2023 (1) TMI 568 - AT - Income Tax

Appeal allowed in tax case, Tribunal criticizes CIT(A) for lack of virtual hearing, violation of natural justice

Tata Digital Private Limited Versus Central Processing Centre/The Deputy Commissioner of Income Tax, 1 (3) (1) Mumbai

Tata Digital Private Limited Versus Central Processing Centre/The Deputy Commissioner of Income Tax, 1 (3) (1) Mumbai - TMI Issues:1. Addition to total income of the Appellant2. Reduction in Carry forward losses of AY 2020-21Issue 1: Addition to total income of the AppellantThe appeal was against the order passed by the Ld. Commissioner of income-tax(Appeals)-National Faceless Appeal Centre (NFAC), New Delhi, regarding an addition of Rs. 5,44,65,784 to the total income of the Appellant for the assessment year 2020-21. The grounds raised by the assessee challenged this addition, citing errors in the decision-making process. The Ld. CIT(A) was criticized for not appreciating the submissions made by the Appellant and misinterpreting the provisions of section 71 of the Income-tax Act. The Appellant argued that the intimation order had already allowed the set-off of income from capital gains with the loss, which was not the subject matter of dispute. The Ld. CIT(A) was accused of not considering the correct amount of loss to be carried forward. The Appellant contended that they should be eligible for a loss of Rs. 55,24,98,770 instead of the restricted amount. The Tribunal found merit in the Appellant's arguments and allowed the appeal for statistical purposes.Issue 2: Reduction in Carry forward losses of AY 2020-21The second issue revolved around the reduction in carry forward losses of the Appellant for the assessment year 2020-21. The Appellant declared a loss of Rs. 55,24,98,770, but the intimation order restricted the carry forward to Rs. 49,80,32,986. The Ld. CIT(A) confirmed this reduction without providing a reasonable opportunity for virtual hearing to the Appellant, leading to a violation of natural justice principles. The Ld. CIT(A) was criticized for not correctly interpreting the provisions related to the set-off of losses and for not allowing the Appellant to present their case adequately. The Tribunal noted that the law requires prior notice to the assessee before making adjustments under section 143(1) of the Act, which was not followed in this case. As the Assessing Officer had not responded to the rectification application filed by the Appellant, the Tribunal decided to restore the matter to the Assessing Officer for proper consideration, ensuring the Appellant's right to be heard. Consequently, the appeal of the assessee was allowed for statistical purposes.This comprehensive analysis of the legal judgment highlights the key issues, arguments presented, and the Tribunal's decision on each matter, ensuring a detailed understanding of the case.