, ruling on Income Tax Act adjustments and CIT(A) enhancement

M/s Visakha Jilla Nava Nirmana Samithi Versus Dy. Commissioner of Income Tax Circle-5 (1) Visakhapatnam

M/s Visakha Jilla Nava Nirmana Samithi Versus Dy. Commissioner of Income Tax Circle-5 (1) Visakhapatnam - TMI Issues Involved:1. Adjustments made u/s 143(1)(a) of the Income Tax Act, 1961.2. Enhancement of addition u/s 11(1A)(a) by the CIT(A) without giving opportunity to the assessee.3. Denial of credit for taxes paid/credit claimed by the assessee.Issue 1: Adjustments made u/s 143(1)(a) of the Income Tax Act, 1961:The appeal was filed against the adjustments made by the Income Tax Department under section 143(1)(a) of the Act. The appellant contested the adjustments made to the income, which resulted in a demand raised by the department. The CIT(A) had enhanced the addition by denying the exemption of long term capital gains on the sale of property. During the appeal hearing, the appellant argued that the adjustments made were impermissible and beyond the scope of section 143(1)(a) of the Act. The Tribunal observed that the adjustments made by the department were not within the scope of section 143(1)(a) as the AO failed to provide intimation before making such adjustments. Consequently, the adjustments made by the department were deemed impermissible and were deleted.Issue 2: Enhancement of addition u/s 11(1A)(a) by the CIT(A) without giving opportunity to the assessee:The next issue revolved around the enhancement made by the CIT(A) concerning the denial of exemption claimed by the assessee under section 11(1A)(a) of the Act. The appellant contended that the CIT(A) had enhanced the addition without providing an opportunity to the assessee. The Tribunal noted that the CIT(A) had not issued any enhancement notice before making the addition, rendering the enhancement unsustainable. Consequently, the enhancement made by the CIT(A) was deemed unsustainable and was deleted.Issue 3: Denial of credit for taxes paid/credit claimed by the assessee:The third issue pertained to the denial of credit for an amount claimed by the assessee. The CIT(A) directed the Assessing Officer to allow a lesser amount as credit compared to what was claimed by the assessee without proper verification. The Tribunal directed the AO to reconcile the receipts and income details, ensuring that the credit for taxes paid/claimed was in accordance with the accounting method followed by the assessee. The appeal of the assessee on this ground was allowed for statistical purposes.In conclusion, the Tribunal partially allowed the appeal of the assessee, primarily focusing on the impermissible adjustments made under section 143(1)(a) and the unsustainable enhancement made by the CIT(A) without providing an opportunity to the assessee. Additionally, the Tribunal directed the AO to verify and reconcile the credit claimed by the assessee for taxes paid, ensuring compliance with the accounting method followed.