2021 (4) TMI 1003 - AT - Income Tax

Tribunal overturns CIT(A) decision, grants dividend income exemption under Income-tax Act

The Tribunal set aside the Ld. CIT(A)'s order confirming the adjustment made to the total income in the intimation under section 143(1) of the Income-tax ... Exemption of dividend income - inadvertent error in e-filed return - mistake apparent from record - rectification of processing adjustment - processing under section 143(1) of the Income-tax ActExemption of dividend income - inadvertent error in e-filed return - processing under section 143(1) of the Income-tax Act - rectification of processing adjustment - mistake apparent from record - Whether the assessee is entitled to exemption of declared dividend income despite omission to report it in the prescribed Schedule EI in the e-filed return and consequent denial of exemption by CPC during processing under section 143(1). - HELD THAT: - The Tribunal found that the assessee had declared the dividend income as exempt in the computation (Schedule BP) but omitted, through inadvertence or ignorance in using the electronic return form, to fill the prescribed Schedule EI where exempt income details are to be reported. The Centralised Processing Centre therefore did not allow the exemption while processing the return under section 143(1). The Tribunal held that such an inadvertent filing error should not defeat a substantive exemption expressly available under the Act. Relying on the Tribunal's decision in Suman Chandra G. Mehta, the Bench observed that the object of assessment is to determine the correct total income and that technical or procedural mistakes in furnishing return particulars may be rectified in the interest of justice. Having found that the assessee had in fact claimed the exempt dividend and had responded to the CPC's communication, the Tribunal concluded there was a mistake apparent from the record in not granting the exemption and that the error deserved rectification. The matter was therefore directed to be remedied by allowing the exemption. [Paras 6, 7, 8]The Tribunal set aside the CIT(A)'s decision and directed the assessing officer to allow the exemption claimed by the assessee in respect of the dividend income.Final Conclusion: Appeal allowed; the Tribunal held that an inadvertent omission in the e-filed return to record exempt dividend in the prescribed schedule does not disentitle the assessee to the exemption and directed rectification by the assessing officer for Assessment Year 2018-19. Issues:Adjustment made to total income in intimation under section 143(1) of the Income-tax Act, 1961.Issue Analysis:1. Background and Adjustment Made:- The appeal was against the order confirming the adjustment made to the total income in the intimation issued under section 143(1) of the Income-tax Act, 1961.- The assessee declared Nil income but claimed dividend income as exempt, which was not reported in the prescribed schedule EI, leading to the denial of exemption by the Centralised Processing Centre (CPC).2. Decision of Ld. CIT(A) and Assessee's Appeal:- The Ld. CIT(A) upheld the adjustment, noting the omission of exempt income details in schedule EI and the failure to file a revised return despite CPC's communication.- The assessee contended that the error was inadvertent and should not disentitle the exemption, citing relevant case laws.3. Arguments and Tribunal's Analysis:- The Ld. A.R. argued that the exemption should be allowed as the dividend income was not taxable under the Act, and the error was unintentional.- The Ld. D.R. supported the CIT(A)'s decision, emphasizing the absence of exempt income details in schedule EI.- The Tribunal examined whether the inadvertent error should prevent the assessee from claiming the allowable exemption.4. Tribunal's Decision and Rationale:- Referring to precedent cases, the Tribunal emphasized rectifying errors for fair treatment of taxpayers and restoring the issue to the Assessing Officer (A.O.) for proper examination.- The Tribunal held that the technical error should not deny the assessee's right to exemption, as the objective is to determine the correct total income.- Consequently, the Tribunal set aside the CIT(A)'s order and directed the A.O. to allow the claimed exemption, acknowledging the mistake apparent from the record.5. Conclusion:- The Tribunal allowed the appeal, recognizing the unintentional error by the assessee and the need to rectify the denial of exemption, ensuring fair treatment and adherence to the provisions of the Income-tax Act, 1961.This detailed analysis highlights the key legal aspects, arguments, and the Tribunal's decision regarding the adjustment made to the total income in the intimation under section 143(1) of the Income-tax Act, 1961.