2023 (6) TMI 606 - AT - Income Tax

Appeal allowed, double taxation error corrected, Rs. 3,00,000/- deletion granted.

Shri Dinesh Kumar Singal Versus The ITO Ward-1, Malerkotla

The appeal was filed against the order of the Ld. CIT(A), NFAC, Delhi for A.Y. 2017-18. The delay in filing the appeal was condoned, and the appeal was ... Double taxation - Rectification of mistake u/s 154 - Rental income was offered as “income from house property” - Addition of the same income under the head “income from other sources” - adjustment u/s 143(1) - HELD THAT:- Adjustment which has been made by CPC, Bengaluru relates to the rental income as reflected in Form No. 26AS which has form the basis of the adjustment done by CPC, Bangaluru wherein the same has been brought to tax under the head “income from other sources”. There is clearly a mistake apparent from record while processing the return of income wherein the CPC, Bengaluru has acknowledged the rental income under the head “income from house property” as so declared by the assessee in his return of income, and at the same time, has brought to tax again under the head “income from other sources” resulting in double taxation of same income - Addition so made by the CPC, Bengaluru and confirmed by the Ld. CIT(A), NFAC, Delhi is hereby directed to be deleted. Decided in favour of assessee for statistical purposes. ISSUES PRESENTED AND CONSIDERED 1. Whether an adjustment made by the CPC treating rental receipts as 'income from other sources' - when the same rental receipts were declared and accepted as 'income from house property' in the return - results in double taxation and is erroneous. 2. Whether the mistake in assessment arising from the CPC's duplicate inclusion of the same receipts under two heads of income is a 'mistake apparent from the record' and therefore rectifiable under the statutory rectification procedure (section 154 / processing rectification following intimation under section 143(1)). ISSUE-WISE DETAILED ANALYSIS - Issue 1: Double taxation by duplicate inclusion of identical receipts under two income heads Legal framework: The assessment/processing framework permits the CPC to process returns under section 143(1) and make adjustments on the basis of third-party information such as Form 26AS; income must be assessed under the correct head and duplication of the same receipt across two heads results in taxation of the same quantum twice. Precedent Treatment: No judicial precedents were cited or relied upon by either party in the record; analysis is conducted on statutory mechanics and documentary record. Interpretation and reasoning: The Tribunal examined the return (showing annual lettable value/rental receipts of Rs. 3,00,000 with statutory 30% deduction resulting in net income from house property of Rs. 2,10,000) and CPC's processing which simultaneously accepted the house property computation and separately added Rs. 3,00,000 as income from other sources based on Form 26AS. The Tribunal treated the contemporaneous acceptance of the house-property disclosure and the separate addition as inconsistent and logically incompatible, producing double taxation of the same quantum. Ratio vs. Obiter: Ratio - where the processing wing accepts a taxpayer's return declaring receipts under a specific head and nonetheless duplicates the same receipts as income under another head based solely on third-party reporting, such duplication is erroneous and results in double taxation; the Tribunal directed deletion of the duplicate addition. Obiter - broader principles about CPC's processing safeguards or systemic causes were not elaborated. Conclusion: The duplicate inclusion constituted an error resulting in impermissible double taxation; the addition of Rs. 3,00,000 treated as 'income from other sources' was held unsustainable and ordered deleted. ISSUE-WISE DETAILED ANALYSIS - Issue 2: Rectifiability as a 'mistake apparent from the record' Legal framework: Statutory rectification (post-intimation / section 154 or processing rectification) permits correction of mistakes apparent from the record without reopening substantive adjudication; mistakes apparent from record are those which can be prima facie recognized from the documents on record without elaborate inquiry. Precedent Treatment: No authorities were cited; Tribunal applied the settled concept of 'mistake apparent from record' by direct appraisal of the return, Form 26AS and CPC intimation. Interpretation and reasoning: The Tribunal compared the return disclosure (income from house property: gross receipt Rs. 3,00,000; deduction 30%; net Rs. 2,10,000) with the CPC intimation which both acknowledged the house property figure and separately added Rs. 3,00,000 under other sources. The Tribunal found the inconsistency to be apparent on the face of the record - the same receipt cannot validly be taxed twice under different heads - and therefore amenable to rectification. The Tribunal rejected the lower authority's view that the mistake was not apparent, holding that no further adjudicatory fact-finding was required to see the duplication. Ratio vs. Obiter: Ratio - where processing records and the taxpayer's return together demonstrate that identical receipts were accepted under one head and simultaneously added under another on the basis of third-party reporting, the error is a 'mistake apparent from the record' and is rectifiable; the proper remedy is deletion of the duplicate addition. Obiter - the Tribunal did not purport to set general guidelines for when CPC may act on Form 26AS, beyond the immediate rectification principle. Conclusion: The Tribunal concluded the error was apparent from the record and directed deletion of the Rs. 3,00,000 addition; the rectification remedy was appropriate and the appeal was allowed (for statistical purposes). Cross-references and Practical Outcome 1. The findings on Issue 1 and Issue 2 are interdependent: the factual determination of duplicate inclusion (Issue 1) directly establishes the character of the error as apparent from record (Issue 2). 2. The Tribunal's relief: deletion of the duplicate addition and allowance of the appeal for statistical purposes - demonstrating that where processing accepts a taxpayer's head-wise disclosure, a subsequent, unexplained duplication based solely on Form 26AS will be corrected as a mistake apparent on the face of record.